On the afternoon of July 10, 2021, the 11th "Criminal Defense Ten-Person Forum" and the Symposium on Lawyers' Involvement in Corporate Compliance were held in Beijing. The forum was jointly organized by the "Criminal Defense Ten-Person Forum" and the Research Center for Corporate Criminal Risk Prevention at China University of Political Science and Law, with Beijing Xinglai Law Firm serving as the承办单位 (organizing entity).

The "Work Plan on Piloting Corporate Compliance Reform," issued by the Supreme People's Procuratorate at the launch of the second phase of its corporate compliance reform pilot program, emphasizes that these initiatives involve prosecutorial agencies employing a variety of measures—such as refraining from approving arrests or pursuing prosecutions in corporate-related criminal cases, or recommending lenient sentencing under the guilty plea and penalty reduction system—while simultaneously encouraging the companies involved to commit to compliance reforms and actively implement corrective actions tailored to the specific crimes they are suspected of committing. The plan also advocates for seamlessly integrating corporate compliance efforts with the judicious application of the guilty plea and penalty reduction system. In Case No. 2 of the typical cases released by the Supreme People's Procuratorate on June 3—the "Shanghai A Company, B Company, and Guan Moumou Case of Fraudulently Issuing Special Value-Added Tax Invoices"—the integration of corporate compliance with the guilty plea and penalty reduction system was clearly demonstrated. This approach allowed prosecutors to recommend suspended sentences instead of actual prison terms where feasible, aligning with the judiciary’s policy of prioritizing leniency. This example highlights how the guilty plea and penalty reduction system serves as a vital institutional cornerstone for both judicial reform and the localized exploration of corporate criminal compliance frameworks in China. Currently, China’s corporate criminal compliance reform is being advanced primarily through the lens of this system.

At this forum, discussions centered on the theme of "Lawyers' Involvement in Corporate Compliance," delving into key topics such as "The Institutional Framework for Lawyers' Participation in Criminal Compliance," "Criminal Compliance vs. Criminal Defense," "Challenges and Risks Associated with Lawyers Engaging in Criminal Compliance," and "Relevant Issues for Lawyers Expanding into Criminal Compliance Services."

In addition to the full attendance of the "Ten Criminal Defense Experts," the forum also specially invited Dr. Gao Jingfeng, Director of the Policy Research Office at the Supreme People's Procuratorate; Professor Zhao Tianhong, Director of the Research Center for Corporate Criminal Risk Prevention at China University of Political Science and Law; Professor Li Hong, Director of the Center for Commercial Crime Studies at Tsinghua University; and Professor Zhao Jun from the Entrepreneurial Crime Research Center at Beijing Normal University to serve as panelists.

Here is the speech delivered by lawyer Lan Ting Xu from Beijing Junyong Law Firm at the forum, compiled and shared for your enjoyment.

Xu Lanting

Lawyer at Beijing Junyong Law Firm

Against the backdrop of comprehensively deepening reform and strengthening judicial protection for private enterprises, Chinese companies—driven by their own international expansion—are increasingly facing overseas compliance allegations and grappling with the complex challenge of managing compliance risks. High-profile corporate compliance cases, such as the "ZTE incident," have underscored the urgent need for businesses to prioritize compliance, prompting the Chinese government to issue a series of guidelines and regulatory frameworks aimed at guiding companies in building robust compliance systems. Meanwhile, legislative bodies have begun incorporating corporate compliance mechanisms into administrative regulations, while central state-owned enterprises have already established comprehensive compliance committees across the board, further advancing their compliance initiatives in recent years. Meanwhile, criminal compliance has emerged as a hot topic in both legal academia and practice, with ongoing efforts to deepen practical exploration and theoretical research into this area. Although China’s legal framework has yet to formally establish a dedicated criminal compliance system, the process is currently being piloted by prosecutors within the existing legal framework. In this context, the plea bargaining system—recognized as a fundamental principle of criminal procedure—has profoundly influenced corporate efforts to embrace criminal compliance, effectively paving the way for smoother implementation of compliance reforms.

I. The Relationship Between Corporate Criminal Compliance and the Leniency System for Plea Bargaining and Punishment Reduction

The "Work Plan on Piloting Corporate Compliance Reform," issued by the Supreme People's Procuratorate when launching the second phase of its corporate compliance reform试点工作, emphasizes that these pilot efforts involve prosecutorial agencies applying a range of measures—such as refraining from approving arrests or pursuing prosecutions in corporate-related criminal cases, or recommending lenient sentencing under the guilty plea and penalty reduction system—while simultaneously urging the companies involved to commit to compliance reforms and actively implement corrective actions tailored to the specific crimes they are suspected of. The plan also advocates for integrating corporate compliance initiatives with the judicious application of the guilty plea and penalty reduction system. In Case No. 2 of the typical cases released by the Supreme People's Procuratorate on June 3—the "Shanghai A Company, B Company, and Guan Moumou Case of Fraudulently Issuing Special Value-Added Tax Invoices"—the integration of corporate compliance with the guilty plea and penalty reduction system was clearly demonstrated. This approach enabled prosecutors to recommend suspended sentences instead of actual prison terms where possible, reflecting the judiciary’s policy of prioritizing leniency. This example underscores that the guilty plea and penalty reduction system serves as a crucial institutional foundation for both judicial reform and the localized exploration of corporate criminal compliance frameworks in China. Currently, China’s corporate criminal compliance reform is being advanced primarily through the lens of this system.

Corporate criminal compliance shares common ground with the plea bargaining system in terms of underlying principles. Both are deeply influenced by the cooperative judicial philosophy, embodying a collaborative approach to justice. Moreover, the rationale behind offering "leniency" in corporate compliance—just as it does in plea bargains—is rooted in the reduced need for preventive measures. In fact, a company’s compliance program serves as a clear and effective demonstration of its willingness to admit guilt and show remorse. From another perspective, while the criminal compliance system incorporates elements such as leniency, compensation for damages, and fines, it also mandates that prosecutors grant the involved companies a necessary period of supervision and assessment. Unlike the plea bargaining system, which primarily aims to enhance litigation efficiency, corporate criminal compliance places greater emphasis on preventing crime before it occurs and encouraging businesses to fulfill their social responsibilities in a meaningful way. This distinction highlights that, despite overlapping goals, the two systems diverge significantly in terms of their core values and intended outcomes. Given these similarities and differences, there are two main perspectives on the relationship between corporate criminal compliance and the plea bargaining system: one advocates integrating corporate compliance into the plea bargaining framework, while the other calls for establishing an independent criminal compliance system that operates alongside plea bargaining. However, since the supervisory review component of corporate compliance often clashes with the efficiency-focused objectives of plea bargaining, and given that the plea bargaining system itself—and its integration with other legal frameworks—still requires further refinement, it may ultimately be more beneficial in the long run to develop a standalone criminal compliance regime. After all, this approach would better align with the overarching goal of preventing crime at its source.

II. Corporate Plea and Penalty Mitigation System

Given the close link between corporate criminal compliance and the plea bargaining system with leniency, the corporate plea bargaining system has become a critical issue in criminal compliance reform. Since its pilot implementation in select regions in 2016, the system has drawn significant attention and was formally enshrined in the 2018 revision of the Criminal Procedure Law, transitioning from experimental exploration to legislative standardization. However, most research on the plea bargaining system with leniency has focused on its application to individual suspects involved in cases, while the question of how this system can be effectively applied to corporations remains relatively underdiscussed compared to its individual counterpart.

Applying the plea bargaining system to companies involved in criminal cases is not only an essential step in strengthening judicial protection for private enterprises and fostering a rule-of-law business environment, but also a crucial pathway to realizing the core objectives of the plea bargaining system. First, from the perspective of enhancing litigation efficiency, corporate crimes tend to be more concealed than those committed by individuals, making them harder to detect promptly. Moreover, corporate offenses often involve high levels of complexity and technicality, further complicating the process of gathering evidence. As a result, prosecuting and punishing corporations typically demands significantly more judicial resources, limiting the full deterrent effect of criminal penalties. By contrast, the plea bargaining system allows businesses to admit guilt and accept lighter punishments, thereby optimizing resource allocation and effectively boosting litigation efficiency. Second, from the standpoint of resolving social conflicts, holding corporations criminally accountable can have far-reaching negative consequences—impacting not only the companies themselves but also their employees, investors, and even consumers—potentially destabilizing both markets and society at large. Implementing the plea bargaining system for corporate defendants, however, can help maintain social stability and harmony, aligning seamlessly with the broader goal of mitigating societal tensions.

The Criminal Procedure Law does not limit the application of the leniency system for guilty pleas and punishment acceptance exclusively to natural persons; indeed, top judicial authorities have repeatedly emphasized "exploring the establishment of work norms and mechanisms tailored to the unique characteristics of criminal cases involving enterprises." During the COVID-19 pandemic response, the issue of applying this system to corporate entities has garnered even greater attention. In February 2020, the Central Political and Legal Commission, along with the Supreme People's Court, the Supreme People's Procuratorate, the Ministry of Public Security, and the Ministry of Justice, jointly issued the "Opinions on How Political and Legal Organs Should Legally Support Resumption of Work and Production During Epidemic Prevention and Control," which explicitly encouraged the proactive implementation of the guilty plea and penalty acceptance system in handling enterprise-related cases, while reinforcing the judicial principles of minimizing arrests and exercising caution in prosecutions. Subsequently, in the 22nd and 24th batches of guiding cases released by the Supreme People's Procuratorate—titled "Application of the Guilty Plea and Penalty Acceptance System by Prosecutorial Authorities" and "Supervision of Filing Cases Involving Non-Public Economic Entities," respectively—several criminal cases involving enterprises were highlighted as examples where the system was successfully applied. These cases clearly demonstrate that the guilty plea and penalty acceptance system can be applied broadly to all types of criminal cases, including those targeting businesses. Specifically, when enterprises and their directly responsible managers or other personnel voluntarily and truthfully confess their crimes, acknowledge the alleged criminal facts, and express willingness to accept punishment, both the company and the individual involved should receive lenient treatment in accordance with the law. As evidenced by these regulations and case studies, the guilty plea and penalty acceptance system has proven its applicability in judicial practice across China, even in cases involving corporate offenses.

III. Corporate Criminal Compliance from the Perspective of Plea Bargaining and Leniency

In the 22nd batch of guiding cases released by the Supreme People's Procuratorate, the case involving Wuxi F Police Equipment Co., Ltd. for fraudulently issuing special VAT invoices highlights the significant role of the plea-bargaining system in promoting compliance among private enterprises and advancing socio-economic governance. It also provides valuable guidance on applying the plea-bargaining system to corporate compliance reforms and exploring innovative approaches to criminal compliance. F Police Equipment Co., Ltd. submitted a written statement expressing no objection to the facts and charges in this case, demonstrating its willingness to plead guilty and accept leniency while requesting a more favorable treatment. The company further showcased its remorse by proactively implementing corrective measures, establishing robust internal controls, and ensuring lawful and compliant business practices—culminating in the signing of a "Plea Agreement." The procuratorial authorities subsequently held an open hearing to gather input from all relevant parties. Considering the relatively minor nature of the offense, as well as the company’s and its directly responsible individuals’ sincere acceptance of guilt and cooperation with the legal process, the prosecutors ultimately decided not to prosecute. This decision aligns with the Supreme People's Procuratorate’s recently published typical case study on pilot programs for corporate compliance reform, which once again underscores the critical importance of the plea-bargaining system in driving corporate compliance initiatives. Notably, corporate criminal compliance directly shapes both the "plea" and "leniency" aspects of the plea-bargaining framework. Therefore, it is essential to further explore criminal compliance from the perspective of the plea-bargaining system itself. Additionally, lawyers involved in corporate compliance matters must clarify their roles and responsibilities in light of the plea-bargaining framework to ensure effective implementation.

1. Criminal Compliance and "Plea Bargaining"

The "Opinions on Establishing a Compliance Examination System for Enterprises Involved in Crimes," formulated by the Liaoning Provincial People's Procuratorate and other entities, clearly state that enterprises subject to this system must voluntarily admit guilt and accept punishment—both the company itself as well as its directly responsible managers and other personnel with direct accountability. However, due to the unique implications of criminal compliance, the specific meaning of an enterprise's "acceptance of punishment" differs from how individuals are expected to demonstrate remorse and cooperation with legal proceedings. According to the "Guiding Opinions on Applying the Leniency System for Confessed and Punished Offenders," "acceptance of punishment" refers to the "sincere remorse and willingness of the suspect or defendant to comply with the imposed penalty." Additionally, the 22nd batch of guiding cases released by the Supreme People's Procuratorate emphasizes that "establishing sound internal rules and regulations to ensure lawful and compliant business operations should be regarded as a key factor reflecting remorse and influencing decisions on lenient sentencing." Thus, under the influence of criminal compliance reforms, factors such as whether an enterprise has developed and implemented a robust compliance plan, improved its corporate governance structure, and demonstrated tangible progress toward ethical and legal business practices are now integral to assessing an organization's level of remorse—and consequently, determining whether it qualifies for reduced penalties.

Additionally, since China’s principle for punishing corporate crimes prioritizes dual punishment while single punishment serves as a supplementary measure, when applying the leniency system for guilty pleas and sentencing concessions in corporate crime cases, it is crucial to pay close attention to the issue of who qualifies as the subject eligible for such treatment. If the alleged offense against the company falls under the single-punishment framework, the subjects eligible for a guilty plea and sentencing concession would be the company’s directly responsible managers and other individuals bearing direct accountability. However, if the alleged crime is subject to dual punishment, the enterprise itself must also be included as a party eligible for this treatment—and when determining whether the company has indeed “pleaded guilty and accepted punishment,” the assessment should be conducted separately for each relevant individual or entity involved.

2. Criminal Compliance and "Leniency"

In recent years, the procuratorial authorities have adopted a judicial policy for handling cases involving private enterprises: "refrain from arrests when possible, avoid prosecutions where feasible, and recommend suspended sentences instead of actual prison terms whenever appropriate," all in strict accordance with the law. Additionally, they have launched pilot programs focusing on compliance oversight for businesses involved in criminal or regulatory offenses—programs designed to ensure that such entities are neither arrested nor prosecuted, and that, if convicted, they avoid harsh prison sentences. This approach aims to achieve more lenient penalties both procedurally and substantively. Subsequently, the Supreme People’s Procuratorate highlighted in its 22nd batch of guiding cases that "establishing sound internal systems and implementing legal and compliant business practices" should be considered a key factor in determining whether to grant leniency. Furthermore, in exemplary cases from the corporate compliance reform pilot program, the Procuratorate emphasized the importance of applying the plea-bargaining system to secure lighter sentences—specifically, recommending suspended sentences whenever possible instead of actual imprisonment. This underscores the clear link between the degree of leniency granted under the plea-bargaining system and the level of corporate compliance achieved.

In terms of procedures, in addition to the principle of "not arresting when possible," the pilot compliance prosecution agencies have proposed lenient investigative measures for enterprises, stipulating that, provided litigation can proceed smoothly and relevant administrative or criminal penalties remain enforceable, authorities may lift the seizure, detention, or freezing of corporate assets such as equipment, funds, and technical documents.

In terms of practical implementation, the "leniency" aspects of criminal compliance include decisions not to prosecute and reduced sentencing. Currently, China’s pilot corporate compliance review system offers a pathway to exemption from criminal liability: Prosecutors identify companies suspected of minor offenses that demonstrate a genuine commitment to compliance and are willing to plead guilty and accept punishment as candidates for compliance scrutiny. If these companies successfully strengthen and refine their management systems during the review period, prosecutors may decide not to press charges against them—provided they meet all applicable criteria. This system builds on the existing framework of lenient treatment for defendants who admit guilt and cooperate with justice. Prosecutorial authorities have already outlined specific conditions for issuing non-prosecution decisions under this system, emphasizing that such decisions must be made after an open and transparent review process. Additionally, prosecutors advocate that, in cases where prosecution is ultimately deemed necessary following the compliance review, courts should consider imposing lighter or reduced penalties—not only on the company itself but also on its directly responsible executives or other individuals bearing direct accountability.

3. Lawyer Involvement

From the perspective of the plea bargaining system with leniency, and drawing on the 22nd batch of guiding cases released by the Supreme People's Procuratorate as well as typical cases from pilot programs on corporate compliance reform, the key aspects related to corporate criminal compliance generally include the following: First, companies voluntarily pleading guilty and accepting punishment commit to implementing compliance measures and initiating compliance initiatives. Second, based on the company’s progress in improvement and considering the specific characteristics of corporate crime, a "Plea Agreement and Commitment Letter" is signed—under the supervision of the procuratorial authorities—with the unit’s litigation representative signing and the company affixing its official seal, all witnessed by a lawyer. Finally, when filing public prosecution, the procuratorate may propose a lighter sentence in accordance with the plea bargaining system; alternatively, after holding a hearing to gather input from all parties, the prosecutor’s office may decide not to prosecute altogether.

From the details of the cases mentioned above, as well as the relevant provisions outlined in the "Guiding Opinions on Applying the Leniency System for Guilty Pleas and Sentencing Agreements," it is evident that, in criminal cases involving enterprises subject to this system, the "Letter of Commitment for Guilty Plea and Sentencing Agreement" should be signed in the presence of either the defense counsel or the duty lawyer. Regarding the commitment letter for acceptance of compliance investigations in criminal compliance cases, some procuratorates have already suggested that it should be signed by the enterprise involved in the crime, along with its directly responsible executives and other personnel bearing direct accountability—again, with the defense counsel or duty lawyer present. Beyond these specific activities requiring attorney involvement, certain pilot procuratorates have also begun designating professional institutions such as law firms as compliance supervisors. Recently, the Supreme People's Procuratorate and other authorities jointly issued the "Pilot Guiding Opinions on Establishing a Third-Party Supervision and Evaluation Mechanism for Corporate Compliance in Criminal Cases." These guidelines specify that, in pilot regions, when handling corporate crime cases that meet applicable criteria such as "the enterprise and individuals involved have admitted guilt and accepted sentencing agreements," the local procuratorates may refer the case to a third-party supervision and evaluation organization selected by the Third-Party Supervision and Evaluation Mechanism Management Committee. This organization will then conduct investigations, assessments, oversight, and evaluations of the enterprise’s compliance commitments. The outcomes of these evaluations will serve as a crucial reference for determining how the case is ultimately handled. Additionally, the "Guiding Opinions" clarify that, for corporate crime cases where decisions such as rejecting arrest requests, deciding not to prosecute, or modifying coercive measures are under consideration, the procuratorate may convene a hearing. During such hearings, members of the appointed third-party organization would be invited to attend and provide their expert opinions.