New FCPA Compliance challenges in China?

Imagine this: You’re a compliance professional, overseeing your company’s operations in China, a country known for its rapid economic growth and business opportunities. Your company has invested significant resources in China, and your teams are excited about the growth in this vast market. But suddenly, a new law comes into play – bringing with it a whole new set of compliance challenges that could impact your operations, reputation, and bottom line.

That’s what the latest buzz in Washington seems to suggest.

Senator Marco Rubio (R-FL) has just introduced a new bill that’s got legal experts talking ( and mostly scratching their heads). The Countering Corporate Corruption in China Act of 2023 is a bill that aims to expand the Foreign Corrupt Practices Act (FCPA) to cover corporations operating in China, and its potential implications are generating a lot of debate already.

Why does it matter?

So, what’s the big deal with this bill? Well, let’s start first with some background. For those unfamiliar with U.S. laws, the FCPA is a law that prohibits bribes and corrupt activities to gain or retain business in foreign countries. It has been around since 1977 and has been a formidable and feared tool used by the U.S. in combatting corruption in international business transactions. The FCPA not only applies to U.S. companies, but also on foreign companies listed on U.S. stock exchanges, and individuals and entities acting on behalf of such companies.

Now, Senator Rubio’s bill proposes to expand the FCPA to cover corporations operating in China. The bill seeks to redefine “corrupt actions” under the FCPA to include activities such as denying or excusing censorship by the Chinese Communist Party, expressing political advocacy in favor of the Party or its system of governance, or supporting China’s territorial claims in contested areas. It would also limit certain types of investments in China.

At first glance, this may seem like a reasonable step to combat corruption in China. After all, the Chinese Communist Party has been heavily criticized (mainly by the U.S.) for its strict censorship, human rights abuses, and aggressive territorial claims in recent years.

However, as with any legislation, the devil is in the details, and that’s where things start to get tricky.

Is this opening to the door to infinite little bills?

One of the key concerns about this bill, is that it would be the first time that the FCPA sets country-specific standards for violations. In other words, if enacted, the bill could very well set a precedent for future amendments to the FCPA targeting other countries as well. If one country-specific standard is added to the FCPA, it could open the door for similar amendments aimed at other nations, creating a patchwork of country-specific compliance requirements that could be burdensome for businesses operating globally.

Monitoring Political Speech: A Compliance Conundrum

Another concern about the bill is that it would mean that corporations operating in China would have to monitor and make judgments about their employees’ political speech. That sounds like one heck of a job, so brace yourselves, compliance folks!

Essentially, the proposed legislation may require you to delve into the political speech of your employees, a task that is rather unusual for corporate compliance departments. While compliance folks may be experts at tracking payments, assessing third-party risks, and conducting due diligence, making judgments about political speech sounds like wearing a whole new other hat.

Let’s imagine for a second what your FCPA liability would be if a US court later determines that your judgments about political speech were off the mark…  New compliance courses soon to be added to our syllabuses?  “Making effective political jugements 101”?

Deciphering the vague Language: What Speech is Permissible?

The proposed bill is riddled with vague language, leaving legal experts scratching their heads. What exactly constitutes “political advocacy in favor of the Chinese Communist Party” or “the system of governance of that Party”? Determining what speech “obfuscates” or “excuses” Chinese government censorship with respect to Hong Kong, and who qualifies as a “third party” committing such censorship, would be like trying to get into the Chinese government’s head (or the US government’s head, depending on which angle you look at it)

So for example would a tweet by one of your employees endorsing communism without mentioning China potentially land your company in FCPA hot waters? How about a press release expressing support for the company’s investment in China? What if an employee engages in political speech that is ambiguous or difficult to interpret? How does a corporation ensure compliance while respecting employees’ free speech rights? What types of speech would be considered permissible or not? Without clear guidelines, businesses may find themselves in a difficult position of trying to interpret and comply with ambiguous requirements.

Implications for Corporate Compliance Departments

  • Corporate compliance departments may face unprecedented challenges in monitoring and making judgments about political speech, which is a departure from their usual scope.
  • Compliance efforts may need to undergo a significant expansion to encompass the monitoring and reporting of employees’ political speech, adding a new layer of complexity to compliance programs.
  • The lack of clear guidance from the legislation may heighten compliance risks and uncertainties for corporations operating in China, requiring proactive strategies to stay compliant.
  • Complying with this bill would require corporations to spend a significant amount of time and effort developing policies and procedures to monitor and regulate political speech by their employees. This would likely involve complex and delicate assessments of what constitutes “corrupt actions” under the FCPA, and it could place an additional burden on businesses operating in China.

It’s important to note that many businesses operating in China already face challenges in navigating the country’s complex political landscape.


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