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The U.S. Foreign Corrupt Practices Act and Doing Business in India

James T. Parkinson

April 4, 2011

Why are American companies in India? The biggest reason is the high potential of the Indian market and economy. Although the gross domestic product of the U.S. is expected to grow 2.9% for 2011, the economy of India is expected to grow at 8.4%, according to the International Monetary Fund. While the Indian economy offers immense promise for American companies, there are also particular risk factors associated with doing business in India, and extra caution must be taken to not fall afoul of the U.S. Foreign Corrupt Practices Act (“FCPA”), which prohibits bribery of non‐U.S. officials.

There is a history of corruption in all levels of government in India, and excessive bureaucracy and regulation, left from the days of the so‐called License Raj, has left procedures that are complicated and lack transparency. It is often necessary to obtain approvals from several government officials to obtain one required permit or license. Underpaid civil servants yield broad discretionary power, and some deliberately stall administrative procedures to induce improper payment. It is also customary in India to give gifts to business contacts and government officials during Diwali and other religious festivals and Indian government officials often solicit donations from businesses for charitable organizations. These need to be scrutinized carefully in light of FCPA guidelines. In this article, we describe the elements of the FCPA, with a particular focus on doing business in India.

Published by India Law News