Examination of Witnesses (Questions 41-59)
PROFESSOR MARK
PIETH AND
MR ROBERT
LEY
17 OCTOBER 2007
Q41 CHAIRMAN:
Good morning, gentlemen, thank you very much for coming in to
give evidence, it is much appreciated. You have heard the previous
exchanges and I think you will see where the Committee is heading.
I wonder for the record if you could briefly introduce yourselves
and your particular relevance to this inquiry
PROFESSOR
PIETH: Thank
you, Chairman. My name is Mark Pieth and I am a Professor of Criminal
Law in Switzerland at Basle University and Chairman of the OECD
Working Group on Bribery.
MR
LEY: I am Robert
Ley and I have been with the OECD for more than 20 years in the
Directorate for Financial and Enterprise Affairs. For 10 years,
from 1990 to 2000, I was head of the division responsible for
the ME Guidelines[13]
that you are interested in today. That is the part of the Directorate
that looks after what is now called the Investment Committee.
During those 10 years we also launched the first non-binding (at
the time) OECD instrument to combat corruption. That was the beginning
of the Working Group on Bribery and Mark Pieth has been chairing
that ever since. I must tell you that since 2001 I have not had
direct responsibility for these issues. I am attached to the Director's
office and I follow these issues as best I can. My Director is
responsible for all of these issues and many others as well. It
is an honour for me to be here and I will do my best to respond
to your questions.
Q42 CHAIRMAN:
Thank you very much. We have taken a close interest in the OECD's
Peer Review of the UK and the comments made and the fact that
a further review is taking place. Three members of the Committee,
not as members of the Committee but as individual Members of Parliament,
did give evidence to the original Peer Review expressing our concerns
about the lack of action, as we perceived it, by the British Government.
That is just by way of background. Since then, of course, we have
had the very high-profile cessation of the al-Yamamah investigation.
This is not a prime concern of this Committee, obviously we are
interested in development, but it is such a significant move that
I wondered if you could perhaps just give us your views. The press
and NGOs have suggested that this action has seriously undermined
the UK's credibility on bribery and corruption issues. I think
it would be fair to say that some of us have taken the view that
the way it was done was also somewhat damaging. It did appear
to be a straight admission that political and commercial interests
outweighed what you might call objectivity about corruption. That
is a subjective comment from me, but I would be interested to
hear your views as to what impact that decision has had on the
UK's standing in terms of its attitude towards bribery and corruption.
MR
LEY: Maybe Mark
could answer this first because his Group is directly responsible
for overseeing the implementation of the Convention. It is the
Group that conducts the peer reviews, makes recommendations, and
so on. One comment I would make, though, from the outset is that
of course the Working Group does not act as a tribunal. It does
not take an interest in individual cases with a view to judging
them or resolving them. It does take an interest in individual
cases such as the one you mentioned as a way of assessing the
performance of the country concerned under the Convention and
there are many provisions that require action by the countries
concerned for which they are accountable.
PROFESSOR
PIETH: Let me
start from this side, there is no hiding the fact that certainly
this case has caused serious concern. That is what we have expressed
several times in our communiques. However, I think rightly it
has to be seen in a wider context. The UK is one of the key members
of the OECD and has a very good reputation on anti-corruption,
especially through DFID, and that is very well acknowledged. The
problem with the OECD Convention is that the goal of this Convention
is about fair competition amongst competitors fighting each other
in a tough economic combat for jobs and for contracts, and here
obviously everybody is very closely observing what others are
doing. We have not only these two instruments, as Robert has just
mentioned, we have a monitoring body, we are able to look at each
other, but it is not a tribunal, it is still peer monitoring,
so it is friends looking at each other and trying to befriend
each other and stay on that friendly level. This case has caused
a lot of concern worldwide. We are not able to and we have not
yet got to the bottom of the case. We have reserved our right
to have a new look at it in the light of something much broader.
We have had over the years a very uneasy relationship with the
UK, and if I say "we" I am not talking about the OECD
as such but the OECD Working Group on Bribery. Since 1999 when
we first evaluated UK law, we found those laws of 1906 and 1912
are not really addressing the issue we are talking about in modern
times. It is not the servant/master relationship and we are really
talking about trans-national bribery, which was at the time not
at the forefront. When we had a new look at the law after 2001,
when the 2001 Anti-Terrorism law came in, in 2002 we had, under
what we call Phase 1 bis a new look at the law. We said it is
better now because it is clearer that trans-national bribery is
meant but we have still inherited this old servant/master construction,
and in fact that is one of the problems that we are now seeing
as one of the major difficulties in the case mentioned in Phase
2, when we had the first fully fledged analysis of not only laws
but also practice, we came up with three difficulties. The laws
still had not changed and the laws were in other ways also, in
our view, not up to standard. Take corporate liability, which
is absolutely fundamental for what we are trying to achieve, the
corporate liability standards are based on jurisdiction. I think
Tesco v Nattrass is still the leading case, and it is simply
attaching responsibility to the brain rather than to the limbs
of the company. That seemed to us not good enough for modern needs.
However, it went further than that: our major problem was that
cases, even though there are about 30 investigations we are told,
never really make it from the investigation phase into the prosecution
phase, so the question was—and this is really still an issue—is
there an inherent or a systemic impediment or a threshold between
investigation and prosecution that does not allow it to go ahead?
The third point was that we felt there were various institutions
concerned with this topic of trans-national bribery and they were
not necessarily co-ordinating really well. At the time in 2005,
we also had difficulties with the resourcing. I believe a lot
has changed here in the meantime. The effect of the stopping of
the BAE-Saudi case is that in the course of our regular evaluation
(we call it the follow up to Phase 2, which happens two years
after the phase two evaluation), 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 and come back to the UK
next March. The emphasis from us is not the case; the emphasis
is the law. 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.
Q43 CHAIRMAN:
Your reasoning behind that is that it does not suit the Government
to do it?
PROFESSOR
PIETH: Sorry?
Q44 CHAIRMAN:
Of course we agree with you, many of us have been calling for
such a bill, but why do you think over that length of time the
Government have not thought it a priority to bring such a bill?
PROFESSOR
PIETH: It is
not really for us to think about the reasons. We are just finding
that the laws have not been made and have not been drafted in
the meantime and that parliamentary time at some point has not
been found. This is worrying but it is not really up to us to
criticise the Government or to question their commitment. We are
just finding that this has not been done. The effect of this situation
is obviously that it is not just a problem for UK, it is a problem
for the OECD as an institution because our credibility is called
into question. That is probably why we reacted quite strongly
last March when we came out with a scathing press release saying
that we are putting the UK in a situation as we are putting Japan
in a situation. That was made very clear. I might also add, however,
that we are not trying to bash the UK, again to be very specific,
this is not the intention of this Group. The Group is not a political
instrument, not a political tool. We are trying to apply equal
standards and there are several other countries in the situation
of having to undergo these Phase 2 bis, for instance, Ireland,
Japan and Luxembourg. Maybe the attitude is different. The Deputy
Prime Minister of Ireland, whose title I cannot pronounce, has
actually made it public before the evaluation that they would
welcome such a Phase 2 bis, so the attitude is different from
country to country.
Q45 JOHN
BERCOW: There is a conflict of
evidence here. The Government says that it is very co-operative
and wants to take forward the whole process of the review, including
presumably the Phase 2 bis review. On the other hand, Transparency
International UK says the Government response to the reviews to
date has been characterised by delays and that "nothing is
being done to resolve the practical difficulty",[14]
so this is a golden opportunity for us to extract from you the
following: what would be the focus of the review and the on-site
visit to the UK by the OECD Working Group? Related to that, and
very importantly in light of the suggestion that there is some
dilly-dallying, when will the visit take place? My understanding
is that there is a commitment that it should take place by March
2008. Professor Pieth, you are amongst friends, within the confines
of this small room you can share with us—
MR
LEY: —And
on the public record!
Q46 JOHN
BERCOW: And on the public record
at a later date. I was simply seeking to entice you into a continuation
of the candour that you have offered so far. Are you encountering
any resistance or difficulties in connection with the review?
Is the visit delayed? Is there a problem with the booking of flights,
or whatever? Give us a no holds barred response, Professor Pieth.
PROFESSOR
PIETH: The first
two points are easy. The focus, as I indicated a moment ago, is
the legislation first of all. We want to see the laws and we want
to see new laws because we are not convinced that these laws that
we have been looking at continuously are really sufficient. The
angle is both the definition of the crime and the matter of corporate
liability, and there are also a few more details. The second point
would be really looking at cases, and it is by no means just this
case, it is actually the systemic approach, what happens with
the other seven or eight cases relating to the same company, what
about the 10 cases on Oil-for-Food, what about the maybe five
cases unrelated to these two complexes. We want to see what is
the difficulty in promoting such a case into the prosecution stage,
because you have to think that the other countries around the
table seem to be able to. Even though many of them have only two
or three cases that have led to convictions or are at the prosecution
stage, still you have read that Siemens has been sanctioned to
the tune of €201 million just last week. I think that is
a step forward. The question will be is there a systemic difficulty
here and a technical threshold but also political issues. In 2005
we had raised the question of whether the role of the Attorney
General is a problem, the political role, the mix of being head
of the line and at the same time sitting in Cabinet. That was
a question mark from our side. Again, we have to be careful because
we do not want to invade your sovereignty, but we have to raise
questions. The third point, the multiple institutions issue, has
a bearing on the topics you are discussing here in this group.
On the second question you asked on dates, we have said the end
of March and we intend to maintain that. We are hoping actually,
to pick up your last point, that there will be a new bill in a
form that is a government commitment going to Parliament. The
difficulty is that we cannot really evaluate a Law Commission
paper because that does not have the firmness yet that we need
because the Government can do what it wants with that type of
document afterwards, so the hope is to give the UK until March
to see where you are going.
Q47 JOHN
BERCOW: Obviously if the visit
is to be, for the sake of argument, in March it needs to be organised
and confirmed and put in diaries rather before then. Is there
some activity taking place in the undergrowth?
PROFESSOR
PIETH: I can
confirm that we are preparing for it on both sides.
JOHN BERCOW:
Good, thank you.
Q48 ANN
MCKECHIN:
I was interested to hear, Professor Pieth, about the reasons that
you have concern and one is a lack of prosecutions. I was also
interested to hear that you mentioned Eire because one thing that
Eire and the United Kingdom share is a very similar legal system
in relation to prosecutions. Any prosecutor will obviously bear
in mind the history of previous prosecutions on issues of fraud.
Fraud prosecution in the United Kingdom is a disaster area for
prosecutors because they have a very high rate of failure in terms
of convictions. I just wondered whether the particular system,
which is generic to the United Kingdom and to Eire, is one of
the causal links about some of the problems about why both prosecutors
and legislators have perhaps an inherent reluctance to broach
this issue because it has been an area of failure? In the United
States of America the prosecution method is to take the company
directors, to put them in jail, and then to plea bargain them
down, which is why they have a prosecution rate of something in
the region of 90% plus. In the Continent of Europe, where many
of the OECD members are based, there is a codified system of law
and a very different system of prosecution. I am wondering whether
the OECD has made any analysis as to whether the different systems
of prosecution are having a bearing on this issue of fraud cases
and corporate liability in particular?
PROFESSOR
PIETH: It is
an obvious question with the two countries undergoing a Phase
2 bis. The reason why Ireland is being subjected to that procedure
is quite different though. At the time we visited Ireland—we
always have a so-called on-site visit as part of this Phase 2
evaluation. It simply—it did not take it seriously enough.
There were one or two public officials and one private sector
person present and we were not in a position to adequately evaluate
Ireland. Thus it is for formal reasons that we are saying we have
to re-do it; it was not a valid evaluation; there is no statement
of contents actually involved there. In fact, Ireland was making
a point that even though they obviously inherited the 1906 laws
and everything, they understood the master/servant approach totally
differently. Obviously we are open to hearing what that means
and what it looks like in practical terms in cases. I do not think
we can say automatically it is because of your legal system that
you find it more difficult because we would then have a similar
situation in countries like Australia or New Zealand.
Q49 ANN
MCKECHIN:
And Canada.
PROFESSOR
PIETH: Or Canada,
and the situation presents itself totally differently there.
Q50 ANN
MCKECHIN:
In light of that, how would you characterise the UK Government's
approach to resolving the outstanding issues? What conversations
have you had about the issue? Are they taking studies about how
to frame this law? Are they making active initiatives to put this
as a priority in terms of the legislative programme? Have you
had any indications from them about where they currently stand?
PROFESSOR
PIETH: The approach
of this Treaty was originally a very careful one because we work
under something that we call the "concept of functional equivalence".
That means that every country has to choose its own way. We are
not going to tell anybody in the detail how to do anything, so
we would not go and tell our members to do this or that in concrete
terms, but the approach is that the overall goal has to be achieved
and we would simply measure what a country has been doing against
the overall goal. To give an example, if no cases are brought
even though you have 30 cases in the investigation or pre-investigation
phase, the question is is there a bottleneck there and why there
would be such a bottleneck, or for instance, to take your example,
whether plea bargaining is an element of your system or not. That
is not at all an issue for us. We would not have a problem with
plea bargaining as long as the system is efficient overall.
Q51 JAMES
DUDDRIDGE: Professor Pieth, in
April this year there were reports in the papers about the UK
Government not wishing to support your re-election. What is in
your mind as behind that reluctance to support your re-election?
I have got some questions for Mr Ley in a second, but I am particularly
interested in your view of what lies behind that.
PROFESSOR
PIETH: I do
not really know much about it at all and it is up to the countries.
I have been elected as Chairman every year for 18 years, by unanimity,
and I need full unanimity to be elected. It has happened in the
past that from time to time a country has had difficulties and
then we have overcome these difficulties. It is in the logic of
this process, which sometimes gets quite rough, that some countries
ask questions, but I could not confirm what has been said there
in the media because I have no way of knowing. That was a media
story.
Q52 JAMES
DUDDRIDGE: But is it possible
that their indication that they might not re-elect you is more
to do with you doing your job than you not doing your job?
PROFESSOR
PIETH: You cannot
exclude that, but on the other hand you also have to say that
18 years is a long time and maybe too long for a Chairman. You
have to find the right moment to leave, and I do not know if this
is the right moment.
MR
LEY: I should
say that the normal practice of the OECD is that chairs are supposed
to give way to somebody new every three to five years or so. Mark
is not the only committee chair to have a longer period than that.
The French chair of the Competition Committee, for example, has
been there for about 10 years or so. We tend to keep our best
chairs. When I say "we" I speak perhaps presumptuously
on behalf of the OECD members who like to retain somebody as chair
with a high degree of technical competence and commitment. It
is very important to have a high-quality person in such a leadership
role, and in this particular case there is an obvious need for
a high technical expertise as well as political savvy.
Q53 JAMES
DUDDRIDGE: Perhaps more broadly
Mr Ley, how would you characterise the UK/OECD's relationship
generally?
MR
LEY: I think
the relationship is excellent. I have been in the OECD for a long
time. It has always been a pleasure to work with the UK. They
send very good people, sometimes more junior than other delegations
but they can take care of themselves. They know how to defend
the national interest and at the same time be constructive. The
committees that I have been most closely associated with have
had a strong negotiating agenda, and in that area it is particularly
useful to have creative minds and people with a sense of how to
help build consensus. Of course, consensus around something you
can live with, but it helps to have that kind of approach rather
than what we are sometimes confronted with.
Q54 CHAIRMAN:
Does defending the national interest include resisting introducing
laws which will secure more effective prosecutions for bribery?
We had a Member of Parliament who gave evidence to the last Peer
Review group specifically on defence contracts (he was Chairman
of the Select Committee on Defence at the time) saying that everybody
knows that you do not win defence contracts without bribery and
corruption and therefore he did not find it at all surprising
that that is what goes on. I do not think he fully understood
the terms of the review! In blunt terms, that is the dilemma,
is it not? Professor Pieth, you said this is a highly competitive
situation and people are in there trying to win contracts; that
is the whole nub of the issue.
MR
LEY: One comment
I would make about this is that it is useful to take a step back
and look at the evolution of this over time, because when Mark
Pieth and I sat for the first time together in an OECD committee
room we were unable to get a conversation started at all because
the only country with legislation on its books that treated as
illegal the corruption of foreign public officials was the United
States, and no other country in the room wanted to take the floor.
It took several meetings and a lot of talking from the chair to
get the conversation started. I must say over the years I have
been astonished that in an area which is perhaps one of the most
sensitive that one could find in regard to national sovereignty
and international economic affairs, we have reached the stage
at the OECD of having a legally binding treaty, and not only a
treaty but this rather intrusive monitoring and follow-up procedure.
It is standard OECD process to have non-binding rules and a monitoring
process to go with it, but here we have binding rules and a monitoring
process that is particularly intrusive, I think more so than in
any other area of the OECD. Personally I am not surprised to see
that from time to time we run into boulders, but I am confident
that this one will be overcome.
Q55 JAMES
DUDDRIDGE: Following The Economist
article, which made certain accusations against Professor Pieth,
the Director-General of the OECD said that the UK media is trying
to smear him through "innuendo, gossip and partial truths".[15]
Do you think that is the position of the UK media and is the UK
Government behind that smear campaign?
MR
LEY: I am not
sure if it is a smear campaign. About the Director-General?
Q56 JAMES
DUDDRIDGE: That was a quote from
the Director-General of the OECD.
MR
LEY: Secretary-General
is his title.
Q57 JAMES
DUDDRIDGE: In which case I am
misquoting, my apologies.
MR
LEY: I do not
see any smear campaign. The Secretary-General has broad shoulders
and can look after himself.
Q58 CHAIRMAN:
The briefing that the Committee had for this said that Angel Gurria,
the Director-General of the OECD has said that he believes the
UK media is trying to smear him—and I think that means you
Professor Pieth, does it?
PROFESSOR
PIETH: Himself
I believe.
Q59 CHAIRMAN:
—"through innuendo, gossip and partial truths".
PROFESSOR
PIETH: It is
not really for me to speak for the organisation as a whole, but
since the two articles came out one day after the other one, it
was in The Economist one day and then the next day I believe
the Guardian, the Secretary-General made the point that
since those points raised in The Economist, in his view,
seemed a strange mix of elements drawn together to make him look
bad that he was now being made a victim. I think that was what
led him to make that media statement in defence of his own integrity.
In my situation, I would add one point, as I said, I do not know
anything about it in concrete terms, maybe you have better means
of finding out, but there is a certain logic in such a move, since
we are in our monitoring mechanism doing something very rough:
in an institution that works on the basis of unanimity, we are
saying there is a noble duty to abstain for the country that is
being subjected to monitoring. We call it unanimity minus one
when we are evaluating, and that can be very rough in a situation
like this. The only way a country can gets its own back is to
say, "We have had enough of this Chairman," because
then you have full unanimity. I am not saying the UK is actually
doing that or trying that but in the past it is true—Mr
Berlusconi has tried it and he failed.
13 Guidelines for Multinational Enterprises (ME Guidelines) Back
14
Ev 10 Back
15
Statement by the Secretary-General, Angel Gurr-«a, in reply
to an article in The Economist of 20 April 2007 Back
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