On May 1, 2026, the Supreme People’s Court and the Supreme People’s Procuratorate implemented the Interpretation on Several Issues Concerning the Application of Law in Handling Cases of Embezzlement and Bribery (II). This update introduces explicit regulatory scrutiny over overseas project commission payments and reasonableness reviews of third-party agency service fees—directly affecting Chinese EPC contractors operating in Southeast Asia and Africa, particularly those engaged in power plant and infrastructure projects.

Event Overview

The Supreme People’s Court and the Supreme People’s Procuratorate issued the Interpretation on Several Issues Concerning the Application of Law in Handling Cases of Embezzlement and Bribery (II), effective May 1, 2026. The interpretation explicitly includes ‘commission payments for overseas projects’ and ‘reasonableness review of third-party agency service fees’ as key regulatory focuses. In response, Chinese EPC enterprises with ongoing power and infrastructure projects in Southeast Asia and Africa are revising FIDIC contract annexes to incorporate anti-commercial bribery due diligence clauses. Concurrently, overseas project owners are requiring Chinese suppliers to submit compliance audit reports covering the past three years.

Industries Affected by Sector

Chinese EPC Contractors (Overseas Infrastructure & Energy Projects)

These firms are directly subject to the interpretation’s enforcement scope because their cross-border payment structures—including commissions to local agents or intermediaries—are now subject to judicial scrutiny under bribery law. Impact manifests in contractual liability exposure, increased pre-signing due diligence burdens, and potential criminal accountability for non-transparent fee arrangements.

FIDIC Contract Service Providers (Legal, Compliance & Contract Advisory Firms)

Providers supporting Chinese contractors in drafting, reviewing, or amending FIDIC-based contracts must now integrate anti-bribery due diligence protocols into standard annexes. Their service scope is expanding to include structured risk assessments of third-party fee arrangements, documentation traceability requirements, and alignment with PRC judicial standards—not just host-country laws.

Third-Party Local Agents & Intermediaries (in Southeast Asia & Africa)

Local entities historically engaged to facilitate permitting, land acquisition, or government liaison face heightened scrutiny regarding the legitimacy and proportionality of service fees. Under the new interpretation, courts may assess whether such fees lack substantive service delivery or deviate significantly from market benchmarks—raising legal and reputational risk for both agent and principal.

Overseas Project Owners (State-Owned or Multilateral Development Clients)

Owners—especially those affiliated with national utilities or multilateral institutions—are proactively enforcing compliance upstream. Requiring three-year compliance audit reports signals a shift toward embedding PRC legal expectations into procurement terms, even where contracts are governed by foreign law or international arbitration rules.

What Enterprises and Practitioners Should Monitor and Do Now

Track official guidance on ‘reasonable fee’ benchmarks and evidentiary standards

While the interpretation identifies third-party fees as a focus area, it does not define quantitative thresholds or procedural criteria for ‘reasonableness’. Enterprises should monitor upcoming notices or case guidance from the SPC or provincial high courts—particularly any illustrative examples involving overseas projects.

Review all active and pending FIDIC-based contracts for commission and agency fee clauses

Focus specifically on Annexes related to payment mechanisms, third-party engagement, and representations/warranties. Identify clauses that lack specificity on service scope, deliverables, or documentation requirements—and prioritize revisions before next milestone payment cycles or contract renewals.

Distinguish between regulatory signaling and enforceable operational obligations

The interpretation establishes a judicial framework, not an administrative licensing regime. Its immediate effect is evidentiary: courts may now treat unexplained or disproportionate overseas payments as circumstantial evidence of bribery intent. Enforcement will depend on case-specific facts—not blanket prohibitions. Companies should avoid overcorrecting (e.g., eliminating all third-party payments) and instead strengthen justification and recordkeeping.

Prepare internal compliance documentation aligned with audit report requirements

Since overseas owners now require three-year compliance audit reports, firms should ensure internal records—including third-party agreements, service verification logs, market benchmark analyses, and internal approvals—cover at least the preceding 36 months. Retrospective documentation gaps may trigger negotiation delays or contractual non-compliance findings.

Editorial Perspective / Industry Observation

Observably, this interpretation functions less as a sudden enforcement pivot and more as a formal judicial codification of existing prosecutorial trends—particularly in cases involving overseas infrastructure projects where payment trails cross jurisdictions. Analysis shows the emphasis on ‘reasonableness review’ reflects growing judicial willingness to assess commercial substance beyond formal contract language. From an industry perspective, it signals that PRC courts are increasingly treating overseas project finance structures as subject to domestic anti-corruption standards—even when no domestic conduct element exists. Current attention should focus less on whether enforcement will occur, and more on how evidentiary expectations around transparency and justification are evolving in practice.

Conclusion
This interpretation does not introduce new prohibitions but sharpens the legal lens applied to long-standing payment practices in overseas EPC work. Its significance lies not in creating novel liabilities, but in lowering evidentiary thresholds for prosecutors and raising contractual expectations among international counterparties. It is best understood not as a standalone policy shift, but as a reinforcement of an ongoing convergence between PRC compliance expectations and global infrastructure contracting norms.

Information Sources
Main source: Official release by the Supreme People’s Court and the Supreme People’s Procuratorate, effective May 1, 2026.
Note: Specific benchmarks for ‘reasonable’ third-party fees, evidentiary weight assigned to audit reports, and interplay with foreign arbitration clauses remain subject to ongoing judicial application and are not yet defined in publicly available materials.