As the Bharti-Walmart saga illustrates, US anti-corruption laws can have a big impact on India.
The 2014 Corruption Risk Index ranks India as an “extreme risk” jurisdiction, alongside fellow notables, the Democratic Republic of Congo and Somalia. Bharti-Walmart’s high-profile corruption woes — and the ineffectual inquiry into its alleged offences — continue to generate appalling headlines globally, and must be considered a contributing factor in the joint venture being called off. As India battles its corruption-related demons, recent years have witnessed a striking increase in American enforcement of the US Foreign Corrupt Practices Act, 1977 (FCPA). The pioneering statute remains the lodestar of foreign anti-bribery laws, even as countries like UK and Canada enact ever-stricter legislation.
The FCPA seeks to combat corruption’s pernicious effects — market inefficiencies, sub-standard products, and unfairness — and to help companies resist corrupt demands. It punishes bribery around the world, so long as it has a US nexus, through two sets of provisions enforced by the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC): one, anti-bribery; and two, accounting and internal controls.
The anti-bribery provisions penalise direct/ indirect payment (including promised or authorised payment) of “anything of value” to foreign government officials, employees of state-owned/ controlled entities, political parties or public international organisations, for a business purpose, that is, in order to procure/ retain business or secure an improper business advantage. These provisions apply to “issuers”, US domestic concerns and their agents, and to “any person” violating the FCPA within US territory. “Issuers” are companies whose securities trade on a US exchange, including foreign issuers with exchange-traded ADRs, and companies whose stock trades in the US OTC market and which file periodic reports with the SEC.
The accounting provisions require issuers’ books-and-records to accurately and fairly detail transactions, including illicit payments, and to maintain adequate accounting controls. Unsurprisingly, Indian operations of US-headquartered companies are now routinely under the FCPA scanner. Apart from Walmart, the DOJ-SEC are investigating beer giant Anheuser-Busch InBev’s Indian joint venture.
Rigorous FCPA enforcement has significant implications for India. First, Indian entities might be governed by the FCPA, or become