The US Department of Justice requires, at the minimum, that gifts by companies must be of modest value, appropriate under the circumstances and given in accordance with anti-corruption laws and regulations, including those of the government officials’ home country. In this context, we review briefly legislation to regulate gifts.
Liability in India
In India, a bribe camouflaged as a gift can lead to civil and criminal liabilities under Indian laws as well as foreign laws. India does not have specific legislation to check corruption by way of gifts in the private sector. Under existing legislation, only public servants and middlemen who are citizens of India, and not bribe payers, face direct liability.
In May 2011, India ratified the United Nation Convention Against Corruption, which requires all state parties to take appropriate punitive and preventive measures to address the problem of corruption. India has not signed the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions but has a moral obligation to uphold it.
India’s Prevention of Corruption Act (POCA), 1988, does not expressly seek to punish corrupt acts of private parties and foreign individuals. Therefore, prosecution of a foreign individual or company for paying bribes to Indian government officials or prosecution of a foreign individual or company having a nexus to India and indulging in bribery abroad cannot be initiated under POCA. However, as regards “gifts” to public servants, POCA states that non-pecuniary favours such as a casual meal, a lift or another form of hospitality are acceptable so long as they are not lavish.
The Prevention of Bribery of Foreign Public Officials and Officials of Public International Organizations Bill, 2011, introduced in the Lok Sabha in March 2011, is seen as the Indian equivalent of the US Foreign Corrupt Practices Act (FCPA). The bill treats “bribe givers” and “bribe takers” on an equal footing and is expected to be a strong deterrent against corruption in the sphere of international business.
The public anti-corruption regime in respect of gifts is also governed to some extent by the Foreign Contribution Regulation Act, 2010, which applies to members of the legislature and office bearers of political parties, judges, government servants, etc., and the Public Procurement Bill, 2012, which aims to ensure transparency, accountability and probity in public procurement. The Whistleblowers Protection Bill, 2011, seeks to protect persons making a public interest disclosure related to an act of corruption, misuse of power, or criminal offence by a public servant.
US and UK acts
By using the term “corruptly”, connoting “evil motive or purpose”, as an essential element of a culpable gift, the FCPA acknowledges that gifts may be aimed at creating a favourable business climate without the intention of wrongfully influencing the recipient to award or retain business or of gaining an improper advantage.
The ambit of the UK Bribery Act appears broader in that gifts by way of giving an advantage or placing someone in a favourable position are prohibited, as well as payments. However, the UK’s Serious Fraud Office has clarified that “bona fide hospitality or promotional or other legitimate business expenditure (which includes gifts)” will not be prosecuted if it does not rise to the level of a bribe.
Under the UK Bribery Act, the determining factor is not the value of the gift offered but the intention of the giver and receiver when it was offered. If it was for the purpose of rewarding or inducing impropriety it will be bribery. Both the giving and receiving of such gifts are punishable and the act covers private or commercial trade as well as corrupt payments made to foreign public officials.
The FCPA’s jurisdiction extends to dealings with Indian government officials by a company incorporated in India having a subsidiary in the US and vice versa, or by an employee, agent or director of a company incorporated elsewhere but having its principal place of business in the US.
The UK Bribery Act covers offences committed outside the UK by British citizens and bodies incorporated under UK law and by foreign nationals who are domiciled or habitually resident in the UK. A commercial organization with business in the UK will be liable if an employee, agent or subsidiary bribes a foreign official. Therefore, a UK parent company may be liable for its failure to prevent corrupt acts of its subsidiaries in India.
In formulating gift, travel and entertainment policies for employees, companies have to be mindful of anti-corruption legislation in both their home country and the country where they are doing business. Specific policies must be prepared for each jurisdiction in which they are operating, which should at all times provide their employees with practical real-world guidance considering that country’s laws and customs.
Nusrat Hassan is the managing partner and Yosham Vardhan is an associate at DH Law Associates.
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