Commission promises tougher graft-busting regime

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On 20 March 2018, the National People’s Congress (NPC) passed the Supervision Law detailing the powers and responsibilities of the National Supervision Commission.

The new commission is China’s highest anti-graft agency, and was established at the first session of the 13th NPC. Under the new law, the new commission provides a centralized supervisory system for anti-corruption enforcement and merges the Ministry of Supervision, under the State Council, and the department of anti-corruption investigation of the Supreme People’s Procuratorate (SPP). It will also carry out the responsibilities of the Communist Party of China’s Central Commission for Discipline Inspection (CCDI).

What does this mean for 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, political advisory bodies, as well as their own staff, executives of state-owned enterprises, management staff of public institutions and mass organizations (collectively referred as “officials”).

Expect 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. 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 in 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.

Highlights of the reform

The National Supervision Commission. The establishment of the new commission follows the local pilot administrative reform that began in Beijing, Shanxi and Zhejiang provinces in December 2016. The new commission is deemed to be an institutionalization of Beijing’s anti-corruption campaign in recent years.

It has the same administrative ranking as the State Council, Supreme People’s Court and SPP, and is expected to mitigate potential improper influence or interference from the government. The new commission assumes the investigative function from the SPP, which will focus on public prosecution.

The new commission inherits duties from the former supervision department and the procuratorate. These include the ability to take administrative disciplinary action against officials who have violated the law, investigate official corruption, and transfer cases to procuratorates for prosecution. The latter is similar to the duties of police for other criminal violations.

The Supervision Law. The new law also provides broad investigative powers to the new commission, including the power to freeze assets and accounts, issue subpoenas, search persons or residential premises, and restrict suspects and relevant persons from travelling abroad.

The new commission replaces the practice of shuanggui and shuangzhi with the power to detain a corruption suspect. (Shuanggui refers to intra-party disciplinary practice that requires a Communist Party member to co-operate with questioning at a set time and set place. Shuangzhi is a similar practice against a governmental official who is not a party member.) Shuanggui and shuangzhi were frequently criticized secret disciplinary detention mechanisms of the Chinese Communist Party.

Although the new law is silent on the right to have access to lawyers or clear redress mechanisms for detainees, compared with shuanggui it provides a certain degree of transparency and clarity during the anti-corruption investigation. For example, the detention has to be approved with caution and cannot continue for longer than six months. Also, in general cases, the family of the detainees have to be notified within 24 hours of the detention.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at danian.zhang@bakermckenzie.com