Criminal Risks for Companys during the Coronavirus Outbreak

In December 2019, a new type of coronavirus (i.e., 2019-nCov) causing novel coronavirus pneumonia (“NCP”) broke out in Wuhan city, Hubei Province, and NCP then became an epidemic disease in many provinces in China and was detected in some countries and regions all over the world.  While the Chinese government, healthcare institutions and personnel have been trying their best to control the epidemic situation, from a legal perspective, the 2019-nCov not only causes labor law issues for companies operating in China, it also brings criminal risks¹ to the daily business operation of companies.  For companies to understand these criminal risks better so as to minimize such risks, we have summarized several hypothetical scenarios, which may occur in different industries with preliminary legal introductions and analysis, as follows: 

Abbreviations:

• CL: the Criminal Law of the People's Republic of China

• 03Int: the Interpretation on Several Issues regarding Law Application in Handling Criminal Cases in relation to Obstructing Prevention of and Controlling the Disasters including Breakout of Infectious Diseases (issued by the Supreme Court and the Supreme Procuratorate of the People's Republic of China in 2003)

• 08Pro: the First Provision on Thresholds for Filing and Pursuing Criminal Cases by Public Security Bureau (issued by the Supreme Procuratorate and Ministry of Public Security of the People's Republic of China in 2008)

• 13Int:the Interpretation on Several Issues concerning the Application of Law in Handling Criminal Cases involving Defamation and Other Offences Committed through Information Networks (issued by the Supreme Court and the Supreme Procuratorate of the People's Republic of China in 2013)

• A: Article

1. Medicare Industry

Scenario	Crime	Law
Product liability-related crime
Manufacturing fake/ungraded products Selling fake/ungraded products	Crime of manufacturing or selling fake/ungraded products (“catch-all article”)	CL-A140 03Int-A2
Manufacturing fake drugs Selling fake drugs	Crime of manufacturing or selling fake drugs	CL-A141 03Int-A2
Manufacturing ungraded drugs Selling ungraded drugs	Crime of manufacturing or selling ungraded drugs	CL-A142 03Int-A2
Manufacturing substandard medical devices Selling substandard medical devices Knowingly purchasing substandard medical devices for compensable use	Crime of manufacturing or selling substandard medical devices	CL-A145 03Int-A3
IP violation-related crime
Faking a registered trademark	Crime of faking a registered trademark	CL-A213
Selling products with a fake registered trademark	Crime of selling products with a fake registered trademark	CL-A214
Business operation-related crime
Raising prices to an unreasonably high level during the infectious disease breakout	Crime of operating business unlawfully	CL-A225 03Int-A6

2. Manufacturers

Scenario	Crime	Law
Epidemic disease-related crime
Restarting business operations ahead of the time scheduled by the government	Crime of obstructing the prevention and treatment of an epidemic disease	CL-A330 08Pro-A49
Environmental protection-related crime
Discharging, dumping or disposal of wastes containing pathogens of epidemic diseases or toxic substances, or other hazardous wastes to land, water or air	Crime of environmental pollution	CL-A338 03Int-A13

3. Retailers

Scenario	Crime	Law
Business operation-related crime
Raising prices to an unreasonably high level during an epidemic disease breakout	Crime of operating business unlawfully	CL-A225 03Int-A6

4. Advertising Industry

Scenario	Crime	Law
False advertising related crime
Advertiser, advertisement operator or publisher releases false advertisements to promote its products or services in the name of preventing epidemic diseases	Crime of releasing false advertisements	CL-A222 03Int-A5

5. Operators and Managers of Hotels, Malls, and Office Buildings

Scenario	Crime	Law
Epidemic disease-related crime
Providing drinking water that does not conform to the hygienic standards prescribed by the state Refusing to sterilize the sewage, filth and faeces contaminated by the pathogens of epidemic diseases in accordance with the hygiene requirements prescribed by the health and anti-epidemic disease authorities Permitting or conniving epidemic disease patients, pathogen carriers and suspected epidemic disease patients to engage in work which they are prohibited from engaging in by the health administration department of the State Council because of the likelihood of causing the spread of epidemic diseases Refusing to implement  preventive and control measures proposed by the health and anti-epidemic disease authorities in accordance with the Law on Prevention and Treatment of Epidemic Diseases of the People's Republic of China	Crime of obstructing the prevention and treatment of epidemic disease	CL-A330 08Pro-A49

6. Network operators

Scenario	Crime	Law
Infringement on citizen rights-related crime
Conniving users to conduct defamation through an internet platform run by the operator	Crime of defamation	CL-A246 13Int-A8
Obstruction of social management-related crimes
Refusing to perform information security management obligations provided by laws and administrative regulations	Crime of refusing to perform obligations in respect of information network security management	CL-A286.1
Conniving users to fabricate or deliberately spread false  information through internet platforms run by the operator	Crime of fabricating or deliberately spreading false  information	CL-A291.1 13Int-A1
Conniving users to conduct provoking behavior through the internet which causes public disorder	Crime of conducting provocation acts	CL-A293 13Int-A5

7. Entities receiving donations

Scenario	Crime	Law
Corruption-related crime
Misappropriating funds and/or materials donated for the prevention and treatment of epidemic diseases	Crime of misappropriation of special funds and property	CL-A273
State staff embezzling funds and/or materials donated for the prevention and treatment of epidemic diseases	Crime of embezzlement by state staff	CL-A382 03Int-A14
Staff of non-state entities embezzling funds and/or materials donated for the prevention and treatment of epidemic diseases	Crime of embezzlement by non-state staff	CL-A271 03Int-A14

In addition to the aforementioned crimes closely relating to the epidemic disease breakout, please note that the following criminal risks may also be triggered by market players due to the lack of awareness of criminal compliance, as follows:

8. Crime of infringing citizens' personal information

During the special period of the NCP prevention and control, concerning public health and safety, governments, the medical industry, transport industry and other relevant industries may need to collect and use the personal information (e.g., health information, diagnosis and treatment information, whereabouts, personal address, etc.) of the patients and people who have been to the NCP breakout areas.  However, such collection and use of personal information should be compliant with the laws and regulations.

Scenario	Crime	Law
Personal information-related crime
Illegally obtaining citizens' personal information Selling/providing citizens' personal information to others in violation of laws and regulations	Crime of infringing citizens' personal information	CL-A253.1

9. Crimes related to securities market

The NCP may also cause a huge impact to the securities market, and we suggest that listed companies and security practitioners focus on the following potential criminal risks, including but not limited to:

Scenario	Crime	Law
Securities market-related crime
Providing shareholders and the public with false financial statements or statements concealing important facts Failing to disclose other important information which is required to be disclosed by law	Crime of illegally disclosing or failing to disclose important information	CL-A161
Trading securities or futures upon insider information Disclosing insider information to others Advising others explicitly or implicitly to engage in securities or futures transactions by taking advantage of insider information	Crime of conducting insider trading or leaking insider information Crime of trading securities or futures by taking advantage of undisclosed information	CL-A180
Carrying out combined or successive purchases or sales by taking advantage of funds, shareholding or information, thereby manipulating the trading prices of securities or futures Collaborating with another person to mutually trade securities or futures at a pre-arranged time and price and by pre-arranged means, thereby affecting the price or volume of the securities or futures traded Carrying out securities trading between accounts under the actual control of the same person, or taking the person himself/herself as the trading counterparty, buying and selling futures contracts from and to himself/herself, thus effecting the trading price or volume of securities and futures	Crime of manipulating securities or futures market	CL-A182

10. Crimes related to raising funds

The NCP will have a grave negative impact on the economy, and some small or medium-sized enterprises will inevitably be faced with a series of problems including but not limited to financial difficulties, capital chain break, etc.  In such cases, some enterprises may be faced with criminal risks because of their prior non-compliant funds-raising process, etc.

Scenario	Crime	Law
Funds raising-related crime
Issuing stocks or corporate bonds without the approval of the relevant state departments	Crime of issuing stocks or corporate bonds without due approval	CL-A179
Raising funds through fraudulent methods with the purpose of unlawful possession	Crime of funds-raising fraud	CL-A192
Obtaining loans from banks or other financial institutions by fraudulent means with the purpose of unlawful possession	Crime of loan fraud	CL-A193
Obtaining loans from banks or other financial institutions by fraudulent means, causing huge losses to the banks or other financial institutions	Crime of defrauding loans	CL-A175.1
Obtaining another party's property through defrauding means in the process of signing or performing the contract with the purpose of unlawful possession	Crime of contract fraud	CL-A224

1.Pursuant to the criminal laws and administrative laws and regulations of the People's Republic of China, for many types of crimes, if the violation of law does not meet the criminal threshold, such violation may still be regarded as illegal conduct under the administrative laws and regulations (e.g., the Public Security Administration and Punishment Act of the People's Republic of China, the Advertisement Act of the People's Republic of China, etc.).  Please be informed that in this article, we only focus on and discuss criminal law-related issues, and leave administrative law issues untouched and to be fully discussed in subsequent article(s).

WU, Lei  Partner

[e-mail]

Practice Areas:

Dispute Resolution

Regulatory Compliance

Restructuring and Insolvency

YIN, Xiao (Benjamin) 

Partner

[e-mail]

Practice Areas:

Commercial Criminal Practice

Anti-Commercial-Bribery

Compliance Investigation

YANG, Tong

[e-mail]

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