Case BriefsSupreme Court

Supreme Court: The 3-judge bench of SA Bobde, CJ and L. Nageswara Rao and S. Ravindra Bhat, JJ has taken suo motu cognisance of the “grim” situation of the country hit by the second wave of COVID-19 pandemic and has asked the Central Government to report on,

  1. The existence or otherwise and requirement of setting up of a coordinating body that would consider allocation of COVID resources in a consultative manner (with the involvement of concerned States and Union 3 Territories).
  2. Considering declaration of essential medicines and medical equipment including the Drugs, oxygen and vaccination as essential commodities in relation to COVID.
  3. In respect of coordination of logistical support for inter-State and Intra-State transportation and distribution of the above resources.

Due to the sudden surge in the number of covid patients and mortality, the nation is witnessing a shortage of essential COVID resources such as Oxygen and drugs like Remdesivir.

While, drugs, oxygen and vaccination availability and distribution are being carried out by Governments including the Central government according to protocols established by the health authorities, the Court noticed that a certain amount of panic has been generated and people have invoked the jurisdiction of several High Courts in the country seeking various reliefs such as Delhi, Bombay, Sikkim, M.P., Calcutta, Allahabad and Gujarat.

“The High Courts have passed certain orders which may have the effect of accelerating and prioritising the services to a certain set of people and slowing down the availability of these resources to certain other groups whether the groups are local, regional or otherwise.”

The Court was hence, of the prima facie view that the distribution of these essential services and supplies must be done in an even handed manner according to the advice of the health authorities which undoubtedly take into account relevant factors like severity, susceptibility, the number of people affected and the local availability of resources.

It, hence, asked the Central Government to place before it a national plan for dealing with the above services and supplies during Pandemic.

The Court, hence, issued notice to the Union Government, the State Governments/Union Territories and the parties, who appeared to have approached the High Courts to show cause why uniform orders be not passed in relation to

  1. a) Supply of oxygen;
  2. b) Supply of essential drugs;
  3. c) Method and manner of vaccination; and
  4. d) Declaration of lockdown.

The Court will hear the matter tomorrow i.e. on 23.04.2021.

Senior Advocate Harish Salve, assisted by advocate Anuradha Dutta, has been appointed as Amicus Curiae to assist the Court in the matter.

[IN RE : DISTRIBUTION OF ESSENTIAL SUPPLIES AND SERVICES DURING PANDEMIC, SUO MOTO WRIT PETITION (C) NO.3/2021, order dated 22.04.2021]

Experts CornerShantanu Mukherjee

Introduction

The bargain implicit in a patent – the Faustian pact, as Bently and Sherman put it – is classic: a limited monopoly granted by the State in exchange for public disclosure of an invention. Over the years, perhaps nowhere has this pact fuelled as much academic and policy debate as in the pharmaceutical industry. The basis for the debate is understandable: medicines can save lives, and therefore monopolies that potentially restrict access to medicines are a matter of public concern, but on the other hand, for the private sector, drug development and manufacture is a business, and an expensive business at that.

 

When the Covid-19 pandemic first hit, it was clear that global commitment to research collaborations and technology licensing would be crucial to scale up research, development, manufacturing and supply of vaccines and therapies. Even after a vaccine or vaccines had been developed, no pharmaceutical company would in itself have the manufacturing capacity to meet global demand for vaccines. One would need to manufacture around 5 billion doses to vaccinate the world, for a single-dose vaccine, and 10 billion for a two-dose vaccine.[1] To contextualise the sheer enormity of this challenge, consider that all the vaccine companies in the world together produce less than 6 billion doses a year (including flu shots, routine childhood immunisations, etc.). This means that in order to meet global demand for Covid-19 vaccines without cutting back on any others, global vaccine manufacturing capacity would need to double at the very least, and more likely almost triple.[2] This would require cross-border licensing, technology transfer and contract manufacturing deals to be struck by vaccine developers at a scale and pace hitherto unheard of.

 

Furthermore, hundreds of patents associated with the treatment of viral infections such as Severe Acute Respiratory Syndrome (SARS), Middle East Respiratory Syndrome (MERS), influenza and Ebola had the potential to be repurposed for treating Covid (as remdesivir, favipiravir and lopinavir, among others, eventually were)[3]. Could this be achieved if patent-holders clung to monopoly-based rent-seeking ideologies? Could innovators be trusted to grant licences fairly, quickly and on reasonable terms? Would vaccine nationalism and corporate self-interest impede the global effort to combat Covid, and limit access to vaccines and therapies? These were the questions being asked by concerned citizens and organisations early in 2020[4], much as they had in the context of other public health crises[5].

 

Now, less than a year later, several vaccines have been approved for public use, supply deals worth billions of dollars have been struck and governments around the world have begun massive vaccination drives for their citizens. Were the naysayers wrong? Has the world managed to rise above petty national and corporate interests and come together, as the Beatles had hoped?

 

As is often the case when ideals collide with realpolitik, the situation is rather more intricate than that.

Through these series of articles, we aim to explore the legal and commercial issues at the heart of the biggest global vaccination effort the world has ever seen.

Part 1: Ideals v. Deals

 

  1. “You Got The Cash, We Got The Doll”

In early 2020, as Covid-19 raged across the world and companies raced to develop therapies and vaccines, supported by billions of dollars in government aid, concerns grew regarding access.

 

In March 2020, it was reported that the Trump administration was trying to secure a vaccine being developed by CureVac, a privately held German biotechnology group, exclusively for the United States (US), by persuading the group to move its development efforts to the US, in exchange for a large financial donation.[6] CureVac’s investors denied the story and German officials conveyed their disapproval of any such exclusive access deal in no uncertain terms. A few months later, the German government bought a 23% stake in CureVac, effectively ensuring it can keep an eye on – and likely a veto over – similar overtures.[7]

 

On 13 May 2020, Sanofi’s CEO, Paul Hudson, said in an interview that the US would likely get Sanofi’s Covid-19 vaccine (if approved) before the rest of the world, because the US was first to fund Sanofi’s vaccine research and expected that “if we’ve helped you manufacture the doses at risk, we get the doses first”.[8]

 

This, understandably, did not go down well in Europe. The French Prime Minister delicately reminded Sanofi that it was a “deeply French company” and emphasised that “equal access to a vaccine for all is non-negotiable”.[9]

 

Hours after Hudson’s interview appeared, Sanofi clarified that while vaccines from US production sites would be mainly reserved for Americans, production capacity elsewhere would supply Europe and the rest of the globe.[10]

 

This echoes a more recent controversy, arising out of an interview given by AstraZeneca’s CEO[11], in which, while seeking to explain the company’s recent inability to meet its vaccine supply commitments (which he characterised as being on a “best efforts” basis), he gave the impression that vaccine production from AstraZeneca’s British plants were being reserved for the United Kingdom (UK), while the European Union (EU) was being supplied by a plant in Belgium (which was facing production issues, hence the supply disruption). We will examine the EU/AstraZeneca Advance Purchase Agreement (recently released in redacted form), and other commercial deals that define the current vaccine access landscape, in greater detail in future instalments of this series (including “Part 2: Follow the Money”).

 

The CureVac and Sanofi incidents underscored a larger trend. As the US, UK and other wealthy nations rushed to enter into Advance Purchase Agreements with vaccine manufacturers such as Moderna, Pfizer and AstraZeneca for the purchase of under-development vaccines, an overwhelming majority of the world’s (already limited) vaccine manufacturing capacity was being blocked for them, effectively denying access to poorer countries that could not afford to enter into these at-risk vaccine pre-purchase deals.

 

The effort to develop and distribute a vaccine was beginning to look less like a collaborative global endeavour and more like an undignified Black Friday stampede, or a brawl for the last action figure in a store the night before Christmas.

2. “Cohagen, Give These People Air!”

Pressure mounted from the open access lobby for a more equitable approach. On 14th May 2020, 140 political leaders and economists released a letter[12], drafted by United Nations Programme on HIV/AIDS (UNAIDS)  and Oxfam, calling for a World Health Organisation (WHO) administered global agreement that (i) ensured mandatory global sharing of all Covid-19 related knowledge with a pool of licences freely available to all countries; (ii) established a global manufacturing and distribution plan “fully funded by rich nations”; and (iii) guaranteed that Covid-19 vaccines, diagnostics, tests and treatments were provided “free of charge to everyone, everywhere”. On the same day, members of European Parliament expressed support for compulsory licensing as a means of ensuring Europeans access to approved Covid-19 vaccines.[13]

 

Meanwhile several health advocacy groups, including Doctors Without Borders, Third World Network and India’s Cancer Patients Aid Association, asked the Indian government to invalidate three Gilead patents protecting Remdesivir (at that time, the only drug approved in the US for emergency treatment of Covid-19).[14] This was despite the fact that Gilead had issued voluntary licences to manufacturers in India and Pakistan allowing them to make and sell Remdesivir in 127 countries.[15]

 

At the same time, other global initiatives such as the Medicines Patent Pool (MPP)[16], the World Health Organisation (WHO) Covid-19 Technology Access Pool (C-TAP)[17] and the Open Covid Pledge[18] were trying to put in place voluntary pooling mechanisms to share the intellectual property (IP) and technology necessary to fight Covid, but these failed to gather critical mass and take off. Industry leaders appeared generally dismissive[19] of these initiatives, and they failed to attract any pledges or licences from drug companies developing Covid therapies or vaccines. Although 18 generic drug manufacturers did offer their capacity to develop and supply Covid-19 treatments to those in need via the MPP, no patent licences for such treatments have been placed in the MPP pool to date.

 

It was reported[20] that apart from lacking industry support, these initiatives had been edged out by the WHO’s more popular program, the Access to Covid-19 Tools (ACT) Accelerator.[21] The ACT Accelerator was preferred, the article theorised, because it respected and preserved the intellectual property status quo, while the C-TAP sought to challenge it.[22]

 

However, with even the European Commission now admitting the unanticipated challenges in scaling up production of vaccines and mulling voluntary licensing mechanisms[23], the dynamics of the conversation around voluntary sharing approaches may shift.

 

3. “I’ll Live To See You Eat That Contract”

On 2 October 2020, India and South Africa tabled a joint proposal before the World Trade Organisation (WTO) requesting that a temporary waiver be granted to WTO members permitting them to choose not to implement, apply or enforce certain obligations related to Covid-19 products and technologies under Sections 1 (copyrights and related rights), 4 (industrial design), 5 (patents) and 7 (protection of undisclosed information) of Part II of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, for the duration of the Covid crisis.[24] The proposal argues that it offers a way to ramp up global production of vaccines and calls on members to ensure that IP rights do not impede timely access to affordable vaccines and medicines.[25]

 

The proposal was opposed by several other countries on the basis of the argument that existing TRIPS allowances for compulsory licensing and parallel importing were sufficient to address the relevant concerns.

 

Proponents of the waiver proposal countered that such TRIPS allowances are illusory, as compulsory licences, when granted in the past by countries such as India, Malaysia and Colombia, have faced backlash from other member States and pharmaceutical companies, including threats of trade sanctions.[26] Interestingly, the draft of the waiver proposal requires that WTO members do not challenge any measures taken in conformity with the waiver, including through the WTO’s Dispute Settlement Mechanism.

 

Recent news reports indicate that more than 400 US civil society groups and lawmakers are calling on the US President to support the TRIPS waiver.[27] On 3 February 2021, 14 members of the European Parliament, in a letter to the EU leadership, asked the EU to support the waiver and issue compulsory licences to facilitate the scaling up of Covid-19 vaccine production.[28] The WTO General Council (GC) will receive an update from the TRIPS Council on this matter during the GC meeting on 1-2 March 2021.

 

Increasing inability by vaccine manufacturers to meet their supply commitments, resulting contractual and diplomatic tensions and allegations of vaccine nationalism will likely cause the conversation to return to the TRIPS waiver proposal periodically, although the proposal itself is unlikely to pass (ultimately). Some believe that the political push for a TRIPS waiver may well lead voluntary pooling initiatives such as C-TAP to finally take off, in that, faced with the prospect of a TRIPS waiver or compulsory licensing, the industry may move to adopt voluntary approaches. Further, while the TRIPS waiver proposal can, in theory, expedite response to the pandemic by suspending intellectual property protection to trade secrets, it may not eventually be able to actually force technology transfer[29]. If potential vaccine manufacturers cannot get access to the complex technological know-how necessary to manufacture the vaccines or therapies (where such know-how has not been disclosed in the patent filings and is protected as confidential knowhow or trade secrets), the TRIPS waiver would do little good[30]. Under those circumstances, a voluntary mechanism for facilitating technology transfer such as the C-TAP could come into its own.

 

Conclusion to Part 1

The biopharma industry’s lukewarm response to sweeping initiatives like the Open Covid Pledge, the WHO/MPP patent pools and the TRIPS waiver proposal, when contrasted with the range of voluntary measures (such as voluntary licensing and IP waivers) taken by the industry over the past year suggest that patent-holders would much rather adopt a case-by-case approach to waiving or licensing their IP than sign up to a blanket, global commitment in respect of such IP. While drug companies can probably live without making large profits[31] from the ongoing vaccine development frenzy (given the substantial government funding they’ve received towards development and commercialisation), they can’t simply give away the IP they develop without retaining any say in the manner of its exploitation, either. From the perspective of a pharma CEO who is, ultimately, a salaried professional answerable to shareholders that demand a return on their investment, this would likely amount to throwing the baby out with the bathwater.

 

The second part of this series (“Part 2: Follow the money”) will examine how compulsory licensing failed to move beyond the statute books other than in Israel but did, arguably, trigger a few voluntary IP non-enforcement pledges by vaccine manufacturers, and how access to vaccines today is a function not of the sweeping global “open access” schemes argued for by so many, but on a patchwork of bilateral advance purchase agreements between governments and vaccine developers, and public-private initiatives such as COVAX[32].

 

† Shantanu is the founder of Ronin Legal, a legal boutique with a focus on pharma, biologics and healthcare. He can be reached at shantanu@roninlegal.in and on Twitter [@LegalRonin]. 

[1]<https://www.gatesnotes.com/About-Bill-Gates/Year-in-Review-2020?WT.mc_id=20201222100000_YIR2020_BG-TW_&WT.tsrc=BGTW>.

[2]Ibid.

[3]<https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7474498/>.

[4]<https://www.iam-media.com/coronavirus/the-danger-coronavirus-presents-biopharma-patent-owners>. See also <https://www.iam-media.com/coronavirus/global-calls-compulsory-covid-19-patent-licensing-build>. See also the Médecins Sans Frontières Technical Briefing Document “Voluntary Licenses and Access to Medicines” available HERE

[5]See, among others, Hoen, Ellen, Private Patents and Public Health, Changing Intellectual Property Rules for Access to Medicines, available HERE

[6]<https://www.nytimes.com/2020/03/15/world/europe/cornonavirus-vaccine-us-germany.html>.

[7]<https://www.fiercebiotech.com/biotech/after-a-turbulent-few-months-germany-takes-a-stake-covid-vaccine-drugmaker-curevac>.

[8]<https://www.bloomberg.com/news/articles/2020-05-13/u-s-to-get-sanofi-covid-vaccine-first-if-it-succeeds-ceo-says>.

[9]<https://sciencebusiness.net/covid-19/news/transatlantic-tensions-over-access-covid-19-vaccines-mount-after-sanofi-ceo-says-us?_sm_au_=iVVTQQcQ7tvsNHsQvMFckK0232C0F

[10]<https://endpts.com/sanofi-walks-back-paul-hudsons-promise-of-early-vaccine-access-for-the-us-sort-of/>.

[11]In an exclusive interview to an Italian newspaper, available Here.

[12] Full text available HERE.

[13] Global Calls for Compulsory Covid-19 Patent Licensing Build, available HERE .

[14]See HERE. See also HERE.

[15] <https://generics.pharmaintelligence.informa.com/GB149889/Gilead-Licenses-Remdesivir-To-Five-Firms>. Generic versions of Remdesivir are now available in India. See  HERE.

[16]On 31-3-2020, the Medicines Patent Pool (MPP) – which has hitherto focused on increasing access to HIV, tuberculosis and hepatitis C drugs in developing nations through patent pooling arrangements – decided to temporarily expand its mandate to include any Covid-related health technology where licensing could improve access.

[17] C-TAP was launched in May 2020, to act as a platform to voluntarily share Covid-related knowledge, intellectual property and data and accelerate the scale up of manufacturing. See  HERE.

[18] The Open Covid Pledge (OCP) website <https://opencovidpledge.org/> lists patent-holders who are making their intellectual property available free of charge for use in alleviating the Covid-19 pandemic. The OCP attracted significant participation from technology giants (its founding partners included Facebook, Amazon and Microsoft) but none from companies developing Covid vaccines or therapies.

[19]Pharma Leaders Shoot down WHO Voluntary Pool for Patent Rights on Covid-19 Products, available HERE .

[20]Constraints Facing the Covid-19 Technology Access Pool (C-TAP) available HERE.

[21] The Accelerator is a global collaboration to accelerate the development, production, and equitable access to Covid-19 tests, treatments, and vaccines. It was set up by the WHO, European Commission, France and the Bill & Melinda Gates Foundation in April 2020.

[22]<https://genevahealthfiles.substack.com/p/constraints-facing-the-covid-19-technology>.

[23]“The Commission will foster the creation, if need be, of a voluntary dedicated licensing mechanism, which would allow technology owners to retain a continued control over their rights whilst guaranteeing that technology, knowhow and data are effectively shared with a wider group of manufacturers.” Communication from the Commission to the European Parliament, the European Council and the Council dated 17-2-2021, available HERE .

[24] Text of proposal available HERE

[25]See generally, Médecins Sans Frontières Briefing Document dated 8-10-2020 available HERE.

[26]<https://www.openaccessgovernment.org/trips-covid-19-waiver/103738/>.

[27]<https://timesofindia.indiatimes.com/world/us/us-civil-society-groups-lawmakers-press-biden-to-support-indias-trips-waiver-proposal-on-covid-19-vaccines/articleshow/81244149.cms>.

[28]<https://www.aninews.in/news/world/europe/eu-parliamentarians-strongly-back-india-south-africa-proposal-for-covid-vaccine-patent-waiver20210205044636/>.

[29]<https://genevahealthfiles.substack.com/p/constraints-facing-the-covid-19-technology>.

[30]<https://medicineslawandpolicy.org/2020/12/what-is-the-know-how-gap-problem-and-how-might-it-impact-scaling-up-production-of-covid-19-related-diagnostics-therapies-and-vaccines/>.

[31] Where do Covid-19 Vaccine Players Stand on Pricing? So Far, It’s No Profit, Slight Profit or Undecided available HERE.

[32] COVAX, the vaccines pillar of the Access to Covid-19 Tools (ACT) Accelerator, is co-led by Coalition for Epidemic Preparedness Innovations (CEPI), Gavi, The Vaccine Alliance and WHO. It is a global initiative that works with Governments, vaccine manufacturers, UNICEF, the World Bank, and others to ensure rapid and equitable access to Covid-19 vaccines for all countries.

Bharat ChughExperts Corner

There is hardly any webinar on the effects of the pandemic that gets concluded without the wise panellists exhorting us – in Churchill’s words not to, “let a perfectly good crisis go to waste”. The intent, of course, is for us to gather newer skills and keep reinventing ourselves, in order to stay relevant. While we may or may not learn, white collar criminals seem to know this better than anyone else and they are not letting this crisis go to waste.

Hate to sound like an alarmist, but the truth is white collar crime (WCC) is on the rise and it is further expected to grow – by alarming proportions – in the next few months and years. A crisis is often followed by a rise in the number of financial crimes. We are already seeing a huge rise/spike in cases relating to cybercrime, employee fraud, illegal profiteering, accounting malpractices, money laundering, corruption in the grant of government contracts, bailouts, stimulus packages, and so on. A large amount of money is being pumped into economies worldwide to alleviate the crisis.

We all know that it was not really the best of all possible worlds – financially, even before Covid, but the pandemic really made it worse. It has given rise to a vicious triangle (known as the fraud triangle); a deadly cocktail of pressure, opportunity and rationalisation which has always provided a great breeding ground for WCC.

Let us see how:

Pressure: A rising tide is known to lift all boats, but, it is only when the tide goes out that you learn who has been swimming naked.1 A crisis such as a pandemic offers not only a great motivation for all sorts of financial chicanery but also lays bare the real financial position of a lot of entities. Because of the financial downturn, businesses are under tremendous pressure to make (or at least appear to make) their financial targets/numbers. Most companies are missing their financial targets and that leads to enormous pressure. This is made worse by the kind of compensation incentive structures that we have. Executive compensation, as we all know, is mostly linked to profits, and the bottom line, unfortunately, is the only thing that separates success from failure in the cut-throat world of business. An unprecedented situation of pressure such as this, often yields itself easily to falsification of accounts, accounting malpractices, market manipulation, fraud and other financial shenanigans.

Opportunity: What has further exacerbated the situation is the presence of a great opportunity for people prone to such acts. With priorities elsewhere, internal controls, compliance and supervision have become somewhat lax. Travel-related restrictions and physical closure of offices have created gaps in regulation and oversight. Attention for the most part, is diverted to somehow keeping businesses afloat and saving jobs. Internal controls and incisive due diligences do not appear to be the top priority at this moment.

What provides an even greater opportunity is the fact that Governments across the world are pushing in trillions of dollars into the economy as stimulus packages and bailouts. Further, the Governments are procuring (especially in sectors such as healthcare) like never before and, since time is of the essence, the usual safeguards in the process in public procurement (both in terms of pricing and quality) are being bypassed. Extraordinary circumstances indeed require extraordinary measures but the extents to which we are ready to make departures from best and healthy procurement practices are quite disconcerting.

Times such as these yield themselves easily to corrupt practices. And in this, we may do well to remind ourselves that – even historically, most anti-corruption laws owe their genesis to crisis, wartime procurement, and the resultant corruption. Everyone seems to have let their guard down. This, as history tells us, is a terrible idea.

Rationalisation: This is another important element in understanding WCC. The people who usually commit WCC are intelligent and sharp people (usually decision-makers at the higher rungs of organisations and companies) who are very good at rationalising (though terrible at being rational). This rationalisation is nothing but a distortion of facts to make things appear better than they really are.

To illustrate this, the thinking of most white collar criminals mostly is, “It is just a change of numbers on a spreadsheet; we are not killing anyone”, or “We are doing this to save jobs, and we will push the money back in, once times are better.”

This deadly cocktail of rationalisation and short-term thinking is extremely problematic and is further compounded by a tendency to want to remain in “denial” – often despite all evidence to the contrary. There is no one as blind as the person who does not want to see, right?

A crisis – in fact, is time to introspect but not many companies (and that is true across the world, and across times) have successfully engendered a culture of radical honesty where anyone can tell the emperor that “he has no clothes…”. Rationalisation and wilful blindness are rampant; meetings often mere echo chambers. This is even more problematic in times of crisis and needs to change.

The fact that the victims of WCC often are a body as diffused and abstract as “shareholders”, “investors”, “taxpayers”, “employees” and not a single visible person – such as an 80-year-old widow, makes it easier for the perpetrators to rationalise. Since one cannot see the immediate victims, as one may – in a conventional crime such as murder, one finds it easier to rationalise and have less (or no) moral compunctions about one’s acts. The importance of putting a face to the victim cannot be emphasised enough. We need to ensure that victims of WCC do not remain invisible.

“If I look at the mass, I will never act. If I look at the one, I will.” This statement by Mother Teresa provides a great insight into human nature and reminds us that we are most likely to act charitably to the suffering of “one” who is before us, but the suffering of an abstraction such as “humanity”, “investors”, “shareholders” or “pensioners” fails to conjure up any humanity in us.

So, the point is made: given the circumstances, white collar crime needs to be taken seriously. In case of a company, indeed a company has “no soul to be damned and no body to be kicked”, but, under our legal system, a company can still be prosecuted and face massive and often debilitating fines. There is, therefore, a need to understand the risks and keep a few things in mind. Here are a few suggestions:

(iRecognising that this is not the time to drop our guard: Compliance departments in organisations should, in fact, be working in overdrive. There should be frequent checks and training/hygiene drives should be ramped up too, especially for those organisations which do business in areas having a lot of government interface, and areas which are tightly regulated and considered high risk traditionally – such as healthcare or defence. The same is also true for organisations dealing with sensitive personal data, take – for instance, companies in the fintech space.

One needs to be wary of the risks. This is not the time to cut down on in-house legal/compliance staff and external legal advice. Cutting corners with the law with a view to save up some money is extremely short-term/myopic thinking. The regulatory backlash and consequences would often far outweigh the compliance costs – for most high to moderate risk areas of work.

(iiPutting in place “adequate procedures” to ensure that corrupt practices do not take place. These “adequate procedures” are nothing but proper compliance and anti-bribery programmes. These commonly include:

(a) Exercises for identification of corruption risks; assessment of controls/checks and balances.

(b) Developing and ensuring compliance with proper policies and codes of conduct.

(c) Regular anti-bribery, anti-corruption training programmes for all relevant stakeholders.

(d) Proper vigil mechanism incentivising whistle-blowers to raise their concerns.

(e) Rules regarding maintenance of proper documentation to ensure illegal practices are ruled out.

(f) Investigation of suspected instances of illegality/corruption with a view to fix liability of individuals concerned.

(g) High-risk areas can be monitored with the help of data analytics. The compliance teams should have access to all the important data streams in order to boost efficiency.

The above procedures may not only help in preventing illegal practices but, in the event of a possible prosecution of the organisation, also afford a legally tenable defence to the company. Having “adequate procedures” in place (to check corruption) is a specific defence for companies under the new Prevention of Corruption Act, 1988 (POCA) where – for the first time – even commercial organisations can also be prosecuted for corruption, and not just errant individuals. Marking a departure from the earlier legal position, POCA also makes bribe-giving an offence. There is, therefore, a need to be extremely careful.

(iii) Introducing expedients such as creation of “ethical hotlines” that provide an anonymous, safe and easy reporting mechanism.

(ivChange in corporate culture: A strong corporate culture of zero tolerance of corrupt practices. Merely detailing the rules on the company website or portal is simply not enough. There should be a cultural shift within the organisation in order to ensure that everyone understands why a strong stance against financial crime is important and why doing business ethically is always a better idea. (In other jurisdictions, courts are increasingly looking into “corporate culture” while deciding as to whether, in a given case, acts of employees/agents can be attributed to a corporation, or not and whether a company can be criminally liable in a case.)

(v) Protection of whistle-blowers and better incentives: “Show me the incentive and I will show you the outcome.” This quote by Charlie Munger really sums up the central force driving human behaviour, across countries and across times. We, as a legal system, (and as organisations) really need to get our act together on not just protection of whistle-blowers but also their incentivisation; whistle-blowers and witnesses – after all – are the eyes and ears of the system. Most white collar investigations are complex and require “someone on the inside” to spill the beans, help and assist the investigation. But we have not done much to incentivise such assistance. Also, barring tax laws and some law on insider trading – no Indian law currently incentivises whistle-blowers. We, as human beings, function on incentives and having better incentives and protection for whistle-blowers will go a long way in strengthening corporate compliance, and ensuring that cases of white collar crime are caught early.

(vi) Prompt internal investigations/enquiries: Once a company learns of a potential fraud, proper fact-finding investigations should be undertaken at the earliest. Steps should be taken to preserve all the relevant data and information, to prevent obliteration of crucial evidence. A forensic investigator may also be engaged at the earliest to identify and plug-in any leaks and external counsel should be consulted to examine risk(s) and duty to report, if any.

(vii) Data backups and cybersecurity: Given the huge spike in cybercrime, corporations should be cautious of threats to their infrastructure both from the inside as well as outside. Data backups should either be centralised or stored in a warehouse and IT Departments should be on the constant lookout for any cyberattacks/ransomware attempts and vulnerabilities.

(viii) Insider trading: An unhinged economic environment can provide motivation to an employee to look for short-term gain, and capitalise on non-public price-sensitive information. Companies should promptly update their insider trading policies and reinforce the same by way of audits, seminars and trainings to remind the employees of their legal obligations as well as the risks associated with insider trading.

All of these would go a long way in checking the risk of WCC. But more than anything else a rethinking of “incentives”, checking loopholes which may provide opportunities for cutting corners with law, encouraging radical honesty and disagreements in decision-making, and broadly, effecting a change in corporate cultures, may go a long way in checking, or at least mitigating, the risk of WCC.

 

Former Judge and practising as an Independent Counsel, e-mail:  contact@bharatchugh.in.

1 Warren Buffet.

Case BriefsHigh Courts

Rajasthan High Court: Arun Bhansali, J., rejected a stay application that was filed aggrieved by the order of the Director, Mines demanding penalty, revoking sanction and passing debarring order against the petitioner.

It was submitted that the petitioner pursuant to the e-auction notification for collection of excess royalty and DMFT amount on masonry stone participated, being a petitioner was granted the contract and was required to fulfill the requirements as indicated successful bidder, However, on account of lockdown imposed due to COVID-19 pandemic, needful could not be done by the petitioner and he requested the respondents to grant time for fulfilling the requirements of the office wherein, he was required to do the needful within 15 days. Thus, the petitioner had sent a communication seeking extension of date for signing the agreement ‘without penalty’ which was responded to by the mining engineer who had asked to do the needful in 3 days along with the penalty. The petitioner again had asked for the waiver of penalty consequently the matter was forwarded to the Director, Mines for taking action under the provisions of Rule 45 of the Rajasthan Minor Mineral Concession Rules, 2017 (‘the Rules, 2017’). In the order passed by the Director the bid security amount was forfeited, the sanction was revoked and the petitioner was debarred from participating in the forthcoming auction.

The Court while rejecting the stay application explained that in the over all circumstances of the case where the formalities had to be completed in 15 days taking into consideration the effect of lockdown, and the prayer made by the petitioner seeking exemption from payment of amount of penalty was declined he was required to do the needful including payment of amount of penalty, the submission that as the communication was a recommendation only, the petitioner had no cause at that stage cannot be accepted inasmuch as insofar as the prayer made regarding exemption from payment of the amount of penalty is concerned stood rejected, which had provided cause to the petitioner. The Court added that the petitioner was not vigilant enough to seek his remedy in relation to the grievance as raised in the writ petition.[Bhaniyana Construction v. State of Rajasthan, 2020 SCC OnLine Raj 1386, decided on 30-09-2020]


Suchita Shukla, Editorial Assistant has put this story together

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Ashok Bhushan, R. Subhash Reddy and MR Shah, JJ has dismissed an appeal against the Allahabad High Court order refusing to interfere in the matter relating to the regulation of fees structure in Universities and Central Institutions

The plea filed by a law student pursuing LLM at Rajiv Gandhi School of Intellectual Property Law, IIT Kharagpur seeking issuance of directions to the Ministry of Education and University Grant Commission for framing guidelines to regulate the fees structure considering the lack of unanimity in structuring fees resulting into institutions charging full fees even for online classes.

The petition states,

“the tuition fee which will be charged by the institution amid online semester is not arbitrary but the other miscellaneous fee charged is indeed arbitrary.”

The petition highlighted that IIT Kharagpur issued the official notification to its students for starting the online semester tentatively from the last week of August and uploaded the full fees for its students in their institute’s login id and had instructed it to be paid before 27th July 2020. The impugned notification demands all the requisite fees charged against all other facilities which are provided viz. electricity, computer, library, Wi-Fi/ internet, laboratory, mess etc which are in no manner going to be utilized by the student during this period.

The key points highlighted by the petitioner in the petition were:

  • the action of the institution by charging more fees without service will be against the principle of rule of law. Every State Action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being.
  • not providing any substantial guidelines will make the fee issues being unaddressed, resulting in charging more fees than expected, thereby leading to de-registration of students on non-payment of fees.
  • parents should not be made to pay for the services which have not been rendered by the schools. All schools, irrespective of whether they offered online classes during lockdown period or not, are only entitled to collect the tuition fee.
  • the salary of teaching and non-teaching staff should be paid even during the lockdown. The guidelines to be issued must be in consonance and proportionate with the salary to be paid to teaching staff and non-teaching staff.

The Supreme Court, however, refused to interfere in the matter and dismissed the SLP.

[Saransh Chaturvedi v. Union of India, special leave to appeal (c) no(s).10722/2020, order dated 25.09.2020]

COVID 19Legislation UpdatesStatutes/Bills/Ordinances

Salary, Allowances and Pension of Members of Parliament (Amendment) Bill, 2020

Which Act will the said Bill amend?

A Bill further to amend the Salary, Allowances and Pension of Members of Parliament Act, 1954.

Which Section will be amended with the passing of this Bill?

Amendment of Section 3

In the Salary, Allowances and Pension of Members of Parliament Act, 1954, in section 3, after sub-section (1), the following sub-section shall be inserted, namely:—

“(1A) Notwithstanding anything contained in sub-section (1), the salary payable to Members of Parliament under sub-section (1) shall be reduced by thirty per cent for a period of one year commencing from the 1st April, 2020, to meet the exigencies arising out of Corona Virus (COVID-19) pandemic.

Hence the said bill reduces the salary by 30% for a year.

Read the Bill here: BILL

As per news reports, the said bill has been passed by the Loksabha.


Lok Sabha

Case BriefsCOVID 19High Courts

Bombay High Court: A Division Bench of Dipankar Datta, CJ and K.K. Tated, J., held that,

“price fixation is necessarily to be left to the judgment of the executive and unless it is patent that there is hostile discrimination against a class of persons, the processual basis of price fixation is to be accepted in the generality of cases to be valid.”

Petitioner challenged the notification issued by Principal Secretary to the Government of Maharashtra, Department of Public Health.

Petitioner stated that directions be issued to State of Maharashtra to provide

  • COVID treatment to all citizens of Maharashtra, totally free of cost in all hospitals including private hospitals
  • to notify uniform rates or charges for the treatment of patients of COVID in all the hospitals in Maharashtra
  • to provide 100% free treatment to COVID patients
  • to charge all the patients other than those suffering from COVID according to the Mahatma Jyotibha Phule Health Insurance Scheme, etc.

Petitioner adds to his submissions that it is the State’s duty and obligation to provide health and medicare services for all the citizens free of cost and that the State of Maharashtra has utterly failed to live up to the expectations of the people.

The above-mentioned notification does not tale into consideration the plight of a vast cross-section of people who are not in a position to afford private hospital treatment, for which State should take a step ahead and make arrangements of free treatment.

Persons not covered under any health insurance product were being charged exorbitantly causing hardship to the public in general.

80% of isolation beds available with any healthcare provider under the above-mentioned notification should be regulated by State Government/District Collectors/Municipal Commissioners and so also the 80% of non isolation beds. Healthcare providers, however, have been allowed to charge their rack rates to the remaining 20% beds.

Several measures, have been directed by the State to be adopted by private hospitals while treating patients infected by COVID as well as ailing from other diseases. Price caps have also been introduced.

In view of the above-stated, Bench stated that there is no compulsion on any citizen to take treatment from private facilities.

Adding to its conclusion, Court also stated that, it is entirely left to the option of the patient as to which of the facilities he would prefer, i.e., facilities in private or public hospitals.

There is also no discrimination between the rich and the poor. Even a rich and a poor person alike can take admission in the 80% reserved category of beds, and pay at the rate prescribed.

Bench also added that the price fixation brought about by the impugned is neither arbitrary or unreasonable.

To urge the Bench to direct the State to provide for treatment of a patient free of cost, in these circumstances, appears to be preposterous.

Petitioner has utterly failed to demonstrate any infringement of any fundamental right or abrogation of any statutory provision by the State so as to adversely affect any class of people, thereby warranting judicial intervention.

Court thus dismissed the PIL stating the same to be frivolous. Cost of Rs 5 lakhs imposed. [Sagar Shivajirao Jondhale v. State of Maharashtra, 2020 SCC OnLine Bom 717 , decided on 16-06-2020]