Antibribery investigations practical considerations for French companies doing

Anti-bribery investigations: practical considerations for French companies doing business in India Webinar | Khaitan & Co / Ikarian

Introduction

About Us History Full Service Firm Talent Trusted lawyers to leading business houses, MNCs and government since 1911 550+ professionals across 4 offices with top skills & experience of high-profile engagements - Many of our Partners are considered amongst the best in the country in their respective areas of practice - A number of them have significant international experience Relationship driven approach Proactive assistance on critical business issues on transactions but also on daily operations Specialist teams Support of industry experts across practices France Desk Dedicated team to focus on the French market Asialaw Asia-Pacific Legal Practice Awards 2017 – Law Firm of the Year – India – Law Firm of the Year – South Asia Ranked as Tier I Indian Law Firm – Antitrust / Competition, Corporate & M&A, Private Equity and Tax Ranked as Tier I Indian Law Firm – Antitrust / Competition, Banking & Finance, Capital Markets, Corporate & M&A – Dispute Resolution, Insurance, Investment Funds, Labour and Employment – Projects and Energy, Real Speakers Estate, Tax, White Collar Crime Rabindra Jhunjhunwala Susmit Pushkar Partner, Khaitan & Co Head of the France Desk Moderator Partner, Khaitan & Co White-collar-crimes specialist Pierre Laporte General Manager IKARIAN Ranked as Tier I Indian Law Firm - Corporate & M&A - Capital Markets Copyright © Khaitan & Co 2018 | 2

International and Domestic Framework

Universe of Corruption laws & enforcement agencies in India Prevention of Corruption Act (POCA) Prevention of Money Laundering Act (PMLA) Indian Penal Code (IPC) Companies Act, 2013 Anti-Corruption Bureau (ACB)/ Economic Offences Wing (EOW) Central Bureau of Investigation (CBI) Enforcement Directorate (ED) Serious Fraud Investigation Office (SFIO) Copyright © Khaitan & Co 2018 | 4

Overview: The Prevention of Corruption Act, 1988 § In India, the law relating to corruption is broadly governed by the Prevention of Corruption Act, 1988 (“POCA”). § No settlement or deferred prosecution agreements § Investigation Procedure – Investigation is autonomous, prosecutorial discretion minimal, ultimate supervision of court § Evidentiary standard: Beyond reasonable doubt § Jurisdictional reach of POCA applies to both individuals and corporate bodies doing business in or related to India. § Includes Indian citizens and bodies incorporated under the Indian law. § Applies to corporations, regardless of jurisdiction of incorporation, if the corporation carries on business or part of its business India. § Can be invoked even if there is no money trail - “abuse of office” Copyright © Khaitan & Co 2018 | 5

Overview: The Prevention of Corruption Act, 1988 Points to keep in mind: § POCA does not apply to purely commercial situations, i. e. where no official is involved. § Where a company pays or receives a bribe, the senior officers of that company will also personally commit an offence, including that of criminal conspiracy. § The definition of ‘public servant’ under the Act is very wide to ensure maximum coverage of this Act. Gratification too is a wide term and includes money and non-cash benefits as well. § The potential penalties are severe and there maybe implications of blacklisting, cancellation of contracts and damages claims by the government department. Copyright © Khaitan & Co 2018 | 6

Overview: Prevention of Corruption Act, 1988 Penalties under the POCA: § A company is liable for a fine if convicted under the POCA. § An individual can be fined and subjected to an imprisonment of 10 years. § Liability could be attributed to a company, if an employee/agent acted within the scope of employment, to obtain benefit for the company. Copyright © Khaitan & Co 2018 | 7

Overview: Prevention of Money Laundering Act, 2002 (PMLA) § Money laundering involves a process or activity connected with ‘proceeds of crime’ and projecting it as untainted property; activity includes concealment, possession, acquisition or use. § Seeks to recover proceeds of crime vis-à-vis offences of cross-border implications, even if proceeds of crime shifted outside India. § Company/person providing assistance to another to launder money would be guilty under PMLA. § Property situated in and outside India can be attached § Property of any person in possession of proceeds of crime can be attached. § Bribery offence lead to prosecution for money laundering also and risk of attachment of company property. Copyright © Khaitan & Co 2018 | 8

Overview: Prevention of Money Laundering Act, 2002 Penalties under the PMLA § The offence of money laundering is punishable with rigorous imprisonment for a period of minimum 3 years up to 7 years along with fine. Copyright © Khaitan & Co 2018 | 9

Overview: Indian Penal Code, 1860 (“IPC”) § Comprehensive code which covers traditional crimes and substantive aspects of criminal law in India. § Where a company pays or receives a bribe, the senior officers of that company will also personally commit an offence, including that of criminal conspiracy. Copyright © Khaitan & Co 2018 | 10

Attorney- Client Privilege § Section 126 of the Evidence Act, 1872 deals with privileged legal communication- any communication, document and opinion given by attorneys to the client cannot be disclosed unless specifically consented to by the client. § Privilege is held to be waived in case of communication related to furtherance of fraudulent or criminal purposes. § Privilege does not extend to in-house lawyers Copyright © Khaitan & Co 2018 | 11

Internal Investigation in India - practical considerations § Investigations should be timely, thorough, accurate, fair and credible. § Can be triggered by whistleblowing, pre-deal situation, enforcement action § External counsel should be involved for privilege purposes § Personal data of the employees should be accessed upon consent § Confidentiality must be maintained in relation to personal information. § Cross border scenario - disclosure concerns to Enforcement agencies § Protection of whistleblower is important Copyright © Khaitan & Co 2018 | 12

Overview: UK Bribery Act § § § Prohibits: § Making payments to foreign public officials for the purpose of influencing the official or to any person in order to obtain/retain a business advantage § Accepting a payment as a foreign public official § Failure to prevent bribery Applies extraterritorially to: § Entities incorporated under the laws of the UK and Scottish Partnerships with a “close connection” to the UK § Officers/directors/managers/etc. of such companies § British Nationals, citizens, subjects, and residents of the UK § Anti-bribery provision also extends to companies that “carry on a business or part of a business” in the UK Penalties: Fines and imprisonment Copyright © Khaitan & Co 2018 | 13

Overview: US Foreign Corrupt Practices Act (FCPA) ▪ ▪ ▪ Prohibits: Corruptly act, in furtherance of payment, offer, or promise, or authorization of payment, offer or promise, of money or anything of value To a public official, political party, party official, candidate for public office, or intermediary To assist in obtaining or retaining business for any person. Maintain books and records which, in reasonable detail, accurately and fairly reflect transactions and dispositions of issuer’s assets; and Devise and maintain internal accounting controls providing reasonable assurances that: ▪ The books and records are accurate; ▪ Transactions are taken pursuant to management direction; and ▪ Access to assets is controlled and monitored. Copyright © Khaitan & Co 2018 | 14

Overview: US Foreign Corrupt Practices Act (FCPA) ▪ Jurisdiction: ▪ Anti-bribery provisions ▪ Nationality Jurisdiction: ▪ ▪ US companies (incl. US issuers), citizens, and residents anywhere in the world Territorial Jurisdiction: ▪ US Nexus: Foreign issuers, foreign companies, and foreign individuals if actions have US nexus (email, phone, etc. ) ▪ Inside territory of US: Anyone acting “while inside” US – but with very expansive interpretation of “inside” (email, phone, etc. ) Copyright © Khaitan & Co 2018 | 15

Overview: US Foreign Corrupt Practices Act (FCPA) ▪ Accounting Provisions ▪ Issuer Jurisdiction: ▪ Issuers (domestic, foreign, ADRs) with a class of securities registered with the SEC ▪ Anyone else that causes an issuer to violate the Accounting Provisions ▪ Penalties: ▪ An individual can be fined up to US $5, 000/violation (accounting provision) OR twice the gross gain. ▪ An individual can be sentenced up to 20 years in prison. * ▪ A company is liable for a fine up to US $25, 000/violation* or twice the gross gain. Copyright © Khaitan & Co 2018 | 16

Impact of Sapin II laws in India

Sapin II law – an overview The Transparency, Anti-Corruption and Economic Modernisation Act 2016 -1691 of 9 December 2016 (Sapin II law) § Enforced by the French Anti-Corruption Agency (AFA), a structure with international reach. § Reach: ▪ Applies to French companies and their subsidiaries outside of France if their consolidated annual turnover reaches at least 100 million € and the number of employees exceeds 500. ▪ Also applies to physical persons such as members of the executive board, presidents and directors of companies accountable under the law. § The obligations of the Art. 17 of Sapin II law can therefore be applied to some French companies and to some subsidiaries of French companies doing business in India. Copyright © Khaitan & Co 2018 | 18

Sapin II law – Compliance programs (1/2) Requirements under the Art. 17 of Sapin II law: § § A Code of Conduct, including anti-corruption rules and procedures should be part of internal rules of the company and its subsidiaries; § Senior management’s commitment to corruption prevention and detection policy in the Code of Conduct. § A disciplinary system to sanction violations of the Code of Conduct should exist. An internal whistleblowing system; § § A single technical system for receiving disclosures with measures to protect the whistleblower is required. A regularly updated Corruption Risk Map; § Assessment of corruption risks considering geographical and sectoral particularities of the company’s business. § Assessment of the adequacy and effectiveness of existing anti-corruption measures. Copyright © Khaitan & Co 2018 | 19

Sapin II law – Compliance program (2/2) § § Internal control and audit process of the anti-corruption compliance procedures; § Internal detection of shortcomings and best practices and the issue of recommendations. § Detection of corruption. Internal and external accounting control procedures; § § § Reasonable assurance that the accounting information is produced to high standard should be provided. Regular training sessions for employees; § The employees which are the most exposed to corruption risks should be accompanied by special training. § The training sessions programs may vary according to risks encountered, employees’ duties and the region in which the company operates. Due diligence process for main clients, suppliers and intermediaries; § The need for Due diligence concerning a given third party is defined on the basis of the Corruption Risk Map. § All third parties should be mapped according to their nature, status, size, sector of activity and geographical location. § The Due diligence is the main tool to validate the decision to start and continue a business relation. Copyright © Khaitan & Co 2018 | 20

Sapin II law – Practical recommendations § Implement your Code of Conduct and Whistleblowing system in India § Perform your risk mapping taking into consideration the specificities of your exposure in the Indian market § § Geographical and sectoral particularities § Assess adequacy of your anticorruption measures to Indian market Internal control and audit process § § § How your internal controls address the specific challenges you have identified in India in your risk mapping? Training § What is your training plan for your operations in India? § Is it adapted to the risks identified? Due diligences § Perform due diligence on your main third parties in India Copyright © Khaitan & Co 2018 | 21

Q&A

www. khaitanco. com Khaitan & Co asserts its copyright as the author of this presentation. The contents of this presentation are for informational purposes only. Khaitan & Co disclaims all liability to any person for any loss or damage caused by reliance on any part of this presentation.