Memorandum from Transparency International
UK
ARMS TRADE
TREATY
UN resolution L55 notes that "the absence
of a common international standard on the import, export and transfer
of conventional arms is a contributory factor to conflict, the
displacement of people, crime and terrorism", and that the
absence of such standards undermines "peace, reconciliation,
security, stability and sustainable development".
Corruption erodes the effective implementation
of common international standards. Anti-corruption must therefore
be at the core of the ATT.
1. INTRODUCTION
Transparency International UK is actively working
with governments and defence companies to strengthen international
defence procurement and the arms transfer process against corruption.
A short outline of our work can be found at the end of this document.
This submission presents ideas for promoting
anti-corruption in arms control by the recipient and supplier.
2. CORRUPTION
IS AN
IMPORTANT RISK
FACTOR
Corruption greases the circumvention of arms
controls. It facilitates the diversion or re-export of arms consignments
to unintended recipients such as embargoed countries and terrorist
organisations. It undermines the capability of officers to apply
effective controls and facilitates the trade of banned or illegal
weapons such as landmines. It introduces distortions into decision-making,
such as whether the proposed export might be used for internal
repression, or provoke conflict. It undermines security and defence,
good governance, the rule of law, the democratic process as well
as sustainable development, all of which it is hoped the International
Arms Trade Treaty will protect.
The appendix presents a brief selection of stories
from the press, showing examples of how bribery undermines arms
control in practice.
3. THE SUPPLIER—PROPOSED
ANTI-CORRUPTION
REQUIREMENTS
(a) Export licensing should be strictly
conditional on presentation by exporting companies of rigorous
contract-specific no-bribery warranties. These should be reinforced
by clear evidence that companies:
— have in place sufficient internal
compliance systems capable of detecting orruption-risk and preventing
the payment of bribes, including through application of anti-corruption
requirements to teaming arrangements and subsidiaries;
— are committed to investigating alleged
anti-bribery violations;
— are committed to disclose corruption
(and other) violations voluntarily;
— are committed to extending their
public accountability through annual reports and best practice
fora; and
— have extended their anti-bribery
compliance programmes to offsets.
Exclusion from export licences should be used
as a sanction against companies or brokers found to have paid
bribes. Reference should be made to blacklists such as the World
Bank list of debarred firms.[46]
Registration for brokers under Export Control Acts should also
include signing a no-bribe warranty.
(b) Export credit support should contain
rigorous anti-corruption criteria, such as the requirement for
the full disclosure of agents appointed by the supplier, by the
supplier's group companies, by the supplier's joint venture, consortium
or similar parties. Powers of inspection by the export credit
body should not be limited to the supplier's home-country premises,
but should also cover the supplier's overseas premises.
4. THE RECIPIENT—POSSIBLE
FORM OF
ANTI-CORRUPTION
REQUIREMENTS
We suggest three elements of guidance be considered
in the ATT:
(a) a section on how to consider corruption
as a risk factor;
(b) a section that defines the level at which
corruption should be treated as a major risk factor, and which
triggers more specific scrutiny; and
(c) a section on the type of additional control
mechanisms that could be considered where corruption is seen as
a significant risk factor.
(a) Considering corruption
Corruption is a wide issue that could be seen
as influencing all aspects of the transaction: the exporting company,
the trans-shipment organisations, the end user organisation, customs
officers, licensing officers, any intermediary or broker on the
recipient side, etc. We expect that the licensing authority will
take into consideration the history and track record of the recipient
organisations, and known or suspected corruption incidents in
the recipient country.
The bigger corruption issue is the more general
corruption environment in the country, as this will affect the
likelihood of diversion, re-export, or other undesired transfer
of the shipment. We believe this should be considered as per b.
below.
(b) Threshold for high corruption in recipient
country
An index of corruption perception, such as that
of the World Bank[47]
could be used as a proxy for corruption risk. We suggest the licensing
authority use such lists as a reference to indicate the corruption
risk perception in that country, and apply progressively more
stringent examination as the perception level gets worse. For
example, using the World Bank table (and selecting "percentile
rank" view), an authority could set a range of above 60%
as being not a major corruption risk, 40% to 60% as significant
risk, 20% to 40% as high risk and below 20% as very high risk.
If the recipient country is above one threshold,
we suggest that the licensing authority carry out more than the
"normal" level of background checks of the recipient
organisation. If the level is below the lowest indicator, then
we suggest that the licensing authority considers refusing the
license, or places additional controls on the approval. Intermediate
steps would be applied for intermediate risk levels.
(c) Enhanced controls in such cases
Where material is being exported to very high
corruption perception countries, additional controls should be
required as a condition of the export license. Proposed additional
controls could be placed in the license application itself by
the applying company, or specific controls could be imposed by
the licensing authority, depending upon the practice of the national
authority.
The nature of these additional controls would
vary according to the material being exported and the recipient
country. We suggest that the User Guide give some examples as
guidance to licensing officers, but not be prescriptive. As examples,
some of the following controls could be suggested:
— Pre-shipment verification: Requiring
the pre-licenser to conduct additional checks on the identity,
business activities and business location of the end user.
— Only permitting the shipment to go
direct to end users and not to intermediaries/brokers.
— If intermediaries/brokers have to
be present, the exporter should require the broker to be vetted
by a centralised business conduct agency, for instance "Trace
International".[48]
— Shipping verification: Requiring
the transporter to double check the recipient to positively confirm
actual use and physical presence of recipient.
— Post shipment verification: Requiring
a follow up check by the exporter that the goods were received
and used as intended in the receiving country.
Transparency International (UK) is happy to
discuss any aspect of the above with those engaged in the preparation
of this User Guide.
5. TRANSPARENCY
INTERNATIONAL UK'S
DEFENCE PROJECT
Transparency International UK is engaged with
export controls issues with a view to finding practical ways to
strengthen international transfers against corruption. This work
is sponsored by the UK Government, with additional financial support
from the Swedish Ministry for Foreign Affairs, and has the active
backing of the Ministry of Defence in the UK and in other countries.
Transparency International has contributed to
inter-government conferences on this topic, for instance International
Export Controls Conference: Budapest 2003, London November 2004,
Stockholm October 2005, Brussels October 2006.
46 World Bank list of debarred suppliers: Back
47
World Bank "Control of Corruption" Back
48
www.traceinternational.org Back
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