Memorandum submitted by Transparency International
(UK) (TI(UK))
Transparency International (UK) (TI(UK)) welcomes
this Inquiry by the House of Commons International Development
Committee (IDC). As the UK National Chapter of the global nongovernmental
coalition against corruption, we are primarily concerned with
combating corruption both within the UK and in the UK's international
economic relations with the rest of the world, particularly developing
countries. We pursue these objectives by working through partnerships
with government, the private sector and civil society. This submission
therefore covers three areas the IDC is focusing on, where the
Government's anti-corruption policies have an impact on trade
and development.
By way of introductory comment, we endorse the
observation of a recent relevant and
international analysis by the International Peace
Academy, assessing "whole of government" approaches
to fragile states[31].
While noting that the UK is at the forefront of conceiving and
adopting integrated policy responses to weak and failing states,
the study observes that its "performance in designing and
implementing coherent and integrated strategies towards fragile
states continues to fall short of its aspirations." Combating
corruption is a key component of any strategy to strengthen weak
governance, and the criticism of the Government's incoherence
and poor implementation is all too apt in relation to tackling
corruption.
OECD AND CORRUPTION
OECD Guidelines for Multinational Enterprises
The OECD Guidelines for Multinational Enterprises
(Guidelines) were adopted in revised form in 2000. The UK, together
with other adhering countries, undertook to set up a "National
Contact Point" (NCP) with responsibility for actively promoting
and developing the Guidelines and for handling complaints about
companies failing to meet them. The activities of companies in
the Congo (DRC) caused widespread concern. The All Party Parliamentary
Group on the Great Lakes Region published a report in February
2005 critical of the UK NCP in failing to address complaints either
promptly or adequately. A Joint Working Group chaired by Lord
Mance, and composed of representatives from prominent companies
and NGOs, proposed substantial reform, and the Government accepted
these proposals almost entirely.
There was criticism that the NCP had been set
up as a low level appointment within DTI. The new arrangement
shared responsibility between three Departments: DTI (0.6 FTE);
FCO (0.2 FTE) and DFID (0.2 FTE), leaving the secretariat within
DTI. The NCP's performance was to be guided by a Steering Board
composed of "senior staff from relevant ministries"
and members from outside government. It was expected that the
Steering Board would be appointed by December 2006.
The Steering Board was eventually appointed
in April 2007, and has met twice, most recently on 19 September
2007. There are four "externals": nominated respectively
by the CBI, TUC, Civil Society and the AAPG (Jeremy Carver, a
Trustee/Director of TI(UK)). No less than twelve Government departments
and agencies are represented: DTI/DBERR, ECGD, DEFRA, Scottish
Executive, Ministry of Justice, UKTI, DFID, FCO, DTI-CSR, Work
& Pensions, DTI-Legal and Attorney General's Office. It is
said that current rules require that, on such bodies, external
members must be out-numbered in a ratio of not less than 4:1.
Whatever the rule, this over-large membership is bound to be unwieldy
and inefficient.
It is too early to comment on the performance
of either the reformed NCP or its Steering Board; but the involvement
of so many officials drawn from a wide range of departments, many
of which are unlikely to have direct dealings with the Guidelines
or their observance globally provides a disappointing indicator
that they will make a difference in strengthening the Guidelines
wherever they operate, but particularly in parts of the world
suffering from entrenched corruption. The Guidelines go beyond
addressing corrupt business, dealing with transparency, labour
relations, the environment, consumer interests, science and technology,
competition and taxation. This is a broad agenda, of great potential
benefit to countries in urgent need of economic development. The
emphasis of the NCP's work has been international, and this is
likely to continue. It must be doubted whether any of the Departments
other than DTI/DBERR, DFID and FCO have any real contribution
to make to the NCP or Steering Board. The still-undefined merger
of responsibilities between DBERR and DFID suggests the possibility
of an even smaller concerned core. The smaller the core, the easier
to manage and implement it, and the easier to finance it from
public funds.
The primary focus of the NCP will almost certainly
continue to be international. Trade and investment today are truly
international; and abuses such as those dealt with in the Guidelines
occur most often in situations of ignorance, exploitation and
lack of understanding between commercial and social aims and expectations.
It is not foreseeable that some binding treaty will be concluded
to prohibit abuses. But if a voluntary code is to do the job,
it will have to function coherently, with effective mechanisms
operating in all the major exporting and investing countries.
Having initially failed to make proper arrangements for the UK
NCP, the Government has the opportunity to make a real contribution
to strengthening the Guidelines. The dispersal of responsibility
for review of the NCP between twelve departments of government
gives grounds for pessimism in this respect.
OECD Anti-Bribery Convention and UK Action Plan
for Combating International Corruption
Serious concerns have been expressed about the
UK by the OECD Working Group on Bribery in International Business
Transactions (Working Group). A coordinated approach across departments
is essential if a meaningful and convincing response is to be
made. This goes to the heart of the UK's national and international
interests, including trade and financial markets.
There is a perception that the UK is not serious
about fully implementing and enforcing the OECD Convention foreign
bribery offence. The Phase 1 and Phase 2 evaluations of the UK
have both led to second follow-up evaluations. The Phase 2 bis
evaluation visit is due in March 2008. Notice has been given that
it will look particularly at the following issues:
— Progress in enacting a new foreign
bribery offence.
— Broadening the liability of legal
persons for foreign bribery.
— Systemic problems that may explain
the lack of foreign bribery cases brought to prosecution.
These issues all have strong "legal"
content. Primary departmental responsibility for them would involve
MOJ, DBERR and the Law Officers. However, national strategic and
international development interests mean that the outcome of the
Phase 2 bis Review of the UK is of vital concern to the FCO and
DIFD. In anticipation of the OECD Review, that concern should
prevail. Law-making is not an end in itself and should serve the
broader interests of the UK represented in this area by the FCO
and DFID. The FCO leads on the UK's implementation of and compliance
with international anti-corruption conventions. DFID has to promote
good governance to facilitate sustainable development. The UK's
reputation and the combat of international corruption are too
important for their progress to be frustrated by the law-making
process.
With only three or four months in which to prepare
for the crucial OECD Phase 2 bis evaluation visit, this is a bad
time to be seen as diminishing the importance of coordination
across departments in the work against international corruption.
There has been significant progress in implementing the first
Action Plan (2006-07) for Combating International Corruption.
That progress was achieved because it was driven at the highest
policy level by the Coordinating Committee's being chaired by
Hilary Benn, then Secretary of State for International Development
who had special responsibility for coordinating action across
departments ("Ministerial Champion"). It is understood
that this role now falls to the Secretary of State (DBERR), but
nowhere is this set down (see the announcement of ministerial
responsibilities within DBERR of 10 July 2007). It is assumed
that the Cabinet Coordinating Committee will continue, but that
Committee only became truly effective when chaired by the former
Secretary of State (DFID).
The written ministerial statement (Minister
for Trade, Investment and Foreign Affairs) of 20 March 2007 announcing
publication of HMG's report to the OECD Working Group underlined
the importance of the UK Action Plan and the changes made to UK
coordination in combating international corruption under the Secretary
of State (DFID). To accord any lesser status to the Plan and the
Coordinating Committee so soon could lead to the perception that
these measures were essentially short-term to get through Phase
2. Phase 2 bis has unexpectedly made the need for demonstrable
coordination with ministerial lead even more important.
The UK Action Plan needs to move forward. A
2007-08 version needs to be published urgently and it should give
high prominence to all three issues that are on the agenda for
the Phase 2 bis review.
Phase 2 bis illustrates well how "lead"
departments need to take account of interests wider than their
separate departmental responsibilities. The only way in which
the UK will begin to redress the damaging perception that it is
not serious about tackling foreign bribery is to make demonstrable
and convincing progress in dealing with the issues.
Enacting a new foreign bribery offence
The Working Group has been promised comprehensive
new legislation since Phase 1. The further reference to the Law
Commission (LC) after 10 years from the first reference will have
done nothing to increase credibility in the context of OECD concerns.
The difficulty of defining bribery has been greatly exaggerated
in order to excuse long periods of inaction within the Home Office
(HO). Other countries have found it possible to define bribery
within their laws. No "consensus" could have been expected
from the last HO consultation—the reason given for the further
reference to the LC. There was nothing in the procedure followed
in the consultation that was calculated to achieve a consensus.
What has been lacking is the will to be seized of the issues and
to make a decision.
At the time of the reference to the LC (5 March
2007), a Phase 2 bis review of the UK had not been expected. The
earliest that a report and draft Bill can be expected is November
2008 and even then there is no assurance that parliamentary time
will be found to enact the new law. A measure that clearly complies
with the OECD Convention is urgent. To tell the lead examiners
on their visit that nothing more can be expected until 2009 is
unthinkable. It would diminish the UK's reputation further and
undermine the UK's standing in "making governance work for
the poor"—the title of DFID's most recent White Paper.
There are legislative options to meet the concerns
of the Working Group that could be started immediately. So long
as the principal components of the offence of foreign bribery
can be clearly understood from the text by those who need to refer
to the legislation, the government could improve the UK's standing
by acting promptly to enact new legislation and by changing the
terms of reference of the LC as necessary.
Broadening the liability of legal persons for foreign
bribery
The record of the UK in dealing with this issue
is a good example of the lack of crossdepartmental coordination.
Article 2 of the Convention requires the UK "to take such
measures as may be necessary, in accordance with its legal principles,
to establish the liability of legal persons for the bribery of
a foreign public official (FPO)". The UK response, presumably
in reliance on the HO or the Law Officers, has been to take a
theoretical stance, ie to claim (correctly) that corporations
can be made liable for criminal offences. Unfortunately, "legal
principles" in the UK (the need to show "directing mind")
make it impossible in practice to prosecute large, especially
global, companies for bribery. These are the very companies that
need to be targeted in investigating bribery of FPOs. Quite apart
from the injustice that may result from prosecuting only natural
persons for offences that confer direct economic benefit on companies
that win business, this exploitation of a technical loophole does
nothing to persuade the Working Group that the UK is serious about
enforcing the Convention.
HMG's position, that it would not be justifiable
to alter the basic principles of corporate liability solely in
relation to bribery, is understood. However the reality is that
almost nothing is being done to resolve the practical difficulty.
The question is a small part of the LC's work on codification
of the criminal law. A perfect opportunity to address this issue
was lost with the recent Companies Bill. Had there been sufficient
cross-departmental coordination, the then DTI could have been
encouraged to look urgently at some provision that could have
met the Working Group's legitimate concerns.
With the issue being raised higher in the agenda
(eg by its inclusion in the UK Action Plan) the LC team dealing
with corruption could be asked to look urgently at whether some
intermediate solution could be proposed to make prosecution of
companies for foreign bribery effective, pending more general
codification? HMG could declare its acceptance of the justice
and reason behind the proposal and then promote this strongly.
Progressive companies could be expected to support the legislation
if sensible defences are built in. The timing is difficult, but
energetic cross-departmental action driven at ministerial level
would demonstrate a will to be fully compliant with the OECD Convention.
Systemic problems in prosecuting
Logically, this needs to look more widely than
at foreign bribery alone—perhaps economic and financial
crime including foreign bribery? With appropriate cross-departmental
coordination to take account of the powerful policy need to satisfy
the OECD Review, HMG could commit (through the Law Officers) to
a thorough examination of all those problems that delay or deter
investigation and prosecution of these crimes—including
judicial process (disclosure, evidence rules, jury trials etc),
mutual legal assistance and judicial cooperation. It can be damaging
to the interests of the City and financial markets for criminal
activities to be conducted and proceeds to be transferred freely
across borders with little expectation of investigation and prosecution.
Nothing that impedes enforcement should go unchallenged.
This is potentially a major piece of research.
If the lead examiners can be convinced that the issue is being
thoroughly examined, the scope of the work could be defined within
a few weeks and an interim report could be available by end-January
2008. This would only be achievable with strengthened cross-departmental
coordination.
NATURAL RESOURCES
The Extractive Industries Transparency Initiative
(EITI), which now includes about 20 countries and 25 companies
who have committed to the EITI's critieria and principles for
revenue transparency, is a good example of effective cross-departmental
working. During the period 2002-06, when the UK Government took
the lead to strengthen international support for EITI, DFID led
this work within the Government, drawing on inputs from other
departments, especially the FCO. EITI is a multi-stakeholder enterprise—involving
governments, companies and civil society. Since different parts
of the UK Government have various interactions with these constituencies,
it was important to have effective co-ordination within Government
to support EITI.
The UK's and DFID's responsibilities for EITI
have been reduced following the establishment of an international
Board to govern EITI as well as a secretariat in Oslo to facilitate
the Initiative's implementation. However, EITI needs the UK Government's
continued support to build on its initial successes. This will
require further cross departmental collaboration between DFID,
the FCO and DBERR.
DEVELOPMENT ASPECTS
OF DEFENCE
EXPORTS
When trade is infected by corruption, development
is negatively impacted. This is particularly true when the product
being traded is a defence export item, as the corruption of the
export process can fuel human suffering, terrorism, and insecurity,
all of which undermine development.
TI(UK) hopes that the ministerial changes will
allow for the adoption of a more rigorous and detailed anti-corruption
methodology in Criterion 8 of the EU Code of Conduct for arms
exports. It is noteworthy that not a single UK arms export licence
has been refused on grounds of Criterion 8. Indeed the Quadripartite
Committee's strategic export controls review (2007) stated: "We
recommend that DFID considers including an assessment in the Criterion
8 methodology applied by Government to test whether the contract
behind an application for an export licence is free from bribery
and corruption".
TI (UK) believes this recommendation should
be implemented and would be happy to help DFID to develop such
a methodology.
31 Stewart Patrick & Kaysie Brown, "Greater
than the Sum of its Parts?" (IPA, New York, 2007). Back
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