Emerging Criminal Liability Issues Foreign Companies are Facing in China

CLE presented on January 16, 2014 by Edward Huang, King & Capital Law Firm

Summary prepared by Kristin Alma Whinfrey, WSBA IPS Student Liaison, 2013-14


In recent years, the Chinese authorities have investigated potential violations of Chinese criminal law by number of well-known multinational companies and their executives, including GlaxoSmithKline (GSK), Eli Lilly & Co., Novo Nordisk A/S, and UCB SA.  Recent investigations and prosecutions have focused on alleged fraud, commercial bribery, smuggling, illegal business operations, and tax evasion.

This trend reflects several potential or perceived factors, including a growing willingness by the Chinese authorities to enforce these laws currently than when the Chinese market initially opened to foreign companies, carelessness or unfamiliarity with Chinese laws and regulation, and the closing of certain loopholes in Chinese law.

Foreign companies and executives operating in or considering entry into the Chinese market should be aware of this changed environment and ways of preventing and controlling their exposure to potential criminal liability.  Among other things, they should be familiar with Chinese laws and regulations, not rely on the protocol adopted by former employees in their position, and consult with experienced in-house and outside counsel.

If a criminal prosecution cannot be avoided, a foreign company or executive may find navigating through the Chinese criminal legal system challenging. The system includes three primary governmental entities: the Public Security Organs; the People’s Procurates, and the People’s Courts.  These entities resemble the police, prosecutors and courts in the US legal system to some degree.  However, there are significant practical differences, including the difficulty of seeking release on bail pending trial in felony cases, long period of custody (could reach close to one year), and the potential for communications among the three governmental entities listed above about a case without involvement of defense counsel.  Foreign executives or companies facing investigation or prosecution should retain Chinese counsel soon as possible, be particularly cautious about attending an interrogation or signing any documents in Chinese, and inform their home country’s consulate (and seek its involvement and assistance) in order to ensure a fair judicial procedure.


The preceding summary discusses certain key points discussed during the CLE presentation, all of which are outlined in greater detail in the accompanying written materials.  This summary is a publication of the WSBA International Practice Section, and is posted with the approval of the speaker and the WSBA International Practice Section executive committee.  It is designed to inform members of the WSBA International Practice Section of recent legal developments, and may not be used to claim CLE credit.  This summary is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations. If you have specific questions about this topic, please feel free to contact Mr. Huang at edward.huang@king-capital.com


For the original announcement of this CLE, please visit HERE.