APPENDIX 13
Changes to ECGD's Anti-Bribery and Corruption
Procedures in 2004 by the Export Credits Guarantee Department
INTRODUCTION: CURRENT
POSITION
1. ECGD will shortly be embarking on a public
consultation under Cabinet Office guidelines about the changes
to its anti-bribery and corruption procedures introduced on 1
December 2004.
2. ECGD will be taking care to ensure that
everyone who wants to can have their say. ECGD will be offering
meetings to consultees in addition to seeking written representations.
We are committed to taking account of all the representations
we receive in considering what future form these procedures should
take.
CHANGES INTRODUCED
ON 1 MAY
2004
3. In 2003, as part of the continuous review
of the rigour of its anti-bribery and corruption procedures, the
then Minister for Trade invited ECGD to work up proposals for
further strengthening the regime. This led to the introduction
of enhanced procedures on 1 May 2004.
4. These changes were intended to underscore
ECGD's commitment to assist the Government's wider anti-bribery
and corruption agenda and to keep it at the forefront of international
efforts within the Organisation for Economic Cooperation and Development
to combat illegal practices in world trade.
5. It was ECGD's judgement that the changes
it proposed to make to its existing anti-bribery and corruption
procedures from 1 May 2004 did not fall within a category requiring
consultation under ECGD's published consultation guidelines. That
is to say, that they did not constitute a major policy issue.
Since 2000, ECGD had amended its anti-bribery and corruption procedures
three times without consultation.
DEVELOPMENTS FROM
1 MAY TO
1 DECEMBER 2004: WHY
ECGD DECIDED TO
REVISE ITS
ANTI-BRIBERY
AND CORRUPTION
PROCEDURES
6. When the amended procedures came into
force on 1 May 2004, some major customers, and all the banks with
which ECGD deals, expressed material concerns about the new procedures.
7. ECGD attended, together with the DTI,
a series of meetings with the CBI Solutions Group (an industry
representative group, convened specifically for the purpose of
conducting these discussions, and led by the CBI, comprising the
British Exporters Association (BExA), the British Bankers Association
(BBA), BAE Systems (BAES), Rolls-Royce and Airbus). These meetings
aimed at dealing with customers' and banks' detailed concerns
regarding the practicality and workability of the procedures.
8. Industry's concerns were about the practical
implementation and workability of certain specific aspects of
the procedures. Having decided that these concerns were legitimate,
ECGD took the view that, if appropriate, its procedures should
be revised so as to ensure that, while they remained robust, they
would be workable in practice.
TIMETABLE OF
MEETINGS IN
2004 BETWEEN GOVERNMENT
AND INDUSTRY
TO DISCUSS
ANTI-BRIBERY
AND CORRUPTION
PROCEDURES
9. In the course of the discussions, there
were a number of written exchanges between ECGD and the CBI, setting
out the latest positions. In addition, the following meetings
took place over the summer:
9.1 On 8 June 2004, officials from ECGD
met with the Society of British Aerospace Companies and certain
aerospace companies.
9.2 On 1 July 2004, officials from ECGD
met with the CBI together with other trade associations and customers.
9.3 On 5 July 2004, Mike O'Brien, the then
Minister for Trade, together with the officials from ECGD and
DTI, met with the CBI Solutions Group (comprising representatives
of the CBI, the BBA, Airbus, BAES, Rolls-Royce and BExA).
9.4 On 19 July 2004, officials from ECGD
and DTI met with the CBI Solutions Group.
9.5 On 4 August 2004, officials from ECGD
met with representatives of the BBA.
9.6 On 9 August 2004, officials from ECGD
and DTI met with the CBI Solutions Group.
9.7 On 14 September 2004, officials from
ECGD met with representatives of the BBA.
9.8 On 7 October 2004, officials from ECGD
and the DTI met with the CBI Solutions Group.
10. In addition, DTI officials had the following
meetings to discuss the bribery and corruption issue:
10.1 On 12 August with Rolls-Royce at its
London HQ.
10.2 On 12 August with BAES at its London HQ.
10.3 On 29 September with BAES at DTI.
10.4 On 6 October, with Rolls Royce, BAES,
and Airbus at Rolls-Royce's London HQ.
11. The issue was also discussed during
the normal course of many business conversations and wider meetings
between DTI and the above companies, and Airbus, from around June
onwards.
12. In their meetings with industry, DTI
officials sought to understand the impact of the proposed changes
on industry, especially the aerospace industry, and to ensure
that future decisions were informed by a proper understanding
of the consequences for business.
MAIN ASPECTS
OF ANTI-BRIBERY
AND CORRUPTION
PROCEDURES CONSIDERED
IN DISCUSSIONS
BETWEEN ECGD AND
THE CBI SOLUTION
GROUP
13. Issues raised by industry about the
1 May 2004 procedures included the following:
13.1 There had been no consultation with
customers prior to the introduction of the 1 May procedures.
13.2 A number of the new proposals were
impractical and in some respects could not be complied with for
contractual or legal reasons. They were also placing unnecessary
difficulties and bureaucracy on exporters and the banks.
13.3 Industry was unhappy about making declarations
that would seem to be more stringent than those required by other
Export Credit Agencies. They felt that the insertion of the new
"legal awareness" warning in application forms would
be sufficient to meet ECGD's objectives in introducing these enhanced
provisions in respect of anti-bribery and corruption measures.
Customers stressed that they were well aware of their obligations
under current bribery and corruption legislation and took them
very seriously. They queried whether ECGD was the primary enforcement
agency for this legislation.
13.4 ECGD's new anti-bribery and corruption
measures required industry to give a very broad undertaking in
relation to Affiliates. Industry believed that the proposed definition
of Affiliates was too broad and put companies, in practice, at
significant risk of liability for the actions of third parties
over which they had no control and, therefore, gave them no automatic
right of access to the information required.
13.5 Industry was concerned that the words
"to the best of our knowledge and belief" prefaced many
of the anti-corruption declarations. Their legal advice suggested
that companies would have had to make specific enquiries in such
cases and, if this were then the case, this would not be practical
for them to do.
13.6 Industry felt that additional information
on the use of Agents, or other intermediaries, and details of
any payments made to them, should not be required in all circumstances.
Industry explained why this was competitively sensitive and commercially
confidential information and felt that disclosure of Agent's details,
including an Agent's identity, should not be an automatic requirement
of ECGD cover.
13.7 Industry queried ECGD's requirement
for extending audit provision without justification.
13.8 Compliance with the new procedures,
with regard to monitoring and taking action against anyone found
to have engaged in any corrupt activity, could have put ECGD customers
and the banks in conflict with the offence of tipping off under
the Prevention of Crime Act 2002.
JUDICIAL REVIEW
14. Following the announcement in November
2004 of the revised procedures which would take effect from 1
December, ECGD was made aware of concerns by NGOs, namely Transparency
International (UK) and the Corner House, who were disappointed
that they had not been consulted on these changes. ECGD met with
representatives from these two NGOs on 18 November to discuss
their concerns and to brief them on ECGD's reasons for making
the changes.
15. They held that the changes were more
significant than ECGD believed them to be. The Corner House claimed
that they amounted to a significant change in policy. ECGD did
not agree with that view although it will look carefully and with
an open mind at any representations received from any quarter
during its forthcoming consultation.
16. The Corner House mounted a legal challenge
to require ECGD to launch a consultation and to overturn the 1
December 2004 procedures. Although ECGD was prepared to defend
its position in this litigation, it felt able to settle out of
Court by agreeing to hold a public consultation (although without
accepting that it had ever been under any legal obligation to
conduct one in this instance), on condition that the 1 December
2004 revisions remained in place until such time as ECGD decided
to change them. By maintaining the procedures while the consultation
takes place, ECGD can continue to process applications from UK
exporters.
17. The 1 December 2004 arrangements represent
an overall enhancement of ECGD's anti-bribery, corruption and
money laundering procedures by comparison with those in place
pre-1 May 2004 and compare favourably with any procedures in place
in other ECAs.
18. For the relevant correspondence between
industry and ECGD during this period, please see ECGD's website:
www.ecgd.gov.uk
ECGD
9 February 2005
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