1 Introduction
1. The Export Credits Guarantee Department (ECGD)
is the UK's official Export Credit Agency. It is a separate Government
Department reporting to the Secretary of State for Trade and Industry
and derives its powers from the 1991 Export and Investment Guarantees
Act. Its objective is to assist UK exporters of goods and services
to win business and UK firms to invest overseas, by providing
guarantees, insurance and reinsurance against loss, taking into
account the Government's wider international policies. It provides
business with insurance or backing for finance to protect against
non-payment, and it currently operates on a break-even basis,
charging exporters premiums at levels that match ECGD's view of
the risks and costs in each case. It now provides support for
about £2 billion of UK exports a year and has a portfolio
of about £16 billion exposure.[1]
2. In 2000 ECGD reviewed its objectives and business
principles and introduced requirements on applicants for its services
to give undertakings that support would not be used to support
bribery or corrupt activities.[2]
These anti-bribery procedures were revised and extended in 2002
and 2003.[3] In May 2004
ECGD announced further changes to the procedures ("the May
2004 procedures") but in the face of opposition from exporters
it revised these procedures in December 2004 ("the December
2004 procedures"). In turn the non-governmental organisations
were dissatisfied with the December 2004 procedures, and one sought
judicial review. At the door of the court the Government undertook
to put the December 2004 procedures to public consultation. Following
consultation in 2005-06, revised procedures—set out in the
Final Response to ECGD's Consultation on Changes to ECGD's Anti-Bribery
and Corruption Procedures Introduced in December 2004[4]—were
published on 16 March 2006. They came into operation on 1 July
2006 ("the July 2006 procedures").
3. Our inquiry has focussed on the reasons why it
has taken over two years from May 2004 to produce revised anti-bribery
procedures and has considered whether the July 2006 procedures
are workable and reduce to a minimum the risk of ECGD supporting
contracts tainted by corruption.
4. Our predecessor Committee in the last Parliament
examined ECGD's bribery procedures twice, and we have drawn on
the evidence it received and on its Reports and conclusions. First,
in 2003-04 it reviewed, among other matters, the effect of the
revision and implementation of ECGD's objectives and business
principles.[5] During the
course of that inquiry the Committee received a significant body
of evidence from non-governmental organisations and individuals
that raised questions about ECGD's compliance with its own business
principles. The Committee decided that this evidence required
further consideration and consultation with the witnesses, and
this was the subject of a further inquiry and Report in 2004-05.[6]
5. It was during the course of the second inquiry
in November 2004 that ECGD announced it was amending the May 2004
procedures in response to representations made by exporters. As
noted, this announcement attracted criticism from anti-corruption
campaigners on the grounds that they represented a marked relaxation
of the May 2004 procedures. In view of the apparently sweeping
nature of the changes to anti-corruption procedures which had
been in effect for less than six months, the Committee decided
to inquire further into the background and to review the practical
effect of the most recent changes. It invited the two organisations,
the Corner House and Transparency International (UK), which had
commented in detail on ECGD's anti-corruption procedures during
its first inquiry, to submit comments on the effect of ECGD's
revisions to the May 2004 procedures. It also invited the exporters'
representative bodies and ECGD to provide an explanation of the
need for the changes.[7]
6. The Committee concluded in its Report published
in April 2005 that, although ECGD had described the December 2004
changes to its anti-corruption measures as clarifications of what
it required from customers applying for support, it was not at
all convinced that such "clarifications" would not seriously
weaken ECGD's ability to contribute to the Government's policies
against bribery. The Committee welcomed the May 2004 procedures,
but noted that their effectiveness would depend on the rigour
with which they were to be implemented. The Committee deeply regretted
that their effectiveness had never been seriously tested.[8]
Our work builds on the earlier inquiries and the Report published
in April 2005.
7. In the course of the preparation of this Report,
we held three evidence sessions with: (i) the Confederation of
British Industry (CBI) and the British Exporters Association (BExA);
(ii) the Corner House and Transparency International (UK)—referred
to collectively in this Report as the "non-governmental organisations";
and (iii) the Minister for Trade, Rt Hon Ian McCartney MP, and
officials from ECGD. We also received various written memoranda
from the Government, those who gave oral evidence and other organisations.
We put on record our thanks to all those who supplied evidence.
8. Finally, the Minister told us that he expected
to review the operation of the July 2006 procedures in three years.[9]
The procedures have been subject to 27 months of change and instability
and we consider that there now needs to be a period of stability,
but at the end of which there needs to be a review. We recommend
that the Trade and Industry Select Committee examine the operation
of the procedures again in three years, or possibly earlier if
they are revised in the meantime.
1 Export Credits Guarantee Department, Annual Review
and Resource Accounts 2004-05, 13 July 2005, HC 158, pp 10,
12 Back
2
From September 2000, ECGD standard forms provided that, if the
exporter was proved to have engaged in corrupt activity, there
was an obligation upon the exporter to repay to ECGD anything
which it has had to pay the bank. See ECGD, Consultation on
Changes to ECGD's Anti-bribery and Corruption Procedures Introduced
in December 2004, 18 March 2005, para 6.4, http://www.dti.gov.uk/files/file15233.pdf
. Back
3
Q 102 Back
4
ECGD, Final Response to ECGD's Consultation on Changes to ECGD's
Anti-Bribery and Corruption Procedures Introduced in December
2004, ECGD, 16 March 2006, http://www.ecgd.gov.uk/final_consultation_main_doc.pdf Back
5
Trade and Industry Committee, Sixth Report of Session 2003-04,
The Work of the Export Credits Guarantee Department, HC
506-I, 15 June 2004 Back
6
Trade and Industry Committee, Ninth Report of Session 2004-05,
Implementation of ECGD's Business Principles, HC 374-I,
4 April 2005 Back
7
HC (2004-05) 374-I, para 36 Back
8
HC (2004-05) 374-I, p 3 Back
9
Q 134 Back
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