Contracts with foreign firms to have 'national security clause'

Contracts with foreign firms to have 'national security clause'

NEW DELHI: Foreign telcos and defence firms looking to invest in India will have to include a 'national security clause' in their contracts, providing for termination of the venture if they are found indulging in any anti-national activity at the post-investment stage. 

"While doing away with country-specific barriers to investment in furtherance of the government's 'Make in India' thrust, the new security clearance policy proposes post-investment safeguards for FDI coming through the FIPB route in 'sensitive' sectors like defence, telecom and private security firms. The 'national security clause' in the FDI agreement can be invoked at the post-investment stage to serve a termination notice to the investor if an adverse, anti-national activity including money laundering, espionage, terror financing or links with terror outfits or foreign intelligence agencies is noticed," a senior home ministry officer told TOI. 

TOI was the first to report on May 22 on the home ministry's move to have a national security clause built into FDI contracts to be approved by Foreign Investment Promotion Board (FIPB). 

The new guidelines on security clearance for FDI proposals in sensitive sectors will require foreign firms to employ Indians in key technical positions like network operators. This will minimize the risk of embedding of spyware/malware in the network equipment used by such firms. Also, testing of equipment both at the initial and post-investment stage is proposed to rule out any malware or spyware. DoT has indicated that it will have the requisite testing infrastructure in place in a year. 

Importantly, while proposing no country-specific barriers, the policy has listed Pakistan as a "country of concern" from which investment is to be discouraged. Even foreign staffers who have served in Pakistan in the past will need to undergo special security vetting before taking up an assignment in India. 

As part of the new guidelines on security clearances for domestic and FDI proposals, which seek to cut the processing time from the current 3-4 months to 4-6 weeks, the promoter or bidder can make a self-declaration on the criminal cases, if any, against them. While the self-declaration would suffice as regards petty criminal cases, the guidelines require the intelligence agencies to report any adverse inputs on parameters such as money laundering, terror financing, links with terrorist outfits or foreign intelligence agencies, major financial frauds etc.

Source :TOI