what we think

By Maarten Roos

On April 10, 2026, China's Supreme People's Court (SPC) and Supreme People's Procuratorate (SPP) issued the Interpretation (II) on Several Issues Concerning the Application of Law in Handling Criminal Cases of Corruption and Bribery (Interpretation (II)), effective 1 May 2026.

Interpretation (II) signals a clear policy shift toward stricter criminal enforcement, particularly in sectors of high public interest such as healthcare. It introduces a number of technical changes, including the lowering of criminal prosecution thresholds, and alignment of standards between state and non-state functionaries. But another immediate impact for many foreign companies lies in how liability is attributed in distributor and agency models.

Legal Framework: Attribution of Third-Party Conduct

The key provision for distributor and agency structures is Article 16 of Interpretation (II), which provides that bribery will be attributed to an entity where:

• the illicit gains ultimately benefit the entity; and
• the decision to offer the bribe is made through collective discussion, approval, or tacit consent of the entity, or by its management.

The standard for the second condition is expected to be low. As long as some part of management was aware, criminal enforcement becomes a reality.

Key point is that this now applies irrespective of whether the payments are made by employees or by third parties acting on the entity's behalf. This reflects and reinforces the broader principle under the PRC Criminal Law that an entity may incur criminal liability where an offense is committed for its benefit and with its involvement or acceptance.

Implications for Distributor and Agency Models

1. Third-Party Structures No Longer Create Distance

Distributor and agency models have historically been used to create operational and legal separation from end-users, particularly in hospital sales.

Under Article 16, that separation is no longer determinative. Where a distributor or agent engages in bribery:

• to secure or maintain business, and
• the resulting benefit accrues to the supplier,

then the conduct may be recharacterized as bribery by the supplier itself, provided the element of approval or tacit consent (e.g. by a manager) is present.

2. "Tacit Consent" Lowers the Attribution Threshold

Another important development to emphasize, is the express inclusion of tacit consent as a basis for attribution. This means that liability does not require explicit instructions, or formal approval of improper payments.

In a distributor context, tacit consent may even be inferred where the commercial model predictably relies on improper payments, or where the company fails to act on clear risk indicators.

This lowers the threshold for establishing the attribution element of entity liability.

3. Benefit to the Company Becomes a Central Test

Article 16 requires that the illicit gains benefit the entity. In practice, this links liability directly to commercial outcome. Examples that this can cover:

• successful hospital procurement;
• increased sales volumes; and/or
• market access secured through the distributor.

As long as the benefits flow back to the company, this part of the test will easily be satisfied.

Taken together, Article 16 establishes a dual test of attribution and benefit, under which distributor conduct can trigger corporate criminal liability.

4. Interaction with Lower Criminal Thresholds

Interpretation (II) also lowers criminal thresholds for bribery offenses in the healthcare sector, including under:

• Article 391 of the PRC Criminal Law (offering bribes to public entities), and
• Article 393 (bribery committed by entities)

For distributor models, this has practical consequences:

• smaller, repeated payments at hospital level are more likely to reach criminal thresholds; and
• fragmented payments may be aggregated in enforcement practice.

As a result, conduct within distributor networks is more likely to move from administrative risk into criminal exposure.

5. Focus on Substance over Structure

A further implication of the new rules is a shift in enforcement approach. Rather than focusing solely on individual payments, authorities are likely to assess whether the commercial structure facilitates improper conduct, and whether the company could reasonably claim to be unaware of such conduct.

In distributor arrangements, particular scrutiny may fall on:

• pricing and margin structures;
• marketing or consulting / service fees lacking clear substance; and
• multi-layered distribution chains.

Where a structure appears to incentivize or depend on improper payments, it may support a finding of tacit consent, and so can result in potential criminal liability.

Conclusion

Interpretation (II) does not prohibit the use of distributors or agents in China's healthcare sector. However, it significantly narrows the extent to which such structures can shield companies from liability.

Under Article 16, the relevant question is no longer whether a company directly made improper payments, but whether:

• the conduct occurred with a company's approval or tacit consent, and
• whether the company benefited.

In this framework, distributor and agency models should be assessed not by their formal structure, but by their economic reality and operational context.

Companies relying on such models should therefore reassess whether their arrangements can withstand scrutiny under this dual test of benefit and attribution, as the consequences of failing to do so may now extend into the realm of criminal liability. This can have serious consequences not only for suppliers in the health care sector, but also their officers and managers.

At R&P, we regularly advise international companies on anti-bribery compliance, distributor and agency structures, and criminal enforcement risks in China's healthcare sector. Our team has extensive experience assisting companies in assessing third-party arrangements, strengthening compliance frameworks, and managing regulatory investigations involving distributors, agents, and other intermediaries. If you would like to discuss how Interpretation (II) may affect your business operations in China, please contact Maarten Roos ([email protected]) or your trusted R&P contact.