Memorandum from The Export Credits Guarantee
Department (ECGD) (DCB 10)
1. The Committee have asked for information
on what procedures ECGD has in place to combat corrupt practices
and what impact the draft corruption bill may have on ECGD's operations.
2. ECGD is the UK's official Export Credit
Agency (ECA) and is a separate Department, which reports to the
Secretary of State for Trade and Industry and the Minister for
International Trade and Investment.
3. ECGD's Mission is to benefit the UK economy
by helping exporters of UK goods and services win business and
UK firms to invest overseas, by providing guarantees, insurance
and reinsurance against loss, taking into account the Government's
international policies. In providing these facilities, ECGD's
Mission also requires it to seek to break-even on its trading
activities and to complement, not compete with, the private sector.
4. ECGD usually issues around £3 billion
of guarantees in support of new capital goods contracts per annum.
This comprises around 2-3% of the UK's non-oil exports, but nearer
20% of capital goods exports. ECGD's cover, however, is principally
needed for non-OECD countries, where our support covers around
50-60% of UK exports of capital goods; these are the main overseas
markets for key industrial sectors such as power generation, water
treatment, defence, aerospace and telecommunications.
5. Since January 2001, ECGD has operated
in accordance with a Statement of Business Principles. These principles
cover policy areas such as the environment, international development,
business integrity and transparency. The main aim is to ensure
that the Department acts in a responsible way, consistent with
the full range of the Government's international policies.
6. One of ECGD's objectives in its Business
Principles is to "combat corrupt practices."
CURRENT ECGD PROCEDURES
7. The measures that ECGD takes to combat
corruption can broadly be divided into procedures that are designed
to prevent cover being given to companies who have been illegally
awarded contracts, and procedures to ensure that appropriate action
is taken where corruption is alleged or proven in cases where
ECGD has provided support.
8. ECGD operates extensive due diligence
procedures prior to underwriting, examining a variety of factors
including: relationships between the parties to the contract;
the track record of the exporter; factors in the pricing or make-up
of the contract that may indicate higher risk of corruption; and
high levels of agent's commission. If any of these factors suggested
a high risk that corruption was involved in the contract award
process this would trigger further research or prompt us to seek
appropriate clarifications or assurances from the parties involved.
9. We also require applicants for ECGD support
to warrant that neither they nor anyone acting on their behalf
has engaged or will engage in any corrupt activity in connection
with the supply contract or any related agreement, undertaking,
consent, authorisation or arrangement of any kind. They must also
declare whether they have been debarred from tendering for or
participating in any project funded by the World Bank or any other
multilateral or bilateral aid agency or whether they have been
convicted previously of corrupt activity.
10. The sanctions for giving a false warranty
can potentially be very serious and could involve voiding the
insurance policy or requiring the repayment of any claims that
might have been paid.
11. A prior conviction for corruption would
be a prima facie case for refusal of new cover. However, we do
not absolutely disbar companies from cover to allow them the possibility
of demonstrating that they had reformed their practices.
12. ECGD also seeks to ensure that it is
aware of any allegations or indeed convictions for corruption
in respect of cases that it has already provided support for.
These could clearly have implications for the validity of the
ECGD support or the likelihood of future ECGD support being offered.
13. As ECGD does not have any legal investigatory
powers, its' policy is to report appropriate allegations of corrupt
activity received to the National Criminal Intelligence Service
(NCIS) who act as the focal point for receiving any allegations
about offences of bribery by UK nationals or UK incorporated bodies
which take place overseas. NCIS are responsible for reporting
allegations worthy of investigation to the authorities in the
jurisdiction concerned eg the Police or Serious Fraud Office.
FOR ECGD PROCEDURES
14. We do not anticipate that the draft
bill will have any significant effect on ECGD's current procedures
for combating corruption. We had previously strengthened our anti-corruption
measures to reflect both the OECD Convention and the enhancements
to the Prevention of Corruption Acts made by the Anti-Terrorism
Crime and Security Act. We will however be reviewing our procedures
to ensure their legal effectiveness, particularly where documentation
is concerned, prior to the new Act coming into force.