Wary Indian companies wake up to UK law

Indian companies with subsidiaries in Britian have begun sensitising employees about the code of conduct to be followed in India to keep them out of trouble from the UK Bribery Act, which took effect from July.

The law's ambit has been widely framed, with severe penalties such as prosecution and jail in the UK for a bribe given in India.

Section 7 creates the 'broad and innovatory offence' of the failure of commercial organisations to prevent bribery on their behalf.

This applies to all commercial organisations with business in the UK.

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This does not only apply to the organisation itself; individuals and employees may also be found guilty.

A commercial organisation can be guilty of the offence if the bribery is carried out by an employee, an agent, a subsidiary or a third-party, as found in Section 8.

The location of the third party is also irrelevant to the prosecution, say lawyers.

Sarosh Zaiwalla of the London-based solicitors, Zaiwalla & Co, said the UK Bribery Act would have tremendous impact on Indian companies.

"You pay a bribe anywhere in the world, you can be prosecuted and jailed in England."

Many companies, particularly those in information technology, have begun sensitising employees to the provisions, putting out clear dos and don'ts.

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Some lawyers are even advising companies to hive off troublesome activities to consulting firms, maintaining an arm's length distance.

"The law will affect a large part of corporate India. At least 10 per cent of listed companies, including all the big ones, have subsidiaries in the UK.

"These companies run the risk of being prosecuted in the UK for violations committed anywhere in the world," said Natrajh Ramakrishna, partner, BSR & Co, a KPMG group firm.

International observers say the UK has the muscle to implement what it has enacted. Dimitri Vlassis, chief of the corruption and economic crime branch of the United Nations' office on drugs and crime, said: "Scotland Yard (the London metropolitan police) wants to police the world. Given their record in law enforcement, they have the ability to do it."

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Vlassis says the bill faced lot of resistance on the way to enactment, especially from corporate groups.

"But, now that it's law, people better take it seriously. We need to watch how they interpret and implement it."

There have not been any major cases reported yet, Vlassis said. Most major Indian groups, such as the Tatas, Birlas, Hindujas, Mittals and the new generation IT companies have subsidiaries in the UK.

Code reminders

Speaking at the World Economic Forum, Adi Godrej, chairman of the Godrej group, said: "There is corruption at the corporate to corporate level and the corporate to government level.

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"Both are bad. Many large groups have already established high ethical standards and have still been successful.

"At the Confederation of Indian Industry, we have released a code of ethics to be followed. This is a good lead. More will follow."

Companies say they already maintain high ethical standards. Vivek Bharati, executive director, Pepsico India, said, "We are ahead of such laws. We have a very strict conduct code on multiple parameters. And, it is reviewed continuously. For example, I can't even take you out for lunch."

A senior Infosys official said laws on ethics don't worry them, as the company already has a stringent ethical code.

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"We pride ourselves on the clean business model."

Still, Ramakrishna said, many of these companies are giving clear dos and don'ts for employees.

"The IT companies were the first. They have already set out the rules and communicated these internally. Others are following," he added.

Some companies are choosing to hive off the dirty work. Shuva Mandal, managing partner of Fox, Mandal & Associates, a global legal firm, said, "We are advising companies to appoint consultants and keep their hands off the kind of work that could get them into trouble. The law will affect companies across sectors."

India's own anti-graft law, the Lok Pal bill is expected to be tabled in Parliament in its winter session, beginning next month.