FEPA’s impact on India’s legal and business landscape

With the buzz around ESG (environmental, social and governance principles) growing significantly, companies require a robust framework to deal with bribery and corruption issues. In doing so, they must take into account various legal frameworks for dealing with bribery.

In the past two decades, the legal framework for combating transnational corruption has expanded significantly. Present efforts now address both suppliers (those offering bribes) and demand makers (officials seeking or accepting bribes). According to an OECD survey, nearly 80% of cases involving demand-side bribery do not result in penalties for foreign officials from their respective governments.

In response, the US Foreign Extortion Prevention Act (FEPA) was enacted on 22 December 2023. Under this legislation, the US attorney general must submit annual reports to congress, which are also made publicly accessible on the Department of Justice (DOJ) website. FEPA brings US law into alignment with anti-bribery and corruption statutes in countries such as the UK, France, Switzerland and India. Previously, the DOJ utilised laws on money laundering, fraud and the Travel Act to pursue those receiving bribes – procedures that were cumbersome and resource intensive.

The FEPA simplifies the process by criminalising the demand or acceptance of bribes by foreign officials, eliminating the necessity to demonstrate fraudulent intent or financial transactions involving illegal activities. FEPA violations can bring up to 15 years imprisonment and fines up to USD250,000, or three times the value of the bribe.

The FEPA expands the definition of “foreign official” to encompass individuals acting unofficially on behalf of governments and international organisations, while excluding political candidates but including senior political figures. This includes both official and unofficial agents representing governments and entities.

In contrast to the Foreign Corrupt Practices Act (FCPA), the FEPA has a zero tolerance stance on bribery, lacking exceptions or affirmative defences. Unlike the FCPA, the FEPA does not recognise facilitation payments, regardless of their legality under foreign laws, or their classification as reasonable and bona fide expenses.

Illustratively, Nigeria’s constitution shields senior officials from charges during their tenure and, in India, prosecuting high-ranking officials necessitates governmental permissions under the Code of Criminal Procedure, 1973, and the Prevention of Corruption Act, 1988 (PCA).

India’s primary anti-bribery legislation, the PCA, broadly defines “public official” and initially focused solely on penalising bribe recipients. A key question is FEPA enforceability in foreign territories. The FEPA asserts “extra-territorial federal jurisdiction,” allowing the DOJ to prosecute foreign officials or entities involved in alleged offences. Currently, regarding India, the principal means of enforcing the FEPA involves leveraging the mutual legal assistance treaty between India and the US, ratified on 17 October 2001 (US-India MLAT). This treaty empowers the DOJ to enlist aid from Indian law enforcement agencies, co-ordinated through the Indian Ministry of Home Affairs, to investigate alleged offences under the FEPA.

Looking ahead, enforcement of anti-bribery and corruption mandates under the FCPA and the FEPA will likely operate in conjunction, although separate prosecutions remain possible. However, due to the FEPA’s recent inception, its effectiveness in prosecuting public officials remains untested and subject to diverse interpretations.

The interaction or potential conflict between the FEPA and other nations’ corresponding bribery and corruption laws is uncertain and awaits clarification.

From an organisational standpoint, the primary safeguard against DOJ prosecution lies in leveraging the FEPA’s provision for self-disclosure. Consequently, entities would be wise to develop robust whistleblower programmes and comprehensive escalation protocols should a foreign official seek facilitation payments, irrespective of whether such demands are fulfilled.

Adequate provisions within the bribery and corruption compliance framework should extend to foreign officials acting in official or unofficial capacities. Entities that proactively implement and educate their staff on bribery/corruption policies will be well prepared to address potential law enforcement inquiries.

Vikrant Singh Negi and Mohit Bakshi are partners at DSK Legal. The authors would like to thank senior associate Priyamvada Singhania for her contribution.