What does this executive order mean for India Inc.? Will the US Department of Justice stop using the Foreign Corrupt Practices Act (FCPA), a key tool of extraterritorial US law enforcement?

Trump while signing the executive order on 10 February 2025 calling for ‘pausing of the FCPA’ called the FCPA “a disaster” and “a horror show” which inhibits doing business with Americans. The executive order states that the FCPA has been “stretched beyond proper bounds and abused in a manner that harms the interests of the United States”. It goes on to say that the current FCPA enforcement impedes United States’ foreign policy objectives and implicates the President’s authority over foreign affairs.

The executive order states that the President's foreign policy is tied to the global competitiveness of American companies. It emphasizes the significance of national security, which depends on the US and its companies securing strategic business advantages in critical minerals, deep-water ports, and other key infrastructure or assets.

The presidential action states that the “overexpansive” and “unpredictable” FCPA enforcement against US citizens and businesses wastes prosecutorial resources and hinders competitiveness of American businesses.

The order instructs the Attorney General of the United States of America, Pamela Bondi, to review the policies governing investigations and enforcement for a period of 180 days, referred to as the review period. During this review period, lasting 180 days from the date of the order (until 9 August 2025), FCPA actions are to be ‘paused,’ and no new FCPA investigations or enforcements may be initiated unless under exceptional circumstances. The Attorney General is required to thoroughly review all existing FCPA investigations or enforcement actions and take appropriate measures to “restore proper bounds on FCPA enforcement and preserve Presidential foreign policy prerogatives”. Following the review, the Attorney General shall issue updated guidelines and policies to prioritize American interests and economic competitiveness. Additionally, the Attorney General has the authority to extend the review period for an additional 180 days if deemed necessary.

The executive order stipulates that once revised guidelines or policies are issued, the Attorney General shall assess whether further actions, including remedial measures concerning “inappropriate” past FCPA investigations and enforcement actions, are warranted. The Attorney General shall undertake such appropriate actions or, if presidential intervention is necessary, recommend such actions to the President.

This executive order is not the first US policy decision in this direction. On 5 February 2025, Pamela Bondi, the new US Attorney General, directed the DOJ's Criminal Division to prioritize foreign bribery investigations linked to cartels and transnational criminal organizations and to “shift focus away from investigations and cases that do not involve such a connection”.

What does this mean for India Inc?

Does this mean the DOJ will no longer pursue companies violating the FCPA?

It would be premature to conclude this, as the actions of the administration are focused on protecting American companies. However, this does not mean that the DOJ will cease to exercise its powers under the FCPA. On the contrary, it is likely that the DOJ may prioritize investigations of non-US companies to safeguard American economic competitiveness and national security. The administration may strategically use the FCPA to advance American interests without disproportionately targeting US corporations.

Indian companies were largely oblivious to the long arm of the US law and the extraterritorial applicability of the FCPA until the Adani indictment woke up India Inc. to these risks. This awareness was further heightened by enforcement of US sanctions on 19 Indian companies last year for aiding the Russian war efforts in Ukraine.

The Adani indictment came as a shock for India Inc. which had previously believed itself to be beyond the reach of U.S. law. This one case highlights the extensive jurisdictional powers of the US DOJ and two of the most popular arms in its arsenal i.e. the FCPA and the Securities Exchange Act.

Indian companies should not expect leniency from the US DOJ and the SEC. It is important to recognize that US criminal law enforcement jurisdiction is extraterritorial, encompassing all activities impacting US interstate or foreign commerce. The DOJ's proposed actions indicate a shift in focus from US corporations or citizens to non-US entities, as the US is unlikely to relinquish the use of the FCPA to advance its interests. Indian companies should enhance their compliance programs, given that they are likely to be scrutinized by US authorities. This trend is evident from the enforcement patterns of FCPA cases, which have increasingly targeted Asia, particularly China and India, with these countries being involved in 75 and 26 FCPA cases, respectively.

Apart from the FCPA, the SEC retains jurisdiction over foreign bribery cases and can pursue civil enforcement for certain cases that the DOJ decides not to investigate under new guidelines, emphasizing the ongoing risks entities face under US law.

As Indian companies expand globally, understanding US legal requirements is crucial. Effective governance and compliance programs can mitigate risks and enhance transparency in international business.

Looking ahead, the enforcement landscape is likely to evolve, influenced by geopolitical developments, regulatory changes, and advancements in technology. Indian entities must remain vigilant and proactive in their compliance efforts, leveraging technology and expertise to navigate the complexities of US law. 

Author:

Abhinav Sharma, Partner, Dentons Link Legal