With international efforts to fight corruption being strengthened and the UK Anti-Bribery Act coming into force from July 1, Lord Goldsmith, European Chair of Litigation, Debevoise & Plimpton LLP and Neeta Potnis, senior director, Deloitte Touche Tohmatsu India, tell M Saraswathy about the current global scenario and the position of the Indian companies. Edited excerpts:
Do you think an international law on bribery is needed?
Goldsmith: The world's spotlight is on corruption. Everybody, including civil society organisations, governments and the public are getting more aware of the reality. The United States has the Foreign Corrupt Practices Act. Germany has an anti-corruption act. China recently amended its anti-bribery laws. Russia has also taken steps in this direction. People are now fed up with corruption. So, all I can say is that the spotlight is getting bigger.
Potnis: There are strict laws all over the world. The Foreign Corrupt Practices Act of US is one of the strongest pieces of legislation. It includes not just anti-bribery provisions, but also internal control requirements and accounting requirements. Moreover, anti-corruption enforcement has also increased under FCPA. There is worldwide awareness regarding the issue. India also has the Prevention of Corruption Act, 1988, though its amendment is on the anvil.
Transparency International had recently revealed that Indian companies do not think they would be affected by the UK Act. What is your view?
Goldsmith: This is an easy mistake which the companies tend to make. This act extends not just to British companies or companies located in the UK. This act covers all companies or individuals who have some connection in the UK or carry out business or a part of it there. It also applies to those companies which raise money on the London Stock Exchange. This Act also has a provision that punishes companies for failing to prevent bribery. The only defence that a company has is "adequate procedures."
Companies need to have a compliance programme in place that includes a detailed anti-bribery policy and effective training for this purpose. UK wants a level-playing field so that British companies do not lose out because they follow all the rules, while its counterpart from another country does not.
The law does not prohibit reasonable and proportionate hospitality. Doesn't this give the companies a chance to escape?
Goldsmith: It is easy to identify normal business procedures. Taking a client for dinner, for example, may be accepted, but giving a free holiday package will not be. The bigger risk is with the intermediaries, public relations personnel, agencies and consultants who help people with the business. That is why they are also covered under the Act. Sports and other such activities may be fine. But they need to be reasonable, appropriate and for legitimate business purposes. It is not corporate hospitality that is the threat.
Potnis: There are adequate guidance available. Anti-corruption compliance programmes, anti-corruption investigations and anti-corruption risk analysis can prevent any or all risks involved.
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Most Indian laws are modelled on laws of UK or US. But still, we stood 87th among 178 nations in the Corruption Perception Index released by Transparency International in 2010. What is the lacuna in the system?
Goldsmith: What is the use of having a perfect law if it is not enforced? You require skilled people to spot the problem. In UK too, the situation was not very good earlier. Prosecutors did not try hard. But now there has been an increased pressure on the people. Lately, big fines have been imposed against corrupt companies. In this context, I would say, I am not surprised that the Lok Pal Bill is such a burning issue in India.
Potnis: The lacunae with our system is that there are differences in implementation. Moreover, the focus earlier was on the bribe taker. Though only public servants were covered under the laws, payment of bribes was not legal.
The situation is better now, as more cases are being registered under the Prevention of Corruption Act. We already have laws preventing bribery of foreign public officials, special investigation team against black money apart from the Lok Pal Bill. The enhancement of the laws is necessary.
What is your advice to the Indian companies in the wake of the new UK law?
Goldsmith: People should understand it is not difficult to comply with the law. A policy is not something to be put in the drawer or to be passed on to the juniors. The initiative has to come from the top. A moral position needs to be taken on the issue. We need a change in the mindset. Both companies and governments should understand that bribery is bad for the public, consumers, company and the economy. Proper education and awareness is needed. There should be a complete unwillingness to accept corruption.
I would advise companies and directors to adhere to all the procedures and bring out policies accordingly. There are firms to help them.
Potnis: There is now a need to change the way of conducting business. Individuals and companies need to understand it is possible to do good business. A strong anti-corruption act is a good deterrent. If people do business in the right way of doing business, the entire scenario would change. An awareness among people is there, as reflected in the Lok Pal Bill issue. The question is how fast can it happen. I would further request companies to study the act and its scope carefully and not undermine the risks involved in unlawful activity.