6 Challenging bribery and corruption
Introduction
101. In our 2008 Report we held an examination of
allegations of corruption in defence contracts in the 1970s, and
the challenges of bribery and corruption in the present day. As
we have previously reported, bribery remains a major problem globally.
According to the World Bank approximately US$1 trillion (£5,000
million) is paid in bribes each year, representing 10% extra on
the cost of doing business and up to 25% on procurement contracts
in developing countries.[161]
Transparency International gave evidence to us in 2008 and told
us that the arms sector was one of the top three sectors in which
bribes are paid.[162]
102. The UK now ranks 17th of the least
corrupt countries in the world according to Transparency International's
annual corruption perceptions index.[163]
Transparency International's 2009 Progress Report on Enforcement
of the OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions found that
there were great disparities in levels of enforcement among the
largest exporting countries. The UK was one of the countries with
a "moderate" level of enforcement that was not considered
enough to provide effective deterrence against foreign bribery.[164]
As reported by Transparency International, four foreign bribery
cases were concluded in the past year in the UK, two of them major
and with sanctions imposed, and about 20 investigations were currently
underway.[165]
103. The UK's decision to halt the investigation
into Al Yamamah defence contracts with Saudi Arabia was described
as a "grave blow" to the OECD Convention. This was because
the UK's claim that national security concerns overrode the commitment
to stop foreign bribery was considered to have opened up a loophole
for other governments to exploit.[166]
104. We note that it was recently announced that
the Serious Fraud Office (SFO) had reached an agreement with BAE
Systems that the company would plead guilty in the Crown Court
to an offence under section 221 of the Companies Act 1985 of failing
to keep reasonably accurate accounting records in relation to
its activities in Tanzania. The company will pay £30 million
comprising a financial order to be determined by a Crown Court
judge with the balance paid as an ex gratia payment for the benefit
of the people of Tanzania. No further prosecutions will be brought
against BAE Systems in relation to the matters that have been
under investigation by the SFO.[167]
The company will also plead guilty to one charge of conspiring
to make false statements to the U.S. Government in connection
with certain regulatory filings and undertakings. The Company
will pay a fine of $400 million to the US Department of Justice
and make additional commitments concerning its ongoing compliance.[168]
105. The responsibility for anti-corruption has moved
in recent years from the FCO to BERR and DfID respectively and,
since October 2008, to the Ministry of Justice, where the Secretary
of State for Justice was appointed the Government's Anti-Corruption
Champion.[169] In our
last Report we concluded that this shifting of responsibility
for anti-corruption from one Department to another raised questions
over whether there was a sufficiently vigorous anti-corruption
culture across Whitehall.[170]
Tackling bribery through the
licensing process
106. In our 2008 Report we acknowledged that the
Export Control Organisation (ECO) did not have the expertise to
investigate bribery and corruption at present without distorting
its focus on the potential risk presented by the export. However,
we made a series of recommendations relating to: the application
of the Criterion 8 methodology to test whether the contract behind
a licence application is free from bribery and corruption; the
creation of a requirement for those seeking export licences to
produce a declaration that the export contract has not been obtained
through bribery or corruption; the revocation of licences where
an exporter had been convicted of corruption; and the amendment
of the National Export Licensing Criteria to make conviction for
corruption by an exporter grounds for refusing an export licence.[171]
107. The Government Response to our 2008 Report stated
that it would not consider our recommendations further until the
defence sector's Common Industry Standards Initiative had been
introduced and the report of the Export Credits Guarantee Department
(ECGD) on its anti-bribery and corruption procedures had been
published.[172]
108. Lord Davies of Abersoch, Minister for Trade,
Investment and Small Business, UK Trade and Investment, wrote
to us on 3 December to inform us of the publication of the anti-bribery
policies and procedures review by ECGD.[173]
This review had taken our 2008 Report into account.[174]
109. The Secretary of State for Justice published
his UK Foreign Bribery Strategy on 19 January 2010.[175]
It has four objectives: strengthening the law; supporting ethical
business; enforcing the law; and international cooperation and
capacity building. The strategy, the result of collaboration across
Whitehall, industry, civil society and international partners,
including the OECD Working Group on Bribery and the UN Global
Compact, states that it aims to set out how the Government will:
[...] address and manage the evolving challenges
and establish a clear legal, regulatory and policy framework for
action against foreign bribery. Law reform through the new Bribery
Bill will be the keystone of this approach but the strategy also
reinforces links to the wider international anti-corruption agenda—reflecting
our commitment to focus on the causal drivers of foreign bribery
and deepen our collaboration with international partners.[176]
110. As part of its objective to support ethical
business, the Government states that it "supports business
anti-corruption initiatives and the development of industry sector
codes of conduct." It provided the following example of this
support:
[...] the Government has encouraged all UK aerospace
and defence companies to participate in the Common Industry Standards,
an anti-corruption code of conduct for the Aerospace and Defence
Industries Association of Europe (ASD). The Common Industry Standards
were initially developed through Chatham House discussions in
London chaired by Lord Robertson and have led to an agreement
between UK and US aerospace and defence leaders, the Global Principles
of Business Ethics, which was formally launched on 13 January
2010.[177]
111. The review of the anti-bribery policies and
procedures of Export Credits Guarantee Department has now been
published and the Global Principles of Business Ethics for
the Aerospace and Defence Industry were launched on 13 January
2010. We adhere to the recommendations on bribery and corruption
made in our 2008 Report and we recommend that the Government consider
them further with a view to implementing the recommendations or
explaining why there is no need to do so.
112. Key to the Government's UK Foreign Bribery Strategy
is reform of bribery law. As noted in our last Report, the existing
law of bribery, has been criticised both domestically and internationally
since at least 1976 when the Royal Commission, chaired by Lord
Salmon, recommended changes to the law relating to bribery.[178]
At the time of publication of our last Report, pre-legislative
scrutiny of the draft Bribery Bill was being conducted by a Joint
Committee.[179] The
primary aim of the draft Bill was to modernise and simplify the
existing law of bribery and provide for a new consolidated scheme
of bribery offences to cover bribery both in the United Kingdom
and abroad.[180] The
Joint Committee supported the draft Bill in principle and made
a number of recommendations, many of which were reflected in the
Bribery Bill as introduced in the House of Lords in November 2009.
At the time of agreement of this Report, the Bill had been referred
to a Public Bill Committee in the House of Commons.
113. We conclude that the introduction of a Government
strategy on UK Foreign Bribery is a welcome development. We recommend
that the Government in its Response to this Report provide information
on how the strategic export control system is working to support
the new strategy.
161 Ministry of Justice, Impact Assessment of draft
bill on reform of the law on bribery, February 2009, p 3;
"New draft Bribery Bill to support international fair trade",
Department for International Development press release, 26 March
2009, www.dfid.gov.uk/news Back
162
HC (2007-08) 254, Q 104 Back
163
See the annual perceptions of corruption index published by Transparency
International, available at www.transparency.org Back
164
Transparency International, Enforcement of the OECD Convention
on Combating Bribery of Foreign Public Officials in International
Business Transactions, 23 June 2009, www.transparency.org,
pp 8 and 51 Back
165
Enforcement of the OECD Convention on Combating Bribery of
Foreign Public Officials in International Business Transactions,
p 51 Back
166
Enforcement of the OECD Convention on Combating Bribery of
Foreign Public Officials in International Business Transactions,
p 8 Back
167
"BAE Systems Plc", Serious Fraud Office Press Notice,
5 February 2010, www.sfo.gov.uk Back
168
"BAE Systems PLC announces global settlement with United
States Department of Justice and United Kingdom Serious Fraud
Office", BAE Systems Plc Press Release 014/2010, 5 February
2010, www.baesystems.com Back
169
Department for Business, Enterprise and Regulatory Reform, Corporate
Responsibility Report, February 2009, www.berr.gov.uk; "Anti
corruption champion", Ministry of Justice press release,
15 October 2008, www.justice.gov.uk Back
170
HC (2008-09) 178, para 97 Back
171
HC (2007-08) 254, paras 112-117 Back
172
Cm 7485, p 18 Back
173
Letter not printed. Back
174
Export Credit Guarantee Department, Review of ECGD's anti-bribery
and corruption procedures, 3 December 2009, www.ecgd.gov.uk,
para 6 Back
175
Ministry of Justice, UK Foreign Bribery Strategy, Cm 7791,
January 2010 Back
176
UK Foreign Bribery Strategy, para 1.4 Back
177
UK Foreign Bribery Strategy, para 3.1 Back
178
Royal Commission on Standards in Public Life, Cm 6524, 1976 Back
179
Joint Committee on the Draft Bribery Bill, First Report of Session
2008-09, Draft Bribery Bill, HC 430 and HL Paper 115 Back
180
Explanatory Notes to the Bribery Bill [Lords] [Bill 69
(2008-09)-EN] Back
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