OECD's May 2006 Action Statement
125. On 11 May 2006 the OECD's Working Party on Export
Credits and Credit Guarantees published an 'Action Statement on
Bribery and Officially Supported Export Credits'. In their evidence
Transparency International (UK) drew attention to paragraph 2(j)
which advises OECD countries "to take, appropriate measures
to deter bribery in international business transactions benefiting
from official export credit support, in accordance with the legal
system of each member country and the character of the export
credit and not prejudicial to the rights of any parties not responsible
for the illegal payments",[192]
including the case where:
(j) If, before credit, cover or other support
has been approved, there is credible evidence that bribery was
involved in the award or execution of the export contract, suspending
approval of the application during the enhanced due diligence
process. If the enhanced due diligence concludes that bribery
was involved in the transaction, the Member shall refuse to approve
credit, cover or other support.[193]
Transparency International (UK) saw the action statement
as "very clearly saying that any corruption in the award
or execution of that export contract would lead to indemnification"
and Transparency International (UK) concluded that "under
OECD guidelines now the ECGD must now revise its recourse provisions".[194]
126. We have considered recourse in detail at chapter
4. We return to the subject here as we are concerned that that
the Action Statement might require the Government to revise the
July 2006 procedures. We put Transparency International (UK)'s
point to ECGD. Nicholas Ridley, General Counsel of ECGD, replied:
I think Transparency suggest that paragraph 2(j)
of the new action statement suggests that we shall have to change
that policy on recourse to give ourselves the right to take recourse
even where there is no complicity and no fault, no knowledge on
the part of the applicant. I have to say that we are a bit puzzled
by that. […] Briefly, article 2(j) deals with what an ECA
should do if, before export credit is agreed to be given, there
is credible evidence of corruption. It does not deal with what
terms you have to put in the contract if you do decide, having
obeyed what the action statement says in 2(j), to give support.
It did occur to us that perhaps Transparency meant to refer to
2(k), which deals with what you put in the support agreement when
you do give grant support, but in that case, our answer would
still be no, we are not obliged to change the recourse provisions
because of the action statement for two reasons really: one because
the OECD action statement itself, and I can take you to this if
you wish to see it, says that actions taken under any of 2(j),
2(k) or indeed 2(a) to wherever it runs to, are not to be prejudicial
to the rights of parties not involved in the corruption. Secondly,
2(k) says that we shall take only appropriate action, leaving
it to the ECAs to judge what is appropriate. Then there is an
issue as to whether it is appropriate to take a right of recourse
from an innocent party.[195]
127. In a supplementary memorandum Mr Ridley expanded
on his reply:
Paragraph 2(j) of the new Action Statement deals
with whether Export Credit Agencies should give cover at all where
there is 'credible evidence' of corruption which is discovered
before support has been approved. Paragraph 2(j) thus has no bearing
on the terms of recourse provisions to be included in a Support
Contract which is approved, which provisions give future rights
in circumstances where corrupt activity is subsequently discovered.
Paragraph 2(k) deals with action to be taken
if corruption is discovered in a transaction after support has
been granted. But it remains HMG's position that the Action Statement
does not oblige it to alter ECGD's standard recourse rights.
HMG does not believe that imposing an absolute
liability, irrespective of fault or complicity, for what could
be a very substantial sum of money is an 'appropriate action'
within the meaning of paragraph 2(k). This view is shared by the
OECD since the Action Statement makes clear that any measures
taken pursuant to it should not be 'prejudicial to the rights
of any parties not responsible for the illegal payments'.[196]
128. In the light of Mr Ridley's reply to our question
about the need to amend the procedures to reflect paragraph 2(j)
of the OECD's Action Statement published in May 2006 we do not
consider that there are grounds to revise the July 2006 procedures.
Alternative sources of finance
from overseas export control agencies
129. Larger companies may have the option of 'shopping
around' to obtain support from an overseas export credit agency.
The CBI pointed out:
[O]ne of the issues concerned throughout all
of this where a company has an option is to look at whether it
might get that finance from another ECA. Where some of the larger
exporters certainly do have an option, then clearly what it will
look at is the procedures and the bureaucracy and the burden of
going through an ECGD route as opposed to going through another
ECA. It has that option open to it and clearly the acid test will
be how this will operate and how, when it operates, it will be
implemented, relatively speaking, in other ECAs. If they find
that another ECA presents a route which is less burdensome, then
clearly that is an option which a company, if it can indeed go
to those other ECAs, may choose to take.[197]
130. As noted, BExA told us that export control agencies
from India and China were very active in some of the markets in
which BExA members were competing in "but they do not subscribe
to the same OECD guidelines".[198]
The Minister was not clear whether "the anti-bribery and
corruption procedures of the export credit agencies of China and
India met the requirements of the OECD action statement on bribery"
but accepted that it was "very desirable for all ECAs to
meet such levels and that includes India and China".[199]
He said that he had asked his international officials to seek
from their Indian and Chinese counterparts more information about
their anti-bribery procedures and to supply a memorandum once
they have received a response.
131. We share the Minister for Trade's aspiration
that all export control agencies—irrespective of membership
of the OECD—should meet the requirements of the OECD action
statement on bribery. Otherwise those companies willing to condone,
or turn a blind eye to, the payment of bribes and corruption to
secure business will gravitate towards the least rigorous export
control agencies. If, notwithstanding the effort of the OECD and
the UK, this occurs and as a consequence ECGD loses business,
we consider that ECGD will be well rid of such business. In these
circumstances responsibility for investigating any breaches of
the law would not fall to ECGD but to the police and the Serious
Fraud Office. The Government will, however, need to monitor the
market for credit and insurance for exports as well as the adequacy
of the procedures that export control agencies outside the OECD
apply to counter bribery and corruption. We recommend that the
Government review, and publish by 1 August 2007, its arrangements
for monitoring the market for credit and insurance for exports
and pass these analyses to those responsible for enforcing the
law on bribery and corruption.
179 The Public Bodies Corrupt Practices Act 1889, the
Prevention of Corruption Act 1906, the Prevention of Corruption
Act 1916, and the Anti-Terrorism, Crime and Security Act 2001;
see Consultation on Changes to ECGD's Anti-Bribery and
Corruption Procedures Introduced in December 2004, ECGD, 18 March
2005, para 5 Back
180
OECD Convention on Combating Bribery of Foreign Public Officials
in International Business Transactions, 18 March 1999, DAFFE/IME/BR(97)20 Back
181
United Nations Convention against Corruption, resolution 58/4,
31 October 2003 Back
182
Q 2 Back
183
Ibid. Back
184
Q 57 Back
185
Ibid. Back
186
Appendix 3, para 22 Back
187
UNICORN is a Global Unions Anti-corruption Network. According
to its website its overall mission is to mobilise workers to share
information and coordinate action to combat international bribery,
http://www.againstcorruption.org/default.asp. Back
188
Kirstine Drew, The UNICORN ECA Anti-Bribery Index, 30 September
2005, para 2.1 Back
189
Q 147 Back
190
Ibid. Back
191
Appendix 10, para 6 Back
192
OECD, Trade Committee, Trade Directorate, 2006 Action Statement
on Bribery and Officially Supported Export Credits, TD/ECG(2006)11,
12 May 2006 and Q65 Back
193
OECD, Trade Committee, Trade Directorate, 2006 Action Statement
on Bribery and Officially Supported Export Credits, TD/ECG(2006)11,
12 May 2006, para 2(j) Back
194
Q 65 Back
195
Q 152 Back
196
Appendix 8, paras 5-7 Back
197
Q 8 [Mr Scott] Back
198
Q 2 Back
199
Q 157 Back
