3. CRIMINAL LAW
(23885)
12249/2/02
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Draft Framework Decision on combating corruption in the private sector.
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| Legal base: | Articles 29, 31(e) and 34(2)(b) EU; consultation; unanimity
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| Department: | Home Office
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| Basis of consideration: | Minister's letter of 10 January 2003
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| Previous Committee Reports: | HC 63-i (2002-03), paragraph 8 (20 November 2002), HC 63-ii (2002-03), paragraph 4 (27 November 2002), HC 63-v (2002-03), paragraph 10 (18 December 2002); and see (23602) 9953/02 and (23734) 11466/02: HC 152-xxxviii (2001-02), paragraph 12 (16 October 2002)
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| Discussed in Council: | JHA Council 18-19 December 2002
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| Committee's assessment: | Legally and politically important
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| Committee's decision: | For debate in European Standing Committee B
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Background
3.1 We considered the current version of the draft Framework
Decision on corruption in the private sector on 20 and 27 November
and 18 December 2002.
3.2 We noted that Article 2 referred to the giving or
offering of 'undue advantages' to a person to act or refrain from
acting 'in breach of one's duties', which acts were to be made
criminal under the proposal. The Minister confirmed to us in his
letter of 21 November 2002 that the definitions in Article 2 were
sufficiently broad to cover the case where an employee of a company
is persuaded by a corrupt inducement to act in breach of his contract
of employment. The Minister also took the view that a court in
the UK would find that an inducement paid to a person to act in
breach of a contract was an offence under the Prevention of Corruption
Act 1906, and that Article 2 of the Framework Decision did not
cover anything which was not already an offence under UK law.
The Minister considered that inducements to act in breach of contract
were breaches of duty and were rightly to be considered as criminal.
3.3 We were concerned that the very breadth of Article
2, as explained by the Minister, gave rise to the concern that
the necessary guilty intent for such widely expressed offences
did not appear to require any element of dishonesty or impropriety.
Aggressive commercial practices, such as the poaching of staff
or the offering of any inducement to act in breach of any term
of a contract would be made criminal.
3.4 We noted that, apparently in response to the concerns
of two Member States as to the width of the offence created by
Article 2, a new Article 2(3) had provided that a Member State
might make a declaration limiting the scope of the offence under
Article 2(1) to conduct which was aimed at giving or receiving
'for competitive purposes, an unfair advantage in relation to
the purchase of goods or commercial services'.
3.5 We remained concerned over the breadth of the offence
created by the proposal. It left the concept of 'breach of duty'
wholly to national law, whilst allowing Member States to make
a significant derogation under Article 2(3). We considered that
this would lead to wide discrepancies in treatment in respect
of an offence for which dual criminality could not be required
as a condition for extradition under the European Arrest Warrant
(EAW), and consequently the danger of warrants being issued for
'corruption' in one country for conduct which is not criminal
in the other.[6]
3.6 We also asked the Minister to explain the effect
of the definition of 'breach of duty' in Article 1, which appeared
to us to be ambiguous.[7]
It was not clear if 'disloyal behaviour' was required in all cases,
or if Member States were permitted to characterise as a 'breach
of duty' conduct which did not involve any element of disloyalty.
The Minister's letter of 5 December
3.7 In his letter of 5 December, the Parliamentary Under-Secretary
of State at the Home Office (Mr Bob Ainsworth) agreed that we
were right to point out that the United Kingdom law on private
sector corruption only applied where an agent 'corruptly' gave
or received an advantage, but stated that the effect of the term
'corruptly' as used in the Prevention of Corruption Act 1906 was
not clear. The Minister repeated his view that an inducement paid
to a person to act in breach of contract would be capable of constituting
an offence under the 1906 Act. The Minister added that Article
2(1) of the Framework Decision referred to an 'undue advantage'
and that there was 'clearly' an element of impropriety implied
in the term 'undue'.[8]
In relation to the term 'breach of duty' as used in Article 1
of the Framework Decision the Minister explained that this was
left largely, but not wholly, to national law and that Article
1 contained a 'minimum definition' leaving Member States free
to define 'breach of duty' more widely.
3.8 In relation to our concern about warrants for extradition
being issued under the EAW for 'corruption' in one country which
is not criminal in the other, the Minister commented that 'corruption'
was a broad term which could cover a wide variety of behaviour,
in both the public and private sectors, but that it was for the
requesting state to decide whether the conduct in question fell
within one of the headings of the EAW. The Minister agreed with
us that disparities would continue to exist following the adoption
of the Framework Decision, but stated that they would be 'less
pronounced than they are at present'.[9]
3.9 We remained concerned that the proposed offence did
not expressly require any element of dishonesty or impropriety.
We did not think it appropriate for a Framework Decision to criminalise
behaviour which might amount to no more than the civil wrong of
interference with contractual relations.
3.10 Having regard to the substantial disparities which
would continue to arise in respect of an offence for which
dual criminality could not be required as a condition for extraditing
a person from the United Kingdom, we asked the Minister if the
proposal could not be improved by at least making it clear that
'corruption' as used in the EAW was to be understood only in the
sense of the present proposal.
3.11 We also pressed the Minister on whether the 'minimum
definition' of the term 'breach of duty' meant that 'disloyal
behaviour' was required in all cases, or whether Member States
in defining corruption 'more widely' were permitted to remove
any reference to acting disloyally.
The Minister's letter of 10 January 2003
3.12 In his letter of 10 January 2003, the Minister explains,
in relation to our concern that the proposed offence did not expressly
require any element of dishonesty or impropriety, that the Framework
Decision does include the idea of impropriety in its use of the
adjective 'undue', which qualifies the 'advantage' given.[10]
3.13 Referring to a letter from the Chairman of our sister
Committee in the House of Lords (Lord Grenfell), the Minister
comments that Lord Grenfell 'acknowledges that there are cases
where payments made to persuade contracted persons to breach their
contracts constitute offences under the Prevention of Corruption
Act 1906'.[11] The Minister
comments that the Government believes that the 1906 Act 'provides
sufficiently broad offences to meet fully the requirements of
the Framework Decision'.[12]
3.14 The Minister does not accept our suggestion of linking
the definition of 'corruption' in the present Framework Decision
with 'corruption' as listed in Article 2(2) of the EAW. The Minister
comments as follows:
"We do not think it desirable to amend it [the EAW] to make
clear that corruption is to be understood in the terms of the
present Framework Decision. That would be to limit the concept
unduly: not least because the present Decision only covers private
sector corruption.[13]
As we have explained previously, the use of the term 'corruption'
in the context of the European Arrest Warrant is entirely in line
with the broad headings on the EAW list, which are designed to
ensure that all serious offences are caught, without them having
to be defined in precisely the same terms in each country."[14]
3.15 In relation to the 'minimum definition' of the term
'breach of duty' as used in Article 1, the Minister explains that
the Government's interpretation of this Article is that :
"Member States are free to go beyond the minimum definition
of 'breach of duty', which means that their law — as ours
— does not necessarily have to require 'disloyal behaviour'
in all cases." [15]
Conclusion
3.16 We regret that the Minister remains unpersuaded
that the offence of 'corruption' in this proposal is too broadly
defined. We repeat once more our concern that the offence does
not expressly require any element of dishonesty or impropriety.
3.17 It is also now apparent from the Minister's latest
answer that the offence does not even require any element of 'disloyal
behaviour'. The offence which is created therefore appears to
us to be broader than the offence under the Prevention of Corruption
Act 1906, with no equivalent of the term 'corruptly'. This offence
could criminalise conduct such as offering an employee a 'golden
handshake' for leaving his present employment without serving
his period of notice. Whilst this amounts to a 'breach of duty'
for the purposes of the Framework Decision (and quite possibly
a matter which is actionable in the courts in the United Kingdom),
we think it would surprise the public to learn that this also
amounted to the criminal offence of corruption.
3.18 We also regret the Minister's rejection of our
suggestion that 'corruption' as listed in Article 2(2) of the
European Arrest Warrant (EAW) should bear the same meaning as
it does in the present proposal in cases of private sector corruption.
Given the abolition of dual criminality for 'corruption' under
the EAW, we think it of particular importance that whatever minimum
standards are agreed for 'corruption' should also apply to extradition
cases. We have drawn attention before to the clear danger of warrants
being issued for 'corruption' in an issuing State for conduct
which is not criminal in the executing State.
3.19 We consider that these points are sufficiently
important to require debate and we therefore recommend a debate
in European Standing Committee B.
6 The
danger is even greater because there is no requirement that 'corruption'
for the purposes of the list in Article 2(2) of the European Arrest
Warrant should be the same as 'corruption' defined in the present
proposal. Back
7 Article
1 provides that 'the concept of breach of duty in national law
should cover as a minimum any disloyal behaviour constituting
a breach of a statutory duty, or as the case may be, a breach
of professional regulations or instructions which apply within
the business of a person, who in any capacity directs or works
for a private sector entity'. The ambiguity lies in the phrase
'as a minimum'. Back
8 On
the other hand, 'undue' may mean no more than not legally due. Back
9 Since
there is no requirement that the term 'corruption' as used in
Article 2(2) of the EAW should correspond to the Framework Decision
, there is no reason to suppose that wide variations will not
continue to operate in relation to extradition for 'corruption'. Back
10 Article
2(1) of the proposal refers to the promising, offering, requesting
or receiving of 'an undue advantage of any kind' where this is
done in order that a person should perform or refrain form performing
any act 'in breach of that person's duties'. Back
11 We
take the Minister to be referring to Lord Grenfell's letter of
19 December which made the point that 'whether or not a particular
inducement to breach of contract will amount to corruption will
very much depend on the facts'. Lord Grenfell went on to remark
that 'one who offers an employee a better paid job and a golden
handshake and induces an employee to quit his current employment
without giving or serving the notice period required under his
contract would not ordinarily be said to have acted corruptly.
Neither would the employee accepting such offer'. We accept that
there may be cases where a payment to induce a breach of contract
might be caught by the 1906 Act (such as an agreement to steal
a company's trade secrets), but we agree with Lord Grenfell that
there will be cases where the inducement is not 'corrupt' even
though it may lead to a 'breach of duty', as in Lord Grenfell's
example of an employee leaving his employment without serving
a term of notice. Back
12 Since
the acts caught by the 1906 Act must be done 'corruptly', a concept
which is not reflected in the Framework Decision, except by a
reference to an 'undue' advantage, the Minister's conclusion does
not seem to us to be at all certain. Back
13 This
point is easily met : 'corruption' under the EAW would bear the
same meaning as it does under this Framework Decision when the
acts fall within its scope, but not otherwise. Back
14 The
proposal does not define 'corruption' in 'precisely the same terms',
but it seems that even the minimum standards it does introduce
are not thought by the Minister to be desirable for the purposes
of the EAW. Back
15 This
illustrates the ambiguity in the drafting, since it is at least
arguable that the expression 'should cover as a minimum' means
that behaviour which is 'disloyal' must be required in all cases,
and that lesser degrees of impropriety are not covered. Back
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