Earlier this week, Senator Marco Rubio introduced in the Senate a bill titled “Countering Corporate Corruption in China Act of 2022.”
In this release, Senator Rubio states that the legislation is “to modernize the Foreign Corrupt Practices Act by clarifying that the definition of corrupt intent includes actions that excuse the genocide in Xinjiang, advance the Chinese Communist Party’s (CCP) propaganda efforts, or “invest” in core CCP activities, among other actions. The legislation would require companies engaged in suspicious behavior to demonstrate that their actions are related to their underlying business, not part of a corrupt bargain with the Chinese Government or the CCP to gain or retain market access or receive any other benefit.”
The release continues: “Name a major American company operating in China — Amazon, Apple, Microsoft, Tesla, Intel — and chances are that company has at some point carried water for the genocidal regime. Those actions are more valuable to the Chinese Communist Party than any monetary bribe. It is time to do something about this.”
The bill includes the following “findings” in pertinent part.
“(1) In section 1 of the National Security Study Memorandum issued on June 3, 2021 (relating to establishing the fight against corruption as a core United States national security interest), President Joseph R. Biden, Jr. established countering corruption as a core United States national security interest.
(2) The practices of the Chinese Communist Party, the Government of the People’s Republic of China, and instrumentalities of the Government of the People’s Republic of China pose a unique challenge to the enforcement of section 30A of the Securities Exchange Act of 1934 (15 U.S.C. 78dd–1) and sections 104 and 104A of the Foreign Corrupt 12 Practices Act of 1977 (15 U.S.C. 78dd–2, 78dd–3) (referred to collectively in this section as the ‘‘corporate anti-corruption laws’’).
(3) The Chinese Communist Party, the Government of the People’s Republic of China, and instrumentalities of the Government of the People’s Republic of China routinely frustrate the enforcement of the corporate anti-corruption laws by leveraging access to the markets of the People’s Republic of China to cause companies that are subject to the corporate anti-corruption laws to improperly provide valuable benefits to those entities in the form of principally nonmonetary actions (referred to collectively in this section as ‘‘corporate actions currying favor with the Chinese Communist Party’’), which include
(A) the hiring, promotion, or retention of Chinese Communist Party officials and children of those officials, such as the unlawful practices admitted to by certain entities subject to the corporate anti-corruption laws in what are commonly known as the ‘‘princelings’’ settlements;
(B) political advocacy on behalf of the goals and policies of the Chinese Communist Party in the People’s Republic of China, the United States, and the rest of the world, including by—
(i) assisting in the denial, obfuscation, or excusal of—
(I) genocide and other atrocities committed by the Chinese Communist Party, the Government of the People’s Republic of China, and instrumentalities of the Government of the People’s Republic of China;
(II) the extrajudicial detainment, subjection to forced labor, torture, and political indoctrination of, and other severe human rights abuses with respect to, Uyghurs, Kazakhs, Kyrgyz, and members of other predominantly Muslim ethnic groups by the Government of the People’s Republic of China in the Xinjiang Uyghur Autonomous Region of China (or comparable treatment of members of other ethnic, religious, and political groups who reside elsewhere in the People’s Republic of China);
(III) censorship or other activities with respect to Hong Kong that—
(aa) prohibit, limit, or penalize the exercise of freedom of expression or assembly by the citizens of Hong Kong; or
(bb) limit access to free and independent print, online, or broadcast media; and
(IV) the extrajudicial rendition, arbitrary detention, or torture of any individual in Hong Kong or other gross violations of internationally recognized human rights in Hong Kong; and
(ii) supporting, legitimizing, or recognizing the unlawful territorial claims of the Government of the People’s Republic of China in Taiwan, Tibet, Korea, the South China Sea, the East China Sea, and other locations in which such claims are contested; and
(C) investments without reasonable business purposes in industries targeted for support by the Chinese Communist Party, the Government of the People’s Republic of China, or instrumentalities of the Government of the People’s Republic of China, including by entering into a joint venture with such an instrumentality or an entity affiliated with such an instrumentality.
(4) Corporate actions currying favor with the Chinese Communist Party are valuable to officials of the Chinese Communist Party, the Government of the People’s Republic of China, and instrumentalities of the Government of the People’s Republic of China, and constitute payments of value for the purposes of subsection (a) of each of the corporate anticorruption laws, because those actions are—
(A) directly or indirectly financially valuable to those officials due to—
(i) the extent of corruption in the People’s Republic of China;
(ii) the reliance of the economy of the People’s Republic of China on state-owned enterprises; and (iii) the integration of the party-state with business enterprises in the People’s Republic of China; and
(B) valuable to the interests of the Chinese Communist Party, and officials of that Party, in a manner that is distinct from any independent economic or public interest rationale for those actions.
(5) Corporate actions currying favor with the Chinese Communist Party are taken corruptly for the purposes of each of the corporate anti-corruption laws because those actions—
(A) have no reasonable business purpose unrelated to obtaining or retaining business 24 within the People’s Republic of China and in25 stead relate to—
(i) accessing markets within the jurisdiction of the People’s Republic of China; or
(ii) avoiding injury threatened by the Chinese Communist Party, the Government of the People’s Republic of China, or instrumentalities of the Government of the People’s Republic of China; and
(B) are morally wrongful to the extent that those actions contribute to denying, obfuscating, or excusing—
(i) genocide and other atrocities; and
(ii) the extrajudicial detainment, subjection to forced labor, torture, and political indoctrination of, and other severe human rights abuses with respect to, individuals by the Chinese Communist Party, the Government of the People’s Republic of China, or instrumentalities of the Government of the People’s Republic of China.
(6) Despite the public and prominent undertaking of corporate actions currying favor with the Chinese Communist Party by individuals and entities that are subject to the corporate anti-corruption laws, the Federal Government has undertaken little enforcement with respect to those corporate actions due to an apparent difficulty in demonstrating that the actions are corrupt, or of value to a foreign official, because of the principally nonmonetary nature of those actions.”
Based on these findings, the bill seeks to amend the FCPA by adding to the definitions section of the law the following:
The term ‘covered investment’—
‘‘(A) means any direct or indirect contribution or commitment of assets, including any—
‘‘(i) acquisition of an equity interest or convertible equity interest; or
‘‘(ii) loan or other debt interest; and
‘‘(B) does not include a transaction in goods or services, or any related party transaction, with a wholly-owned subsidiary of an entity—
‘‘(i) that is incorporated in a jurisdiction of the United States; or
‘‘(ii) the principal place of business of which is in the United States” and
For the purposes of this section
(1) an action that is taken corruptly includes an action that serves to—
‘‘(A) deny, obfuscate, or excuse that a third party has committed, or assist a third party in committing—
‘(i) the extrajudicial detainment, subjection to forced labor, torture, and political indoctrination of, and other severe human rights abuses with respect to, Uyghurs, Kazakhs, Kyrgyz, and members of other predominantly Muslim ethnic groups by the Government of the People’s Republic of China in the Xinjiang Uyghur Autonomous Region of China (or comparable treatment of members of other ethnic, religious, and political groups who reside elsewhere in the People’s Republic of China);
“‘(ii) censorship, or another activity, by the Chinese Communist Party, the Government of the People’s Republic of China, or instrumentalities of the Government of the People’s Republic of China with respect to Hong Kong that—
‘‘(I) prohibits, limits, or penalizes the exercise of freedom of expression or assembly by citizens of Hong Kong; or
‘‘(II) limits access to free and independent print, online, or broadcast media; or ‘‘(iii) the extrajudicial rendition, arbitrary detention, or torture of any indi1vidual in Hong Kong or other gross violations of internationally recognized human rights in Hong Kong;
‘‘(B) support, legitimize, or recognize the territorial claims of the Government of the People’s Republic of China in Taiwan, Tibet, Korea, the South China Sea, the East China Sea, or another location in which such a claim is contested;
‘‘(C) express political advocacy in favor of the Chinese Communist Party, the system of governance of that Party, or any official of that Party; or
‘‘(D) make a covered investment—
‘‘(i) in partnership with the Belt and Road Initiative of the Government of the People’s Republic of China; or ‘‘(ii) in any entity (including a parent, subsidiary, or affiliate of, or another entity controlled by an entity) that is—
‘‘(I)(aa) affiliated with the Chinese Communist Party, the Government of the People’s Republic of China, or instrumentalities of the Government of the People’s Republic of China; and
‘‘(bb) involved in the development, production, or sale of emerging or foundational technology identified pursuant to section 1758 of the Export Control Reform Act of 2018 (50 18 U.S.C. 4817); or
‘‘(II) on the Entity List maintained by the Bureau of Industry and Security of the Department of Commerce and set forth in Supplement No. 4 to part 744 of title 15, Code of Federal Regulations; and
‘‘(2) an action described in paragraph (1) is made with respect to a foreign official, or any foreign political party or official thereof, if, among other reasons, the action is taken in response to—
“(A) a request of any foreign official, or any foreign political party or official thereof, as applicable;
‘‘(B) an injury or threat of injury, by means of economic coercion, to the applicable issuer, or to an officer, director, employee, or agent of the applicable issuer, made by any foreign official or any foreign political party or official thereof; or
‘‘(C) a material action or announcement, including with respect to policy, by the Chinese Communist Party, the Government of the People’s Republic of China, or instrumentalities of the Government of the People’s Republic of China from which the action would rationally follow.
