Examination of Witnesses (Questions 1-19)
CONFEDERATION OF
BRITISH INDUSTRY
AND BRITISH
EXPORTERS ASSOCIATION
17 MAY 2006
Chairman: Good morning and welcome. Before
we go any further, as a new one-off sub-committee, we, as Members,
have to declare any interests, so we will briefly do that. I have
constituents who work for major aerospace companies and I am a
member of the trade union Amicus. To the best of my knowledge,
they are the only interests relevant to this issue.
Mr Weir: I have nothing to declare.
Rob Marris: I have constituents who work
in aerospace and I am a member of the Transport and General Workers'
Union and the GMBU.
Q1 Chairman: Welcome. Would you introduce
yourselves for the record and then we will start the evidence.
Mr Caldwell: Thank you for your
welcome. My name is James Caldwell; I am here in my capacity as
the Chairman of the CBI Export Finance Committee.
Mr Scott: I am Andrew Scott and
I am the Director of CBI responsible for our international and
UK operations.
Ms Walton: I am Sue Walton and
I am here in my capacity as Chairman of the British Exporters
Association.
Mr Jones: I am Clive Jones and
I am here in my capacity as member of the British Exporters Association's
Council and I am also Chairman of the BBA[1]
Export Finance Committee.
Q2 Chairman: Thank you for your written
submissions and thank you again for being here this morning. It
is a public evidence session. There will be a record of the proceedings
on the internet, I think within a week is the target and that
is usually what happens. So, that will be the first place you
will see it. May I begin by referring to the CBI's memorandum.
In paragraph 6 you state that it is, "The UK Government's
intention to be at the forefront of introducing enhanced anti-bribery
provisions risks putting both the UK Export Credit Agency and
UK exporters at a competitive disadvantage." Do you think
the arrangements set out in the Government's final response of
March of this year increased that risk or reduced that risk?
Ms Walton: It is true that ECGD
has certainly been at the forefront of applying anti-bribery and
corruption procedures and we are very pleased to see that, through
some of ECGD's good efforts, the OECD working party on export
credits is now promoting a multilateral approach which is much
closer to that of ECGD although I would have to say that ECGD
is still probably clearly ahead of what the OECD is proposing.
It will be interesting to see how other OECD countries actually
implement these new guidelines and, until we see how that is done,
it will be difficult for us to determine whether or not UK exporters
have been particularly disadvantaged. I think that it is a move
in the right direction but there is also the issue of watching
very closely what non-OECD countries are doing through their export
credit agencies and we see more frequently that ECAs from India
and China are very active in some of the markets that our members
are competing in but they do not subscribe to the same OECD guidelines
and I think that is something that we would like to see the UK
pursuing to ensure that we are left on a level playing field.
I think this very recent announcement—it was only last week,
I think 11 May—is a move in the right direction and we are
more comforted by that than we were before.
Q3 Chairman: In your memoranda, you
both refer to the fact that Germany, Japan, Belgium and the Czech
Republic were against tighter OECD guidelines. Do you think they
are now coming round to the view that we should all subscribe
to OECD guidelines?
Ms Walton: Unfortunately, as none
of us were privy to what went on in those OECD meetings, it may
be a question that is more properly posed to ECGD who were represented
there. Looking at the guidelines that have come out, it is clear
that they are not as strong as ECGD's and I suspect that that
may be due to the influence of some of those parties who were
less convinced that this was the way to go.
Q4 Chairman: In summary, you are
not unhappy about the ECGD position?
Ms Walton: We are happier that
others are now following it more closely. Where we are today,
we can work with ECGD's guidelines. It is more onerous. It will
be more difficult particularly for some of our smaller members
to comply with because they do not have the manpower and resources
to deal with it, but certainly we are in a better position than
we were back in the year 2004 when many of our members were simply
unable to do these things.
Q5 Chairman: Finally on this point,
do you believe that the procedures outlined in the Final Response
are workable? After all, they are more stringent than December
2004 but they are less onerous than May 2004.
Ms Walton: The proof of the pudding
is going to be in the eating here. They appear to be more workable
to us. Our members have been consulting with ECGD on safe handling
arrangements, but I think we will come on to that later.
Chairman: Yes, we will come on to that
later. Thank you, that is helpful.
Q6 Mr Weir: Both organisations advocate
an alternative approach to combating bribery based on ECGD "knowing
their customers". Would you outline for us how you see that
working, please.
Mr Scott: I think the comment
in our submission on that was really trying to put the new provisions
into context. We fully accept that ECGD has decided to go down
what we would probably describe as a more pre[G1]scriptive and
procedural approach, but what we were saying was that if ECGD
wanted to have greater confidence that none of its dealings could
be described as having been tainted with bribery and corruption,
then one of the most effective ways of doing that is to have a
very close understanding and working relationship with the customer.
We do not regard that as being cosy, as some might describe it;
we regard that as being a very practical and positive thing for
ECGD to do who actually understand what the due diligence procedures
are which the customer himself operates and understand what it
does in terms of its own codes of practices. To be fair, in some
respects, it does have that full and close understanding with
the customer but we believe that it could be developed even further.
We actually believe that that would have been an approach which
could have given ECGD and then ultimately the taxpayer greater
confidence that there was a clear understanding of how companies
were approaching this issue, which many do from their own due
diligence and their own internal procedures. That was our comment
setting it in context. We acknowledge though that what ECGD has
decided to do is to tighten up its procedures. It will still need
to have that understanding of the companies' own codes of practice,
but we would have felt that that approach would have been able
to give a degree of confidence which it was looking for and we
have acknowledged that it decided to go a more prescriptive approach.
Q7 Mr Weir: How do you feel that
that approach assists given the transparency necessary to assure
taxpayers that their taxes are not underwriting projects tainted
by bribery and the fact that they want to see what is going on
in these contracts?
Mr Scott: I do not think that
the revised procedures as opposed to that more closer understanding
of what the individual companies are doing themselves by ECGD
working closely with them produces any different approach to that
transparency. As far as we were concerned, we would believe that
ECGD understanding its customers, having information about the
due diligence processes which those customers operate and requiring
them to produce codes of practice would be a very fair and legitimate
way to approach this whole issue.
Q8 Mr Weir: I take it from your earlier
answer that you have reached the conclusion that you will work
with ECGD's anti-bribery rules. If your members did ever find
them too onerous, are there other sources of support open to them
for export purposes?
Mr Scott: Obviously, one 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.
Mr Caldwell: I would like to add
something to that which is to make a point of which I am sure
you are well aware. English law will apply to the exporter irrespective
of which country they are exporting to and irrespective of which
export credit agency they employ, or indeed if they employ no
export credit agency at all and simply put in place a commercial
bank finance structure. They are still subject to English law
and its provisions against bribery and corruption.
Q9 Rob Marris: One way in which people
get round English law is by the use of agents. You may recall
that in the Select Committee's report in March 2005, we said,
"We are not persuaded by the arguments put forward by ECGD's
customers that the Department had no right to information on the
agents they use and the money to be paid to them". Does the
CBI accept that one of the common conduits for bribes is through
agents and that therefore, if one accepts that and you may not,
the control or regulation of agents is rather important?
Ms Walton: I think the way in
which we would like to address this is to say that actually agents
play a perfectly normal and legitimate role in our members' business
day to day and again, reiterating the point that James has just
made, UK companies are subject to some of the most stringent rules
in this regard around the world and those laws have extraterritorial
effect. So, our membership is very concerned that they and their
agents are deemed to be working within the law.
Q10 Rob Marris: I am not suggesting
that all agents are corrupt by any means. I am saying that those
are commonly taken to be, for reasons I will get on to, a conduit
for bribery where bribery and corruption take place. I am not
saying that every agent is corrupt or that there is bribery and
corruption in every case, not at all, but in some cases there
is but part of the difficulty is of course discovering the identity
of agents and whether ECGD will have that information and is prepared
to disclose this. Do you think that all agents' details should
be given to these people?
Ms Walton: ECGD will, under its
new guidelines, be given details of those agents—
Q11 Rob Marris: I am asking you if
you think that is appropriate.
Ms Walton: What our members were
concerned about was the confidentiality of that information. I
do not think there was a particular problem with sharing the information
if our members could be confident that ECGD was going to keep
what is very commercially sensitive information confidential and,
as we were all working to understand, for example, the impact
of the Freedom of Information Act—and there is no case law
in that respect yet—it was difficult for our membership
to say categorically that they were happy for ECGD simply to have
this information on the face of an application form.
Q12 Rob Marris: Are they now reassured?
Ms Walton: Having been through
very recently a consultation on safe handling arrangements, I
think that we are getting to a stage where members are more reassured
though we actually have not had yet the outcome of that consultation,
so we will have to wait and see on that.
Q13 Rob Marris: Do you have a date
for the outcome of the consultation?
Ms Walton: I do not believe we
do on safe handling.
Mr Caldwell: I am not sure.
Mr Scott: We did not have a date
for the outcome, we had a date by which we had to make our submissions.
Ms Walton: The new arrangements
for ECGD's anti-bribery and corruption procedures come into effect
by 1 July, so one would hope it would happen before that.
Q14 Chairman: It has been noted.
Before I move on to the question I have on special handling arrangements,
you may have heard a whistling. There is a whistle. Attempts have
been made to sort it out but the only way to eliminate it for
sure is to stop the sound recording and webcasting and so on.
So, since we clearly would not want to do that, I apologise for
the whistling. If you cannot hear it, you are lucky! Paragraph
7 of the special handling arrangements to which there has been
reference advises that where an applicant refuses consent for
knowledge about agents to be more widely shared, ". . . it
is likely in those circumstances that ECGD would be unable to
process the Application further". I appreciate that this
may be a contentious point, so I would like to ask whether you
believe there are circumstances in which a company could reasonably
refuse that consent and still expect ECGD to consider its application
for support.
Mr Caldwell: I think it is probably
more a question for ECGD.
Q15 Chairman: Do not worry, we will
ask them! Your views on these matters are, as always, extremely
important to us. Are they being reasonable or are they being unreasonable?
Mr Caldwell: I think it will depend
upon the circumstances of the case; it will depend upon the information
that is available to them. It is a hypothetical case, so it is
quite a difficult question to be able to answer with any certainty.
Q16 Chairman: Can you think of circumstances
in which a company could reasonably refuse consent to give that
information and still expect ECGD support?
Mr Scott: I think at this stage,
as James has said, it is difficult to identify what those circumstances
would be. I think the reason why we would have argued it the other
way is to leave that option open in the event that such circumstances
do arise. At the end of the day, the decision ultimately will
be ECGD's. It will decide whether it feels that there is any basis
for continuing to provide support if the customer decides not
to give that information, but all I think we would have argued
for is that that would give that option should a situation arise
in the future rather than having a blanket automatic refusal.
At the moment, we have not identified what those specific circumstances
might be.
Q17 Chairman: If you take the TV
licence, you do not have the choice. If you want to pick up a
TV program, you have to pay the licence fee. What is being said
here is, if you want ECGD's support, there are certain conditions
that you have to satisfy including disclosure of knowledge about
agents. Either you think that is a reasonable thing for taxpayers
through ECGD to be expecting of those applying for support or
you think it is unduly intrusive and unnecessary.
Mr Caldwell: If it is an absolute
requirement, then it is an absolute requirement. There is no flexibility
and the question does not arise.
Q18 Chairman: The question of whether
you think it should be a requirement does arise. I have asked
it!
Ms Walton: I think that potentially
there would be a case where, for example, a customer/applicant
for ECGD services has actually provided ECGD with a great deal
of information about the agent already. They may have been through
a review which has involved a third party. A number of our members
use agencies to do very detailed scrutiny and analysis of their
agents abroad. They may have provided ECGD with that information
already and they may be in the middle of a very sensitive and
very competitive campaign where they do not want further information
potentially leaked into the market that might jeopardise their
campaign. If ECGD is actually happy with the information that
has been provided to them by the exporter, I think that in those
circumstances the exporter might well be valid in its decision
to say, "No, we don't want you to do any further exploration
in the country because we are at a very sensitive stage of this
campaign and you have had every piece of information that we have
diligently collected on our agent".
Q19 Chairman: That is helpful. Do
you think that many companies will invoke the special handling
arrangements?
Mr Scott: I think it is difficult
for us to say how many will do that. Again, it will be entirely
up to that company to make that decision. All that we have been
looking for in this is to give that option, so that the exporting
company can take that option if it so chooses. At this stage,
it is difficult to predict how many will take that route.
Mr Caldwell: That is right. The
answer to that and the previous question is that, to the extent
that flexibility is permitted from an exporter's perspective,
that is a good thing.
1 British Bankers' Association. Back
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