By * Kengo Nishigaki* and Yoshiaki Muto* (Baker McKenzie Japan)
1. Domestic bribery (private to public)
1.1 Legal framework
Bribery of public officials (komuin) is regulated under Articles 197 and 198 of the Japanese Criminal Code.
1.2 Definition of bribery
The giving, offering or promising to give a bribe, including anything that satisfies a person’s desire, by a private individual to a public official in connection with the public official’s duties constitutes the crime of bribery.
1.3 Definition of public official
A national or local government employee, a member of an assembly or committee or another employee engaged in the performance of public duties in accordance with laws and regulations constitutes a “public official.” Furthermore, officers and employees of government- related entities, including independent administrative agencies (dokuritsu gyousei houjin), local incorporated administrative agencies (chihou dokuritsu gyousei houjin), national university corporations (kokuritsu daigaku houjin), state-owned enterprises, and public hospitals are treated as public officials (quasi-public officials).
1.4 Consequences of bribery
(a) For the individuals involved
Individuals that corrupt public officials are subject to imprisonment for a maximum of three years or a fine of up to JPY 2.5 million.
(b) For the company/legal entity
The Criminal Code does not provide for a penalty to be imposed on the company / legal entity. However, the company / legal entity may be disqualified from public bidding or be subject to other sanctions under the relevant regulatory laws (e.g., revocation of license).
1.5 Political contributions
Political contributions are regulated under the Political Funds Control Law. It provides the following rules:
- A company may not give a political activity-related donation to an entity other than a political party or a political funding entity.
- No person may give a monetary donation in connection with any political activity (except for an election campaign) engaged in by a candidate for elected public office.
- The total annual aggregate donations to a particular political party or political funding entity must be: (i) less than JPY 20 million when given by an individual person; and (ii) a maximum amount from JPY 7.5 million to JPY 100 million, depending on the capital amount of the company when given by a company.
- The total annual aggregate donations by an individual to all candidates for elected public office must be less than JPY 10 million.
- The annual aggregate donations by an individual to a specific candidate for elected public office must be less than JPY 1.5 million.
- A non-Japanese citizen or company may not give donations in connection with any political activity.
- Anonymous donations or donations made in the name of another person are prohibited.
1.6 Limitations applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)
The Criminal Code does not establish quantitative or qualitative limitations on hospitality expenses. Anything of value can constitute a bribe under the Criminal Code.
It is worth noting that a national public official who is subject to the National Public Official Ethics Act and the National Public Official Ethics Code must comply with the following rules, among others:
- A public official may not receive a meal from an interested person under any circumstance other than casual box lunches during a conference (usually valued at JPY 2,000 to JPY 3,000) or a party at which a buffet is provided for a number of attendees (usually more than 20 attendees).
- A public official may not receive entertainment.
- A public official may not receive hospitality. Even when paying their own expenses, they need to obtain approval from their ethics supervisor.
Furthermore, other public officials, including local government and independent administrative agency officials, are usually subject to similar ethics ordinances or ethics rules established by such organizations.
2. Domestic bribery (private to private)
2.1 Legal framework
No Japanese law or regulation specifically restricts bribery of private persons.
However, under the Japanese Criminal Code, a person who is in charge of the affairs of a company, for the purpose of promoting his or her own interest or the interest of a third party, or inflicting damage on the company, commits an act in breach of legal duty and causes financial loss to the company is punished (“Breach of Trust”). Accordingly, an officer or employee of a private company who receives a bribe may be punished under the Criminal Code.
In addition, under the Japanese Company Act, a director of a company who receives a property benefit based on an unlawful request in connection with his or her duty shall be punished (Bribery by Director).
Furthermore, it is worth noting that some industries have established industry guidelines restricting bribery of private persons, which apply only to companies subject to the guidelines. For example, the pharmaceutical industry and the medical device industry have established fair competition codes that restrict the provision of benefits to physicians, among others, regardless of whether they are public officials. However, these guidelines are industry codes (not statutes) and impose no criminal penalties (they may impose civil penalties up to JPY 1 million).
2.2 Definition of private bribery
None
2.3 Consequences of private bribery
(a) For the individuals involved
Under the Japanese Criminal Code, a person who commits the abovementioned Breach of Trust shall be subject to imprisonment for up to five years or a fine of up to JPY 500,000.
Moreover, a person who commits the abovementioned Bribery by Director shall be subject to imprisonment for up to five years or a fine of up to JPY 5 million under the Japanese Company Act.
(b) For the company/legal entity
None
2.4 Limitations applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)
None
3. Corruption of foreign public officials
3.1 Legal framework
Corruption of foreign public officials is prohibited under the Japanese Unfair Competition Prevention Act (Article 18).
3.2 Definition of corruption of foreign public officials
“Corruption of a foreign public official” is defined as giving, offering or promising any pecuniary or other advantage to a foreign public official in order that the official act or refrain from acting in relation to the performance of official duties, or in order that the official, using his or her position, exert upon another foreign official so as to cause him or her to act or refrain from acting in relation to the performance of official duties, in order to obtain or retain improper business advantage in the conduct of international business.
3.3 Definition of foreign public official
For the purpose of this crime, “foreign public official” means any of the following persons:
- Any person who engages in public services for national or local foreign governments
- Any person who engages in services for an entity constituted under foreign special laws to carry out specific tasks concerning public interest
- Any person who engages in services for an enterprise of which the number of stocks with the right to vote or the amount of capital subscription directly owned a by national or local foreign government exceeds one-half of that enterprise’s total issued stocks with the right to vote or total subscribed capital, or of which the number of executives (including directors, statutory auditors, trustees, inspectors, liquidators or other persons who engage in management of its business) appointed or named by a national or local foreign government exceeds one-half of that enterprise’s executives, and to which special privileges are given by national or local foreign governments to do its business; and such person as defined in the government ordinances as “foreign public official”
- Any person who engages in public services for an international organization (hereinafter, an “international organization” means an international organization that is formed either by governments or by an international organization formed by governments)
- Any person who exercises a public function that falls under the authorized competence of national or local foreign governments or an international organization and is delegated by them
3.4 Consequences of corruption of foreign public officials
(a) For the individuals involved
- Maximum of five years’ imprisonment
- Maximum fine of JPY5 million
(b) For the legal entity
- In the case where a representative, an agent or an employee of a legal person or a person has committed violations in relation to the business of the legal person, in addition to the violator being punished, the legal person shall also be liable for a fine not exceeding JPY 300 million.
3.5 Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)
The Unfair Competition Prevention Act does not establish quantitative or qualitative limitations on hospitality expenses. Anything of value may constitute a bribe.
3.6 The Ministry of Economy, Trade and Industry issued “Guidelines for the Prevention of Bribery of Foreign Public Officials” on 26 May 2004, and updated it on 30 July 2015.1 The guidelines explain interpretation of the Unfair Competition Prevention Act, and recommend introduction of effective compliance programs, which may negate the liability of a corporation. Further, the Japan Federation of Bar Associations issued the “Guidance of Prevention of Foreign Bribery”2 on 15 July 2016, which provides practical solutions for Japanese companies operating in high-risk countries through the introduction of compliance programs and internal investigations at the awake of involvement in foreign bribery.
4. Facilitation payments
The Unfair Competition Prevention Act does not recognize so-called facilitation payments.
There is no article literally mentioning small facilitation payments in the Unfair Competition Prevention Law in Japan, and no action is freed of punishment under the title of small facilitation payment exemption. As long as the prerequisite “to obtain or retain improper business advantage in the conduct of international business” is fulfilled in specific individual cases, it will constitute the offense of bribery of foreign public officials under the Unfair Competition Prevention Law, regardless of whether or not it is a small facilitation payment.
5. Compliance programs
5.1 Value of a compliance program in mitigating/eliminating criminal liability for legal entities
The Japanese Criminal Code does not specifically recognize a compliance programs as an instrument to mitigate or eliminate liability for legal entities before the crime of corruption has been committed.
However, in order to prevent a company from incurring liability due to a violation by an employee of the Unfair Competition Prevention Act, the company is likely required to exercise caution as necessary to prevent violations. General and abstract advice is insufficient; proactive and specific instructions, among others, must be given.
In July 2015, the Japanese Ministry of Economy, Trade and Industry updated guidelines describing the framework for a compliance program capable of appropriately preventing bribery of foreign public officials.
5.2 Absence of a compliance program as a crime
Neither the Japanese Criminal Code nor the Unfair Competition Prevention Act recognizes the absence of a Compliance Program as a crime.
5.3 Compliance program elements
(a) Legal framework
Neither the Japanese Criminal Code nor the Unfair Competition Prevention Act recognizes or regulates the elements of a compliance program.
(b) Recommended practice
With respect to the Unfair Competition Prevention Act, the Ministry of Economy, Trade and Industry in July 2015 updated its guidelines describing the framework of a compliance program. According to the guidelines, the compliance program should contain the following mechanisms:
- Establishing and announcing a basic policy
- Establishing internal rules including an approval procedure for high risk activity and disciplinary measure against a violator
- Establishing Organizational Structure, including: (i) involvement of a senior corporate officer; (ii) appointment of a compliance officer or compliance supervisor; (iii) establishment of an internal consultation desk and a reporting desk, among others; and (iv) development of a follow-up structure after suspicion is brought to light
- Conducting orientation sessions for employees in the company
- Regular audit
- Review by the chief executives
6. Regulator with jurisdiction to prosecute corruption
The Japanese legal system does not have a specific regulator with the exclusive responsibility to prosecute corruption. Any public prosecutor can indict a perpetrator.
1 http://www.meti.go.jp/policy/external_economy/zouwai/pdf/ GuidelinesforthePreventionofBriberyofForeignPublicOfficials.pdf – Back
2 http://www.nichibenren.or.jp/en/document/opinionpapers/20160715.html – Back
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