1. New law or regulation
State level: No developments.
Local level (Beijing & Shanghai): No developments.
Communist Party Rules:
(1) On January 16, 2014, the Communist Party of China (“CPC”) Central Committee issued the Regulation on Selection and Appointment of the Party and Government Leaders (the “Regulation”), which took effect on the same day and replaced a prior regulation issued in 2002. The Regulation identifies the general principles and procedures for selecting leading officials. According to the Regulation, the selection, promotion and appointment of Party and government officials shall involve consideration of both the moral integrity and the professional experience of the candidate, but the former will be more stressed.
2. Upcoming law or regulation
3. Government action
(1) It was reported on January 2, 2014 that Ma Junfei (“Ma”), the former Deputy Head of the Hohhot Railway Bureau in the Inner Mongolia Autonomous Region, was sentenced to death with a two-year reprieve by the Intermediate People’s Court of Hengshui City, Hebei Province. Ma was found guilty of accepting bribes amounting to more than RMB 130 million (USD 21.46 million) and holding a large amount of property from unidentified sources.
Railroads play an important role in transporting coal within Inner Mongolia, and the railway bureau determines how to allocate transport, giving some railway officials significant influence. Ma allegedly took advantage of his position to accept bribes from various enterprises and individuals totaling RMB 75 million (USD 12.38 million), including RMB 59 million (USD 9.74 million), USD 2.21 million, ERU 5,000 (USD 6,832), GBP 5,000 (USD 8,275), and 5.9 kilogram of gold on 269 occasions. Ma was also charged with holding RMB 63 million (USD 10.4 million) from unidentified sources.
(2) On January 5, 2014, Li Xuezhi (“Li”), the chief of the Ministry of Environmental Protection North China Supervision Center, was sentenced by the No.2 Intermediate People’s Court of Beijing to 14 years in prison for taking bribes.
Li reportedly accepted RMB 1.9 million (USD 313,758) and five Samsung mobile phones from Henan Xinxiang Xinya Paper Co., Ltd. in January 2011 while coordinating on-site environmental inspections of the company’s assets. In addition, Li received RMB 180,000 (USD 29,724) in cash, as well as gifts totaling RMB 12,000 (USD 1,981) while inspecting other enterprises in Henan province.
(3) On January 17, 2014, Hou Fucai (“Hou”), the former Chief of Construction Management Division of Housing and Urban-Rural Construction Bureau of Weinan City, Shanxi Province, was sentenced to death with two years’ reprieve by the Intermediate People’s Court of Xianyang City, Shanxi Province, for accepting bribes and holding a large amount of property from unidentified sources.
Reportedly, Hou registered a company named Weinan Xianghe Construction Technology Consultancy Service Co., Ltd., through which Hou solicited bribes in the form of security bonds and consulting service fees from 46 construction enterprises amounting to RMB 21.91 million (USD 3.61 million) during August 2006 to February 2012. Hou was also charged by prosecutors with owning property worth RMB 30.84 million (USD 5.08 million) from unidentified sources.
(4) On January 17, 2014, Liu Shenghai (“Liu”), the former Deputy Head of Local Tax Bureau of Dingxi City, Gansu Province, was sentenced to 22 years in prison by the Intermediate People’s Court of Jiuquan City, Gansu Province with confiscation of all his personal property for embezzlement, accepting bribes, and holding a large amount of property from unidentified sources.
During his term in office from 2004 to 2013, Liu allegedly took advantage of his position to accept bribes amounting to RMB 4.37 million (USD 721,015) from various individuals and enterprises. In exchange, Liu provided illegal tax benefits to the bribers. Liu was also charged with embezzling up to RMB 1.4 million (USD 230,988), misappropriating public funds totaling RMB 490,000 (USD 80,846) for stock investments, and holding RMB 5.88 million (USD 970,152) from unidentified sources.
(5) It was reported on January 23, 2014 that Zhou Jianhua (“Zhou”), the former Chief of the Standing Committee of the National People’ s Congress (“NPC”) of Xinyu City, Jiangxi Province, was sentenced to death with two years’ reprieve by the Intermediate People’s Court of Yichun City, Jiangxi Province with confiscation of all his personal property and deprivation of political rights for life.
Zhou reportedly accepted and solicited bribes on 99 occasions, totaling RMB 10.23 million (USD 1.68 million), USD 12,000, HKD 150,000 (USD 19,319), three bars of gold (each 50 grams) and other gifts worth RMB 235,800 (USD 38,939) by taking advantage of his position. In exchange, Zhou provided various illegal favors to the bribe-givers in real estate developments, investments, personnel arrangements, and elections of representatives to the Standing Committee of the National People’s Congress. Zhou appealed to Jiangxi Higher People’s Court for retrial and the case is now undergoing a second review.
(6) On January 24, 2014, Liu Jiakun (“Liu”), the former Deputy Chief of the Standing Committee of NPC and Secretary of CPC Committee of Taihe County, Anhui Province was sentenced to life in prison with deprivation of political rights for life by the Intermediate People’s Court of Suzhou City, Anhui Province.
Liu was reportedly charged with accepting bribes from real estate developers in the amount of RMB 24.66 million (USD 4.06 million), 12 bars of gold valuing RMB 1.76 million (USD 290,385), a painting worth RMB 1.56 million (USD 257,387), a BMW automobile worth RMB 960,000 (USD 158,392), and stock worth RMB 350,000 (USD 57,747). In return, Liu was found to have taken advantage of his position to pursue illegal interests for the benefit of bribe givers in connection with project contracts, land resettlement, demolition, and the disbursement of construction payments.
(1) On January 10, 2014, the Central Commission for Discipline Inspection of the CPC and Ministry of Supervision reported that during 2013, discipline inspection and supervision agencies across the country have accepted 1,950,374 petition reports relating to anti-corruption, filed 172,532 cases, settled 173,186 cases, and disciplined 182,038 people, including 31 central management cadres such as Liu Tienan, the former Deputy Chief of National Development and Reform Commission, and Jiang Jiemin, the former Chairman of PetroChina Co., Ltd, a subsidiary of China National Petroleum Corporation.
(2) It was reported on January 22, 2014 that the U.S. Securities and Exchange Commission (“SEC”) suspended the China-based counterparts of the “Big Four” accounting firms (Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers) from auditing U.S.-listed companies for 6 months, due to their refusal to reveal their clients’ auditing documents to the SEC. The Big Four said that they would appeal the ruling. China Securities Regulatory Commission reportedly is negotiating with the SEC regarding follow-up issues.
(3) In October 2013, a US District Court in the Southern District of New York ordered Bank of China Limited (“BOC”) to produce documents in BOC’s possession that the court determined were not protected by the attorney-client privilege or work-product doctrine.
Reportedly, the plaintiff is the relative of two victims of a suicide bombing in Israel who sued BOC under the Anti-Terrorism Act for providing material support to a terrorist organization and requested BOC to provide documents that had been prepared by BOC’s legal department in China. BOC refused the request, asserting that these documents are under the protection of the attorney-client privilege or work-product doctrine. For the documents governed by Chinese law, the court ruled “because Chinese law does not recognize the attorney-client privilege or work-product doctrine, BOC must produce these items”. For the documents governed by US law, the court pointed out that the protection under the attorney-client privilege is limited in its application to communications involving licensed attorneys. Because in China, in-house counsels are “not required to have legal degrees or bar certificates”, the court found that BOC had not made a sufficient showing that “the members of BOC’s Legal and Compliance Department and other departments are members of the Chinese bar” and therefore ruled that “the attorney-client privilege does not apply”.
5. China-related FCPA Action