Examination of Witnesses (Questions 140
- 154)
TUESDAY 20 APRIL 2004 (Morning)
TRANSPARENCY INTERNATIONAL
(UK)
Q140 Mr Hoyle: Once you put British
business aside for tendering, because it is a bit like the argument
you are using, if you have 30 miles per hour, we all have 30 miles
per hour round Europe, but only one has speed cameras, it is not
quite as effective as it should be. What I would like to know
from you—you did not quite answer the question—is
we operate a robust system. Fine. Nobody argues about that. But
is the same robust system being endorsed by other countries in
competing projects?
Mr Cockcroft: Can I come in there?
I think one needs to put this in the context of a whole process
of reform of ECA arrangements being triggered by OECD. TI as an
organisation has had an input into that during the last two years,
and we are pretty confident that the other ECAs associated with
major exporting countries within OECD will be putting in or are
putting in already equally significant measures, so that the issue
of competitive disadvantage, if it occurs in the next six months,
will not be there in a year's time; and one may contrast that
with the adequacy of our own anti-corruption legislation, which
is, frankly, not very strong. Some of our competitor OECD countries
have stronger legislation. So to some extent it has to be seen
in a slightly wider context. I think one needs to position it
very firmly in the framework of the general revision of ECA processes
which we are confident is moving forward in a very substantive
way.
Q141 Mr Hoyle: So when do you expect
everybody to be using due diligence in the way that we do?
Mr Cockcroft: If one had to hazard
a guess, I would say in two years' time.
Q142 Mr Hoyle: So at the moment we
are leading the way and the others are following?
Mr Cockcroft: That is effectively
so, yes. If one wants to look at this in a different context and
look at the reasons why this is, as it were, the case, or why
the progress is uneven, then we get into the areas of political
persuasion where some countries, notably the US, are in a position
to be much more politically persuasive than European countries,
including this one.
Q143 Mr Hoyle: So it would be fair
to say we have all introduced 30-mile per hour speed limits but
we are the only one operating speed cameras at the moment?
Mr Rodmell: I do not think we
can say that, no, because we do not know what all the other ECAs
are doing, but, as Laurence says, it is really part of a process.
ECGD is one of the last ECAs to have introduced the statement
in their forms pointing out that this is a crime, and it will
only come in on 1st May. Overall, due diligence aside, I know
that you are most interested in that because that looks like the
most threatening one, but in other areas, ECGD has been a little
behind and it is now catching up with others. It is part of a
process where they are all going forward. What I would suggest,
though, is that one should not assume a competitive disadvantage,
because the kind of business that ECGD will want to do is the
kind of business that would merit this additional and more robust
approach to due diligence.
Q144 Mr Hoyle: Lastly, obviously
you have not got the information to hand, but if you have any
information that you could send the Committee about the state
of the play of how other countries are operating at what stage—
Mr Cockcroft: We would be glad
to put in a memo on that.
Q145 Mr Hoyle: Please.
Mr Cockcroft: And we can judge
whether the speed cameras are operating.
Mr Stansbury: One point is that
the assumption is that business will not welcome extra due diligence.
I am not sure that is correct. Many contractors in Britain, consultants
in Britain, have had to withdraw from various markets overseas
because they are not willing to bribe. Therefore, their turnover
has dropped. It has hit their profitability, but they have made
the decision, "We are not going to bribe". But many
of their competitors have not made that decision, so many companies,
contractors and consultants in Britain continue to bribe, and
this is being repeated in many countries around Europe. Therefore
there is a perception, "We should be rewarded for ethical
conduct". We would like to go back into those markets but
we cannot until it is cleaned up. Therefore if ECGD's due diligence
makes sure that the corrupt contractors cannot get export credit
and that ethical contractors can, surely it is assisting you to
get the business, not deterring you.
Mr Hoyle: Unless you are not operating
the speed camera.
Q146 Chairman: Apart from the analogy
about speed cameras, you could say there is also the dimension
of volume, in the sense that in some countries it might be quite
easy to introduce the most rigorous procedures because at the
end of the day it does not matter because they do not have much
trade. As one of the major trading nations, is it the case that
because of the number of deals that are struck by British-led
consortia the propensity to have corruption is that much greater,
the opportunity is that much greater?
Mr Cockcroft: One can, as it were,
if I might say so, Chairman, exaggerate the force of that argument.
Germany is the largest single exporter in the world. German procedures
are being changed as we speak and German legislation introduced
after the OECD Anti-bribery Convention has been rather more effective
than ours; so I think one has to put this in the context of what
countries are doing generally in the anti-corruption field. For
example, it was said that our anti-corruption legislation was
particularly tough because it banned facilitation payments, but
that is equally true of the French legislation. So the traditional
British argument that other people are not doing what we are doing
and we are ahead of the game is extremely dubious in this area
of anti-corruption measures.
Chairman: That is very helpful. I wanted
to get that point either on the record or denied, but you have
given your opinion and we will take it up with others. That is
very helpful.
Q147 Judy Mallaber: Moving on from
that, you advocate the proportionate use of legal powers to deny
support for applications for assistance in parent and subsidiary
companies which have been found to have been involved in the payment
of bribes, and you say in your evidence that that is the practice
of World Bank institutions and is recommended best practice of
the OECD Group but that ECGD does not feel it has sufficient legal
cover for such an action. Would you like to comment on the logic
of the argument made by ECGD?
Mr Rodmell: Yes. I have not seen
the legal opinion which ECGD rely on, but they do kindly summarise
it for me, and it is all based on a general principle of administrative
law pursuant to which it is said: "The Secretary of State
may not fetter his future discretion; he must in each case, evaluate
all relevant facts before making decisions", and so on, and
I would not for one moment quarrel with the general principle
of administrative law. But if you take it ad absurdum,
in a way, it stops you making a decision, because each decision
to some extent fetters the discretion of your successor from making
subsequent decisions. So, again, I am sure that ECGD has had the
benefit of learned counsel's opinion and I do not pitch my opinion
against his or hers, but, generally speaking, if one looks at
the Act under which the ECGD operates, which is the Export and
Investment Guarantees Act 1991, it is difficult to imagine an
attempt that could be made to use wider wording in terms of powers.
It says, "The Secretary of State may make arrangements under
this section with a view to facilitating the export . . . The
Secretary of State may make arrangements . . . with a view to
facilitating performance of obligations created or arising, directly
or indirectly", and he "can make arrangements . . .
for the reduction or avoidance of losses arising in connection
with any failure to perform such obligations." It is extremely
wide wording. Under "financial management", which is,
I think, where you start to think about risk management and so
on, "The Secretary of State may make any arrangements which,
in his opinion, are in the interests of the proper financial management
of the ECGD portfolio, and, in pursuance of those arrangements,
he may alter any arrangements he has already made and he can "make
further arrangements in connection with arrangements so made".
It is very wide wording. It seems curious to me that, as part
of those arrangements, the Secretary of State could not, in fact,
require a procedure for sanctions where it is found that an applicant
has engaged in corrupt activity. That is basically what the World
Bank has done, which is why I mentioned that example, and their
criteria are not where corruption has been admitted or where there
has been an actual conviction, it is simply where it has been
found by the World Bank or by its sanctions committee that there
has been fraud or corruption in the procurement of goods or services.
They have a procedure which is all set out; it is ostensibly a
very fair procedure allowing the person against whom corruption
is alleged the opportunity of putting in written submissions and
being heard with legal representation, because the sanction is
a very powerful one. If you are blacklisted by the World Bank
and all its affiliates, that is a very powerful sanction. Those
companies in Lesotho who have been found guilty on appeal stand
the risk now of being blacklisted. I do not know if they have
been. Not yet, but it is coming up for consideration. What I am
suggesting is that if learned counsel consulted by ECGD is right,
and this principle of administrative law precludes it, it would
be the simplest thing to legislate to correct that, because the
ECGD should not be denied this very powerful tool in its own risk
management.
Q148 Judy Mallaber: Do you have that
statement about the legal opinion, the summary from ECGD? Do you
have that in writing?
Mr Rodmell: Yes.
Q149 Judy Mallaber: Would it be possible
to have a copy of the statement?
Mr Rodmell: I do not see any reason
why not. If it has been given to me I am sure it can be given
to the Committee. I am sure, if they wanted to, they could see
the actual legal opinion, but this one I am very happy to provide.
Q150 Judy Mallaber: Do you feel that
would be a very powerful tool for ECGD?
Mr Rodmell: Yes.
Q151 Judy Mallaber: More powerful
than what they are able to do at present?
Mr Rodmell: Yes and it is seen
as best practice; but I would say that if a recommendation went
from this Committee that consideration be given to introducing
this sanction, it should follow more the World Bank style than
resting on actual convictions.
Q152 Judy Mallaber: You also said
it is recommended best practice of the OECD Group. Do you have
any information about the legal powers used in other OECD countries?
Mr Rodmell: Yes, and it is true
to say, again, that a number of the other ECAs are not using this
power, but it is their recommended best practice. The Export Credit
Group of the OECD have something called an "action statement",
the current one is from 2000, which actually says what they should
all do. Beyond that they have some recommended best practices
which get modified and are considered. I believe the Group is
meeting this week and may well be looking at another action statement,
or that may go to the next meeting. So it is a current issue.
It is a process. As Laurence says, it is improving all the time.
Q153 Judy Mallaber: Do you know of
other countries that are currently operating that legal provision
that you are suggesting we should operate here?
Mr Rodmell: I do not know the
actual countries, no. They are in the minority at the moment.
Q154 Judy Mallaber: Thank you very
much. If we could have copies of that advice that you had from
ECGD I would be grateful.
Mr Cockcroft: May I add two points
to that. First of all, the process by which the World Bank reached
a view that it would be prepared to exercise a power of debarment
was gradual, and initially, as recently as 1997, the World Bank's
position was that they would only debar companies that were found
to have behaved corruptly by a court, a successful prosecution.
At the 1998 AGM in Hong Kong, Wolfensohn announced that this would
change and the World Bank would now debar companies on the basis
of its own investigation. If I may slightly respond to the second
part of your question: although I am well aware that it is not
a wholly adequate answer, blacklisting within states in Germany
is now quite standard practice. It was pioneered in Bavaria and
a number of German states now operate a debarment system in relation
particularly to public sector contracting.
Judy Mallaber: Thank you very much.
Chairman: Thank you very much, gentlemen.
I think that is very helpful. It is only one aspect of what we
are concerned with, but I think we have mined fairly deeply this
morning in that area. We are grateful for the information you
have given us and, if you can give us any more by way of written
submission, we would be very happy to receive it. Thank you very
much.
|
