ANTI-CORRUPTION SURVEY 2014 - IFLRcorporate issues, tax, investment, intellectual property, real...

Anti-corruption Survey 2014

IFLRinternational financial law review

ANTI-CORRUPTION SURVEY 2014

Lead contributor: Andrew M Levine

RISK RATING MAP

IFLR SURVEY | ANTI-CORRUPTION 201440

HONG KONG

CHINA

VIETNAM

Asia Pacific: risk rating map

KeyIndicates an anti-corruption regime ofbroad scope

Indicates an anti-corruption regime ofmoderate scope

Indicates an anti-corruption regime ofnarrow scope

Legal landscape

Potential penalties

Investigation

Adjudication

CHINA

IFLR SURVEY | ANTI-CORRUPTION 2014 41

SECTION 1: LEGAL LANDSCAPE

1.1 What is the scope of bribe payors and bribe recipients coveredby your jurisdiction’s anti-corruption laws?

The PRC Criminal Law criminalises official and commercial bribery.

Official bribery involves offering a bribe to or the solicitation or acceptanceof a bribe by a State functionary. This offence can be categorised into twoclasses: the crime of accepting or soliciting a bribe, which is governed byarticle 385 of the PRC Criminal Law; and, the crime of offering a bribe,which is governed by article 389 of the PRC Criminal Law. The crime ofoffering a bribe may be prosecuted against individuals as well asorganisational units.

Under the Criminal Law, a state functionary is defined as: (i) a person whoperforms public services in state organs (including executive, administrative,judicial, prosecutorial, and military organs of all levels); (ii) a person whoperforms public services in state-owned companies or enterprises; (iii) aperson who is assigned by state organs or state-owned enterprises toenterprises or institutions that are not owned by the state but perform publicservices; and (iv) other persons who perform public services according tolaw.

Commercial bribery refers to acts of unfair competition committed byprivate individuals or companies. Governed by both the PRC Criminal Lawand the PRC Unfair Competition Law (AUCL), this offence can be criminalor non-criminal.

1.2 What conduct directly related to bribery is prohibited by anti-corruption laws?

Both direct and indirect payments are covered under Chinese law.Prohibited payments include not only cash, but also gifts, hospitality, traveland anything of value.

1.3 What conduct related to internal controls and to books andrecords is covered by the anti-corruption laws?

Chinese anti-corruption laws do not have direct provisions regarding booksand records. However if information is recorded wrongfully with a clearintention of committing commercial bribery, criminal law may be applied.

Wrongful books and records may only be fined for committing commercialbribery if discounts are not recorded truthfully in the account books underthe Interim Provisions on Prohibition of Commercial Bribery. Other laws,such as the PRC Accounting Law, provide that all units must set up accountbooks according to the law's standards and must ensure their truthfulnessand completeness. Administrative and criminal responsibilities may beinvestigated if there are violations.

SECTION 2: POTENTIAL PENALTIES

2.1 What is the range of direct financial consequences for acompany engaged in a prohibited anti-bribery offence?

Under the Criminal Law, a company will be fined, and persons directly incharge and other persons directly responsible will be imprisoned for up tofive years, or detained. Under the AUCL, administrative penalties forcommercial bribery may include a fine from Rmb10,000 ($1,600) toRmb200,000, as well as confiscation of illegal income from the bribery.

2.2 What is the range of collateral consequences for a companyadjudicated to have engaged in prohibited anti-bribery offences?

Convictions for commercial bribery will have collateral consequences for acompany. For example, if a pharmaceutical company is convicted ofcommitting commercial bribery, it will be blacklisted. This prevents it fromselling drugs, medical devices, or medical disposables to public medicalinstitutions for two years. A bribery conviction is also detrimental to acompany’s credit profile, which will affect the company’s ability to bid,procure, and enter the market.

2.3 What are the typical punishments of individuals prosecuted forpaying or accepting bribes?

Sanctions for official bribery include criminal detention or up to five years’imprisonment for the least serious cases, to life imprisonment or not less than10 years imprisonment for the most serious cases. Sanctions for commercialbribery range from criminal detention for less serious cases to up to 10 years’imprisonment for serious cases. The offender’s property and illegal proceeds mayalso be confiscated. Under the AUCL, administrative penalties for commercialbribery may include a fine ranging from Rmb10,000 to Rmb 200,000, as wellas confiscation of illegal income from the bribery.

SECTION 3: INVESTIGATION

3.1 What is the role of self-investigation at the remedial stages of ananti-corruption matter?

Implementing internal investigation measures is not a defence under thePRC anti-corruption regime.

China

David Tiang and Harry Liu, King & Wood Mallesons

www.kingandwood.com

CHINA


3.2 With respect to anti-corruption compliance programmes, whatare regulatory expectations if a business wants to receive credit orleniency during an investigation into corrupt behaviour by companypersonnel?

Regulatory authorities do not provide guidance towards anti-corruptioncompliance programmes. The implementation of bribery preventionmeasures by a company may be presented to the authorities as evidence thatthe illegal actions of the company’s agents are contrary to the company’sregulations, and serve to prevent a prosecution of individuals from becominga prosecution of the company.

3.3 What resources are available to regulators to investigate andprosecute anti-corruption offences?

Anti-corruption investigations are conducted by the regulatory bodies andfinanced by government expenditure.

While government bodies may collect documents themselves, individualsand companies must cooperate with investigatory bodies. The expense ofcollecting and gathering internal documents is borne by individuals orentities under investigation.

3.4 What are the customary forms of resolution of individual andcorporate regulatory actions?

Administrative penalties are the most common means of punishingindividuals and corporations. However, if the bribe amount is relativelyhigh, prosecutors may prosecute offenders under the criminal law. Privateindividuals and corporations may reach a settlement with the regulatoryauthorities, such as the Administration for Industry and Commerce (AIC).The amount of the fine is sometimes negotiable.

SECTION 4: ADJUDICATION

4.1 What is the perception with respect to the fairness of regulatorsand the judicial system in addressing anti-corruption?

Generally, Chinese regulatory and judicial systems are fair in addressing anti-corruption issues. Regulatory authorities have little discretion to impose afine beyond the maximum amount of Rmb200,000. Regarding theconfiscation of proceeds, concrete evidence needs to be provided todetermine the amount of proceeds to be confiscated. Given the politicalimportance of fighting corruption, the Chinese judicial system has beenvery transparent when it hears bribery cases. An example is the trial of theformer Communist Party chief in Chongqing, Bo Xilai, in JinanIntermediate Court.

CHINA


About the authorDavid Tiang is a partner at King & Wood Mallesons, specialising ingovernance, risk management and compliance. He also has extensiveexperience in foreign direct investment, M&A and other corporate andcommercial work in China and in other Asian jurisdictions. Recently,he has advised on foreign investments in the China retail sector,particularly in e-commerce.

Tiang has worked in both private practice and as an in-house counsel.As Asia regional counsel for top Fortune 500 companies, he hasmanaged and provided counsel on a broad spectrum of issues includingintellectual property, global procurement and sourcing, sales andmarketing, supply chain, human resources, tax, compliance and, morerecently, in risk and crisis management.

Tiang received his LLB and LLM from the University of Sydney and agraduate diploma from the University of Hong Kong. He is qualified topractice in Australia (New South Wales), Hong Kong and the UK. Hisworking languages are English, Mandarin, Cantonese and Fujiandialects

David TiangPartner, King & Wood Mallesons

Shanghai, ChinaT: +86 21 2412 6000 F: +86 21 2412 6150E: [email protected] W: www.kingandwood.com

About the authorHarry Liu is a dispute resolution lawyer specialising in commerciallitigation and international arbitration. He has over 20 years’ experiencerepresenting domestic and international enterprises in financing,corporate issues, tax, investment, intellectual property, real estate andmaritime-related matters. Liu is recognised for his experience and skillsin handling complicated disputes, and the Shanghai High Court hasincluded a number of his cases in their case collection series.

Liu joined in King & Wood Mallesons in 2006, and he has also workedat two leading US law firms as a visiting lawyer. He has advisedmultinational companies and foreign-invested companies on issuesrelating to anti-commercial bribery. He has worked on internalinvestigations into commercial bribery for clients, advised oninvestigations initiated by Chinese AICs, and has worked oncompliance investigations in M&A projects.. The clients he hasrepresented include companies in the pharmaceutical, medical device,sports brand, luxury brand, advertisement, and IT sectors. He has alsolectured in workshops and conferences on anti-corruption.

Liu earned his LLB and JM from the Nanjing University and the EastChina University of Political Science & Law respectively and his LLMfrom Columbia University. He is admitted in both China and NY State,and is a Shanghai International Arbitration Centre (SHIAC) and ChinaInternational Economic and Trade Arbitration Commission (CIETAC)arbitrator.

Harry LiuDispute resolution lawyer, King &Wood Mallesons

Shanghai, ChinaT: +86 21 2412 6000 F: +86 21 2412 6150E: [email protected] W: www.kingandwood.com

HONG KONG


Section 1: LEGAL LANDSCAPE


The Prevention of Bribery Ordinance (POBO) broadly prohibits bothgiving and receiving bribes. As the chief anti-corruption authority, theIndependent Commission Against Corruption (ICAC) is mandated toinvestigate alleged corrupt practices, while the Department of Justice (DOJ)is responsible for prosecuting corruption charges. Persons regulated by theSecurities and Futures Commission (SFC) and the Hong Kong MonetaryAuthority (HKMA) must comply with the POBO, and the Stock Exchangeof Hong Kong provides anti-corruption guidelines for listed companies.

The POBO contains criminal offences applicable to corruption in the publicsector as well as the private sector. Public sector offences apply to HongKong public bodies (such as state-owned enterprises and government boards,but not mere shareholders of public bodies) and their public servants ortheir prescribed officers (high ranking civil servants). Private sector offencesprohibit the exploitation of a principal by its agent (for instance, theiremployee, contractor or company director).


A bribe consists of (i) an offer, solicitation or acceptance of (ii) an advantage(iii) with an illegitimate purpose, but (iv) without lawful authority orreasonable excuse. An advantage is defined broadly to include, among otherthings, favours, gifts and payments. ‘The provision of food or drink, forconsumption on the occasion when it is provided, and of any otherentertainment connected with…such provisions’ is not considered anadvantage.

It is a defence if a public body or private principal authorises or ratifies thealleged misconduct in writing. Otherwise, the POBO makes no de minimisexception or broad exemption (for example, no so-called grease paymentsare permitted). The ICAC previously secured convictions for low value cashand in-kind gifts.

Perpetrators of public sector offences are liable whether or not the advantageis offered in Hong Kong. For private sector offences, the POBO only applieswhere the advantage is offered onshore. However, Hong Kong anti-moneylaundering laws apply extraterritorially to proceeds connected withindictable offences under the POBO. There is no express prohibition forthe bribery of foreign officials, but recent cases suggest that foreign officialscould be considered agents of their governments, and their bribery couldamount to commercial bribery if the misconduct occurred in Hong Kong.

There are other offences in the POBO. For example, prescribed officers maybe liable for having unexplained property, where they have ‘control ofpecuniary resources or property disproportionate to (their) present or pastofficial emoluments.’


Not applicable. The POBO does not address internal controls and booksand records. The ICAC provides community education and consultingservices, targeting corruption-prone industries and offering guidance aboutcorruption prevention best practices to businesses.

Section 2: POTENTIAL PENALTIES


Convicted persons are subject to a maximum fine of HK$1 million($129,000). In addition, restitution of the advantage received may beordered. Individuals are normally prosecuted under the POBO, althoughlegal persons are arguably subject to the legislation. Under the CriminalProcedure Ordinance, directors and officers may be liable for offencescommitted by their companies.


Persons regulated by the SFC or the HKMA are subject to disciplinaryactions, including public censure and licence revocation, if they havebreached the POBO. In addition, the facts supporting an allegation underthe POBO could lead to civil litigation.


Custodial sentences are common for individual convictions under thePOBO, but only the most serious breaches would attract the maximum of10 years. The courts may also prohibit convicted individuals from managingcompanies and public bodies or from practising in a profession, for up toseven years. Individuals also face confiscation orders and other pecuniarypenalties.

Section 3: INVESTIGATION


As a matter of best practice, companies should act promptly to preserveevidence and investigate internally anti-bribery issues that arise.

Companies should work cooperatively with the ICAC when responding toits investigatory requests. Tipping off others about ICAC investigations isitself an offence. Companies retain the right to legal representation andevidentiary privileges; however, the ICAC can obtain court orders to suspendcertain rights, such as the right to silence, in its investigations.

Hong Kong

Philip Rohlik and Sebastian Ko, Debevoise & Plimpton

www.debevoise.com

HONG KONG


3.2 With respect to anti-corruption compliance programmes, whatare regulatory expectations if a business wants to receive credit orleniency during an investigation into corrupt behaviour by companypersonnel?

Businesses are not legally required to have anti-corruption complianceprogrammes, and there is no stipulation that convicted businesses can expectleniency if they operate such programmes. This may be because individualsare typically prosecuted under the POBO.


The ICAC is well-resourced and has about 1200 staff members, in a territoryof 7.3 million. The ICAC has recently established a Forensic AccountingGroup to investigate complex commercial cases and a Proceeds of CrimeUnit to handle asset freeze and forfeiture after its annual budget wasincreased.

The ICAC has wide statutory powers, including: search and seizure; arrestand detention; bank account examination; travel document detention; andretention of property (whether or not tainted, and whether held by suspectsor third parties). Exercise of these powers is subject to judicial oversight.


After each ICAC investigation, the DOJ may decide to prosecute if theevidence is sufficient and prosecution merits public interest. In minor cases,offenders may be cautioned if they have admitted to their offences. TheICAC may refer cases of civil service misconduct to governmentdepartments for disciplinary action.

Section 4: ADJUDICATION


Hong Kong’s constitutional instrument, the Basic Law, guarantees the DOJand ICAC independence. According to recent ICAC surveys, the publicoverwhelmingly support the ICAC and consider its work to be very effective.The judiciary also provides an independent supervisory function inlitigation. Enforcement actions are viewed as tough but fair, especially inrespect of public sector offences, although there is public demand forenhancing enforcement against commercial collusions and the discharge ofpublic duties involving conflicts of interests.

Note: The above is compiled from publicly available sources and does notconstitute legal advice.

About the authorPhilip Rohlik is an international counsel in the Hong Kong office ofDebevoise & Plimpton. He focuses on international investigations,securities law and dispute resolution. Rohlik has represented US andmultinational companies from a range of sectors in connection withcomplex white collar litigation, regulatory investigations, domestic andinternational arbitration and domestic litigation. He also regularlycounsels corporate clients on regulatory issues arising in the course oftheir business around the globe or in connection with M&Atransactions.

Philip RohlikInternational counsel, Debevoise &Plimpton

Hong Kong T: +852 2160 9856E: [email protected]: www.debevoise.com

About the authorSebastian Ko is an associate in the Hong Kong office of Debevoise &Plimpton. His practice focuses on high-value, complex and multi-jurisdictional commercial litigation and arbitration, and on internalinvestigation and regulatory enforcement matters.

Sebastian KoAssociate, Debevoise & Plimpton

Hong Kong T: +852 2160 9827E: [email protected]: www.debevoise.com

VIETNAM


SECTION 1: LEGAL LANDSCAPE


With regard to bribe payors, laws apply to: (i) individuals (irrespective ofnationality) making or offering a corrupt payment in the territory ofVietnam; (ii) Vietnamese citizens (irrespective of place of offence); and (iii)foreigners in circumstances provided for in the international treaties whichthe country has signed or acceded to, even if the payment is made or offeredoutside its territory. On the other hand, as to payees, laws apply to any“person having position and/or power” (including public officials andmanagers of state-owned enterprises) and public organisations (see 1.2).


Laws prohibit both direct and indirect corrupt payments or offers of thesame to enumerated public payees. In Vietnam, public officials and publicorganisations, including state agencies, political organisations, state-ownedenterprises and their managerial personnel, are generally and strictlyprohibited from receiving gifts, including facilitating payments, given inrelation to their responsibilities or given for unclear purposes.


Laws impose both administrative and criminal liability for falsifying booksand records such as the acts of fabricating accounting documents, financialstatements and auditors’ reports (with or without corrupt payments) whichmay be subject to administrative penalties (including monetary fines). Also,even though the laws fail to clarify the contents of internal control, failureto implement it may, depending on other specific criminal factors, be subjectto criminal charges such as the crime of neglect of responsibility causingserious consequences.

SECTION 2: POTENTIAL PENALTIES


Criminal laws impose liability merely upon individuals but not for acompany in this situation; individuals may be held liable for actionsundertaken on behalf of the company (see 2.3). However, laws on auditingimpose monetary penalties up to approximately $3,000 on a companyconducting breaches in the accounting and auditing sectors (see 1.3).


Laws impose few collateral consequences on companies and individualsengaged in prohibited anti-bribery offences. In this regard, managers of astate-owned enterprise or state agencies may be subject to reproach, warning,demotion or debarment from holding official positions for a certain periodof time. Furthermore, according to the revised Law on Tendering (whichwill come into effect from July 1 2014), results of a tendering may becancelled and the tenderer may be banned from participating in tenderingin Vietnam if there is any bribery during the tendering process.


Laws punish bribe payors and recipients with a range of civil and criminalconsequences that can be very severe, including life imprisonment, as wellas penalty charges up to five times the amount of the corrupt payment. Incase of bribe recipients, possible punishments include the death penalty andthe bribe may be confiscated.

SECTION 3:INVESTIGATION


Laws may permit self-investigation, but it is not certain to what degree suchactivity can be helpful to companies engaging in self-investigation. Forindividuals, the Penal Code provides that a person who is coerced intooffering bribes, but takes the initiative in reporting them before beingdetected may be exempt from criminal liability and the bribe will bereturned in part or in whole.

3.2 With respect to anti-corruption compliance programmes, whatare the regulatory expectations if a business wants to receive creditor leniency during an investigation into corrupt behaviour bycompany personnel?

Regulators provide general guidance (see 1.3), but do not articulate detailedstandards regarding expectations for an effective compliance programme.In an investigation, credit can sometimes be received for a robustprogramme. On a related note, the Law on Anti-Corruption provides thatmanagers of a state agency or a state-owned company may be exemptedfrom liability in cases where they were incapable of learning of a corruptact, or where they have applied necessary measures to prevent and stop acorrupt act.

Vietnam

Hikaru Oguchi and Ha Hoang Loc, Nishimura & Asahi

www.jurists.co.jp

VIETNAM



Law enforcement personnel have few resources, with low salaries, thanklesswork and a pressurised working environment. That is one reason why theydo not work effectively and only bring few anti-corruption cases.


Laws do not systematically permit individuals and companies to voluntarilyresolve regulatory actions. However, the voluntary admission of guilt or thevoluntary remedy of consequences caused by the corrupt acts may help themenjoy relief from or a reduction of liability.

SECTION 4:ADJUDICATION


The perception is that anti-corruption investigations and prosecutions areinfluenced by some other social factors. State investigation agencies maysometimes be unofficially influenced by hierarchical bureaucracy. Also, thejudiciary is not sufficiently independent to make judgments in corruptioncases.

About the authorHikaru Oguchi is a partner at Nishimura & Asahi and leads the SouthEast Asian practice, including Vietnam. She provides legal consultationon a wide range of areas in relation to foreign investment, such as green-field investment, M&A, post-investment and general corporate, such aslabour and compliance (including anti-corruption) matters. She hasbeen admitted to practice in Japan since 1998, in New York since 2005and she has been registered as a foreign attorney in Vietnam since 2010.In addition to her private practice at Nishimura & Asahi, Oguchi hasexperience in the public sector, including serving as a deputy director inthe Ministry of Foreign Affairs’ Aid Policy Division, InternationalCooperation Bureau in 2006. She is a graduate of The University ofTokyo (LLB, 1996), Harvard Law School (LLM, 2003) and StanfordLaw School (JSM, 2004). Oguchi has been recognised as a leadingindividual in corporate and M&A in Vietnam for three consecutiveyears (2012 to 2014) by Chambers Global.

Hikaru Oguchi Partner, Nishimura & Asahi

Ho Chi Minh City, VietnamTel: +84 8 3821 4432Fax: +84 8 3821 4434E: [email protected]: www.jurists.co.jp

About the authorHa Hoang Loc is the Vietnam counsel at Nishimura & Asahi. He hasextensive experience in the areas of anti-corruption and foreigninvestment into Vietnam, especially in cross-border M&A deals andother corporate transactions in a wide range of sectors. Loc has beenpracticing since 2001 at law firms in Vietnam, including more thanfour years’ experience at international law firms. He is a graduate of HoChi Minh City University of Law (LLB, 2001) and SouthamptonSolent University (LLM, 2008) and is admitted to the Ho Chi MinhCity Bar Association.

Ha Hoang Loc Counsel, Nishimura & Asahi

Ho Chi Minh City, VietnamTel: +84 8 3821 4432Fax: +84 8 3821 4434E: [email protected]: www.jurists.co.jp

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