House of Commons - International Development

Select Committee on International Development Second Report

3 Promoting responsible trade

41. In July 2006, the Prime Minister asked Rt Hon Hilary Benn MP, then Secretary of State for International Development, to lead the Government's work on combating overseas corruption. The role was widely publicised and launched at a high-profile event. This 'Ministerial Champion' would lead implementation of the UK's first annual action plan on combating international corruption.[74]

42. Evidence we received in this inquiry revealed some confusion about this role under the new structures. Transparency International (UK) said that "it is understood that the role now falls to the Secretary of State for Business, Enterprise and Regulatory Reform but nowhere is this set down".[75] The TUC had come to the same conclusion and said that "so far there has been no announcement that John Hutton is the new Ministerial Champion".[76] The Government's evidence to this inquiry stated that the role had indeed moved to the Secretary of State for Business, Enterprise and Regulatory Reform.[77] In response to a question about why the transfer of responsibilities had not been publicised, the Minister told us:

"It is a little unfair, if I may say so, to expect my Secretary of State for Business, Enterprise and Regulatory Reform in a sense to have advertised his responsibility in this area immediately. […] I know he appreciates having the responsibility but he has been concentrating on the detail of work in that area rather than on seeking to advertise the post."[78]

43. We welcome the continuation of the role of Ministerial champion for combating international corruption. We would be concerned, however, if the transfer of responsibility from the Department for International Development to the Department for Business, Enterprise and Regulatory Reform meant that these matters were now seen largely from a trade perspective and that development concerns were neglected. We do not agree with the Government's view that the visibility of the role is of secondary importance: championing an issue by definition requires a high-profile. We recommend that the Government prepare a plan for promoting the role and the associated action plan and that it share this with the Committee within two months.

OECD ANTI-BRIBERY CONVENTION

44. The United Kingdom ratified the OECD Anti-bribery Convention in 1998.[79] This legally-binding instrument is viewed internationally as a key tool in tackling corruption. The Convention notes that corruption is not a one-sided process; those who bribe are as guilty as those who are bribed. The Convention states:

"Investigation and prosecution of the bribery of a foreign public official […] shall not be influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons involved."[80]

45. The Anti-Terrorism, Crime and Security Act 2001 made bribery committed overseas by UK nationals and companies a criminal offence. We are aware that the Serious Fraud Office has investigated a number of allegations of trans-national bribery but we are concerned that none of these have so far been brought to court. We ask the Government to inform us in response to this Report: how many cases and allegations of trans-national bribery have been referred to the Serious Fraud Office for investigation; how many have been investigated by the SFO and closed without charges being brought; how many cases are currently under investigation; and when the Government expects the first case of trans-national bribery to be brought before a UK court.

46. In a statement in December 2006 on the decision to halt the investigation into BAe Systems Plc's Al Yamamah defence contract, the Solicitor-General said:

"This decision has been taken following representations that have been made both to the Attorney-General and the Director [of the Serious Fraud Office] concerning the need to safeguard national and international security. It has been necessary to balance the need to maintain the rule of law against the wider public interest."[81]

In its June 2007 Report on the UK, the OECD Working Group on Bribery, which monitors implementation of the Convention, stated that it had concerns about "whether the decision was consistent with the OECD Anti-bribery Convention."[82] In his evidence to us, Professor Mark Pieth, Chairman of the Working Group, said "We came to the conclusion that this might be the tip of the iceberg and we would want to have a totally new look at the entire outfit."[83]

47. The Corner House, Campaign Against Arms Trade, and Unicorn all pointed in their evidence to what they saw as damaging wider implications of the decision.[84] For example, Unicorn said that these events,

"have not only damaged the UK Government's reputation as a credible anti-corruption player, but, critically, have also undermined the collective political will of governments to tackle international bribery."[85]

48. The OECD Working Group's June report also repeated its concern at continued shortcomings in UK anti-corruption legislation. These had been raised in earlier reports which had recommended that the UK enact modern foreign bribery legislation and address issues linked to corporate liability at the earliest possible date. Professor Pieth told us of the Working Group's concern that these key recommendations remained unimplemented:

"I must be very frank with you, this is really worrying everybody because we believe that one can in half a year write a bill and give it to Parliament, and we are worried that this has not happened since 1999, to put it in very straightforward words."[86]

Moreover, despite several investigations by UK authorities into allegations of corruption overseas, the lack of any consequent prosecutions caused the Working Group to wonder if there was "an inherent or a systemic impediment" between investigation and prosecution.[87] As a result of these various concerns about the UK's implementation of the Convention, the Working Group resolved to conduct a further review of the UK and that there would be a visit to the UK by March 2008 in connection with that review.

49. There are questions for the Government to answer about the UK's implementation of the OECD Anti-bribery Convention and whether the decision to halt the BAe Al Yamamah investigation is consistent with the Convention. We are concerned that the UK has failed to act expediently on recommendations from the OECD Working Group on Bribery. We recommend that the Government make every effort to resolve all these issues during the forthcoming review conducted by the Working Group and that it make a clear commitment that time will be found in this or the next parliamentary session to enact the new legislation recommended by the Working Group.

OECD Guidelines and Risk Awareness Tool

50. The OECD Guidelines for Multinational Enterprises are non-binding recommendations addressed by governments to multinationals.[88] They provide voluntary principles and standards for responsible business conduct consistent with applicable laws. Under OECD Guidelines, participating governments are required to set up a National Contact Point (NCP) to handle enquiries and complaints on all issues covered by the Guidelines. A restructured UK NCP was launched in August 2006 with shared responsibility between the Department for Trade and Industry (now Business Enterprise and Regulatory Reform), the Foreign and Commonwealth Office and DFID, with DTI taking the lead. Complaints are brought when a company is alleged to be involved in activities that are inconsistent with the Guidelines and can be brought by anyone with relevant evidence. The NCP then mediates between the complainant and the company.

51. The Confederation of British Industry in its evidence welcomed the changes to the NCP's structure.[89] The OECD Secretariat told us that the UK NCP was "one of the better" ones.[90] However, according to evidence from the Trades Union Congress:

"There are a number of issues relating to the implementation of the guidelines and the acceptance of cases which continue to cause us concern, including; the speed at which cases are assessed, the training provided to officials forming part of the NCP on industrial relations, the issue of parallel proceedings and overall how the NCP views its role as a proactive mediator once cases have been raised."[91]

52. The Corner House claimed in its evidence, citing a complaint which it had submitted jointly with other non-governmental organisations (NGOs) against BP, that the NCP's handling of complaints favoured business interests and "continues to be dogged by bias, delays and a failure to adhere to stated procedures".[92] It goes on to recommend that the "NCP is reconstituted as an independent body". Gavin Hayman of Global Witness told us that they also had concerns about the investigative capacity of the NCP and the fact that it was staffed by three part-time, junior staff: "It is still very much that we have to present all the evidence and do all the running and all the work".[93]

53. The National Contact Point is a key instrument for national-level implementation of the OECD Guidelines for Multinational Enterprises. It is therefore of paramount importance that the UK Contact Point is a well-resourced, credible body. We share the concerns that some key stakeholders have raised about both the effectiveness and impartiality of the NCP. We recommend that the Government undertake a review of the impact of the 2006 restructuring of the NCP and of the resources available to it.

54. In our Report on Conflict and Development, we referred to evidence we had received from two NGOs about the activities of two UK companies, Afrimex and Alfred Knight, in the Democratic Republic of Congo which might be inconsistent with the Guidelines.[94] We did not take a view on the detail of these cases but were surprised that the Government at that time had not investigated them. We heard during this inquiry that Global Witness has brought a complaint against Afrimex and that this was being investigated by the NCP. However, despite our Report and the evidence taken during our previous inquiry, particularly from Rights and Accountability in International Development, the Government had not undertaken an investigation of Alfred Knight because, it told us, it had not received a formal complaint.[95] Moreover, we understand that Alfred Knight has not even been interviewed or contacted by the Government to discuss these allegations.

55. We will follow with interest the progress of the Global Witness complaint against Afrimex as a test case for the restructured UK National Contact Point. We believe it is unacceptable that the Government has not investigated the activities of Alfred Knight, nor even contacted the company, despite the findings in our Conflict and Development Report and the evidence taken in that inquiry. We call on the Government to be pro-active in these matters generally and to investigate the case of Alfred Knight's activities in the Democratic Republic of Congo in particular. We expect the Government to provide us with a full report of its past, current and planned action in connection with the Alfred Knight case within six months.

56. In June 2006 the OECD launched its Risk Awareness Tool.[96] This was developed in response to a request made by governments at the Group of Eight (G8) Summit at Gleneagles in 2005 for "OECD guidance for companies operating in zones of weak governance". It is designed to help companies to think about the risks and dilemmas they may face in such zones and how they can respond to them. Its aim is to be a more practical, accessible complement to the OECD Guidelines.

57. As we said in our Conflict and Development Report, "Tools are of little use if they do not change behaviour". OECD members have agreed to promote its active use.[97] Robert Ley of the OECD Secretariat told us that the Canadian and American authorities had taken some interesting steps to promote the Tool and that the UK Government might usefully look at these.[98] Mr Ley also said that a web-portal, a sophisticated website where companies could share experiences of working in such zones, could be a way of ensuring that the Tool became "more operational".[99] He indicated that the Netherlands had offered to contribute towards the estimated annual €160,000 needed to fund the portal but that other contributions would be needed. The CBI supports the idea of a web-portal.

58. We recommend that the Government assess the initiatives taken by Canada and the USA to promote the OECD Risk Awareness Tool, with a view to drawing up a UK plan for its promotion within six months. We also recommend that the Government look at the case for contributing to a fund for a web-portal for the Tool, which we believe could encourage its active use.

Extractive Industries Transparency Initiative

59. The UK's Extractive Industries Transparency Initiative (EITI) supports improved governance in resource-rich countries through the verification and publication of company payments and government revenues from oil, gas and mining. The Initiative is now supported by the G8 and major donors including the USA, France and Germany. At the meeting of the EITI Board in September 2007, it was announced that 15 resource-rich countries had agreed to implement EITI and nine others were working towards meeting the criteria.[100] The CBI said that the EITI model "could be extended into other areas which would benefit from increased transparency and good practice".[101] The Minister told us that such initiatives had been discussed for the construction industry and medicines.[102]

60. The Government's Interim Progress Report on the UK Action Plan for Combating International Corruption 2006-07 says that the UK is "supporting further development of EITI, including a UN General Assembly resolution to establish EITI as a global standard for transparency in the extractives sector".[103] This is now also reflected in a new Public Service Agreement target announced in October.[104] Global Witness acknowledged that the Government had been "cheerleading" on behalf of a UN General Assembly resolution but queried whether the commitment needed of FCO, as well as DFID, was there.[105]

61. We welcome the progress on encouraging resource-rich countries to adopt the Extractives Industries Transparency Initiative. We recommend that the Government continues to pursue this actively and to promote the Initiative as a model for other sectors. We also recommend that Ministers at the Foreign and Commonwealth Office and DFID make greater effort to agree and coordinate an active lobbying strategy for a UN General Assembly resolution which would establish the EITI as a global standard.

Conflict resources

62. DFID's Preventing Violent Conflict policy paper opens with the assertion that scarcity of and competition for natural resources are key triggers of armed conflict.[106] Our Report on Conflict and Development noted that creating systems to identify and license resources produced legally was one way of limiting the ability of competition for natural resources to act as a driver of conflict. The Kimberley Process, for example, created a market of certified legitimately-sourced diamonds to squeeze the finances of rebel movements trading in illegitimately-sourced diamonds. Our Report concluded that while it would be cumbersome to develop a Kimberley Process for every category of natural resources, there was virtue in agreeing,

"a definition of conflict resources which would assist the international community in differentiating between natural resources used to fund conflict legitimately, and natural resource extraction and trade used to fund illegitimate activities."[107]

We are aware of efforts at the UN to agree such a definition. However, Mr Hayman of Global Witness told us that, not only had the UK Government failed to lead this effort to define conflict resources at the UN, it had been,

"absurdly passive [… and] overtaken by the Germans and the Belgian Government. They had a debate in the Security Council where the UK made vaguely supportive noises but, in fact, the UK Government has been almost missing in action."[108]

63. We reiterate our view stated in our Conflict and Development Report that the Government needs, as a matter of urgency, to push for an internationally agreed definition of conflict resources. We encourage the Government to work closely and actively with those of a like mind towards agreement at the UN and to make more visible to stakeholders its support for the initiative.

74 Department for International Development, Combating International Corruption: UK Action Plan For 2006-07, www.dfid.gov.uk/pubs/files/corruption-action-plan.pdf Back

75 Ev 64 [Transparency International (UK)] Back

76 Ev 58 [TUC] Back

77 Ev 34 [DFID] Back

78 Q 96 [Mr Thomas] Back

79 Organisation for Economic Co-operation and Development, Convention on Combating Bribery of Foreign Public Officials in International Business Transaction, November 1997 Back

80 Organisation for Economic Co-operation and Development, Convention on Combating Bribery of Foreign Public Officials in International Business Transaction, November 1997, Article 5 Back

81 HC Deb, 14 December 2006, col 1119 Back

82 Organisation for Economic Co-operation and Development Working Group on Bribery in International Business Transactions, United Kingdom: Phase 2: Follow-up Report on the Implementation of the Phase 2 Recommendations, June 2007, paragraph 23 Back

83 Q 42 [Professor Pieth] Back

84 Ev 38, 47, 67 [Campaign Against Arms Trade; Corner House; Unicorn]. On 9 November, The Corner House and the Campaign Against Arms Trade were granted a two-day judicial review hearing on the decision in the new year. Back

85 Ev 67 [Unicorn] Back