Corporate crimes in the criminal law of the People's Republic of China
With the development of the market economy in some countries of the world, in particular in the People's Republic of China, the criminal liability of legal entities for corporate crimes, which are crimes committed in the interests and/or on behalf of the organization, has been established. This article examines the theoretical and practical aspects of corporate crimes, compares the concepts of corporate crime in Western and Eastern criminal law doctrines, presents the typology of corporate crimes in China, and analyzes methods of combating corporate crime in China. In the era of global capitalism, the development of advanced technologies, including e-commerce, we can expect a further increase in corporate crime. Corporate crime is also strongly correlated (but not identified) with other types of crime, in particular with white-collar crime, economic and organized crime. At the present stage, a key factor in the fight against corporate crime in China is the improvement of legislation aimed at preventing corporate crime within the company and the development of compliance programs to reduce the risks of illegal behavior among employees and managers. Despite the absence of criminal liability for legal entities in Russian legislation, the experience of preventing and combating corporate crime in China can and should be used to organize the prevention of illegal behavior of legal entities in Russia.
Keywords: corporate crimes, corporate crime, criminal liability of legal entities, corporation.
As the number of corporations that take an active part in the economic and socio-political life of the state grows, it becomes obvious that corporations, within the framework of their core activities, can act contrary to the law, thereby causing damage to the state and society.
In Western criminal law doctrine, corporate crime refers to actions in violation of the law that are committed by enterprises, corporations or individuals within these organizations <1>. In addition to violations of current legislation, corporations can commit actions that, being legitimate, have many negative social consequences <2>. Corporate crimes can be defined as illegal actions or omissions that result from deliberate decision-making or criminal negligence within the legitimate activities of an organization and are committed on behalf of the corporation or to achieve its official goals <3>. Corporate crime is a phenomenon in which an individual uses his position in an organization to illegally extract benefits for corporate interests, including increasing profits or market share <4>.
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<1> Hartley R.D. Corporate crimes. Santa Barbara, California: ABC-CLIO, 2008. p. 1.
<2> Passas N. Legitimate but terrible: legal corporate crimes // Journal of Socio-Economic Theory. 2005. No. 34. pp. 771 - 786.
<3> Pierce F., Tombs S. Toxic capitalism: corporate crime and the chemical industry. London, England: Routledge, 2019.
<4> Siegel L.J., Brown G.P., Ron Hoffman R. KRIM: An Introduction to Criminology, 4th edition, adapted by Nelson Tchengage, 2022. p. 272.
As for the criminal law system of the People's Republic of China, at present the term "corporate crime" does not have a clear definition in Chinese legislation. The norm of Article 30 of the Criminal Code of the People's Republic of China does not give the very concept of a corporate crime, but only indirectly describes its meaning: "For an act committed by a company, enterprise, institution, body, public organization and considered by law as a crime, criminal liability must occur" <5>. In fact, even Chinese scientists have not come to a consensus on this definition. According to He Binsong, a corporate crime should have the following characteristics: 1. Harming public interests (sociological characteristics of a corporate crime). 2. Application of criminal liability in accordance with the law (legal characteristics of a corporate crime). 3. The subject of the crime must be an organized unit (corporation) <6>. Hou Guoyun believes that "a corporate crime is a socially dangerous act of a company, enterprise, institution, body, public organization, which was committed by the decision of the organization's staff or its leaders to illegally satisfy its interests" <7>. According to researcher Li Hong, a corporate crime is committed in order to make a profit for a corporation <8> and a crime can be corporate only when the actions of the employees/management of the organization fully correspond to the intentions and will of the organization itself <9>. Chen Ruihua divides corporate crimes into systemic and non-systemic ones. The first group includes both crimes committed by making a collective decision, and crimes committed with the permission or at the direction of the person heading the enterprise. The second group includes crimes committed by other managers or employees on behalf of and in the interests of the enterprise in the absence of a collective decision or permission/instruction from the person heading the enterprise <10>. When committing crimes belonging to the second group, it is easy to prove that the subject of the enterprise acted "on behalf of and in the interests of the enterprise", however, it is more difficult to prove that the will of the subject of the crime reflected the general will of the enterprise.
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<5> The Criminal Code of the People's Republic of China.
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Summarizing the above definitions, it can be concluded that a corporate crime is a culpably committed socially dangerous act committed by the management of the corporation or its employees in order to increase their personal well-being and/or to improve the financial condition of the company, which is prohibited and punishable by law.
Corporate crime in the PRC should be differentiated from organized crime and white-collar crime. The explanations of the Supreme Court of the People's Republic of China dated June 18, 1999 "On judicial practice in cases of corporate crimes" stated that "if an organization is created with the sole intention of committing crimes or if its main activity becomes illegal from the moment of creation, crimes committed by such an organization should not be considered corporate. Instead, the guilty individuals will be punished, and the sentence will be more severe than for a corporate crime" <11>. Thus, corporate crime is not identical to organized crime. Meanwhile, corporate crimes also differ from white-collar crimes, a category of crimes committed by educated, socially respected and successful individuals in the course of their professional activities, since this emphasizes individual responsibility rather than the joint responsibility of the corporation as a whole <12>.
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<11> Clarifications of the Supreme Court of the People's Republic of China dated June 18, 1999 "On judicial practice in cases of corporate crimes".
<12> Zhou Z.J. Corporate crime in China. History and modern debates. London: Routledge, 2015. 220 p.
Unlike Western countries, China's socio-economic model is based on the theory of socialism with Chinese characteristics. From the formation of New China in 1949 until the period of economic reforms, corporations in China were generally owned by the state or the community. As a result, there have traditionally been only two types of corporations in China: state-owned or collective. In 1978, after the XI Congress of the Communist Party, the policy of economic reforms breathed new life into state corporations. Privatization became possible, and the Chinese Constitution noted the fact that, in accordance with special legal conditions, private enterprises (for example, small companies) or privately owned institutions have now become an important part of the socialist economic market. The unification of various types of privatized businesses marked the beginning of a socialist economic model with Chinese characteristics, and also gave rise to unprecedented economic reforms. Private and foreign investors in China began to conclude new deals. During the XIV Congress of the Communist Party of China in 1993, a number of regulations were adopted that laid the foundation for the transition from state-owned enterprises to privately owned businesses. In particular, the importance of privatization in the economy and its inextricable link with China's modernization and other economic reform measures were emphasized. It was also noted at the congress that a modern business entity should be competitive in the market, have clear profit goals, a differentiated level of responsibility and follow modern, scientifically based management methods. This model, in fact, will become the prototype of a "new corporation" in China. Numerous corporations should be able to coexist in the market under conditions of limited government regulation, as well as compete freely for the attention of consumers. In the same year, the Law "On Companies" was issued, according to which companies began to be considered as "legal entities". Subsequently, the positive economic reforms of the People's Republic of China led to the further consolidation of the concept of corporate crime in criminal law, and corporate crime began to have an increasing impact on the economic and social spheres <13>. In this regard, in 1997, the Criminal Code of the People's Republic of China was amended: section IV of Chapter II entitled "Corporate crimes" was introduced.
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<13> Zhang Y.J. Corporate criminal responsibility in China: Legislations and its deficiency. Beijing Law Review, 2012. N 3 (3). P. 103 - 108.
Over the past two decades, China has seen a sharp increase in the number of economic crimes, in particular corporate crimes. Moreover, the participation of corporations in various branches of economic crimes has increased dramatically, such as the misappropriation of intellectual property of others; the production of goods imitating patented or established trademarks; the production, distribution and sale of prohibited substances, as well as the smuggling of prohibited substances or goods from abroad <14>. The number of organized corporate crimes is growing at an alarming rate. In fact, crimes involving several individuals and involving financial investments are committed by corporations and companies in an organized manner and are one of the most serious social problems in China.
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<14> Zhang L., Lin Z. The Punishment of Corporate Crime in China. In Henry N. Pontell and Gilbert Geis (eds.). International Handbook of White-Collar and Corporate Crime. Heidelberg: Springer, 2007. P. 663 - 679.
Article 30 of the Criminal Code of the People's Republic of China defines a company or corporation as a person who has directly committed a crime, if it is an enterprise or organization, regardless of the type of ownership (state, collective or private) or the method of organization (public investment, collective investment or private investment) <15>. According to this definition, she is the perpetrator of a crime and, therefore, can be prosecuted in accordance with criminal law and be criminally punished. Thus, any legally established organization, whether commercial or non-profit, public or private, can be the subject of a corporate crime. Corporate crimes in China can be committed intentionally or by negligence. However, some researchers from the PRC believe that such a form of guilt as negligence should be excluded from corporate crime, since it is assumed that all subjects of corporate crimes commit criminal acts in order to benefit the corporation <16>.
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<15> The Criminal Code of the People's Republic of China.
Article 31 of the Criminal Code of the People's Republic of China provides for two principles of punishment for corporate crimes. One of them is the principle of "double punishment", which requires that both the corporation itself and the responsible persons be punished, i.e. the legislative act states that both an individual and an organization will be criminally punished in accordance with the law <17>. For example, in accordance with Article 393 of the Criminal Code of the People's Republic of China, in case of bribery by an organization, the principle of double punishment will be applied <18>. That is, a corporation that has given a bribe in order to obtain illegal benefits will be fined, and the head of the organization will be sentenced to imprisonment for up to five years. The second principle is the principle of "uniform punishment", in which only those responsible for the activities of the organization are criminally punished; no further action is taken against the corporation. For example, in accordance with art. 162 of the Criminal Code of the People's Republic of China, if an organization hides property, enters false information into the list of assets of the company, then only those who run the corporation will be prosecuted <19>, but no further punishment of the corporation will be imposed. This is due to the fact that the imposition of further monetary fines will only worsen the financial situation of the corporation and negatively affect investors. Crimes in such circumstances will fall under a single-tier punishment model and the company will be exempt from further criminal liability. Article 31 of the Criminal Code of the People's Republic of China defines that "for corporate crimes, monetary fines are imposed as punishment against a corporation, while criminal penalties will be applied in full to those persons who directly manage the corporation or participate in the activities of the corporation when committing a crime" <20>. Thus, in accordance with the Criminal Code of the People's Republic of China, any type of criminal punishment can be applied to those who headed the company, including penalties related to imprisonment, as well as fines, deprivation of political rights and confiscation of property. However, there is only one type of punishment for the corporation itself - a monetary fine. The subject of discussion in China today is the relationship between a corporation and responsible persons in accordance with the principle of double punishment, namely whether they are accomplices in a crime, because the answer to this question determines whether a person who was once found guilty in a corporate crime case is a repeat offender when he is found guilty of committing a crime on his own behalf by name or again guilty of another corporate crime <21>.
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<18> The Criminal Code of the People's Republic of China.
19> Criminal Code of the People's Republic of China.
<20> The Criminal Code of the People's Republic of China.
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In recent decades, systems of deferred prosecution Agreements (DPA) have been introduced in the United States, Great Britain, Canada, France and other countries in order to combat corporate crimes. As part of this agreement, the corporation is granted a probation period during which it must fulfill its obligations under the agreement. These obligations may include compensation for damages, cooperation with investigative authorities, creation or improvement of corporate compliance programs, implementation of internal controls, compliance with regulations of law enforcement agencies, etc. Upon expiration of the probation period, if the corporation has not violated its obligations, criminal prosecution against it is terminated <22>. The DPA systems developed in these countries provide for procedural possibilities for ending criminal prosecution of corporations after they admit guilt and take corrective measures. This makes it possible to hold corporations responsible for violating the law with the help of fines provided for in agreements, while avoiding side effects in the form of criminal records. The DPA allows the prosecutor's Office to constantly monitor commercial activities for a certain period of time, while ensuring that corporations change their approach to conducting their activities in accordance with current legislation. <23> The usefulness of the DPA system and the need for its implementation in China are in the focus of attention of Chinese scientists, while many researchers in China are calling for legislative reforms in this area <24>, <25>. In 2018, the Chinese authorities began to apply an approach related to the postponement of execution of sentences. At the same time, the Chinese government published a number of documents in which it appealed to companies to create programs aimed at ensuring compliance with the requirements of legislation regulating the activities of companies. The terms of detention of entrepreneurs were shortened and guarantees appeared for the preservation of corporate property necessary for conducting business activities. This trend encourages the transformation of business culture towards stricter observance of the rule of law and indicates the transition from punitive to health-improving justice in the fight against corporate crimes in the People's Republic of China. In the long term, continuous efforts should be made to encourage corporations to create criminal law compliance programs in order to more effectively prevent crime <26>. The purpose of these programs is to increase the level of responsibility of companies to monitor the activities of their employees. The orientation of Chinese enterprises to create a systematic criminal compliance mechanism will contribute to the prevention of corporate crime, and the introduction of compliance programs will encourage legal entities to take proactive measures to prevent risks within the corporation <27>.
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<22> Xiao M.Y. Deferred/Non-prosecution agreements: Effective tools to combat corporate crime // Cornell Journal of Law and Public Policy. 2013. N 23.
<23> Tao L.X. A Study on China's Corporate Crime Enforcement: An Emerging Reprieve Approach // US-China Law Review. 2020. Vol. 17. N 5. P. 175 - 188.
<24> Chen R.H. Deferred prosecution agreement system from the perspective of corporate compliance // Journal of Comparative Law. 2020. N 1. P. 1 - 18.
<25> Li Y.H. Criminal procedure incentives for corporation compliance in China // Journal of Comparative Law. 2020. N 1. P. 19 - 30.
<26> Truntsevsky Yu.V., Yesayan A.K. Pilot project to stimulate corporate compliance in the People's Republic of China // International public and private law. 2023. N 1. pp. 36-39.
<27> Pan Dongmei. Criminal liability of legal entities in China: traditional approaches and modern choice // All-Russian Journal of Criminology. 2020. Vol. 14. N 4. pp. 613 - 622.
The current legislation of the Russian Federation does not provide for criminal liability of legal entities, and in case of illegal actions, the organization is subject to administrative liability. In addition, for example, in case of non-fulfillment of obligations when concluding and executing government contracts and contracts within the framework of Federal Law No. 44-FZ of April 5, 2013 "On the contract system in the field of procurement of goods, works, services for state and Municipal Needs" <28> and Federal Law of July 18, 2011. No. 223-FZ "On procurement of goods, works, and services by certain types of legal entities" <29>, which, as a rule, leads to negative consequences for the state and public interests, the legislator provides for liability in the form of inclusion of legal entities and individual entrepreneurs in the register of unscrupulous suppliers. Inclusion in the specified register for two years makes it impossible to participate in the trading procedures provided for by the above-mentioned Federal Laws. In addition to the inability to be bidders and conclude contracts, legal entities lose the opportunity to accumulate contract execution experience for two years, which is key when participating in tenders (competitive procedures), where various qualification criteria are used in the selection of a supplier in addition to the price criterion <30>. We believe that the creation of such a register of unscrupulous legal entities in the PRC in the event of their committing illegal actions could contribute to the prevention of corporate crime, especially given the fact that business reputation in China is a basic value and one of the most important elements of any enterprise's activities.
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<30> Legal mechanisms for combating corruption in the field of corporate procurement: A scientific and practical guide / O.A. Belyaeva, Yu.V. Truntsevsky, A.M. Tsirin; ed. by I.I. Kucherov, M.: Contract, 2019. 160 p.; Combating corruption in business: A scientific and practical guide / Yu.V. Truntsevsky, R.A. Kurbanov, A.M. Tsirin et al.; ed. by T.Ya. Khabrieva, O.S. Kapinus. M.: Jurisprudence, 2020. 256 p.
In conclusion, it should be noted that the level of countering corporate crime in China has increased at the present stage, while the measures applied are less aimed at bringing to justice and more, starting in 2018, at improving the internal corporate system. However, a number of problems related to eliminating the negative consequences of corporate crime and increasing the level of law-abiding legal entities have yet to be solved in the long term by further reforming the criminal legislation of the People's Republic of China.
