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China’s lawfare against corruption and lessons for Pakistan (Part II)

By Hassan Aslam Shad and Dr. Ikram Ul Haq

So how has China’s lawfare against corruption been successful despite its mammoth geography and population size?  In our view, some of the reasons behind China’s successful lawfare are the following.

First, China has demonstrated the political will and resolve to uproot corruption from within the system.  If history is any guide, all previous attempts at uprooting corruption in Pakistan have been focused on settling political scores and selective accountability.

Second, over the years China has embarked on a journey to craft a regime of anticorruption laws which  has recently manifested in the consolidation of an anti-corruption regime covering both the public and the private sectors. In March 2018, two new  “super agencies” were created to regulate both the public and the private sector.

The “super agency” regulating the public sector is the National Supervisory Commission (NSC) which replaces the earlier predecessor agency and unifies the anti-corruption functions that were earlier spread among a number of national level agencies.  The NSC has increased investigative scope and powers and these now extend to heads of state-owned enterprises, public health care, research and educational institutes. NSC’s powers include obtaining evidence from individuals and entities, seizure of assets and recommending cases for prosecution. 

The “super agency “regulating the private sector in China is the State Administration for Market Regulation (SAMR) which represents a consolidation of the predecessor agency, the General Administration of Quality Supervision, Inspection and Quarantine, the Certification and Accreditation Administration, the Standardization Administration of China, and the China Food and Drug Administration.

Another example of the China’s raging lawfare against corruption is through amendments (in January 2018) to the Anti-Unfair Competition Law (AUCL) which is the primary law dealing with commercial bribery by individuals and companies in China. The revised anti-corruption provisions in the AUCL now prohibits bribery “by offering money or goods or by any other means in order to seek a transaction opportunity or competitive advantage” (art.7, AUCL). Similarly, AUCL enhances the net of bribery recipients by making accountable (i) employees of “transaction counterparties”, (ii) entities or individuals entrusted by “transaction counterparties” to handle relevant transaction matters and (iii) those who use their position, power or influence to affect a transaction.  Another penetrative mechanism introduced in AUCL is employer’s vicarious (strict) liability for employees’ misconduct relating to the seeking of a transaction opportunity or competitive advantage (art. 7, AUCL). AUCL also provides the regulators with further enhanced powers which include the power to seize and hold financial assets relating to financial bribery and the power to access bank accounts of parties suspected of engaging in bribery.

AUCL amendments is emblematic of China’s resolve to take the lawfare against corruption to the grassroots and thus drain the swamp of corruption infested with intermediaries in the economic ecosystem who are the typically conduit for unlawful financial transactions. Similarly, making owners and senior management of companies responsible for acts of employees is another additional arsenal being used in China’s lawfare since it would compel the private sector to conduct audits to avoid suspect commercial transactions and thus do proper house-keeping.  

Chinese lawfare is not merely a crystallization of laws on paper. Rather, it has been weaponized in action.  According to one source – Visualizing China’s Anti-corruption Campaign, China File – the anti-corruption campaign has resulted in “sweeping up some 2 million officials of both high rank and low”. According to the aforementioned source, just in the first half of 2018, some 302,000 investigations are underway in China. The anti-corruption lawfare has also netted political heavyweights who were previously considered untouchable.  These include General Xu Caihao (former Vice Chairman of the Central Military Commission) and Bo Xilai (former Minister of Commerce between 2007 and 2012, and a prominent member of the Politburo and Communist Party Secretary).

In the author’s view, the reasons behind the success of China’s lawfare against corruption are: (a) a clear delineation of laws governing the public and private sectors; (b) creation of independent regulatory bodies (super agencies) regulating the public and the private sectors to streamline enforcement mechanisms by doing away with inefficiency; (c) amendments to existing anti-corruption laws to enhance the penetrative reach of those laws; and (d) above all, the political will to uproot corruption from all segments of society.

Although Pakistan and China are poles apart in terms of the constitutional framework, forms of government and state structure, Pakistan should undertake a detailed study of the Chinese anti-corruption lawfare model from all perspectives.  Some questions that Pakistan needs to address include (but are not limited to) the following: Does Pakistan require stand-alone superagencies to separately regulate the public and private sectors? To answer this question, Pakistan may need to take a holistic view at the National Accountability Ordinance, 1999 (NAO) with a new set of legal eyes. Another important question that Pakistan needs to ask is what are the different forms of corruption that are rampant in Pakistan that require laws, and whether the existing anti-corruption laws are adequate to tackle exiting corruption and corrupt practices. 

In the author’s view, Pakistan’s anti-corruption laws are inadequate and require upgradation and substantial amendments to bring them in line with Pakistan’s international obligations under the United Nations Convention against Corruption (the “Convention”).  To this effect, Pakistan would need to consider inclusion of all-encompassing provisions in anti-corruption laws to tackle “intermediaries” (the proverbial smaller fish rotting the economic ecosystem). In the NAO 2009, this would include a catch-all clause to supplement the list of public officials [(art. 15 (a) of the Convention)]. 

In Pakistan, there is also an urgent need to take measures to enhance data-collection systems and forge coordination between various state institutions in order to achieve the effectiveness of their enforcement measures and do away with inefficiency.

Adequate transparency, predictability and proportionality would need to be ensured while entering into plea bargains and out-of-court settlements (art. 30, para. 1 of the Convention). It is painful to note that little attention has been given for the quality and continuous prosecutorial, investigative and other specialized training of NAB and other agencies (art. 36 of the Convention). Only well-trained officials with proper training can meaningfully implement Pakistan’s lawfare against corruption.

For the successful implementation of the Convention and effectively countering corruption, serious efforts are also required for training in specialized areas such as forensic accounting, etc., as well as foreign training in reputable organizations with emphasis on relevant anti-corruption case studies and on-site assistance by an anti-corruption experts. Pakistan has yet not paid attention even to go for model legislation (arts. 21, 30, 32 and 33 of the Convention) which, in our view, Pakistan would need to consider doing without any further delay.

Moreover, it is important that the discretionary powers of Chairman NAB –a single individual – and violations of due process of law, especially Article 10A of the Constitution of Pakistan, must end to make the process of accountability transparent and free from public criticism.   

No doubt, Pakistan faces an uphill battle against corruption. Pakistan’s economy – rather its survival as a nation – depends upon Pakistan tackling corruption. China’s lawfare against corruption can offer a useful lesson or two for Pakistan to uproot the scourge of corruption and take meaningful steps towards the creation of the Naya Pakistan envisaged by Prime Minister Khan.

Dr. Ikram Ul Haq is an Advocate of the Supreme Court and Adjunct Faculty at Lahore University of Management Sciences (LUMS). Email: ikram@huzaimaikram.com

Hassan Shad is a practicing international lawyer and a graduate of Harvard Law School. Email: veritas@post.harvard.edu

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