New Bribery Act enacted in Britain, worry for Indian Cos

Category: WTO Sub-category: International Standards
Document type: news

12-August-2011 | 15:35 IST | Edited by: Suman Chatterjee

Corruption preventionAny company with operation in Britain found involved in bribing act, will be punishable under the new Bribery Act enacted in Britain, modifying the old Victorian law. According to imminent account and law professionals, the clauses of the Bribery Act are pretty pervasive and can turn a matter of worry to the Indian companies.

"Large number of Indian firms will get affected by the new British Bribery Act. Promotional activities, including corporate hospitality will become increasingly sensitive issues. Provisions of the Act are wider compared to the US Foreign Corrupt Practices Act or our Prevention of Corruption Act," said Neeta S. Potnis, senior director of Deloitte Touche Tohmatsu (India).

According to her, "domestic companies need to be aware of the requirements of this law and take proactive steps to have adequate systems in place."

Any organization, headquartered in India, will be accountable to British Serious Frauds Office (SFO), if any branch of the company stationed in any country engages in bribery or any other corrupt practices, and that affects the business of the British companies' interests. It applies even if the company does not have an office in Britain. If the company has operation in Britain, employees as UK citizens or serves for a British company, it falls under the strict draconian anti-corruption legislation.

"English prosecutors would have jurisdiction over an Indian firm as long as it does some business in Britain. More importantly, it is not just in relation to what this firm does in Britain, but what it does elsewhere in the world," said London-based legal firm Debevoise & Plimpton's Peter Goldsmith.

According to the Act, the violator may be charged a hefty fine and sentenced to jail for up to 10 years, if found guilty. Companies should take proper measures to control corruption in their operation, especially the ones that have parts in Britain. This Act should be a bit of worry for the Indian companies such as Tata, Essar and Infosys that have a significant part of their operation in Britain.

"It's wider ranging even than the [U.S.' Foreign Corrupt Practices Act]," said Lord Peter Goldsmith. "It's going to affect all companies with business in the U.K., even if they're not incorporated here. The enforcement agencies have greater powers and the penalties are much tougher than under previous U.K. law. Boardrooms throughout America and beyond should have this on their agenda."

There are a couple of differences between the US FCPA and UK Bribery Act. US FCPA deals in government entities while UK Act deals in any commercial entities. US law asks for prosecutors to prove intent and inclination towards the practice at the senior level, while UK law condemns the company that fails to prevent the practice, regardless of awareness or intent. This may affect the smaller enterprises that rely on third party agents for many international assignments. Even public relations houses and joint venture companies will fall under the purview of the Act.

"Bribes have been given a wide interpretation. Bribes could include cash, education provided to the representatives of a firm, fine dining, vacations and donations to specific charities, besides other corporate hospitality. However, tickets to sports events like F1 and other events, are okay," Goldsmith said.

Even corruption slangs, for example, 'mangoes', 'useful payments', 'slides' among others, used in business conversations are also punishable under the new Act.

External Links

UK Bribery Act - Read more

US Foreign Corrupt Practices Act (FCPA) - Read more

Indian Prevention of Corruption Act - Read more