India Struggles Forward with Prevention of Corruption
Dec. 2 – In a positive sign for doing business in India, a new anti-corruption bill is currently awaiting approval by the Indian parliament. The Prevention of Bribery of Foreign Public Officials and Officials of Public International Organizations Bill (Bill) seeks to amend the loopholes that existed within the original Prevention of Corruption Act (Act) that was passed in 1988.
The Bill was originally introduced to the Lok Sabha in 2011 and was then referred to a parliamentary standing committee. It has only now reemerged for approval by the Indian parliament.
A common complaint from foreign businesses in India has been about the level of corruption. This has been an issue that the country has struggled with for some time, but with the new Bill, India seems to be telling the world that is serious about getting corruption under control and creating a fair and efficient business environment.
A key problem of the 1988 Act was that the person giving the bribe was legally seen as a victim and so not held culpable or criminally liable. Thus, currently, bribery of foreign officials is not a crime in India. This scenario in effect appears to actually encourage bribery.
Further issues arising from the Act include:
- prosecution delays,
- needlessly long process for recovering the assets of a convicted bribe taker,
- weak whistle-blower protection,
- central or state government must sanction prosecution against officers, and
- chief vigilance officers have limited jurisdiction
The new Bill seeks to fix all of these problems. It will criminalize giving bribes to public officials. Those found guilty of giving bribes could face up to seven years in prison or a variety of other penal provisions, such as seizure of property. It will also be easier to prosecute the bribe receiver as well. Whistleblower protection will also be strengthened. Additionally it has been suggested that a Lokpal, or People’s Ombudsman, should be created.
It is clear that India has awoken to the ill-effects that corruption can have upon a country. According to the Bill, “corruption in awarding business contracts has social, political, environmental and economic costs which no country can afford.”
Many Indian companies have already been taking prevention of corruption seriously. Even though it is not yet mandatory, numerous companies have whistleblower protection policies in place. For example, Tata Steel has had a whistleblower policy since 2005.
There is a strong incentive for compliance with the new laws. The UN Global Compact Thought and the Arbitrage Research Institute recently conducted a survey which found that “43 percent of businesses that were indicted had either been liquidated or were in the process of liquidating their operations.”
A corruption-free India will no doubt make it a much more attractive location for foreign investment and drastically reduce the risks and costs of setting up a business in that dynamic country.
Other important anti-corruption laws in India include:
- Prevention of Money Laundering Act, 2002
- Prevention of Corruption Act, 1988
- Benami Transactions (Prohibition) Act
- Right to Information Act
- Companies Act, 2013
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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