Developments in Indian Anti-Corruption Legislation

Most recently, Indian authorities arrested Suresh Kalmadi, the former chief organizer of the Commonwealth Games, alleging that he awarded an inflated $33 million contract to a Swiss company that provided timing equipment to the games. See “India Arrests Former Chief of Commonwealth Games,” The New York Times (Apr. 25, 2011), www.nytimes.com/2011/04/26/world/asia/26india.html. And two days earlier, Indian airline safety officials stripped the licenses of more than a dozen commercial pilots in India after uncovering alleged fraud and corruption in the way pilot licenses were awarded. See “India Finds Corruption in Fast-Growing Aviation Industry,” The New York Times (Apr. 23, 2011), www.nytimes.com/2011/04/24/world/asia/24india.html.

In March 2011, leaked diplomatic cables from the Wikileaks website described a senior Indian congressional aide showing a U.S. embassy official “chests of cash” allegedly used to bribe members of the Indian parliament to support the majority government in a vote of confidence in 2008. “India's Corruption Scandals,” BBC News South Asia (Mar. 17, 2011), www.bbc.co.uk/news/world-south-asia-12769214? Also in March of this year, the Indian Supreme Court overturned the appointment of P.J. Thomas as India's anti-corruption chief as a consequence of allegations that Mr. Thomas had earlier in his civil service career accepted bribes in exchange for agreeing to inflated contracts for imported palm oil. “India Anti-Corruption Chief PJ Thomas Forced to Resign,” BBC News South Asia (Mar. 3, 2011), www.bbc.co.uk/news/world-south-asia-12631887?. And in what might be India's biggest corruption scandal to date, Telecommunications Minister Andimuthu Raja was arrested in February of this year for allegedly selling mobile phone frequency licenses at a reduced price ' an alleged fraud that cost the exchequer nearly $40 billion in lost revenue. On April 25, 2011, the Indian Central Bureau of Investigation named five more people in connection with the telecom scandal, including several politicians, and alleged that Raja and two other defendants accepted bribes of 2 billion rupees in exchange for “undue favors.” See “CBI Charges Lawmaker in Indian Telecom Probe,” The Wall Street Journal (Apr. 25, 2011), http://blogs.wsj.com/corruption-currents/2011/04/25/cbi-charges-lawmaker-in-indian-telecom-probe/?modgoogle_news_blog.

A History of Strong Anti-Corruption Legislation and Weak Enforcement

Despite these high-profile corruption scandals, India has had several strong anti-corruption laws on the books for decades. In particular, the 1988 Prevention of Corruption Act criminalizes both public and private corruption with potential prison sentences of up to five years. See Prevention of Corruption Act of 1988, www.kar.nic.in/lokayukta/preact.htm. In 2005, India enacted the Right to Information Act (RTI), a significant piece of legislation similar to the Freedom of Information Act in the United States, which allows any Indian citizen to request specific information in the hands of public authorities. See Right to Information Act of 2005, http://righttoinformation.gov.in/webactrti.htm.

In spite of these laws, the recent public corruption allegations and arrests have focused attention on weaknesses in both the laws themselves and in their enforcement. For example, though laudable in its promise of transparency to 1.2 billion citizens, the RTI's decentralized nature has resulted in significant backlogs of information release appeals at the state and local levels. Sidharth Pandey, “Losing Steam: RTI Appeals Pile Up,” NDTV.com (Oct. 13, 2007), www.ndtv.com/convergence/ndtv/story.

In addition, Transparency International has highlighted the “huge gap between anti-corruption policies and practice.” See Marie Ch'ne, “Overview of Corruption and Anti-Corruption Efforts in India,” U4 Anti-Corruption Resource Centre, Transparency International (Jan. 21, 2009), www.google.com/url?sa=t&source=web&cd=1&ved=0CBoQFjAA&url=http%3A%2F%2Fwww.u4.no%2Fhelpdesk2%Fhelpdesk$2Fquery.cfm%3Fid%3D188&ei=fqO5Td6rFMXegQe0tPVm&usg=AFQjCNFRGUXvRqkED0c8Fk5d51oC5shLQA&sig2=32t9KA3S2DQdfP0WkrP2Qg.

Although Transparency International has rated India's “legal framework against corruption” as “good,” it noted that India needed a law protecting whistleblowers and that “law enforcement ' remains weak, suggesting a lack of political will effectively to address corruption challenges in the country.” Id.

In next month's issue we will discuss some proposed changes to India's anti-corruption laws and the reception those proposals are getting both domestically and internationally. http://aspx?id=NEWEN20070029213&ch=10/13/2007%208:04:00%20AM. Only two years after the RTI's passage, the State Information Commission of Maharashtra had incurred a backlog of 11,000 cases and the Central Information Commission in Delhi had close to 4,000 cases pending. Id. Because of the backlog it takes approximately four to five months for an appeal to be heard, but the RTI mandates that appeals must be disposed of within 30 days of their receipt.

Paul R. Berger is a partner and Aaron M. Tidman is an associate in the Washington, DC, office of Debevoise & Plimpton LLP. Steven S. Michaels is a counsel in the firm's New York office. They are members of the Litigation Department and White Collar Litigation Practice Group.

While U.S. authorities have stepped up FCPA enforcement to an unprecedented level, other countries have concurrently taken steps to pass tougher anti-corruption laws and bring their enforcement efforts in line with international standards. India, the world's largest democracy and second largest country by population, finds itself among the forefront of countries working to rid themselves of corrupt transactions, joining regional neighbors Indonesia and the UAE, as well as China, Mexico and Russia as countries that have most recently decided to tackle significant anti-corruption legislation.

India currently ranks 87th (in a tie with Jamaica and Liberia, and below China, which ranks 78th) out of 178 countries on Transparency International's 2010 Corruption Perceptions Index. The Indian government has been under significant pressure at home to enact new, strong anti-corruption legislation and to provide greater resources to back the enforcement of existing anti-corruption laws because of several major scandals involving high ranking public officials that have made international headlines over the past few months.

Recent Cases Highlight Need for New Legislation

Most recently, Indian authorities arrested Suresh Kalmadi, the former chief organizer of the Commonwealth Games, alleging that he awarded an inflated $33 million contract to a Swiss company that provided timing equipment to the games. See “India Arrests Former Chief of Commonwealth Games,” The New York Times (Apr. 25, 2011), www.nytimes.com/2011/04/26/world/asia/26india.html. And two days earlier, Indian airline safety officials stripped the licenses of more than a dozen commercial pilots in India after uncovering alleged fraud and corruption in the way pilot licenses were awarded. See “India Finds Corruption in Fast-Growing Aviation Industry,” The New York Times (Apr. 23, 2011), www.nytimes.com/2011/04/24/world/asia/24india.html.

In March 2011, leaked diplomatic cables from the Wikileaks website described a senior Indian congressional aide showing a U.S. embassy official “chests of cash” allegedly used to bribe members of the Indian parliament to support the majority government in a vote of confidence in 2008. “India's Corruption Scandals,” BBC News South Asia (Mar. 17, 2011), www.bbc.co.uk/news/world-south-asia-12769214? Also in March of this year, the Indian Supreme Court overturned the appointment of P.J. Thomas as India's anti-corruption chief as a consequence of allegations that Mr. Thomas had earlier in his civil service career accepted bribes in exchange for agreeing to inflated contracts for imported palm oil. “India Anti-Corruption Chief PJ Thomas Forced to Resign,” BBC News South Asia (Mar. 3, 2011), www.bbc.co.uk/news/world-south-asia-12631887?. And in what might be India's biggest corruption scandal to date, Telecommunications Minister Andimuthu Raja was arrested in February of this year for allegedly selling mobile phone frequency licenses at a reduced price ' an alleged fraud that cost the exchequer nearly $40 billion in lost revenue. On April 25, 2011, the Indian Central Bureau of Investigation named five more people in connection with the telecom scandal, including several politicians, and alleged that Raja and two other defendants accepted bribes of 2 billion rupees in exchange for “undue favors.” See “CBI Charges Lawmaker in Indian Telecom Probe,” The Wall Street Journal (Apr. 25, 2011), http://blogs.wsj.com/corruption-currents/2011/04/25/cbi-charges-lawmaker-in-indian-telecom-probe/?modgoogle_news_blog.

A History of Strong Anti-Corruption Legislation and Weak Enforcement

Despite these high-profile corruption scandals, India has had several strong anti-corruption laws on the books for decades. In particular, the 1988 Prevention of Corruption Act criminalizes both public and private corruption with potential prison sentences of up to five years. See Prevention of Corruption Act of 1988, www.kar.nic.in/lokayukta/preact.htm. In 2005, India enacted the Right to Information Act (RTI), a significant piece of legislation similar to the Freedom of Information Act in the United States, which allows any Indian citizen to request specific information in the hands of public authorities. See Right to Information Act of 2005, http://righttoinformation.gov.in/webactrti.htm.

In spite of these laws, the recent public corruption allegations and arrests have focused attention on weaknesses in both the laws themselves and in their enforcement. For example, though laudable in its promise of transparency to 1.2 billion citizens, the RTI's decentralized nature has resulted in significant backlogs of information release appeals at the state and local levels. Sidharth Pandey, “Losing Steam: RTI Appeals Pile Up,” NDTV.com (Oct. 13, 2007), www.ndtv.com/convergence/ndtv/story.

In addition, Transparency International has highlighted the “huge gap between anti-corruption policies and practice.” See Marie Ch'ne, “Overview of Corruption and Anti-Corruption Efforts in India,” U4 Anti-Corruption Resource Centre, Transparency International (Jan. 21, 2009), www.google.com/url?sa=t&source=web&cd=1&ved=0CBoQFjAA&url=http%3A%2F%2Fwww.u4.no%2Fhelpdesk2%Fhelpdesk$2Fquery.cfm%3Fid%3D188&ei=fqO5Td6rFMXegQe0tPVm&usg=AFQjCNFRGUXvRqkED0c8Fk5d51oC5shLQA&sig2=32t9KA3S2DQdfP0WkrP2Qg.

Although Transparency International has rated India's “legal framework against corruption” as “good,” it noted that India needed a law protecting whistleblowers and that “law enforcement ' remains weak, suggesting a lack of political will effectively to address corruption challenges in the country.” Id.

In next month's issue we will discuss some proposed changes to India's anti-corruption laws and the reception those proposals are getting both domestically and internationally. http://aspx?id=NEWEN20070029213&ch=10/13/2007%208:04:00%20AM. Only two years after the RTI's passage, the State Information Commission of Maharashtra had incurred a backlog of 11,000 cases and the Central Information Commission in Delhi had close to 4,000 cases pending. Id. Because of the backlog it takes approximately four to five months for an appeal to be heard, but the RTI mandates that appeals must be disposed of within 30 days of their receipt.

Paul R. Berger is a partner and Aaron M. Tidman is an associate in the Washington, DC, office of Debevoise & Plimpton LLP. Steven S. Michaels is a counsel in the firm's New York office. They are members of the Litigation Department and White Collar Litigation Practice Group.