Interestingly, heavy fines have been imposed in the US, on companies for violating the Foreign Corrupt Practices Act, 1977 (FCPA). For example, a fine of $19.6 million was imposed on Beam Suntory (in 2020) to resolve FCPA charges of improper payments by its Indian subsidiary.

Settlement mechanisms and Deferred Prosecution Agreements

Countries are increasingly relying on settlement agreements and deferred prosecution agreements (DPA) as effective enforcements tools to recover fines from the accused, while avoiding the time-consuming process of a trial. A settlement agreement/DPA, would typically involve an understanding, whereby the prosecutor/ enforcement agency would agree not to pursue the prosecution, provided, the accused agrees to pay a fine or compensation and agrees to abide by certain conditions (such improvements in the compliance framework, conducting necessary diligences or investigations and/ or appointing compliance monitors).

For example, in 2021, the Wood Group agreed to pay $177 million in settlements with authorities in the UK, the US and Brazil over foreign bribery, including in India. Similarly, in 2019, Walmart paid $282 million to settle the US SEC’s charges and to also resolve parallel criminal charges by the US DOJ.

However, there are no specific provisions under the PCA which would allow a settlement prior to a trial, in the form of a settlement agreement/DPA. The offences under PCA are not compoundable. While charges of non-compoundable offences can be quashed by the High Courts under Section 482 of the CrPC, the Supreme Court has held that such powers are not to be exercised for offences under special statutes like the PCA or for offences by public servants and that such charges are not to be quashed merely based on compromise between the parties.

While the concept of plea-bargaining is recognized under Indian law, it is not commonly used by parties for settlement of matters. Further, unlike a settlement agreement/DPA process, which would be completed at a pre-trial stage, the plea-bargaining process involves greater monitoring from the trial court and can therefore be more time consuming. Additionally, plea bargaining would involve the admission of a guilty plea, which may not necessarily be the case for settlement agreements. Further, an application for plea bargaining can only be made for offences punishable by imprisonment of 7 years or lesser. Therefore, not all corruption or fraud offences may be eligible for plea bargaining.

As highlighted above, currently, India does not have a statutory mechanism wherein offences related to corruption may be settled/ resolved through a settlement agreement/ DPA, at pre-trial stage. It is recommended that a statutory framework is brought in, which allow companies to enter into settlement agreements/ DPAs for corruption related offences. This would also be helpful in addressing problems related to incessant delays in the judicial system.

While these recommendations are not intended to be exhaustive, we are confident, that if these are implemented, it would go a long way in India’s fight against corruption.

This article was originally published in BW Legal World on 27 June 2023 Co-written by: Alina Arora, Partner; Apurva Zutshi, Principal Associate. Click here for original article

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