Dealing with crime-without-intent

Written by Sandeep Verma | Updated: Feb 26 2014, 08:00am hrs
The importance of ensuring that honest officers are not harassed for bona fide mistakes while taking well-meaning decisions was once again underlined by the Prime Minister on the occasion of golden jubilee celebrations of the Central Vigilance Commission recently, when he stressed upon the need to avoid an automatic imputation of guilt and mala fide. Speaking on the same occasion, the finance minister mentioned the need for focused regulatory intervention in corporate matters in cases of gross violations or when there are clear cases of criminality, so that law enforcement agencies themselves do not get overburdened in the process.

In this context, it may be useful to revisit certain provisions of the Public Procurement Bill, 2012, and the Prevention of Bribery of Foreign Public Officials and Officials of Public International Organisations Bill, 2011, placed before Parliament, as some provisions of the Public Procurement Bill embed criminality to procurement officials even without any criminal intent on their part, while certain provisions of the Foreign Bribery Bill can place Indian industry on a non-level playing field vis-a-vis their foreign counterparts in export markets.

Section 45(f) of the PP Bill, for instance, makes any person (including public officials) liable to imprisonment for a term up to five years for engaging in any form of anti-competitive behaviour in the procurement process. The phrase anti-competitive behaviour itself has not been defined, making it a matter of subjective interpretation by courts or by disgruntled bidders; and this sub-section does not require any evidence of criminal intention to cause undue advantages or wrongful gains to any party to the procurement process. It is, therefore, possible that it could easily be abused by unsuccessful bidders or their proxies for causing undue harassment to contracting officers. While section 50 of the PP Bill disallows a court from taking cognisance of an offence committed by a public servant during the course of his employment, it may be open to interpretation if an omission resulting in anti-competitive behaviour would be protected as an official act during the course of employment. In addition, section 52 of the PP Bill offering a good faith defence to acts of public officials may provide only limited protection in the form of a reactive defence, rather than as a proactive defence if the Bill were to offer a presumption of good faith to routine decision-making.

Similarly, the Foreign Bribery Bill applying to Indian companies in their export operations defines bribery more broadly as compared to similar laws that apply to their foreign competitors. For instance, the USs Foreign Corrupt Practices Act (FCPA) excludes customary payments (also known as speed payments) to foreign public officials from the definition of punishable bribery. The FCPA also allows an affirmative defence for compulsory payments (which could mask bribes) if made in discharge of a foreign regulation, such as transactions to meet an importing countrys offset requirements. Similarly, while the UKs Anti Bribery Act (ABA) does not, by itself, exempt customary payments, executive guidance issued recently under this Act discourages prosecutors from pursuing foreign bribery charges in respect of customary payments. Given that most foreign contracts or licences are high value where policymakers are also contract/licence-granting authorities, the exception clauses under the FCPA and the ABA, in practice, allow companies to disguise policy-influencing payments (which are prohibited under the FCPA/ABA) as customary or compulsory payments (that are exempt from foreign bribery).

Indias Foreign Bribery Bill, on the other hand, has a more comprehensive definition of bribery and contains no exemptions for customary/compulsory payments, making it a more morally correct formulation. However, it may have adverse practical implications for Indian companies operating in exports markets: customary/compulsory payments by their foreign competitors would be exempt from bribery charges under US/UK domestic laws, while an Indian company would be liable to criminal prosecution for similar payments under Indias own law.

It is interesting to note that Chinas public procurement law contains provisions similar to US/UK laws requiring criminal intent for prosecuting public officials: its public procurement law does not automatically equate procedural or substantive deviations to criminally prosecutable actions.

As discussed above, the current legislative proposals may, therefore, need alignment with the vision outlined by Indias top executive leadership. In their present form, the Bills could result in significantly adverse, albeit unintended, consequences in terms of chilling effects on public officials and on Indian companies in one or more of the following ways. One, the government could end up with more criminal litigation on government contracts, well beyond what it can or should handle in the first place, simply on account of mere actions/omissions being equated to potential criminality. Two, and as a corollary, relatively professional government officers may be discouraged from continuing with procurement-related responsibilities because of added criminality, making streamlined award and administration of government contracts even more difficult than at present. Three, that Indian industry increasingly finding its rightful place in global markets could face an adverse level-playing field vis-a-vis their foreign competitors merely because of stricter definitions under Indias own Bill as compared to laws applicable to their foreign competitors.

Public procurement and integrity reform in India may, therefore, necessarily need to steer clear of excessive criminality being imputed to routine executive decisions. Public officials should have an ab-initio presumption of good faith if standard operating procedures are followed, rather than being left to fend for themselves in the face of ad-hoc, post-facto and subjective determinations; just as the Indian industry could do without legal requirements that place discriminatory obligations on them vis-a-vis their foreign counterparts.

The author specialised in Government Procurement Law from the George Washington University Law School, Washington DC. He is the founder of Views are personal