The Indian government recently passed the Prevention of Corruption (Amendment) Bill 2018, making a number of crucial changes to how corruption is defined, investigated, and prosecuted in the country. Some key changes include the definition of a corrupt public official, making bribe-giving an offence, and fast tracking the investigations of graft cases.
One important clause pertains to commercial organizations. Firms giving bribes will be liablefor prosecution and punishment. This brings the law in line with established international conventions on bribery that focus on the “supply side” of the bribery transaction. For instance, the OECD Anti-Bribery Conventionestablishes legally binding standards to criminalize bribery of foreign public officials in international business transactions. This means that companies from countries who are signatories of the OECD Anti-Bribery convention (35 OECD countries and 8 non-OECD countries) may be prosecuted in their home countries for actions they take in foreign markets, regardless of whether corporate bribe-giving is punishable in the foreign market. In a recent case, ENI and Shell were investigated in Italy for their roles in a $1.1 billion bribery scandal in Nigeria.
While the jury is still out on the effectiveness of international conventions in curbing corruption (research points to mixed evidence), it is clear that competition between foreign and domestic firms in India was “uneven” until now. That is, foreign firms from signatory countries could be prosecuted and punished in their home countries for bribing public officials in India while domestic firms (or firms from non-signatory countries) faced few penalties for the same behavior. This put foreign firms at a competitive disadvantage. Indeed, the OECD Convention itself came in to being after American firms complained that the US Foreign Corrupt Practices Act – a 1977 measure that penalized US firms for bribery abroad – put them at a competitive disadvantage vis-à-vis their European counterparts, some of whom could even get tax deductions for foreign bribes. And today, western companies complain of the competitive advantage that Chinese firmshave in bidding and winning contracts in Africa as the Chinese are not held to similar standards of regulation and enforcement.
What India’s new Anti-Corruption law could do, when enforced effectively, is make differences among firms’ home country regulations irrelevant. In other words, the new law makes bribe-giving by American, European, Chinese, or Indian firms an offense. Domestic firms can no longer hide behind different anti-corruption laws to gain a competitive edge against foreign firms. And among foreign firms, it would no longer matter whether the firm’s home country adopts and enforces international anti-bribery regulations because all firms may be subject to monitoring and enforcement under the new Indian law. The playing field is more level.