Complying with anti-bribery laws

Mini vandePol and Richard Dean at Baker & McKenzie explain how global companies can safeguard their interests when doing business with India

While India remains an emerging market with immense opportunities, it is also seen as highly corrupt. Until the Indian government’s moves to eradicate public sector corruption produce results, businesses in India must be alert to the challenges of operating in this high-risk environment, particularly because of the extraterritorial reach of global anti-bribery laws.

Laws such as the US Foreign Corrupt Practices Act (FCPA), the UK Bribery Act 2010 and the Australian Criminal Code Act 1995 impose significant criminal and civil penalties for the bribery of foreign public officials. India, too, has a law prohibiting bribery and corruption of public officials, and further laws are proposed to strengthen that position.

The US Securities and Exchange Commission (SEC) has taken regulatory action against multinationals such as Oracle Corporation and Diageo Plc in connection with their operations in India. In August 2012, the SEC charged Oracle with violations of the books and records and internal controls provisions of the FCPA as a result of actions of its Indian subsidiary between 2005 and 2007, which were said to have created the “potential for bribery and embezzlement”. Oracle agreed to pay a US$2 million civil penalty to settle the claim. In July 2011, the SEC charged Diageo with extensive violations of the FCPA stemming from its subsidiaries’ improper payments to government officials in India and elsewhere to obtain sales and tax benefits. In India, the payments were achieved by inflating and otherwise falsifying invoices, and the SEC found that Diageo did not have sufficient internal controls to detect and prevent such activities. To settle the charges against its Indian, South Korean and Thai subsidiaries, Diageo agreed to pay disgorgement of US$11.3 million, prejudgment interest of US$2.1 million and a civil penalty of US$3 million.

Mini vandePol is a partner in the Melbourne office and Richard Dean is a partner in the Washington DC office of Baker & McKenzie.