INDIA Law and Practice Contributed by: Alina Arora, Samarth Gupta and Parth Singh, Shardul Amarchand Mangaldas & Co
• the registration requirement for bidders from countries sharing a land border with India (see 2.10 Exclusion Grounds ), imposed on grounds of defence and national security. These conditions are enforced through tender eli - gibility, verification of IC, and licence and approval conditions. The National Security Directive on the Tel - ecommunications Sector, which restricts telecommu - nications networks to trusted products from trusted sources, exemplifies a sector-specific trust regime for a defence-adjacent sector. 5.7 Counter-Espionage and Insider Threat Obligations India does not have a standalone insider threat statute and the relevant obligations primarily arise from two sources, as follows. • The OSA penalises espionage and imposes a duty to furnish information, on demand, regarding offences or suspected offences under the OSA. Failure to comply is punishable with imprisonment and/or a fine. • The Security Manual requires licensed companies to maintain a security organisation headed by a CCSO, who must be an Indian citizen and posi - tively vetted, to: (a) control visitor and foreign national access; (b) report security breaches, espionage, sabotage, subversive activities and suspicious contacts to the DDP’s nodal office and the nearest police station immediately on occurrence; and (c) notify any suspicious behaviour of employees handling classified information. 5.8 Foreign Ownership, Control and Influence (FOCI) Mitigation There are no special security agreements, proxy boards or government-appointed security direc - tors of the kind prevalent in the USA. Instead, India addresses foreign ownership, control and influence, ex ante, through approval/licence conditions rather than through mitigation instruments. The controls in India comprise: • government approval for FDI required above 74%;
• government approval for investment where benefi - cial ownership from land-border countries exceeds the 10% non-controlling safe harbour; • MHA security clearance for any FDI in the defence sector and, irrespective of FDI, for industrial/manu - facturing licences; • conditions under the industrial/manufacturing licence regimes that require either intimation to (for an industrial licence) or prior approval by (for a manufacturing licence under the Arms Act) the GoI, in the event of change in ownership or change in directors; • stipulation under the Arms Rules whereby restric - tions in joint venture agreement imposed by the foreign partner shall have no legal consequence on the joint venture entity; and • the Security Manual’s restrictions on access by foreign nationals. Additionally, the GoI reserves the right to review any FDI in the defence sector on national security grounds (see 6.5 Assessment Criteria ). 5.9 Interaction Between National Security Regulation and Other Regimes National security considerations run through each regime described in this chapter: export licensing (see 3.5 Criteria for Granting or Refusing Licences ), FDI screening and the government’s reserved right of review (see 6.5 Assessment Grounds ), security clear - ance and licence conditions (see 5.2 Security Vetting and Clearance Requirements ) and procurement eli - gibility (see 2.10 Exclusion Grounds ). There is no apex co-ordinating authority. Co-ordina - tion occurs through the nodal department consulting the MoD, the MHA and the MEA, and inter-ministerial bodies such as the IMWG, as well as the MHA security clearance that recurs across regimes.
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