Examination of Witnesses (Questions 60-75)
16 NOVEMBER 2004
Mr John Weiss, Mr Roger Gotts, and Mr David Allwood
Q60 Chairman: You have
already told me several times that what is happening on 1 December
is different from what was expected to happen on 1 May, but it
is still more than you had on 1 May. Could you explain to us in
relatively brief terms what you offered on 1 May and what you
are going to offer on 1 December? Do not tell us that it is a
wee bit better or a wee bit harder than it was on 30 April. Can
you give us a clear description of what you are withdrawing as
proposals as of 1 December?
Mr Weiss: I will do my best, although
it may be helpful for me to confirm this in a note to you.
Q61 Chairman: That is
fine, but it would be useful to have a flavour of the nature of
the change because it will then help us with subsequent questions
we might want to ask.
Mr Weiss: A lot of the issues
were legal issues which we changed. Let me give a set of examples
rather than the whole thing. I think I mentioned to you that we
have moved from a requirement for undertakings to be made about
affiliates—every company in the group the applicant for
ECGD had to give certain assurances and undertakings about. We
have now pulled that back to controlled companies rather than
affiliates. In the case of applicants who are in a joint venture
with another company, rather than ask them to give undertakings
and make declarations about the joint venture—which again
they said to us they could not do, it was not within their control
to do that—that has been changed to reporting to us if they
become aware that the joint venturer has engaged in a corrupt
activity. We have limited the requirement to make a declaration
about the blacklisting of employees. There was a rather wide requirement
for them to tell us whether any of their employees had been engaged
in corrupt activity. That is now limited to directors of the companies
rather than just all employees. The extended audit rights were
general in our May proposals, the rights to audit documents relating
to the period up to the end of contract, but those rights only
exist in the new system if there is an allegation of bribery around
which gives us the right to go and inspect those particular documents.
In relation to information about agents, we ask our applicants
for the name of the agent involved in a transaction, but the new
procedures give the possibility to the applicant not to disclose
the name of the agent so long as they can justify that to us and
they would have to give us a written explanation of why they felt
unable to disclose the name of the agent. That may not be all
the changes, it is quite an extensive array of changes, but those
are some of the major ones.
Q62 Chairman: How long
have you worked for the ECGD, Mr Weiss?
Mr Weiss: Since 1964, Chairman.
Q63 Chairman: So you know
all about affiliates, you know about joint ventures, you know
about the blacklisting and I am sure you have ideas about the
desirability or otherwise of extended audit rights and the whole
question of the need to disclose the names of agents where there
may well be concerns. You were not really working in a vacuum
when you put your name to these changes, were you?
Mr Weiss: No, Chairman. With hindsight
I think it would have been advisable for us to have consulted
industry before launching the new procedures. What we have learned
in discussions with industry is that those requirements that we
had imposed from May were extremely difficult for very large firms
with thousands of employees to comply with. If you have got 50,000
employees and you are being asked to the best of your knowledge
and belief to tell ECGD—
Q64 Chairman: That is
a bit much. Let us face it, you have got plenty of resources and
not all of the 50,000 are going round with brown paper bags giving
them to people to do particular jobs. I can understand that it
is maybe a little bit more difficult to police in some ways, but
the old line "They would say that, wouldn't they?" comes
to mind. We know there have been a number of British companies
against whom charges have never been made but who have been fingered.
There is a sense in which a lot of people feel that they are getting
away with it. I am not putting words in your mouth. I am merely
saying that some of us who have looked at these things over the
years are a bit disappointed that what seemed to be a sensible
and rigorous approach now seems to have been discarded.
Mr Weiss: I think I should emphasise
that we accepted in the negotiations with industry—and I
regret this—that some of the requirements we had imposed
on them had gone a step too far just in terms of the sheer ability
of the company to give us reliable answers to those questions.
I accept that what we have got now is more workable without reducing
the overall rigour of the procedures.
Q65 Sir Robert Smith: What
was the reason for bringing them in on 1 May? Was there any particular
trigger for that?
Mr Weiss: No. We had been conducting
a review of the procedures and we had put proposals to ministers
for enhancing them. That was the earliest possible date for it.
Q66 Sir Robert Smith: There
was not a great system before, then there was what we thought
was quite an attractive system and now you have come down from
what we welcomed to a system you still claim is better than what
was there in April.
Mr Weiss: ECGD has had rigorous
anti-bribery systems in place for some time now and we were intending
to change them from 1 May. Most of the changes we have made are
just making them more practical and workable. There has not been
a step change in the quality of our procedures.
Q67 Sir Robert Smith: You
have emphasised in the announcement and in answers so far that
what has driven this change is discussions with your customers
and the CBI. What discussions have you had with other interested
parties on these new changes?
Mr Weiss: We did not go in for
a public consultation on this.
Q68 Sir Robert Smith: Having
thought you did not need a consultation and launched new procedures
and discovered they do not work with your customers, you are then
launching another change and you have not thought to consult the
other interested parties who welcomed the original change.
Mr Weiss: The changes we made
and the discussions we had with industry were all around what
was possible for companies to provide us with by way of information.
It was a very detailed negotiation with a lot of legal issues.
For example, there was a long debate about what does "to
the best of your knowledge and belief" mean and we produced
a legal text on this which we then agreed is our expectation of
our customers when they sign to the best of their knowledge and
belief. There was an enormous amount of detailed negotiation around
specific points in the documentation which I do not think would
have been of any interest to other parties.
Q69 Sir Robert Smith: They
have written saying they are upset. Is it up to you to decide
who should be interested? Having found the first time round that
by not consulting it did not work from your point of view, to
then change the goalposts without saying "let us have a proper
consultation this time and see what people feel about the changes
we are making" seems peculiar.
Mr Weiss: We had a situation where
the new procedures were preventing us giving support to a whole
range of companies because their own legal advisers were telling
them they could not enter into business with the ECGD on that
basis. We did need to reach agreement urgently on something that
could unblock that problem. As I have emphasised, these changes
were on the whole very, very specific issues around the meaning
of the documents and their interpretation. We are due this very
week, the day after tomorrow, to meet with interested NGOs and
I hope that we can explain to them what the changes are and why
we have made them and I would be very happy to report back to
the Committee on the outcome of that discussion.
Q70 Sir Robert Smith: That
would be helpful. If they think they have spotted a loophole you
have created that you could close, are you still open to refinement
in the light of your meeting with the NGOs?
Mr Weiss: We are always willing
to consider improvements to our systems as long as they are practical
and can be put into place.
Q71 Linda Perham: Some
of the larger firms felt they would not be able to comply and
others felt they could not apply perhaps because of legal difficulties.
Would you accept that you have watered the proposals down in response
to your largest customers not being happy about it?
Mr Weiss: No, I do not think that
is the right description of the changes. We have had to accept—
and I regret this in the sense that I was the person who launched
the new procedure—that for many of our customers they were
unworkable and those customers were refusing to complete our new
application forms or accept our new documentation because it was
not possible for them to meet the requirements. We have made them
workable without, I hope, reducing the rigour of our procedures
and indeed the deterrent value of our procedures. I do not think
I would accept that as a description of the change that has happened.
Q72 Linda Perham: If there
were companies, particularly larger ones, who felt they could
not apply, would that actually matter in the long run because
the taxpayer would not be subsidising their activities?
Mr Weiss: It would not be an acceptable
outcome for ECGD, whether in the bribery and corruption area or
in other areas, to impose requirements on its customers which
they could not reasonably be expected to meet, we would be failing
in our duty and I think that was the situation we had here. For
example, in the banks their own compliance officers were telling
the managers who deal with us they were not permitting them to
sign these documents with ECGD because they risked changing the
ECGD guarantee from being an unconditional guarantee to being
a conditional one. They were genuinely fearful of the consequence
of the change we had made. I would argue that it would not be
appropriate for us to leave something like that on the shelf and
say to our customers "Well, just put up with it" because
I think that would be unreasonable. We have done a fairly thorough
review of the practices of the major export credit agencies. We
are very much in the lead on this still despite our changes and
we have a very rigorous procedure in place.
Q73 Chairman: Is it more
rigorous than Atradius, the Dutch equivalent?
Mr Weiss: I do not think I could
comment on that.
Q74 Chairman: We have
had evidence which has suggested that you should get full marks
for trying but you are still not as good as the Dutch.
Mr Weiss: I think our review included
the G7 agencies on the whole.
Q75 Chairman: Thank you
very much. Obviously you are going to have your consultations
with the NGOs and the NGOs will be interested to get your note
of the meeting and it would not surprise me if we got notes from
other interested parties as well and we will raise them and other
issues with the Minister when we see him in the New Year once
the Freedom of Information Act is in place as well, which may
help us. Mr Weiss, Mr Gotts and Mr Allwood, thank you very much.
I realise that not all of the decisions to which we have had to
refer this morning have necessarily been of your making, but we
are very, very grateful for your frankness and we look forward
to the supplementary notes you are going to provide us with as
well as that relating to the NGO meetings and the like. Thank
you very much.
Mr Weiss: Thank you, Chairman.
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