A New Era for China’s Overseas Anti-Corruption Campaign

In October 2023, China’s top court publicized a lower court’s ruling that is of great importance: It is the first publicly reported case of convictions being handed down under a law passed 12 years ago which incorporated the crime of bribing foreign public officials into China’s criminal law. Beyond heralding a new era of criminal liability for Chinese businesspeople, these convictions also manifest Xi Jinping’s global ambition. They are an important early step in what he calls “Foreign Related Rule of Law.”

The judgment was passed down by the Guangzhou Intermediate Court. It found that, from 2017-2019, two former senior staff members of the state-owned China Railway Tunnel Group Co., Ltd. (CRTG), Xi Zhengbing and Zhou Zhonghe, sought illegitimate business interests by paying bribes totaling SG$220,000 (US$166,000) to Henry Foo Yung Thye, then-deputy group director of Singapore’s Land Transport Authority. Xi was also found guilty of receiving bribes of 1.92 million Chinese yuan (US$270,000). The court sentenced Xi to five years in prison for both paying and taking bribes, and Zhou to two years for paying bribes.

In 2021, Foo, the Singaporean official tasked with overseeing the construction of a large subway project, was sentenced to five-and-a-half years in prison by a Singaporean court for taking bribes totaling SG$1.24 million. Those bribes came from contractors and subcontractors, including the CRTG. Foo’s case was described by Singaporean prosecutors as “the most significant case of public sector corruption” in recent memory in a country that prides itself on the rectitude of its officials.

The Xi and Zhou case provides a glimpse into China’s application of extraterritorial jurisdiction in anti-corruption laws. In doing so under the larger backdrop of the so-called “Foreign Related Rule of Law,” it also sheds light on China’s ambition to take the driver’s seat in the international order.

China’s original Criminal Law, promulgated in 1979, contained no stipulation about bribing foreign public officials. In 2003, China signed the United Nations Convention against Corruption, which requires each state party to adopt legislation to criminalize bribery of foreign public officials (FPOs) and officials of public international organizations (OPIOs). After ratifying the Convention, China added the crime of bribery of FPOs and OPIOs to its Criminal Law through the eighth amendment in 2011. This new provision, applicable to both natural persons and legal persons (entities), was added as a second paragraph under Article 164, where bribery of non-public officials was stipulated. It provides that “[w]hoever gives any property to a functionary of a foreign country or an official of an international public organization for any improper commercial benefit shall be punished according to the previous paragraph [i.e. the provision of bribery of non–public officials].”

As for extraterritorial jurisdiction, when China’s Criminal Law was first revised in 1997, it provided Chinese courts with jurisdiction over crimes specified in international treaties or conventions where China is a party or a member. In this case, despite the fact that the crime was committed in Singapore and was a part of Foo’s larger bribery scheme, the Chinese court could assert its jurisdiction based on China’s obligations under the Convention. Additionally, Chinese courts’ jurisdiction could also stem from Xi and Zhou’s Chinese citizenship.

Given the ample grounds for jurisdiction, why have there been no previously reported cases of convictions in China resulting from bribing FPOs and OPIOs? Clearly, it is not for lack of prosecutable suspects. Over just the last decade, more than 150 Chinese companies and individuals have been debarred from the World Bank, Asian Development Bank, and other multilateral development banks for fraud and corruption. High-profile cases involving Chinese businesses or individuals bribing FPOs have been widely reported in other countries. These include unspecified Chinese state-owned companies reportedly bribing Malaysia’s former Prime Minister Najib Razak in exchange for rail link and pipeline projects that would provide the companies “above market profitability.” Multiple Chinese companies have been investigated by local prosecutors for offering bribes in Latin American countries including Bolivia, Ecuador and Venezuela.

The unusual – indeed, unprecedented – conviction of Xi and Zhou can be attributed to two major recent developments in Chinese law, domestically and internationally.

Clarifying China’s Domestic Law

Domestically, the judiciary and the procuracy are gradually putting enforceable measures in place to deal with overseas corruption.

Until recently, Chinese law lacked clear guidance on even the threshold for indictment. At the time of the eighth amendment, bribery of non-public officials (NPOs) was prosecuted if a person paid bribes of over 10,000 yuan or if an entity paid bribes of over 20,000 yuan. According to Article 164 of the Criminal Law, bribery of FPOs and OPIOs should have the same threshold for indictment as that of NPOs.

However, a judicial interpretation in 2016 complicated things by raising the threshold for bribery of NPOs to 60,000 yuan, but omitting to specify whether this should also apply to bribery of FPOs and OPIOs. This omission created confusion over the very basic question of the amount above which bribery became a criminal offense. The confusion was not resolved until May 2022, when the monetary threshold was set at 30,000 yuan for both crimes.

Despite this important clarification, prosecutors needed still more guidance before they could effectively enforce the provision. For example, what is the scope of FPOs and OPIOs, and what shall be deemed “improper commercial benefit?” Though the Convention has provided definitions for FPOs and OPIOs, it is not directly applicable to China’s domestic cases without being incorporated into Chinese law. Under the common understanding of Chinese criminal law, officials employed by foreign governments are often undisputedly a type of FPOs. But it is not clear whether, for example, officials in non-profit organizations funded by a foreign government, or nominal representatives of international organizations, have the status of FPOs or OPIOs.

Additionally, unlike most bribery crimes in China, which require the element of “improper benefit,” bribery of FPOs and OPIOs requires “improper commercial benefit.” There are several judicial interpretations and departmental guidelines elaborating the definition of “improper benefit,” but none of them touch on “improper commercial benefit.”

Not surprisingly, then, when being interviewed by a leading national legal newspaper, several judges and prosecutors expressed concern that this new provision is not really operational, and that its symbolic meaning probably exceeds its judicial effect.

Nevertheless, the court did hand down the convictions of Xi and Zhou. It is not clear what exact improper commercial benefit the CRTG had sought, except that Foo reportedly shared confidential information relating to the project and promised to support the bribers in their bid. At least there is little doubt that Foo, as director of Singapore’s Land Transport Authority, was an FPO.

The judgment was announced with fanfare, in the presence of local legislators. It was immediately published by the top court’s website, as well as People’s Daily, the Chinese Communist Party’s mouthpiece. The decision has likely become final since no appeal has been reported.

By promoting the Guangzhou court’s decision, the Supreme Court is encouraging courts across the country to refer to it while adjudicating similar cases. Although the judiciary and the procuracy are likely to release more detailed guidance related to foreign corruption in the near future, the campaign of Foreign Related Rule of Law (FRROL) is marching on and cannot wait. For now, courts have to take a pragmatic approach called “crossing the river by feeling the stones.”

China’s Law Goes Global

China’s impactful FRROL campaign is the other recent development in Chinese law that helped the Guangzhou court to arrive at its convictions in this case. As China has become increasingly assertive globally, expanding its Belt and Road Initiative (BRI) to 154 countries and 32 international organizations, China’s leadership is stressing the importance of being able to apply its own rules to foreign-related matters.

The term FRROL was coined by Xi Jinping in 2020. There is still no consensus among scholars and practitioners as to its specific application in the legal field. One of the most prominent authorities on this subject within China is Huang Huikang, a law professor and a former diplomat, who gave a talk on this topic in November to the Politburo, the highest political body of the Chinese Communist Party. According to Huang, one of the most important aspects of FRROL is to apply jurisdiction of domestic laws to legal matters with foreign elements, which is to be done by improving both legislation and law enforcement.

Huang underlined that FRROL is different from long-arm jurisdiction in the United States. The latter allows a U.S. court to exercise jurisdiction over foreign persons or entities having minimum contacts with the United States. For example, it allows the prosecution of individuals operating websites in foreign countries whose only contact with the U.S. is the use of their websites by U.S. citizens. The Chinese government portrays U.S. long-arm jurisdiction as unilateralism and bullying. Its own FRROL, on the other hand, it portrays as a concrete embodiment of widely recognized legal principles for extraterritorial jurisdictions.

In theory, Huang’s differentiation between FRROL and long-arm jurisdiction is legally subtle. In practice, given China’s global ambition, FRROL will likely become just a Chinese euphemism for a policy essentially similar to the long-arm jurisdiction it criticizes.

China has long been accused of deliberately neglecting to enforce its anti-foreign corruption laws. When competing with democracies where bribing foreign public officials is vigorously prosecuted, it enjoys advantages from this negligence, especially in some of the BRI countries where corruption is ubiquitous. Why would China curtail its unethical but lucrative practices? It has two major incentives, one reactive and one proactive.

Reactively, China is touting FRROL to counteract foreign interference and foreign sanctions, and to block U.S. long-arm jurisdiction. China-U.S. relations have soured over the past eight years. Geopolitical tensions are mounting over numerous matters, including Taiwan’s status and accusations of Chinese espionage. Beijing feels isolated and victimized by U.S.-led Western countries. FRROL will serve as a platform from which to mount legal counterattacks.

Proactively, China is boasting a “rule-based” business environment to attract and regulate foreign investment, to provide the BRI with legal protections, and to increase its impact on international rule making. Recently, in an effort to recover from the economic impact of three years of COVID-19 lockdowns, China lifted visa requirements for 11 Asian and EU countries. It also increased international flights to attract foreign business. It is eager to reassure foreign investors, who want predictable outcomes.

At the same time, China has become the world’s biggest creditor. In the past three years, $78.5 billion worth of debt from China’s $1 trillion BRI infrastructure financing program has gone into default, and China spent $240 billion in bailout money between 2008 and 2021. China is eager to establish a legal framework for dispute resolution.

As the world’s second largest economy, China is no longer shy in showing its ambition to reshape the global order. The Supreme Court’s publicization of the Xi and Zhou case sends a clear signal to the country’s 409 intermediate courts: the time has come to exercise extraterritorial jurisdiction. The Xi and Zhou case will be the first of many prosecutions involving FPOs and OPIOs. People and businesses who used to think they would have little contact with China’s judicial system will feel the impact of China’s anti-corruption laws and policies.

It is one thing to expand a country’s jurisdiction over foreign-related disputes. It is quite another to inspire stakeholders with confidence in the credibility of a country’s judiciary and acceptance of its decisions. Beijing has long been criticized for weaponizing its domestic anti-corruption campaigns to get rid of unwanted political rivals. Will the foreign anti-corruption laws and FRROL fall into the same pattern? Will they become instruments for China to manipulate the world order? Or will they, in a more hopeful scenario, improve China’s relationship with the West? Might they even, by a virtuous feedback loop, improve China’s own domestic rule of law? We will be watching to see.