Category: Corporate Social Responsibility

China Adopts Amendment to the Criminal Law to Outlaw Bribery of Foreign Officials

Recent guest bloggers at the National Law Review from Squire Sanders & Dempsey (US) LLP.…Nicholas Chan, Zijie (Lesley) Li, Amy L. Sommers, and  Laura Wang outline some of the recent changes in Chinese law related to bribery of foreign officials: 

On February 25, 2011 the PRC adopted Amendment No. 8 of the PRC Criminal Law, criminalizing bribery of foreign government officials and “international public organizations” to secure illegitimate business benefits. This amendment goes into effect on May 1, 2011.

The PRC did not have any law addressing cross-border bribery before and this law will be the first law to condemn bribery of foreign officials. This amendment is the PRC’s effort to comply with the United Nations Convention Against Corruption to which the PRC is a signatory.

The amendment was made to Article 164 of the PRC Criminal Law prohibiting entities or individuals from offering bribes to employees of companies and enterprises who are not government officials. With the amendment, it is a criminal act to bribe foreign government officials or international public organizations.

According to this Article 164, if the payor is an individual, depending on the value of the bribes, he or she is subject to imprisonment up to 10 years; if the payor is an entity, criminal penalties will be imposed against the violating entity and the supervisor chiefly responsible and other directly responsible personnel may also face imprisonment of up to 10 years. Penalties may be reduced or waived if the violating individual or entity discloses the crime before being charged. According to the PRC Supreme Procuratorate issued in 2001, individuals offering bribes of more than RMB10,000 and entities offering bribes of more than RMB 200,000 may be prosecuted under Article 164.

Unlike other bribery-related crimes in the PRC, which focus on the receipt by the briber of ”illegitimate benefits,” bribery of foreign officials or international organizations prohibits securing illegitimate business benefits. In advance of the release of judicial interpretation of what may be “illegitimate business benefits,” the current legal understanding of what is “to secure illegitimate benefits” means in other bribery-related crimes may provide a reasonable basis for understanding this amendment.

The law refers to “officials of foreign countries and international public organizations,” but does not define these terms. For example, it is not clear whether international public organization includes foreign non-governmental organizations.

As of this Alert, no judicial interpretation or administrative regulations regarding the implementation of this provision has been promulgated. It is not clear whether foreign companies may also be subject to jurisdiction under the PRC Criminal Law with respect to this new amendment. We will continue to closely monitor future development related to this amendment.

©Squire, Sanders & Dempsey All Rights Reserved 2011

The "Safer Products" Database: Reports of Harm Made Public on March 11, 2011

Posted last week at the National Law Review by Mary C. Turke of Michael Best & Friedrich LLP – updated information on the U.S. Consumer Product Safety Commission’s Publicly Available Consumer Product Safety Information Database which is set to officially launch March 11, 2011: 

The U.S. Consumer Product Safety Commission’s Publicly Available Consumer Product Safety Information Database (the “Database”) (found atwww.saferproducts.gov) will be launched officially on March 11, 2011. Mandated by the Consumer Product Safety Improvement Act of 2008 (the “Act”), the Database includes a new mechanism for consumers to report harm, or merely a risk of harm, involving consumer products (excluding food and drugs). The Database makes qualified reports of harm available to the public, in an online, searchable format. Prior to publication of any report, the Commission will allow manufacturers to comment and/or challenge reports containing materially inaccurate or confidential information. In certain cases, manufacturers’ comments may be published as well. Previously, reports of harm and responsive comments were not available to the public unless published in a Commission report or obtained through a Freedom of Information Act request.

The Database is currently in “soft-launch” i.e., the Commission and stakeholders are testing the new reporting and response system with the knowledge that until March 11, 2011, nothing will be made publicly available in the Database. Indeed, consumer reports are being accepted through the website and any report meeting minimum requirements for publication are transmitted to registered manufacturers, importers and private labelers. These companies are able to provide comments online and challenge reports as containing inaccurate or confidential information.

This practice time is valuable, particularly because the faster a company is able to respond to a negative consumer report, the better. Companies should use the soft-launch to establish protocols for dealing with reports of harm involving their products, including designating persons within the company to be notified of reports via email and identifying the single account holder who is allowed to submit comments. The Act does not require that reports be based on first-hand knowledge or that they be made within a certain time following the alleged harm. Thus, companies should carefully review all reports in which they are named and consider monitoring reports in the Database by industry — where no manufacturer is named. Perhaps most importantly, companies should develop procedures for responding to reports that contain materially inaccurate or confidential information. The Act requires that any request to remove information from a report be “timely” and accompanied by a certification to defend the Commission if the removal is later challenged. Thus, companies must be prepared to act quickly and accurately in responding to reports of harm. Practice and preparation during soft-launch will help in that endeavor.

To succeed in an increasingly competitive business environment, manufacturing companies need to seize every available advantage. Whether negotiating a contract, moving an idea through the patent process or dealing with customers, getting your manufactured products to market requires expertly-coordinated efforts. Any delay can have a significant impact on your business. 

© MICHAEL BEST & FRIEDRICH LLP

European Parliament Adopts Resolution on Corporate Social Responsibility

Update from this week’s guest blogger at the National Law Review from Foley Hoag LLP.  Tafadzwa Pasipanodya discusses how a Corporate Responsibility Mandate would actually work.  

A resolution adopted by the European Parliament on November 25, 2010 increases the likelihood that the days of CSR as a purely voluntary initiative are numbered. Approved by a margin of 480 votes to 48, the resolution on corporate social responsibility in international trade agreements calls on the European Commission to include a CSR clause in all of the European Union’s trade agreements.

Such a clause would require, inter alia, companies to publish “CSR balance sheets,” report on due diligence, and seek free, prior and informed consultation with local stakeholders.  The proposed CSR clause would also provide for monitoring and judicial cooperation in pursuing and punishing breaches of CSR commitments.  More generally, the resolution also calls on the Commission to reinforce its promotion of CSR in multilateral trade policies and to conduct sustainability impact assessments before and after trade agreements are signed.

According to its explanatory note, the resolution was drafted in recognition of the reality that for “ordinary people throughout the world, the expansion in international trade is justified only if it contributes to economic development, to job creation and to improved living standards.”

The note provides moral, socio-economic, and political justifications for Europe to address CSR in the context of its trade agreements:

  • First, European companies enjoying the benefits of trade must be asked to conduct themselves in a socially and environmentally responsible manner in developing countries and elsewhere.
  • Second, “non-compliance with CSR principles constitutes a form of social and environmental dumping” in developing countries to the detriment of companies and workers in Europe, who are required to meet more stringent social and environmental standards.
  • Third, the EU’s trade policy must be consistent with and complimentary of its other foreign policy priorities on matters such as environmental protection and development aid.

Many of the EU’s international trade agreements already address social and environmental concerns. The significance of the proposed CSR clause is that it would place an onus on companies – not just the State parties to the trade agreements – to act in a socially and environmentally responsible manner.  Also, while recent trade agreements concluded by the EU with South Korea, Colombia and Peru vaguely mention the State parties’ intent to promote CSR, the proposed CSR clause would require specific actions by companies.  Among the proposed requirements for the CSR clause are the following:

  • Companies would be required to publish CSR balance sheets in two or three year intervals in order to reinforce transparency and reporting and encourage visible and credible CSR practices;
  • Companies would be required to conduct due diligence in order to identify and prevent  “violations of human and environmental rights, corruption or tax evasion, including in their subsidiaries and supply chains”;
  • Companies would be required to commit to “free, open and informed prior consultation” with local and independent stakeholders prior to commencing a project that impacts a local community.

The resolution envisions that other provisions enforcing implementation of CSR would accompany the CSR clause.  It recommends, for example, that in addition to establishing appropriate investigatory mechanisms, State parties should be willing to “name and shame” companies in serious breach of their CSR commitments.  The resolution also foresees judicial cooperation and training as a means of facilitating judicial redress for victims of inappropriate corporate conduct.

The European Parliament’s resolution is a non-legislative act and thus not enforceable.  It is now up to the European Commission to decide whether to incorporate the Parliament’s proposals into binding legislation.  Although some companies will balk at any attempts to limit the voluntary nature of CSR, others, especially those that already seek to operate in a socially and environmentally responsible manner, may welcome the prospect of all companies being required to operate by the same rules in the context of particular trade agreements

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