US President Joe Biden signed the Foreign Extortion Prevention Act in December 2023 (“FEPA”), a federal criminal offense creating criminal liability on foreign officials who demand or accept bribes thus acting as a concomitant legislation to the Foreign Corrupt Practices Act of 1977 (“FCPA”)[1]. While FCPA only criminalized/ prohibited US companies from offering or bribing foreign officials, the introduction of FEPA provides a level playing field for US companies and reverses criminal liability on foreign officials, mirroring FCPA.
In India, the Prevention of Corruption Act, 1988 (“PC Act”), is the principal anti-bribery legislation, which shifts the focus from traditional public officials to those individuals who perform public duties. Originally, only bribe-takers were penalised, but bribe-givers could go scot-free unless prosecuted for abetment of corruption. Recently, when India ratified the UN Convention against Corruption (“UNCAC”), it amended PC Act[2] to bring it in line with UNCAC to punish even bribe-givers, including commercial organisations.
Therefore, now the US and Indian anti-bribery legislations are in line with international anti-corruption conventions.
When will the jurisdiction get triggered?
Under FEPA, the prohibition clause largely mirrors FCPA’s prohibition clause, with the focus on foreign officials who corruptly demand or accept bribes in exchange for (1) being influenced in the performance of any official act; (2) being induced to do or omit to do any act in violation of the official duty of such foreign official or person; or (3) conferring any improper advantage, in connection with obtaining or retaining business for or with, or directing business to any person from (a) any person while in the US territory, (b) an issuer and (c) a domestic concern.[3] Further, we note that FEPA is wider than FCPA since the payment of the bribe in question is not qualified by the exception in FCPA that mentions payment for expediting routine governmental action.
In comparison, the PC Act criminalises the following acts:
- Any public servant who accepts or obtains or attempts to accept or obtain any undue advantage (a) from a public servant; (b) by a person from another person; (c) from another person for himself or other person with the (a) intention; (b) as a motive or reward to induce a public servant, by corrupt or illegal means or by exercise of his personal influence; (c) as a motive to reward or induce a public servant, by corrupt or illegal means or by[4] exercise of his personal influence to perform or cause performance of any public duty improperly or dishonestly or to forbear or cause forbearance to perform such duty either by himself or by another public servant;[5]
- Whoever performs or induces another public servant to perform improperly or dishonestly a public duty or forbears the performance of such duty in anticipation of or in consequence of accepting an undue advantage from any person;[6]
- Any public servant who accepts or obtains or attempts to accept or obtain for himself or for any other person any undue advantage without consideration or for consideration, which he knows to be likely to be concerned in any proceedings or business transacted or about to be transacted by such public service or having any connection with the official functions or public duty of himself or of any public servant to whom he is subordinate or from a person whom he knows to be interested in or related to the person so concerned;[7]
- Any person ‘associated with a commercial organization’ also gives or promises to give any undue advantage to a public servant intending to (a) obtain or retain business for such organization or (b) to obtain or retain an advantage in the conduct of business of such organization; and[8]
- Criminal misconduct by a public servant.[9]
However, PC Act requires prior sanction of the appropriate government to prosecute both current as well as former officials for offences done while in office.
Who has criminal liability?
Under FEPA, the definition of ‘foreign official’[10] expands on the definition offered in of FCPA[11]. While incorporating all FCPA’s elements, it also adds ‘any person acting in an unofficial capacity’ on behalf of governments, international organizations, etc. FEPA also differs in introducing ‘senior political figures’ into its ambit, while choosing to omit political candidates. State-owned companies and endeavors will also come under the ambit of the Act. Thus, ‘foreign official’ would include not only an employee of a foreign government (including department, agency, or instrumentality), but also people acting officially/ unofficially on behalf of such government or public international organization.[12]
Keeping the recent trends in mind, PC Act is being construed liberally to expand the meaning of public servant to prevent corruption and curb illegal activities where mere technicalities do not defeat the object sought to be achieved by PC Act. For instance, public servant has been interpreted to include the Managing Director and Executive Director of a private bank, operating under a licence, issued by the Reserve Bank of India[13] and private individual, in the context of a Deemed University[14], etc.
The following persons are covered under PC Act:
- ‘a person who holds an office by virtue of which he is authorised or required to perform any public duty, is a public servant’. ‘Public duty’ under PC Act is a ‘duty in the discharge of which the State, the public, or the community at large has an interest’.[15]
- Public servant acting through a third party;[16]
- Person or third party acting or mediator who gives or promises to give undue advantage to another person with intention to induce or reward a public servant;[17]
- A person ‘associated with a commercial organization’ has been defined to mean any person performing services, directly or indirectly, for or on behalf of such organization, including an employee, agent, or subsidiary,[18] where the capacity of the person acting shall not matter.
Extent of proof required
Just like FCPA, FEPA requires a quid pro quo, i.e., a corrupt demand by a foreign official must be in exchange for an improper benefit. By virtue of being placed under the federal domestic bribery statute (18 USC § 201), FEPA has a more stringent quid pro quo standard that requires prosecutors to prove that a bribe was paid in exchange for a specific “official act”.[19] While FEPA does not have an affirmative defense clause like FCPA, the phrase ‘corruptly demand’ in the prohibition section does implicitly place a corrupt-nexus requirement, and will definitely play a part in determining whether the payment was actually intended to be a bribe.
For offences under PC Act or conspiracy to commit or attempt to commit or any abetment of commission of any offences under PC Act, the procedure that is followed is under the Code of Criminal Procedure, 1973 (and now the Bharatiya Nagarik Suraksha Sanhita 2023), and the offences have to be proved beyond reasonable doubt. However, where the offences are alleged to have been committed by a public servant in relation to contravention of any special order[20], the same are tried summarily, thus discretion is provided to skip certain formalities, such as recording detailed evidence, and the courts can rely on prima facie evidence to arrive at a decision.
Further, to substantiate a charge, prosecution must prove the following facts, namely, (1) it must establish that the accused is a public servant, (2) the nature and extent of the pecuniary resources or property which were found in his possession, (3) it must be proved what his known sources of income were, i.e. known to the prosecution, and (4) it must be proved, quite objectively, that such resources or property found in possession of the accused were disproportionate to his known sources of income. The burden then shifts to the accused to satisfactorily account for his possession of disproportionate assets. Furthermore, under the unamended act, both demand and acceptance had to be established[21] and mere recovery was not sufficient to hold a public servant guilty of the offence.[22]
It is also presumed that for an offence by a commercial organisation under PC Act that a person is acting on behalf of the commercial organisation, and the burden is on the commercial organisation to prove that the person is not acting on its behalf.[23]
Punishment for the acts:
Under FEPA, any person who commits the offence of bribery as described in paragraph 1 of subsection (f) shall be fined not more than $250,000 or three times the monetary equivalent of the thing of value, in addition to a possible imprisonment for not more than 15 years, or both.[24] In comparison, FCPA, however, has a more detailed structure, with penalties under the act differing for corporate entities and natural persons.[25]
In contract, under PC Act, where the offences are tried summarily, the punishment prescribed is for a term not exceeding one year. Further under PC Act, the punishment ranges from not less than six months to 10 years with fine, where the quantum of fine is to be ascertained basis the amount or property the accused has obtained or the property the accused person is unable to satisfactorily account for.[26]
Further, a commercial organisation, if caught under the provisions, is liable to be punished with a fine[27], unless it is proved that the offence had been committed with the consent or connivance of any director, manager, secretary or other officer of a commercial organization, then such person shall be guilty and shall be liable for punishment of 3 to 7 years with a fine.
Conclusion:
FEPA and FCPA both have extraterritorial jurisdiction.[28] While we have seen instances of India[29] cooperating where an offence has been committed under FCPA, we are yet to see how the situation will play out under FEPA, i.e., whether India will cooperate with the US enforcement agency – US Attorney’s office – if an Indian is held liable.
Further, Indian companies acting in joint ventures or partnerships with US state-owned companies should be wary, since the expansion in definition under FEPA now covers these officials/ unofficial employees/ workers of the Indian company on the demand side of the bribe, since they will now be considered ‘foreign officials’, thereby rendering them responsible in an individual capacity.
For further information, please contact:
Sara Sundaram, Partner, Cyril Amarchand Mangaldas
sara.sundaram@cyrilshroff.com
[1] With the amendment to the US domestic bribery statute (Title 18, USC, s. 201)
[2] By way of Prevention of Corruption (Amendment) Act, 2018
[3] The term “domestic concern” means– (A) any individual who is a citizen, national, or resident of the United States; and (B) any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship which has its principal place of business in the United States, or which is organized under the laws of a State of the United States or a territory, possession, or commonwealth of the United States.
[4] Refer Sec 7, Prevention of Corruption Act (“PC Act”)
[5] Refer Sec 7(a) 7(b), PC Act
[6] Refer Sec 7 (c), PC Act
[7] Refer Sec 11, PC Act
[8] Refer Sec 9, PC Act
[9] Refer Sec 13, PC Act
[10] Inserted into s. 201 of Title 18, USC, after clause (c).
[11] Refer Sec 78dd-1 part (f), Foreign Corrupt Practices Act
[12] Refer Sec 2 (4), Foreign Extortion Prevention Act
[13] CBI v. Ramesh Gelli 2016 3 (SCC) 788
[14] State of Gujarat v. Mansukbhai Kanjibhai Shah 2020 (20) SCC 360
[15] CBI v. Ramesh Gelli 2016 3 (SCC) 788
[16] Refer Sec 7(ii), PC Act
[17] Refer Sec 8, PC Act
[18] Refer Sec 9, PC Act
[19] See International: Foreign Extortion Prevention Act – Congress expands DOJ’s authority to pursue corrupt non-US Government officials – Baker McKenzie InsightPlus
[20] Refer Sec 3, PC Act
[21] Soundarajan v. State 2023 SCC OnLine SC 424
[22] Jagtar Singh v. State of Punjab 2023 SCC OnLine SC 320
[23] Refer Explanation 3 to Sec 9, PC Act
[24] Refer Sec 2(f) 2, Foreign Extortion Prevention Act
[25] Refer Sec78dd-2 (g), 78dd-3 (e), 78ff of the Foreign Corrupt Practices Act
[26] Refer Sec 16, PC Act
[27] Refer Sec 8 and 9, PC Act
[28] Refer Sec 2 (f) (3), Foreign Extorting Prevention Act; Refer Sec 78dd-2 (i), Foreign Corrupt Practices Act 1998
[29] Louis Berger Scam’ Business Standard (Panaji, 31 March 2017)
