Compliance & Investigations, Ebner Stolz
The Prevention of Corruption (Amendment) Bill of 2018 brings about a change in a 30-year-old law defining and penalizing corruption in the Indian public system. The newly introduced law aims to provide a more comprehensive definition of bribery. To a country ranking 81 out of the 180 countries on Transparency International’s Corruption Perception Index, and with its complex regulatory procedures and tax systems, it is not uncommon for an organization to encounter an unfavorable situation with a public official. With the government touting initiatives to fight corruption and the increasing pressure on the government in the wake of the NPA crisis, enforcements will only increase. With criminal prosecution now possible against corporations and for the person in charge, it is a change in legislation that compliance teams need to be aware of and promote.
Key highlights of the amendment bill are:
The definition of bribe now includes undue advantage.
Moving from the term ”valuable thing,” the act now defines a bribe as ”any undue advantage,” i.e. any form of gratification other than legal remuneration. This eliminates the necessity of the bribe to be measurable in monetary terms.
Giving a bribe is now a crime.
For the first time, any person offering a bribe is covered under the ambit of this legislation and is liable to be prosecuted under the Act. However, the act provides relief in cases of extortion, where a person who has been compelled to offer a bribe will not be held liable if the matter is reported within seven days of giving such undue advantage.
Commercial organizations, third parties and the possibilities of cross-jurisdiction enforcements will change.
Commercial organizations willingly offering bribes to public officials have now been brought under the purview of this Act. The definition of commercial organization covers all forms of non-individual entities doing business in India, whether incorporated or not.
In addition, whether the organization has directly bribed/promised to bribe the public official or the same has been done using a third party, the organization will be primarily held liable for such representation.
And lastly, the commercial organization doesn’t need to be an Indian company or a body formed or registered in India. Instead, the only requirement is to carry on business or part of business in India. It would be interesting to see whether this will open up possibilities of cross-jurisdictional enforcements, similar to FCPA enforcements.
The punishments for directors and partners includes imprisonment.
Any director/partner of a commercial organization which has been proven of an offense under the Act shall also be liable to be prosecuted under the Act. If proven that the offense has been committed with the consent or involvement of such director/partner, the punishments can range from imprisonment up to a minimum of three years to a maximum seven years and a fine.
There is a defense for commercial organizations.
The only olive branch given to a commercial organization is the existence of an effective control and compliance environment. Initiatives like comprehensive compliance programs and reviews, as well as periodic anti-corruption awareness sessions with employees, may act in the favor of the organization in front of the enforcement authorities.
However, there are limitations that still exist. The act still does not explicitly outlaw commercial bribery, i.e. bribery where the giver and the receiver are commercial organizations, and does not include a public official or an intention of influencing public functions.
In India, enforcement of a law is always a challenge. The Act does not constitute or assign a single autonomous agency for monitoring compliance or initiating enforcements under the same. Fine amounts for corporations have not yet been specified and since there are no preceding indictments, only future enforcements will set the bar for corporate fines. As we have witnessed with the FCPA and UK Bribery Act, huge corporate fines play a significant role in deterring noncompliance.
The above amendments are a significant step toward the fight against corruption in India and finally holds all the stakeholders to a bribe accountable. What was a law to only regulate the public systems and officials within the country will now be viewed as a compliance requirement across all organizations and businesses dealing in India.
Shrikant Kamalasanan currently heads the India desk - Compliance & Investigations at Ebner Stolz, a consulting firm in Germany.