With recent anti-corruption cases against large multi-national pharmaceutical companies fresh in memory, and China President Xi Jinping’s high profile Anti-Corruption campaign underway, excellent time for another reminder on the lawyer’s role in anti-corruption and ethical business practices, in China and beyond.
May foreign companies approach China, as some place “foreign,” as if the laws and expectations they are happy to abide by in their home country don’t apply to them in China. This is a huge mistake, and one that any legal advisor should be quick to guard against. The
USA Foreign Corrupt Practices Act
, the
UK Bribery Act
, and China’s own
Criminal Law
, and
Anti-Unfair Competition Law
, open up foreign companies to investigation and fines if their China operations engage in bribery or other corrupt practices.
To protect a foreign company and its China operations from these legal problems, legal counsel should assist a company in developing standards to be included in China employee contracts and company handbooks. All employees should be made aware of the policy of the company regarding all forms of bribery, and should be made to sign an employee contract that clearly indicates what types of actions will be considered bribery as well as outlining clear steps the company will take to punish employees found to have engaged in prohibited behavior.
In addition, legal action should be taken to make clear to the foreign companies China partners, (suppliers, distributors, OEMs, JV partners and others) that bribery or other corrupt practices will not be acceptable as a condition of the business relationship. Provisions should be included in all China business contracts (which should be completed in Chinese) making clear that both parties agree that bribery is unacceptable behavior, and outlining all the actions which are unacceptable to the foreign company. The contract should also outline contractual remedies, which may include termination of contact and payment of damages to the foreign company in case the Chinese company is found to have violated the law and the anti-corruption terms of the contract.
Instead of approaching China as a ‘foreign”, or lawless country, international companies would be best served to treat their China operations as a legal extension of their home country’s business. Subject to all the laws and high professional standards found there.