 Four executives of pharmaceutical juggernaut, GlaxoSmithKline (GSK) were questioned in connection with allegations which related to the funnelling of almost US$500 million in bribes through 700 travel agencies to hospitals and doctors with a view to prompting them to purchase and prescribe their products. The alleged payoffs were allegedly facilitated to enable GSK to increase its sales and its profit margin for its drugs. In light of the recent drive to ensure anti-corruption compliance in China – particularly after the US Foreign Corrupt Practices Act and the UK Bribery Act have been more robustly enforced over the last few years – the extent and magnitude of the allegations comes as a bit of a surprise to the legal community. Below, William Rosoff, corporate partner and partner in charge, Akin Gump, Beijing and Yuanming Wang, Senior Counsel with Akin Gump and formerly a prosecutor in the Civil and Administrative Procuratorate Department of the Supreme Procuratorate of China take us through some of the developments in the bribery arena in China in the aftermath of the GSK bribery allegations. The Chinese government investigation of GlaxoSmithKline for alleged bribery has been front-page news in China for several weeks. This recent very public crack-down should be seen in a broader historical context and as a manifestation of developments in the legal arena that have been taking place over some time. Traditionally, the Chinese government had focused more on penalizing the bribe recipients, usually government officials, than on the bribe givers. That has begun to change in recent years. The laws against bribe giving are contained in the PRC Criminal Law, first promulgated in 1997. Importantly, the law applies only to the actual giving of bribes, not the offering of one. Several recent developments, all of which became effective in January of this year, set out and define more clearly the various levels of bribery. These are based, among other things, on the amounts involved and the identity of the recipient, and set out various fines and prison terms appropriate to each level, termed either “serious” or “extremely serious.” The Interpretations on Several Issues Concerning the Application of the Law In the Handling of Criminal Bribe-Giving Cases, adopted jointly by the Supreme People’s Court and the Supreme People’s Procuratorate in December 2012, provides that the crime of bribe giving is “extremely” serious where the amount involved is more than RMB 1 million (approximately $160,000), or the amount involved is more than RMB500,000 and a) more than three people are bribed, b) the bribe is given to a government official who has a duty of supervision in the areas of food, drugs, work safety or environmental protection, c) the bribe is given to an officer of any law enforcement authority or judicial body for the purpose of perverting the course of justice, or d) the bribes are sourced from the offender’s illegal gains. In addition, a bribery action will be considered “extremely serious” if the economic loss caused by the bribe is more than RMB 5 million. Individuals found to have committed the offence of ‘extremely serious’ bribe-giving face a 10-year or even life-time imprisonment. In addition, the government has now fully implemented a public database that documents all cases of convictions for bribery and lists all parties involved, whether or not those parties have been criminally pursued. Inclusion in the database can be grounds for exclusion from tenders for government funded projects. What constitutes an illegal bribe, as opposed to lawful gift-giving, is not always straightforward, especially in a society where long-term relationship-building is as important to business dealings as it is in China. Various Chinese court rulings provide some guidance on the issue, including examining the following factors; i) the nature and history of the relationship between the parties; ii) the value of the gift; iii) the purpose and timing of the gift relative to what is obtained; and iv) to what extent the recipient has used his or her position to promote the interests of the gift giver. Prosecutors and judge have considerable discretion in determining whether a particular act amounts to an illegal bribe. For many years, U.S. companies doing business in China have had to concern themselves with the strictures of the Foreign Corrupt Practices Act. The recent developments in anti-bribery enforcement in China will add to those burdens. While the US FCPA and Chinese anti-bribery laws are similar in many respects, they are not identical. For example, the FCPA applies only to the bribing of government officials; the Chinese law is not so limited. The FCPA contains an exception for “facilitation payments”; the Chinese law contains no such express exception. Thus effective compliance programs will need to take account of and address both sets of laws. |
