Nota Bene Podcast Ep. 173
India’s Economic Rise: Antitrust, AI, and International Trade with Navroze Palekar of Cyient and Ann O’Brien of Sheppard Mullin
Thank you for downloading this transcript.
Listen to the original podcast released January 29, 2025 here:
https://www.sheppardmullin.com/notabene-620
In today’s episode, we’re joined by Navroze Palekar, Vice President and Global Head of Legal and Compliance for Cyient, and Ann O’Brien, a partner at Sheppard Mullin and head of the firm’s Criminal Antitrust and Cartels Team. Our conversation explores the complexities of doing business in India, including issues related to antitrust law, artificial intelligence, and international trade.
About Navroze Palekar
Navroze Palekar is Vice President and Global Head of Legal and Compliance at Cyient, an engineering, research and development services provider headquartered in Hyderabad, India.
Navroze is responsible for management and oversight of all legal matters, including the company’s commercial contracts, intellectual property portfolio, dispute resolution, M&A, employment matters, and global compliance programs. He has over 16 years of experience, primarily as in-house counsel working across geographies in the IT/ITeS sector. He is a graduate of the Boston University School of Law, where he received a master’s degree in American Law (with a concentration in Intellectual Property) and an award for "Outstanding Achievement" for the Class of 2009.
Navroze frequently speaks at leading technology law forums and serves as a board member for the Pune Chapter of the Indian Lawyers Association.
About Ann O’Brien
Ann O’Brien is a partner in Sheppard Mullin’s Washington, D.C. office, where she serves as Co-Leader of the firm's Antitrust and Competition Practice Group and leads its Criminal Antitrust and Cartels Team. She focuses on advising clients facing criminal and civil government antitrust investigations or litigation.
Ann has extensive knowledge of antitrust enforcement practices and policy decisions, gained from her time as a federal prosecutor and manager at the U.S. Department of Justice in the Antitrust Division and as a Special Assistant United States Attorney in the District of Maryland. During her 20-year tenure with the DOJ, Ann was involved in virtually every major criminal enforcement and policy decision made by the Antitrust Division and led every aspect of domestic and international antitrust and white-collar investigations and prosecutions, including litigating federal criminal jury trials. She now leverages her experience to provide valuable insider insight on antitrust agency priorities, goals, and policies to strategically guide companies and individuals facing international, domestic and multi-agency antitrust and competition exposure. She also provides clients with cutting-edge compliance counseling and training to help deter or quickly detect antitrust exposure, informed by what is most important to the DOJ, FTC, and the courts.
An established thought leader in the antitrust community, Ann also regularly speaks and writes on a broad range of antitrust topics, including serving as co-editor of Competition Policy International’s Cartel column and editing the ABA’s Antitrust Cartel Leniency and Sentencing Handbook. She has also trained hundreds of antitrust prosecutors and law enforcement agents and served as a liaison to other DOJ components and government agencies.
About Scott Maberry
An international trade partner in Governmental Practice, J. Scott Maberry counsels clients on global risk, international trade, and regulation.
Scott’s practice includes representing clients before the U.S. government agencies and international U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC), the Department of Commerce’s Bureau of Industry & Security (BIS), the Department of Commerce Import Administration, the Department of Homeland Security (DHS), the Department of State Directorate of Defense Trade Controls (DDTC), the U.S. Department of Justice (DOJ), the International Trade Commission (ITC) and the Committee on Foreign Investment in the U.S. (CFIUS). He also represents clients in federal court and grand jury proceedings, as well as those pursuing negotiations and dispute resolution under the World Trade Organization (WTO), North American Free Trade Agreement (NAFTA) and other multilateral and bilateral agreements.
A member of the World Economic Forum Expert Network, Scott also advises the WEF community in the areas of global risk, international trade, artificial intelligence and values.
Transcript:
Scott Maberry:
Welcome to episode 173 of the Nota Bene Podcast. I'm your host, Scott Maberry. My guests today are Navroze Palekar of Cyient and Ann M. O'Brien of Sheppard Mullin. We're talking about global business in India today. Before I introduce our guests, I'd like to thank our viewers and listeners in over 100 countries worldwide. We're so glad you're tuning in, and please keep the feedback coming.
It definitely influences our programming, and you can email me directly with your comments and suggestions. My email address is in the program description. My guest, Navroze Palekar, is Vice President and Global Head of Legal and Compliance for Cyient. Cyient is an engineering research and development services provider. Their clients include 30% of the top 100 global innovators around the world.
And Navroze is an old friend and it's a pleasure to have him on the podcast. Navroze, welcome to Nota Bene. It's great to have you. Our guest Ann M. O'Brien is familiar to viewers of our podcast. She's the head of the criminal antitrust and cartels team for the international law firm, Sheppard Mullin. She advises clients facing criminal and civil government antitrust investigations and litigation.
She also served for two decades in the US Department of Justice, both as a prosecutor and as a manager within the DOJ Antitrust Division. And so she's here to share her vast experience and insider insight with respect to the government's enforcement priorities. And with that wealth of insight, there's no better person to help our audience talk about antitrust and trust.
Ann, welcome to Nota Bene. So we're talking about India, and India is the world's sixth-largest economy. Also, it's growing at a steady six or 7% every year. And so it's now expected to pass Germany and Japan by 2030, which would make it the world's third-largest economy after the United States and China. India maintains a robust import/export trade in both goods and services with the entire globe.
The exports of India of goods and services are about even, and India maintains a very favorable climate for an investment. Multiple waves of structural reforms recently have steadily improved that climate. And so there's a lot of our listeners who are doing business in India or are planning to do businesses in India. And so let's start with competition law or what we'd call trusts. And for that, Ann, I'll turn to you.
Ann M. O'Brien:
Thanks, Scott. So let's start in the trust section of this podcast talking about labor and non-competes, a hot topic that, Navroze, you know a lot about as the global legal lead navigating Cyient through these issues during recent times. And really times have changed in the US in an antitrust enforcement context where the FTC has tried to impose a non-compete ban and we've seen a lot of focus on labor as a sector and competition for labor with no poach and wage-fixing cases even being brought criminally in the US.
So with that, I've been seeing a lot that there seems to be similar concern and focus in India. I'm reading about this in the press, but tell me from your real on the ground perspective, what are these efforts focused on labor concerns regarding non-compete? What does that mean for a global organization like yours operating in India, but also with work being done in the US? How do you navigate these challenges?
Navroze Palekar:
It's quite interesting and the topic that you brought to the fore is something that you and I have also worked very closely on and actually signed in managing that aspect of the law in the United States. But I believe those details or your expertise to comment on when I give you some of the India flavor on this and how we've had similar matters being dealt with out here. When it comes to the labor non-competes, I think we have not had any specific law that provides for labor anti-competition provisions to be applied for employment.
However, we have the basic principles of the Contract Act in India, which address that at the very grassroots level in an employment contract. For example, if there is a clause that prevents an employee from working with a competitor of his or her employer, then the Indian Contract Act has provisions which make that particular clause void and cannot be enforced by the employer against the employee. So it goes against the basic tenets of also trying to restrict the movement of employees from one employer to the other.
And it also upholds the constitutional right of employment for every individual within the country. So there are two aspects that come to play out here. One is, of course, the constitutional right and second is the contractual right. Now, when it comes to the contractual right, of course, there are several judgments that have been passed by various high courts within the country and upheld by the Supreme Court is that such non-competes are not tenable if they cannot be enforced. However, there are exceptions.
And like in every country, you will have those exceptions. One is where if the employer is able to show the importance of the employee to the organization or the amount of information that they are exposed to or the data that they're exposed to is of such a nature that gives the company a competitive edge over their competitors, then there is a reasonable cool-off period that is permissible under the law. And the test of reasonableness is anywhere between a six month to 12 month post-employment termination obligations.
Ann M. O'Brien:
Is that like a gardening leave type situation, Navroze?
Navroze Palekar:
Absolutely, absolutely. You're absolutely right. So that is like a gardening leave and is obligated to compensate the employee during such time. However, there are other situations as well. Now I'm shifting the focus from executives to maybe the engineers. I'm focusing my attention only to the IT industry because that's where I've spent the majority of my career.
So in that too where you have software engineers who are working on a particular project, if they wish to move on and wish to join a competitor or including a customer whose project they're working, but let's focus on the competition part. The customer generally has to consent on the movement of the employee.
And at the same time, the employer has to ensure that there is a reasonable clause that is put in such employment agreement which helps them to work with a competitor of the customer or a competitor of the employer immediately after their termination of their employment agreement.
But they will not work on similarly placed projects for the competitor or they will adhere to the strictest levels of confidentiality to ensure that there is no leakage of confidential information, data, or trade secrets. So if both safeguards are put in place, most of the courts have found it easy to rule in favor of enforcing the non-competes based on the test of reasonable risk.
Ann M. O'Brien:
And that's very similar to where we are in the US, and we've talked about the FTC's attempt at a non-compete ban in the US that had exceptions including for M&A work and M&A post-transaction employment and things like that. But I still see a lot of, and I'm looking at it from the antitrust perspective, not the labor unemployment perspective obviously for my clients in the antitrust world, but I still see a lot of non-compete provisions.
I have a lot of clients coming to me for antitrust counseling, India and globally and in the US. So there still seems to be a lot of them. Is that your sense too navigating this? I mean, I'm not seeing the downtrend I might expect given the status of the law in India and the US and elsewhere.
Navroze Palekar:
It's quite interesting that you raised that point, especially since we've gone through some of the landmark cases and the landmark decisions that have been made by US courts of late. And we work closely on these matters. And especially for a company like us, which has a global presence, majority of the countries now are moving towards the direction of banning non-competes completely. And we've seen that trend in Europe as well.
And we see that with majority of our presence in the countries that have enforced those bans, we have the challenge of dealing with customers on a day-to-day basis who have not read through these updates in the law. There was a very recent case where one of my colleagues was dealing with a customer in the North Americas and the customer's counsel was not aware that non-competes have been banned and they continue to argue against them.
They wanted to enforce the clause in the contract. So at the end of the day, we had to do a little bit of research for the customer, pulled up the data, pulled up the regulations, the judgments, sent it to the customer and that's what convinced them. And in fact, we also received a feedback from the procurement manager of the customer saying that he appreciated that we educated the opposing counsel or the customer's counsel on the non-compete provisions in their jurisdiction when we actually come from a different jurisdiction altogether.
Scott Maberry:
That's surprising to me and funny and it makes me think about the practical effect. What would it be? I'm sure it's in millions or hundreds of millions of contracts around the world. What's going to happen next and how would that affect business if everybody to have that discussion on every contract in the future?
Navroze Palekar:
It's all a matter of keeping yourself abreast with all the developments in the law. As an in-house counsel, I think apart from just making sure that we keep ourselves updated, we rely a lot on our local partners, our law firm partners who are in panel with us, to provide us with the updates on a regular basis because that's the only way we would know. I mean, while I would keep a track of what are the updates in the local jurisdiction within India, I would not know what's going on in a Scandinavian country or what's going on in Canada.
Those are the updates that I would look for from my local partner. And even I've seen that they do send their updates on a regular basis. I mean, they're very, very proactive, and we receive them on a weekly basis. But it's the prerogative of the in-house counsel to be responsible and accountable for updating their knowledge and going through that on their own accord rather than waiting.
So it should not be a hot fix approach where something goes wrong and then you start researching on what should have been the approach on that. Rather, you preempt on what should be the next step, not what should be a plan of action, and implement those steps within the organization immediately so that you're in compliance with the requirements.
Ann M. O'Brien:
And I very often get the call from the antitrust context after in-house counsel like you or others have gone through that process and you might be dealing with not even a lawyer that's negotiating the contract and a partner in some sense that really, really wants this so you don't steal their employees. I find that the more they really, really want it, the more concerns we sometimes have because the reasons they really, really want it might be the reasons that trigger our review.
So sometimes I will say antitrust is a scary word or competition laws and some education calls from outside counsel. I spend time doing that. And also just looking through tons of, well, we've been using this contract form for years. Well, I see a lot of large companies going through a process now, to Scott's point, where they're doing an overall review and saying, just because we've used this form for years, let's take a fresh look at it and see if it meets these criteria globally for this issue. So I think there's still a lot of development here that we're going to go through, right?
Navroze Palekar:
Absolutely. See, at the end of the day, you have to be proactive in taking those steps, want to educate yourself, and also to make sure that you change the process internally. So the moment we saw these changes in the laws across the globe... Rather, let me put it this way, in majority of the countries that we are operating in, we took an executive decision to amend our employment templates and our contracting process, especially in dealing with certain customers, to ensure that we remove the restrictive governance in total.
And when we get a pushback, and of course, on the employment side we never get a pushback, but on the customer side when we get a pushback, to include the clauses. And in 80% of the time when we are using customer paper to sign up on our contracts, they do have these clauses. And when we strike them out and we send it back, now what we've started doing is rather than getting into an argument with them or a negotiation with them, all those clauses, we give them the hyperlink to the provisions of the law that say that non-competes are unenforceable.
So that's where the customer is also appreciative of the fact that we are trying to make sure that we are not striking off something just for the heck of striking it out, but with an absolute rationale behind it.
Ann M. O'Brien:
I think we're going to have a lot more of those conversations, and I'm always happy to be called in to be the antitrust heavy and be the backup on this. The second topic I just wanted to cover on the final topic talking about trust in this episode, one I know is near and dear to your heart and business and really a hot topic in India as well as the US and that's tech, big tech.
So really what we've seen in the US, and this is the news in the US every day, and I feel like more people know what antitrust is than ever in my career, but blockbuster monopolization. It's an antitrust suits against big tech companies are playing out in the courts in the US. And I've been really interested following, and you might get tired of me keeping sending you these headlines, but there's been a lot of recent headlines in India and I've seen really parallel and similar concerns, particularly in the area of AI and tech from the head of the Competition Committee of India.
Even this week I saw references. And really I think that the concerns expressed there are very similar to the core concerns in the US. And it's that somehow tech, which is great, and AI, huge tool we're trying to figure out how to harness for its best uses, can pose challenges to competition. What we're seeing in the US, and I hear that concern also in headlines but not yet cases in India, so I want to hear your perspective on that, is that artificial intelligence, AI, can be used to facilitate collusion, price fixing.
We're seeing it play out in rental markets for housing, hotels, where the idea is we have this great algorithm that can help you to suggest pricing. That takes a lot of data in, that takes a person a long time to crunch and takes a computer a very short time. So let's use that. Seems like a great idea for price, for supply, but those are also hot-button antitrust issues. So that's the lead up of what I'm seeing in the US and I really want to hear your views on how do you see those concerns about tech and AI playing out in India and how are you thinking about them from your business perspective?
Navroze Palekar:
A great area of meaningful debate and we can have a complete session on just this topic considering that it's so new and the novelty of this topic is such where very few jurisdictions have actually been able to take a crack at it or enforce their specific anti-competition laws in this area, of course, because of the fact that with AI tech developing on a daily basis. And let me just dial back a bit. At the end of the day, what does the AI tech do for these tools or platforms? And let's take the auto aggregator platforms, which was the other that you said, the rental for that.
Ann M. O'Brien:
Pricing or supply tools that help to aggregate data that could be viewed as used by competitors to collude on those things. So helpful or harmful, who knows?
Navroze Palekar:
Here's the funny part. I mean, I find it funny because it's both, it's helpful as well as harmful. You have all the competitors or the users of the AI tech on one side and the AI tech is basically being fed with data by all these competitors, and this data is not exclusive to any one user at any point of time. So the data that is of say user one, which, of course, it's anonymous, but at the same time it will help to determine the pricing for user four or user three.
And similarly, the same pricing that is given by the other users that is being fed back into the system, the search engine they keep on adding additional layers of data collecting from the end customers, that data is being fed into the backend AI system, which is basically free for all. And then that is the reason why the four users can then adjust their pricing in such a way where neither of them will go below a certain price point, which in the absence of the AI tech they would've probably been undercutting the other to make sure that they add to their top line.
Ann M. O'Brien:
Yes, that's the hot topic here and what we're seeing from an aggressive DOJ and FTC in some briefing is that they would say even anonymized aggregate data, so you don't know whose it is, which I've counseled for years, is lower risk. That if that's used to train models and you know that, that that can be concerning. So therefore, a question, if you're developing that tool, I see a lot of marketing about how great the tools are and they are great.
But if that marketing is you can use it to keep your prices up, that's red light alarm bells I think in the US now. So what you're discussing, I think it's real time everyday steps. So are you having these, because I know Cyient is very innovative in terms of both development and usage of tools like this, or is antitrust in those issues? And I think that'll be my last question here is, is that part of the discussion when you're developing or using these tools? Or are we not there yet, that we have more work to do raising awareness as lawyers, as in-house and outside lawyers?
Navroze Palekar:
I would work for the latter. There is a lot of awareness that needs to be raised. And not just that, I think the in-house counsel need to be prepped with the changes in AI laws and especially their applicability across. Now, here's the thing, European Union coming up with it. So they set a benchmark by putting up the EU AI Act in place. Now, it's not too far off where the other countries will follow and set up their own systems and their own legislations, which will, for lack of better term, mimic the EU AI Act.
And on one hand, there will be a parity across jurisdictions, but at the same time, the implementation and the awareness amongst the actual users of AI tech, they are the highly skilled software engineers or engineers in the industry. They are not aware of what they are getting into. So it will be the prerogative of the in-house counsel to keep themselves aware of the compliances that they need to put in place with respect to the contractual requirements that they have with their customers.
We've seen certain AI clauses coming up in some of our contracts and they're quite interesting. But at the same time, it is only... We've seen very few of them actually making it through to the execution stage because what we say is that let's not have this as a standard. But if we are going to be utilizing AI tech for any of your projects, let us put a clause in place under the relevant SOW rather than putting it under the contract as an umbrella document because we don't know what are the changes or the amendments to the law and that is the only way we can mitigate that risk at the moment.
Ann M. O'Brien:
I will say now that I'm going to my fifth year working with Cyient and a lot of the scientist engineers, the great thing about engineers, me as an antitrust lawyer doing these very boring antitrust compliance, when I get into the AI and tech stuff is some really smart people. And engineers are smart. So they want to understand what's the concern.
So my hope for the future is that the smartest of the smart and the engineers that you and other companies have, they're going to be the ones that think about how to both harness the tools that we have and keep in mind the concerns, because I think there is a lot of good that can come of this. And the antitrust laws, especially in the US, upcoming new administration, there's a lot of eyes on, but this is not an issue that's going to go away globally.
And you're sitting right there in the hot bird seat, as we say, and seeing it every day. So I know you and I will have many more conversations on this, but we'll end this part and I'll turn it over to Scott for the trade portion.
Scott Maberry:
Thank you, guys. That is really great. And for our audience, it's notable that we're getting some cutting-edge views on not just on what's happening in technology, but also in that crossover between the technology and the law. And so big headline for me is there's a lot of work yet to be done in artificial intelligence and the algorithms that are used for some of these pricing models for all kinds of businesses.
And the challenge for all of us in the future is to figure out how to make those work, make them work for us and do what we want them to do, and also to keep them from getting us crosswise with the antitrust authorities around the world. So that's to be determined and I'm sure we'll have some future episodes on that. And stripping gears now just a little bit and moving to the issues of international trade, there are a million things we could talk about with trade with India.
The one that's on my mind a lot recently is Russia sanctions. President Biden has continued to commit to a tough economic sanctions regime against Russia in the wake of the invasion of Ukraine, and UN and EU have also followed suit. These are very important current US National Security and Foreign Policy goals for this administration. And Russia has been one of India's largest trading partners.
In particular, there's a lot of trade in Russian crude among other products. So Navroze, what do you think the Indian strategy is with respect to Russian trade and in particular the effect on the sanctions regimes?
Navroze Palekar:
I think it's got more than two years since the war broke out. And ever since these actions have been put in place, several industries have been impacted with those sanctions. Of course, we have a lot of Indian industry actually does a lot of business with Russia considering we've seen that in the pharmaceutical industry, the petroleum and energy sector, manufacturing industry as well.
And several of the if you've seen that American conglomerates, European conglomerates, Australian conglomerates had their operations in Russia, which they have either shut down or they have isolated them and spun them off as dependent entities to operate independently.
Now, in the case of the Indian industry, I think especially I can speak for some of the companies that act as service providers to their customers in Europe or in the Americas, because of the neutral position that India has taken in this entire dispute between Russia and the rest of the world, if I may put it, there have been questions that have been raised and queries that have been asked by several European and American companies on the nature of business that has been carried out along both with a vendor or a customer that may have a link to Russia.
So there are two parts. One is doing business directly with Russia and two is doing business for a customer that is based in a country that has imposed sanctions on Russia. So for this, the first one, which is a very easy one, doing business directly with Russia, I think Indian companies are not part in doing that. As long as the transaction and the currency of trade is in INR, then it's a very straightforward transaction.
Secondly, there are also companies that have joint ventures with the Russian conglomerates in the manufacturing space and they are inviting pigs and floating RFPs from service providers to provide services within India itself, which is a good thing for India, which means that we are getting the entire... The economy or the backbone for this industry, for the manufacturing industry, is growing because of the additional business that the Russian companies are providing India since it is not going anywhere else in the world. So it is all getting localized within India.
Scott Maberry:
Yeah, it's a very unique position for India to be in, and it's a position that India, I think, as a national strategy has pursued for decades really, a non-alignment type of strategy if you want to call it that. My thought about that right now is that, one, as a trade controls compliance lawyer, I'm always counseling our clients on how to stay abreast of the US laws and the other applicable laws and how not to run afoul of them. With the US sanctions in particular, the main tool, as you know, that the United States has is control over the US dollar.
And so any transaction in dollars is going to be caught by the US sanctions, and any transaction in euros is going to be caught by the European sanctions. And so my understanding of a lot of what's happening is that a lot of the trade between India and Russia is happening in rupees. And there's a lot of talk now about the rupee accounts that are being held by the largest Russian banks for purposes of this trade.
And it's a solid move to make and it's very interesting to think about what that's going to mean for the Indian economy in the future. I'd guess not to mention the Russian economy because there is a question about how useful those massive and growing accounts are going to be to Russia. I think it's quite clear that they're going to be useful to India, but maybe a little less so for Russia. So it's an interesting thought to think about how it's going to play out in the future. What do you think is going to happen next in terms of this trade?
Navroze Palekar:
I'll just sum it up in a short sentence that let's go back to your opening comment of how Indian economy is growing and where we are today and where we will be in 2030. I think that is a testament to the boost that we are getting for the economy out here with such kind of... Let's put it this way, we are taking advantage of the sanctions that have been imposed on Russia, which is great. I mean, it's not harming anyone. As long as there is free trade, as long as it's advantages to the economy, I think it's good.
Second is the point that I come back to in terms of terms of what are some of the concerns that the industry is seeing from their American and European clients is on the linkage to Russia. So it's not just a direct linkage. They want to go two or three levels down of relationships. Say for example, is there a director on the board of a customer or of a vendor who's of Russian origin, or is there a company that holds interest or shareholding with a vendor or another customer which is of Russian origin, et cetera.
You and I have spoken about that, Scott, and I would also like to thank our friend Reid, who has advised us in this matter quite extensively. He and I had a very long discussion on this. And at the end of the day, we look at it as long as the Indian industry is taking the necessary safeguards to ensure that none of their European, American associates are involved in a transaction or even Australian associates for that matter involved in the transaction that is dealing with an entity that may have a Russian linkage.
In that sense, it should be in the clear as long as the transaction is being dealt straight out of India. And the second and the most important thing is as long as it is being, it is transacted in INR or the rupee and not the Euro or the dollar.
Scott Maberry:
And the concerns you're talking about are driven specifically by the US laws and the analogous European codes. And it has to do with making sure that everything is independent of the controls that the United States and the Europeans can impose. And again, that really means a lot to India and it's in some ways the fruit of decades of Indian national policy.
It remains to be seen what's going to happen with Russia sanctions after the change of administration, which as of today is 11 days away. So we'll see what happens and I'm sure we'll have to have another session soon on the Trump era international trade issues with India. But for now I think we've covered all the ground we're going to cover today and I really appreciate having you both. Ann, Navroze, thank you so much for being on with us today.
Navroze Palekar:
Well, thank you so much, Scott and Ann, for having me. It was an absolute pleasure.
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