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In many cases, we are not yet satisfied that the Government have fully tied down this issue and we will wish to discuss that more fully in Committee. The International Chamber of Commerce has provided the example of hospitality payments. On the one hand, the Government have recognised the importance to business of bona fide promotional expenditure, but on the other, the question of where a line should be drawn on this issue is still unclear. Indeed, there is continued uncertainty as to whether a line should be drawn at all. We were pleased to see that the requirement for guidance
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was made statutory in the other place. Guidance will doubtless be crucial to allow companies to understand what will be acceptable under the new laws. However, the problem is-the Government admitted as much in the other place-that there will always be borderline cases that may inadvertently fall within the definition of "bribery". The difficulty for business is obvious. It is not correct to expect that businesses should instruct employees that a certain course of action, while theoretically falling foul of the legislation, may nevertheless proceed because prosecution is unlikely. The risk is that, in striving for a clear message in combating bribery, the effect of the Bill-if the guidance does not work-could actually be to confuse the situation yet further.

I was pleased to hear from the Lord Chancellor that consultation on the guidance is now well advanced. It will be important, when the Government produce the guidance, that business is consulted closely and allowed to contribute to its content. As my hon. and learned Friend the Member for Beaconsfield said, the guidance must clearly be in place prior to the offences becoming available. I was also pleased to hear the Lord Chancellor's confirmation that that will be the case. The Government will also need to explain the position to business to help all concerned, and I would be grateful if the Minister, in her concluding remarks, could identify how the Government intend to do that.

A serious outcome of this possible ambiguity is a danger that UK companies could be disadvantaged compared to foreign competitors, as my hon. Friend the Member for Shrewsbury and Atcham said. For example, in the United States, a company can seek a public ruling from the Department of Justice in case of doubt regarding a payment. However, such a system has been rejected by the Government as being "inconsistent" with traditional practice. This argument was used by the Government several times in the other place, but I found it somewhat counter-productive and counter-intuitive. Indeed, the same argument could be used to say that the concept of "corruption" should be retained as the Bill's use of "improper" conduct is also inconsistent with traditional practice. The fact is that this Bill is creating new law which will inevitably be tested in the courts, and we should just accept that and look to deal with the consequences of it-both intended and unintended.

It is also important that the issue of how the Bill will overlap with related legislation be considered in greater detail. Under the Bill, a company found to have engaged in bribery under clause 11(2) may be liable, if convicted on indictment, to an unlimited fine. Many businesses we have spoken to are worried that this will not be the end of the matter. Indeed, there are concerns that further action may be taken against companies under the proceeds of crime legislation. That legislation was designed to deprive individual defendants, particularly drug dealers and organised criminals, of the benefits of their criminal conduct. However, if companies convicted of bribery are fined were and then also caught by the proceeds of crime legislation, they will face serious financial penalties that could in some cases see them put out of business entirely. We will seek clarification in Committee on policy on this issue and on the use of the measures under this Bill and other existing legislation. To what extent will civil remedies be used? Does the existing legal framework support the desired use of plea bargaining? Will other laws hold up deals being made?
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Those are important issues-my hon. and learned Friend also raised many of them-and they should have been addressed much earlier in this Parliament.

Some prosecution issues will be of political importance, and we will wish to investigate whether the authority to prosecute should lie with the various directors specified in the Bill or, as colleagues in the other place maintained, remain with the Attorney-General. That point was addressed by the hon. Members for City of York and for Cambridge, who were keen to put the OECD's position forward. But as others have noted, especially in the other place, that does not cater for the traditions of our own constitution. I am sure that further interesting debates will be had on this point. However, the Bill also raises various practical issues, such as which prosecutor should take the lead and in what circumstances. That remains unclear.

If the Bill is passed, the UK will have among the strictest bribery laws in the world. Consequently, we have been told that there is a real danger that UK businesses could be put at a competitive disadvantage when compared with international businesses whose domestic bribery laws will be less strict than our own. I have seen the rather flimsy anti-bribery strategy rushed out by the Lord Chancellor a few weeks ago, and I remain to be convinced that the Government understand how important this issue is. In that regard, the Minister needs to address the concerns of CAFOD, Transparency International, Tearfund and others, such as the hon. Members for City of York and for Cambridge, who are concerned to ensure that the Government intend to provide sufficient funds for the effective investigation and prosecution of bribery offences. As my hon. and learned Friend said, it is very important to ensure that the UK, in modernising its bribery laws, does not end up shooting itself in the foot in the way explained very clearly by my hon. Friend the Member for Shrewsbury and Atcham. That danger is that contracts will be lost because others bribe when we do not. To do this, serious pressure will need to be exerted on other countries to follow our lead and introduce tougher bribery laws of their own-and to enforce them.

We will wish therefore, in Committee, to review how the Government will make it a priority to put pressure on other countries to follow suit and strengthen their own bribery legislation. There are other international aspects to this, such as the EU procurement directive. The directive appears to be very rigid in that any company found to have been involved in instances of bribery must be permanently disqualified from the procurement process. Hon. Members will be able to see the problem with that. On the one hand, UK companies will be subject to the strictest bribery laws to be found anywhere in the world, but on the other, any company caught by these laws could be prevented from applying for procurement contracts. Companies are understandably very nervous about the huge impact of falling foul of the regulations, concerns that are compounded by the fact that many of the Bill's provisions remain unclear and are reliant on guidance that has yet to appear.

By contrast, the position in the United States seems to be more flexible. Although disqualification provisions do apply, different degrees of sanctions for fault are recognised and, importantly, it is possible for such a debarment to be lifted after a period of time. Will the Minister explain the Government's discussions
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with EU officials to determine what effect, if any, an offence under clause 7 of the Bill will have under the directive?

On a separate point, there is continued ambiguity on the issue of consortiums and businesses' potential responsibility for the acts of their agents and "associated persons". The issue was raised by the International Chamber of Commerce. It is often the nature of international businesses to operate in joint ventures. The point was raised in the other place that a company, even though it may have no control over a joint venture partner, may none the less be caught by the provisions of this Bill due to that partner's conduct. Although the Government have attempted to explain away the problem by stating that the degree of control would be one of the circumstances to be taken into account when deciding whether an offence had been committed, it is not clear that that comfort would be effective in law.

The ICC has pointed out to us that the current wording in the Bill makes it clear that the circumstances that may be taken into account are those that are decisive for the question of whether services are being performed. Indeed, the relationship between the company and the associated entity is expressly excluded. This conflict gives rise to further uncertainty for business, and it is therefore evident that this question of businesses' responsibility for the actions of such partners and agents needs to be resolved.

It is clear also from the contributions of the Lord Chancellor, the hon. Members for City of York and for Cambridge and my hon. and learned Friend that there are ongoing concerns about defences for intelligence services and our armed forces. As my hon. and learned Friend said, we were generally satisfied with the narrower definition agreed in the other place, but we will have to return to the matter in Committee.

There are evidently a number of outstanding issues that the House needs to address over the coming weeks. We certainly believe that it is a good Bill, but as I have indicated, there are areas of continued concern that will need to be reviewed. The tiny number of prosecutions to date for overseas bribery shows that our law in this area requires updating and enforcing, but in strengthening the UK's bribery laws to combat corruption, it will be vital that the ability of UK companies fairly and legally to compete commercially and on the international stage is not impaired. That is the balance that we look to achieve over the coming weeks.

3.1 pm

The Parliamentary Under-Secretary of State for Justice (Claire Ward): We have had an interesting debate with contributions from both sides of the House that in essence welcome this important piece of legislation. I welcome the fact that it has cross-party support, although no doubt in Committee there will be one or two differences of opinion. It is possibly best described, as it was in another place, as a love fest for all parties in support of the Bill. The Bill will provide modern and effective legislation to deal with bribery, whether committed at home or abroad. Its comprehensive scheme of bribery offences represents a formidable deterrent against bribery and is capable of meeting the challenges of today's complex world of international commerce.

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We understand that this matter can be difficult, but I want to respond initially to the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) and make the point that the UK's reputation is strong. The UK is recognised as one of the least corrupt countries in the world. We are the joint 17th least corrupt out of 185 countries in Transparency International's 2009 corruptions perceptions index, with British companies seen as cleaner than their French and American counterparts. We are also equal fifth least likely to pay bribes out of 22 countries in Transparency International's 2008 bribe payers index. However, we must not be complacent about what happens in some companies and ensure that we continue to maintain a strong reputation. Once enacted, the Bill will enable us to do that.

Members on both sides of the House have raised a number of important points, some of which I would like to deal with now. I am confident, however, that those not picked up today will be dealt with in more detail in Committee; it appears that there will be ample opportunity to do so then. Initially, however, I wish to pay tribute to my hon. Friend the Member for City of York (Hugh Bayley) and his work in supporting a high level of commitment to achieving the highest standards of business and to ensuring that we remove opportunities for bribery and corruption. I join him in paying tribute to work of Transparency International, with which we have worked closely in developing the Bill.

Members have suggested that the Bill has had a long gestation period-even longer than an elephant's-but it has the overwhelming support of both sides of the House and is much better than when it was first considered in its draft form. The problems with the initial proposals in 2007 meant that the Joint Committee could not accept much of the basic premise of the Bill, having to do with principals and agents, and that is why it had to be referred back to the Law Commission for further consideration. Its contribution has ensured that the Bill can, I believe, make it on to the statute book with all-party support.

Members have raised a number of issues, and I want to deal initially with the point about the Attorney-General and prosecutorial discretion. The hon. and learned Member for Beaconsfield (Mr. Grieve) was concerned about some aspects of that, and the hon. Member for Huntingdon (Mr. Djanogly) raised similar points. They asked how prosecutors would be guided in deciding whether to bring a prosecution for bribery and in ensuring that there is some understanding and certainty for business. Whether a case is dealt with by the Crown Prosecution Service or the Serious Fraud Office, all prosecutions are subject to review under the principles in the code for Crown prosecutors, which requires the prosecutor to apply an evidential and a public interest test.

Where there is sufficient evidence for a realistic prospect of conviction, prosecutors must consider whether a prosecution is required in the public interest. A prosecution will usually take place, unless the prosecutor is sure that public interest factors tending against prosecution outweigh those in favour, or that the public interest may properly be served by offering the offender the opportunity to have the matter dealt with through an out-of-court
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disposal. Each case must be considered on its own facts and merits, but the more serious the offence, the more likely it is that prosecution will be needed in the public interest.

Mr. Grieve: The Minister will be aware that I highlighted the regulatory nature of the Bill. Clause 7 is entitled "Failure of commercial organisations to prevent bribery". Earlier, I used the word "negligence", but that probably was not strictly right. It is in fact a strict liability offence tempered by a defence, the burden of which is on the defendant to show that they had adequate procedures in place. As with the Health and Safety Executive, that places a great burden on the regulator or prosecutor in deciding where the public interest lies, particularly, for example, where it might consider that the company has made real efforts to improve its performance in this area.

Claire Ward: And those issues must of course be a matter for the prosecution. Bribery is a serious offence, but in deciding whether to prosecute, prosecutors will take all those factors into account and weigh them appropriately. They might take into account whether the loss or harm can be described as minor; whether it was a single incident; whether it was a matter of misjudgment; or whether the offence was committed as a result of a genuine mistake or misunderstanding. The prosecution must consider all those factors before deciding whether to proceed.

Members have also mentioned the consequences of replacing the requirement for the Attorney-General's consent to a prosecution under the Bill with that of the director of one of the prosecuting authorities. Clause 10 provides that responsibility for granting consent to a bribery prosecution will rest with the directors of the relevant prosecuting authorities. For offences under the Bill, we consider that to be the appropriate level at which such a judgment should be taken on the basis of what I have already said about the factors that they need to take into consideration. The Joint Committee agreed with our judgment.

We fully recognise the constitutional importance of the Attorney-General's position and the need to maintain effective parliamentary accountability for the operation of the prosecution services, but the Attorney-General will continue to have a fundamental role in those matters. The protocol between the Attorney-General and the prosecuting authorities published last July sets out the circumstances in which the Attorney-General will be consulted and how the Attorney-General and directors will engage with one and other.

The protocol serves to underline the fact that the directors of the prosecuting authorities exercise their statutory functions under the superintendence of the Attorney-General, who is responsible to Parliament for those directors' functions in relation to prosecutions. The Attorney-General is responsible in turn for safeguarding the independence of prosecutors in taking prosecuting decisions.

The hon. Member for Cambridge (David Howarth) asked whether there would still be opportunities for the Attorney-General to interfere, as he put it, in cases that involved national security. The only type of case in which the Attorney-General would consider directing
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that a prosecution not be started or not continue-or, in the case of the SFO, that an investigation not take place or not continue-would be one in which the Attorney-General was satisfied that it was necessary to do so for the purpose of safeguarding national security. Again, it is important to take the protocol into account.

When national security is under threat, the Government consider it right that the Attorney-General, having consulted other Ministers, should have the power to halt a prosecution or an investigation carried out by the Serious Fraud Office. It will be the Attorney-General-after consulting other Ministers-and not necessarily the prosecuting authorities who will have the significant relevant expertise in that area. The Government still expect most such cases to be settled by way of discussions between the Attorney-General and the relevant prosecutor. Only in rare cases would it be appropriate for the Attorney-General to give such a direction.

David Howarth: Is the Minister satisfied that the OECD will find that arrangement satisfactory, given its concern about the independence of the SFO in the light of the al-Yamamah case?

Claire Ward: Without wishing to get into a discussion about a case that is still subject to the courts, I would say to the hon. Gentleman that we believe it appropriate, in those exceptional cases where it is a matter of national security, for the Attorney-General to have the ability to intervene where appropriate.

Let me turn now to facilitation payments. There was some discussion about the extent to which facilitation payments, of whatever size, large or small, would still be classed as bribery. The reality is that facilitation payments, no matter how big or small and no matter what they are called, still amount to bribery. We have not included an exemption for such payments, despite what might happen in the rest of the world, including in the US, under the Foreign Corrupt Practices Act. There is no exemption in our existing legislation for facilitation payments. The Joint Committee agreed that facilitation payments should continue to be criminalised, saying:

We share the Committee's view that, in general, the Bill must prevent individuals from relying on local customs to justify corrupt practices or considering small facilitation payments to be appropriate.

Tackling petty bribery is a key element of changing the culture of corruption, which is so corrosive, particularly in developing economies. We recognise that many UK businesses still struggle with petty corruption in some markets, but the answer is to face the challenge head-on, rather than carve out exemptions that draw artificial distinctions, are difficult to enforce, and have the potential to be abused. Providing exemptions for facilitation payments, as the US does, is not a universally accepted practice, and not something that we consider acceptable.

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