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China, China and More China


It is a country often talked about on these pages.

Not surprising given the extent to which companies subject to the FCPA have flocked to this growth market in recent years.

Not surprising given that most companies operating in China do so through joint ventures or third parties. Even if a company does business in China through a subsidiary, oversight and control of the subsidiary’s employees and agents is often difficult.

Not surprising given the number of Chinese “foreign officials” because the enforcement agencies deem all employees of state-owned or state-controlled enterprises to be “foreign officials.” [On this issue, an in-house attorney recently shared with me that during training sessions the attorney tells company employees that there are 1.3 billion “foreign officials” that could be the recipient of a bribe in China. A bit of an exaggeration, but no doubt you get the point.]

I’ve written about China specific issues, including this guest post for the China Law Blog and more extensively here “The Unique Foreign Corrupt Practices Act Challenges of Doing Business in China.”

With many FCPA enforcement inquiries focused on China and with no expected slowdown in China business activity, China issues remain at the forefront of much of what is covered on these pages.

Against this backdrop, two recent practitioner pieces caught my eye.

The first piece (here) is titled “FCPA Compliance in China and the Gifts and Hospitality Challenge” and is authored by Gibson, Dunn & Crutcher attorneys Joseph Warin, Michael Diamant and Jill M. Pfenning.

Below is a short summary of the article.

“This Article discusses the anti-corruption enforcement trends confronting business practices in China, addresses the legal risks posed by the Chinese gift and hospitality culture, and presents suggestions for structuring corporate anti-corruption compliance programs to mitigate these risks. To contextualize law enforcement’s current focus on bribery and other economic crime in China, Part I provides an introduction to the country’s pervasive corruption climate, with a brief summary of recent enforcement actions by both Chinese and U.S. authorities. Turning to the problem of business courtesies, Part II provides background on the unique Chinese gift-giving culture and briefly discusses the FCPA, exploring within the statute’s anti-bribery framework the issue of business courtesy expenditures. Finally, Part III gives advice on how to tailor the gifts and hospitality component of an organization’s compliance program to address this risk in China.”

The second piece (here) is titled “The Chinese Puzzle Box: the Conundrum of
Distinguishing a Permissible Gift from an Illegal Bribe” and is authored by Paul, Hastings, Janofsky & Walker attorneys Leslie Ligorner and Barbara Tsai.

Of particular interest is the section on Chinese state-owned entities and China corruption laws. Among other things, the article notes that many SOE employees “behave like private players in commercial playing fields and not in the manner traditionally associated with the behavior of government officials” and that China law “does not specifically include employees of SOEs within the definition of public officials.”

Also catching my eye was this recent Businessweek piece by Dexter Roberts titled “The Higher Costs of Bribery in China.”

Some China reading material to keep you occupied until the next China-related post.

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