How Indian companies are going to be affected by the UK Bribery Act?
Companies in other jurisdictions are actually hit in some degree by legislation in the US and the UK (the Foreign Corrupt Practices Act, or FCPA, and the UK Bribery Act) even though they may not be present or listed in these countries.
Sometimes, in some matters, a company bribes an official in some other territory and pays the bribe in US dollars. In such a case, the US can seek jurisdiction under FCPA.
Indian companies frequently invest in the US or the UK, causing them to be directly subject to these legislation. Some Indian companies have been worried about FCPA for the last couple of years due to the significant business dealings with US customers, clients and business associates. The broader scope of the UK Bribery Act, which comes into effect from April, will put additional pressure on them.
Indian companies have been very active in cross-border mergers and acquisitions. The acquiring company may inherit the liabilities of the acquired company under FCPA or the UK Bribery Act for bribes the target company may have paid.
India has the Prevention of Corruption Act (PCA). So, why will they fall prey to the UK Act?
India has had a piece of such legislation since 1988. However, it has not been rigorously enforced. There are some statistics (from Transparency International) that some management roles in corporate India see bribery as an acceptable business practice, which is a concern.
Regardless of whether they are liable under PCA in India or not, they may be liable under the US FCPA or the UK Bribery Act. This is the impact of globalisation.
What if a company does not have any presence overseas?Many business leaders believe that if they have no subsidiary or listing in the US or the UK, these laws will not affect them. This belief is mistaken. The US nexus that FCPA requires is interpreted widely. Paying a bribe in US dollars is sufficient to establish a US connection.
A study by Transparency International shows that the risk of falling under one of these legislation is completely underestimated by the managing boards in India.
What challenges do you perceive for Indian companies?The UK Bribery Act will come into force in April. This gives time to review procedures, their implementation and how robust these procedures are tailored to the specific needs of the company.
A one-size-fits-all approach, which only exists on paper, will not be sufficient to demonstrate 'exemptional' behaviour under FCPA or the UK Bribery Act.
What has been the impact of the Satyam case on the D&O (Directors and Officers Liability) policy?Following the Satyam fiasco, many independent directors resigned from their positions in listed companies. To address the concerns of independent directors, we designed enhancements providing coverage specifically for independent and non-executive directors.
What was the impact on premiums?India is a very price-sensitive and sophisticated market. The coverage is getting broader, exposures are becoming more severe and at the same time companies expect the rates to come down.