China’s Anticorruption System 2.0: A Harbinger of Rule of Law?

In his three-and-a-half-hour speech at China’s 19th Party Congress last month, President Xi Jinping demonstrated his determination to maintain his vigorous anticorruption campaign. But he also proposed a number of significant changes, including (1) the creation of a new National Supervision Commission (NSC), along with supervision commissions (SCs) at the provincial, municipal, and county levels, to spearhead China’s anticorruption efforts, (2) the adoption of new national legislation, the Supervision Law, that includes improved procedural protections for the accused, and (3) the integration of China’s obligations under international anticorruption treaties into domestic law.

For the most part, Western commentators were unimpressed (for example, see Tom’s previous post). The establishment of the NSC was characterized as “essentially another power expansion of the Central Commission for Discipline Inspection (CCDI),” while the reforms related to protections for the accused were seen as little more than the “replace[ment of] one abusive detention system with another.” I beg to differ. This reform plan, while incomplete and inadequate in some respects, is a big step forward from where China stands now. While it would be a mistake to be overly optimistic before any positive change actually takes place, it would also be a mistake to dismiss these new reforms out of hand as insignificant or cosmetic. Any movement toward greater judicialization and respect for the rule of law in China is likely to be incremental and face pushback. Understood in that context, the three announced reforms noted above seem quite significant, and mark a notable break with China’s previous approach to anticorruption enforcement.

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Who’s at the Wheel of China’s Anticorruption Drive?

Since China’s anticorruption drive kicked off five years ago, it has had a tremendous impact on the country’s politics. The Central Commission for Discipline Inspection (CCDI), until recently led by President Xi Jinping’s close ally Wang Qishan, has targeted officials both high and low—so-called tigers and flies. According to the CCDI’s own data, more than 70,000 officials at or above the level of county head have been investigated, and close to two million officials have been punished in some way. The drive has also ensnared a few senior figures who, during their days of freedom, where among the most powerful men in China, including Zhou Yongkang and Bo Xilai. The CCDI’s power does not stop even at China’s borders: According to official statistics, by the end of August 2017, over three thousand fugitives had been repatriated from more than 90 countries.

But the drive is now shifting gears. Last October, in his speech opening the Chinese Communist Party’s (CCP) 19th Party Congress, President Xi laid out plans to “deepen reform of the national supervisory system” and establish a new body, the National Supervisory Commission (NSC), to spearhead anticorruption efforts. The NSC is expected to consolidate and institutionalize the hitherto campaign-style anticorruption efforts of the CCDI. (While the exact structure of the NSC is still unknown, it will be based on lessons learned from pilot projects – the so-called Provincial Supervisory Commissions (PSCs) established in the city of Beijing, as well as Shanxi and Zhejiang provinces.) The new anticorruption system outlined by President Xi for the national level is likely to have four major effects: Continue reading

China’s Anticorruption Campaign Adds Popular Culture Entertainment Into its Toolbox

A TV series called In the Name of the People, featuring China’s current fight against high-level government corruption, has gone viral in China. Dubbed the Chinese House of Cards, the show reached an 8% TV viewing rate (the highest in 12 years) and by the end of April 2017, had been watched over 20 billion times across major Chinese online video platforms. The show is widely acclaimed for its quality production, intriguing storylines, and, more importantly, for its bold, vivid depiction of the ugly side of China’s political and social reality. Shows like this are not merely entertainment: popular culture, including TV shows, can be an important tool in the fight against corruption.

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Is China’s Anticorruption Crusade Reaching a Turning Point? Towards What?

In April 2014, a post on this blog claimed that the People’s Republic of China’s anticorruption campaign was reaching a turning point, and suggested that the campaign might be “significantly curtailed” in light of troubling signs of economic slowdown and strong pushback from other senior Party leaders. This prediction seemed reasonable at the time, yet more than three years later, the campaign shows no signs of winding down: Reports on senior government officials’ downfalls or corrupt fugitives’ repatriation from overseas still hit headlines on an almost daily basis. A recent development, however, does suggest that China’s anticorruption campaign might be reaching a different sort of turning point—turning from a near-exclusive emphasis on aggressive enforcement to institutional reforms that address the root causes of corruption.

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China Should Go After Bribe Takers in FCPA Cases

As other contributors to this blog have noted (see here, here, here, here, and here), in transnational corruption prosecutions there is a huge disparity in the enforcement of corruption laws against bribe-givers (the “supply side”) and bribe-takers (the “demand side”). For example, corporations have been penalized under the U.S. Foreign Corrupt Practices Act (FCPA) for bribes they allegedly paid to foreign officials, but the foreign officials implicated in these enforcement actions have largely remained untouched under their respective countries’ legal and political regimes. The reasons why demand-side governments have not stepped up and investigated officials who have been implicated in FCPA cases may include the lack of political will, the lack of capacity, and lack of inter-governmental cooperation. The particular reasons likely vary from country to country.

The People’s Republic of China is one of the demand-side countries that has demonstrated such a disparity. In 2016, for example, the SEC concluded 26 FCPA-related enforcement actions, 14 of which were related to corruption in China. In the same year, the DOJ published 24 FCPA-related enforcement actions as well as five declinations under its pilot program, and ten of these cases involved China. (Note that there were some overlap between the DOJ and the SEC’s enforcement actions.) Yet there has been no report about China initiating investigations into any of the officials implicated in these cases. This suggests a failure, or missed opportunity, in China’s otherwise aggressive and wide-ranging anticorruption campaign. If the government officials who take bribes can escape without any consequences, even as the bribe-paying firms are penalized, it will be very hard to effect fundamental changes to corrupt business and cultural norms, which eventually will become roadblocks to the Chinese economy’s healthy and sustainable development. Furthermore, unlike other countries, China does not seem to face significant structural obstacles that prevent it from acting on these FCPA cases. It has the political will and capacity, and it has been collaborating with the U.S. government on other matters, such as bringing back corrupt fugitives from the U.S. It seems to be just a matter of awareness or choice. This post urges the Chinese government to take a look into the government officials implicated in the FCPA cases.

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Post-TPP Withdrawal: Loss of a Trade-Corruption Milestone?

As promised, President Trump removed the United States from the Trans-Pacific Partnership (TPP) trade agreement soon after he took office in January. The move withdrew the world’s leading economy from the largest regional trade deal ever proposed. It also represented a major step back from what looked like a breakthrough in linking anticorruption and trade. As I discussed in a previous post, the TPP’s anticorruption chapter was an important step towards inclusion of anticorruption commitments in trade deals, making the U.S. withdrawal from the TPP a step backwards for the decades-old movement to incorporate anticorruption provisions in trade agreements.

Yet Trump’s move was not the end of the TPP negotiations. Nor should it be the end of championing an increased role for anticorruption and transparency in trade deals. With the TPP having reached the final stages of negotiation, its Transparency and Anticorruption Chapter can provide an outline for future trade deals that might provide further opportunities for trade-corruption linkage. As outlined in a previous post, the TPP’s chapter on anticorruption made several strides forward, including obligations to join UNCAC and respect other anticorruption instruments. What’s more, the anticorruption provisions were to be made enforceable in trade dispute resolution tribunals (though, as Danielle has previously written, corruption can already support certain actions in trade dispute arbitration). Looking at the strides forward in the draft TPP, there are three key avenues through which the Transparency and Anticorruption Chapter can continue to strengthen international trade deals.

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When, If Ever, Does a Favorable Legal or Regulatory Decision Count as an “Emolument”?

Last week, I posted about the amended complaint that the Citizens for Responsibility and Ethics in Washington (CREW) filed in its lawsuit against President Trump for alleged unconstitutional acceptance of “emoluments” from various sources. My post last week, like much of the immediate commentary on the amended complaint, focused on the new plaintiffs who had joined the suit, and the extent to which their addition mitigated concerns about whether the court would have jurisdiction to hear the case. But the amended complaint was notable for other reasons. In particular, it fleshed out more details about President Trump’s alleged violations of the Foreign Emoluments Clause, and also added a new set of allegations focused on separate violations of the Domestic Emoluments Clause.

What was most striking to me about the allegations detailed in the amended complaint is that in several cases, the alleged “emolument” is not a monetary payment or a market transaction, but rather a legal or regulatory decision by a government (U.S. or foreign) that favors businesses owned by President Trump. Consider the following examples:

  • Donald Trump had long sought—and had long been denied—Chinese trademark protection for his “Trump” brand in China. Shortly after his inauguration, President Trump made statements suggesting that he might reconsider the U.S. commitment not to recognize the government of Taiwan (the so-called “One China” policy). On February 9, President Trump met with Chinese President Xi Jinping. Following the meeting, President Trump reaffirmed the U.S. commitment to the One China policy. Five days later, China granted the Trump Organization its trademarks. According to CREW, the decision to grant the trademarks was an emolument, from the government of China to President Trump.
  • The Trump Organization has several ongoing real estate development projects in Indonesia, which require permits from the government. According to the CREW complaint, if and when the government of Indonesia grants these permits, this will constitute an emolument from the government of Indonesia to President Trump.
  • Prior to the election, a company owned by President Trump signed a lease with the U.S. General Services Administration (GSA) to open what is now the Trump International Hotel at a property owned by the U.S. government. The lease agreement stated that “no … elected official of the Government of the United States … shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom.” Prior to President Trump’s inauguration, a GSA official indicated that the GSA thought that Trump would be in violation of the lease unless he fully divests from the hotel. Shortly after the inauguration, President Trump appointed a new GSA Administrator. On March 23, the GSA issued a letter taking the position that President Trump is not in violation of the lease, principally because President Trump would not receive any earnings from the hotel until he leaves office. Many ethics experts derided the GSA’s letter as unpersuasive. The CREW amended complaint goes further, arguing that the GSA’s letter is itself an “emolument” from the U.S. government to President Trump.
  • Prior to the election, the Trump company that owns the D.C. hotel applied for a “Historical Rehabilitation Tax Credit,” which, if approved, could be worth up to $32 million. The application has cleared the first two phases of the three-stage approval process—the first step before the election, the second step after the election (but before inauguration). The National Park Service must provide the third and final approval. If the Service were to grant that approval, according to the CREW complaint, this would be an unconstitutional domestic emolument to the President.

All of these alleged “emoluments” are regulatory or legal decisions by government agencies. Can such decisions count as emoluments? When or under what conditions?

These turn out to be hard legal questions, and to the best of my knowledge there’s very little existing case law or scholarly commentary. I’ll throw out some preliminary thoughts here, but this issue likely deserves more sustained and careful analysis from genuine experts (which I am not). Continue reading