China’s graft-busters to step up scrutiny, enforcement soon, foreign firms warned

HONG KONG – Global lawyers Baker McKenzie have issued a Client Alert detailing how China’s new Supervision Commission on corruption might impact on foreign companies doing business in China.

The new law entrusts supervision commissions to oversee individuals across public sector entities, including party organs, legislatures, governments, courts, procuratorates and political advisory bodies (as well as their own staff) as well as executives of State-owned enterprises, management staff of public institutions and mass organisations (collectively referred as "Officials").

BM says it expects to see increased scrutiny and enforcement in the near future.

While the new law targets Officials with public responsibilities, parties doing business in China, including foreign companies, are also at increased risk of being implicated if their business falls within the investigation conducted under the Supervision Law,” the Client Alert says.

“Specifically, the New Commission can detain individuals who commit official bribery or who jointly commit the crime of misconduct in office pursuant to the Supervision Law.

“Such individuals can include those from the private sector.

“ Investigators now have increased investigation and surveillance powers such as wiretapping, when they are investigating severe violations.

“Of interest is that the new law does not expressly restrict the target of such measures to Officials.

“The new law also clearly requires the New Commission to be responsible for global assistance and information exchange in relation to anti-corruption enforcement.

“It envisages co-operation between the New Commission and foreign law enforcement bodies, such as the US Department of Justice and the UK's Serious Fraud Office.”

BM says that although it may take time to establish provincial and district-level supervision commissions in the short term, it recommends that companies doing business in China take steps to proactively review their existing operations and assess the risks under the new law.

“In particular, such review should identify whether there is any interaction with government bodies, public entities and SOEs, when such interaction is conducted using a third-party liaison vendor,” the Alert says.

“We will be closely monitoring how anti-corruption investigations and enforcement are carried out under the new regime. Meanwhile, companies should remain vigilant and continue to monitor and improve their compliance controls.   www.bakermckenzie.com (ATI).