Surviving the long arm of global anti-bribery laws

Mondelez case is latest case of FCPA enforcement action against foreign companies operating in India

Business today is global, and so is anti-corruption enforcement. The recent multi-million-dollar settlement between Mondelez International Inc., the multinational snack-food manufacturer, and the US Securities and Exchange Commission (SEC) highlights the reach of the United States Foreign Corrupt Practices Act, 1977 (FCPA). Mondelez was pulled up by the SEC because its Indian subsidiary Cadbury India made “facilitation payments” in violation of the FCPA to obtain approvals for its unit in India. The matter was closed with Mondelez agreeing to pay $13 million as the settlement amount, without admitting to the charges.
 
The anti-bribery framework in India
 
The Prevention of Corruption Act, 1988 (PCA), and the Indian Penal Code, 1860 (IPC), deal with corruption primarily in India. Some other anti-corruption laws are the Whistleblowers’ Protection Act, 2011; the Lokpal and Lokayuktas Act, 2013; and the Prevention of Money Laundering Act, 2002. The Central Vigilance Commission, Central Bureau of Investigation and Anti-Corruption Bureau are the main agencies responsible for investigating corruption charges against both central and state government departments, government companies, local government bodies and public servants under the PCA and IPC. The Serious Fraud Investigation Office, the investigating arm of the Ministry of Corporate Affairs, probes fraud in companies.
 
The main focus of the anti-corruption laws in India is on the public sector. Further, they seek just to prosecute public officials accepting the bribe and not the person offering it. The bribe giver may be convicted, on rare occasions at that, at best for abetment. The PCA is proposed to be amended through the Prevention of Corruption Amendment Bill, 2013, pending in Parliament. Though the Bill seeks to bring in private entities and the bribe givers within the penal purview, it does not provide a comprehensive regulatory framework to deal with corruption.
 

Merely bringing private entities within the purview of the PCA is but a half-hearted approach that may not help in combating corruption. The Bill does not outline guiding principles, prescribe good corporate governance standards or act against extraterritorial offences in the way the FCPA and the UK Bribery Act do. A statutory framework on the lines of the FCPA has to be in place to prohibit payment by private entities to government officials and/or assist in obtaining/retaining a business favour. Also, private entities have to be mandated to maintain books of records and reports related to facilitation payments made by them, failing which penal repercussions will follow. Given the low conviction rates in corruption cases, this may bring about compliance if accompanied with strict enforcement.
 
The Mondelez case is the latest in a series of actions against companies operating in India. They include Walmart, Oracle and Diageo. Regardless of when the Bill becomes law, it is imperative that Indian subsidiaries of foreign companies (especially the ones having a US/UK connection) take measures to avoid going the Mondelez way. Most multinational corporations have to adopt an anti-bribery policy and identify corrupt practices. The policy should distinguish between acceptable and unacceptable practices. For instance, greeting cards are deemed acceptable but gift vouchers may not pass muster. Managements and employees must be made aware of this.
 
A whistleblower protection mechanism, coupled with setting up a disciplinary process and periodic audit/monitoring of such acts, will usher in integrity in the organisation. While it is one thing to have policies and records in place, the challenge is implementation. With checks and balances, foreign companies operating in India will find it relatively easy to comply with the requirements of the FCPA and other international anti-corruption laws. 

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(Sharanya G Ranga is a partner at Advaya Legal and Probal Bose is an associate)