The law of the letter

The Foreign Corrupt Practices Act (FCPA),enacted in 1977,prohibits US companies from making “corrupt payments to foreign officials for the purpose of obtaining or keeping business”. The law is robustly enforced by two agencies that work in tandem. While the anti-bribery provisions of the FCPA are enforced by the Department of Justice,auditing requirements — to detect irregular fund transfers in the form of bribery — are in the hands of the Securities and Exchange Commission (the American counterpart of SEBI). Punishments range from fines to jail sentences. It is these enforcement agencies that have found evidence of wrongdoing by US companies in India. Ambassador Meera Shankar’s letter merely refers to their report.

India has no equivalent law that prohibits its companies from bribing foreign officials,let alone the kind of sophisticated enforcement mechanism that the US has in place.

India is also not part of a global treaty against bribing foreign officials,which 38 countries,including Brazil and Argentina,have signed. The OECD Convention On Combating Bribery Of Foreign Public Officials In International Business Transactions — also known as the Anti-Bribery Convention — was brought about in 1999 because the United States feared that the FCPA placed it at a disadvantage to firms from other countries vying for contracts in corruption-prone nations. Though 30 OECD countries,as well as eight others,have ratified the convention,India has not.

Articles 4 and 9 of the Anti-Bribery Convention require all 38 member-countries to cooperate in conducting joint investigations when foreign officials are bribed. For instance,if a US company bribes a Brazilian official,the Government of Brazil is bound to jointly investigate with the FCPA enforcement agencies. Since India has not signed the treaty,we are under no such obligation.

This is perhaps why,in the seven instances of bribery that Shankar cites,it is commitment from our side that seems lacking. For example,Shankar had sent the letter to Principal Secretary in the PMO,T K A Nair,on May 12,2009. Five months have passed,but the Centre is yet to present any action-taken report on these allegations,prompting the BJP to ask the government to “explain” its silence.

One of the “instances” that Shankar mentions refers to a 2007 settlement that Dow AgroSciences,a subsidiary of Dow Chemicals,reached with the FCPA-enforcement arm SEC. The settlement was for bribes allegedly paid to Indian government officials. Dow AgroSciences claimed,in a 2007 press release,that these “were made without the authorisation or knowledge of Dow or Dow AgroSciences employees in the US”. Though this settlement was reached two years ago,no action-taken report has been presented by any Indian investigative agencies on this matter.

What also plays into the problem is that complying with the FCPA’s code-of-conduct could possibly limit Foreign Direct Investment to India. A 2009 report by the consultancy firm Deloitte seeks to allay these fears,advising companies to “implement a film-wide culture of compliance… (with) due diligence.”