Memorandum from George Staple, Consultant,
Clifford Chance (DCB 19)
1. I am submitting this Memorandum in response
to the invitation of the Joint Committee. As Director of the Serious
Fraud Office from 1992 to 1997 I have been responsible for the
investigation and prosecution of corruption offences.
2. The draft Bill appears to present serious
problems in relation to payments to agents performing public functions.
To use a simple example: a motorist makes a payment in respect
of a motorway toll to a private sector operator who has been given
the right to collect the toll under a PFI/PPP contract with the
government. The operator is acting as an agent, and is performing
a public function. The motorist confers an advantage (the payment)
on the operator who, primarily in return for the advantage, does
an act in performing his functions, ie allows the motorist to
use the motorway. The Clause 6 exception does not apply because
the motorist is not acting on behalf of the agent's principal
(the government). The Clause 7 exception does not apply at all
where the agent is performing functions for the public. The payment
is therefore corrupt.
3. Analogous examples can be complied ad
infinitum: payments to Companies House, the Land Registry or Ordnance
Survey for information provided as a public function; payments
to bodies such as English Heritage for access to sites of historical
interest, payments for travel on buses or trains where the operating
company has "an agreement or understanding" with the
government to provide such services (which are clearly public
functions). In none of these cases can the payer be said to be
conferring the advantage "on behalf of the public" as
required by the exception in Clause 6(3)(b).
4. Equally, it appears that in every case
where the person conferring the advantage is doing so "corruptly"
as in the above cases, the person receiving the money, eg English
Heritage or Companies House, is also guilty of corruption under
5. I note that in the draft Bill produced
by the Law Commission the equivalent exception was that the advantage
had to be conferred "on behalf of the public as remuneration
or reimbursement in respect of the performance of the functions".
The extra wording might have dealt with some of the examples of
corruption outlined above, but it still begs the question as to
whether it is appropriate to define offences of corruption in
such a way as to require no element of lack of integrity, or breach
6. Concern has been expressed in the financial
services industry that the proposed legislation, as currently
drafted, could apply to forms of commission which are standard
practice for remuneration in the industry. One example is the
practice whereby an insurance broker is remunerated by commission
from the insurance company with whom the policy is ultimately
arranged, rather than by the policyholder on whose behalf the
broker has acted.
7. The offences are concerned with whether
advantages have been conferred or obtained. They do not require
any element of lack of integrity, or breach of the agent's duties
to his principal. To be sure that an offence was not being committed
the parties would have to be satisfied that the agent's conduct
was not determined primarily in return for the commission, and,
if this were uncertain it would be necessary to rely on the consent
exception in Clause 7. However, in order to use this exception,
the person remunerating the agent would have to establish either
that the principal knew all the material circumstances and consented,
or that he would have consented had he known those facts. There
is concern that this may be difficult to establish.
8. The view has been expressed that the
draft legislation could not be intended to apply to commission
arrangements in the financial services industry because that outcome
would make the criminal law stricter than the regulatory requirements
to which financial services firms are subject.
9. The draft Bill also appears to create
unreasonable difficulties for partnerships. By virtue of Clause
11(1)(c), a partner is an agent of the other partners in the same
partnership. In order to ensure that there is no corruption, under
Clause 7(1)(b) the consent of all the partners is required.
10. The difficulties to which this could
give rise can be illustrated by the following example. A client
asks a partner in a large international law partnership for advice
in relation to a contract for the sale of goods, which, though
legal, are considered dangerous and unethical. The partner nevertheless
gives the advice, and receives a fee. The client is not by paying
the fee "acting on behalf of" the partnership. So there
is no exception under Clause 6(2). Therefore, if the other partners
do not consent, which might be the case where the subject matter
of the contract is dangerous and unethical, or if the partner
acting does not believe that, if they knew all the material circumstances,
they would consent, the payment of the fee is corrupt.
11. There is a real problem here for a firm
such as Clifford Chance which has around 700 partners worldwide.
It is not possible for each partner taking on work to make sure
that all the rest are aware of "all the material circumstances"
and consent. Nor is it possible for that partner to form an opinion
as to whether all the others would consent, if aware of all the
material circumstances. There is no workable mechanism that could
achieve this result, and, in any event, to place a burden of this
kind on a partnership in order to enable it to receive an entirely
legal payment is inappropriate.
12. The proposed legislation requires the
Attorney-General's consent for any corruption proceedings in England
and Wales. That is contrary to the recommendation of the Law Commission,
whose conclusion I agree with.
13. In addition to the reasons given by
the Law Commission for the Attorney-General's consent not being
required, I would add that I can see no particular reason for
the new offences to require the Attorney-General's consent while
other serious crimes do not.
14. The Magistrates' Association apparently
expressed the view to the Law Commission that due to the potential
significance and sensitivity of corruption it seemed sensible
to require the consent of the Director of Public Prosecutions
to ensure that the matter was considered at a sufficiently high
level. If by sensitivity the Association meant that the offence
could involve senior public officials or politicians, it seems
preferable that a Minister should not be put in the position of
giving consent to a prosecution. Considerable care has been taken
to distance the Attorney-General from the day-to-day decisions
of the prosecuting authorities, setting up the Crown Prosecution
Service and Serious Fraud Office as independent government departments
under their own Directors. I can see no reason why the principles
which led to the setting up of independent prosecuting authorities
should not be equally valid in respect of prosecutions for corruption.
15. It would not be appropriate for the
DPP, however, to sanction a prosecution to be brought by the SFO.
Compliance with the Code for Crown Prosecutors by the CPS and
SFO should be sufficient safeguard against abusive or inconsistent
prosecutions and ensure that important considerations of public
policy, or of a political or international nature, are taken fully
16. If all else fails, as the Law Commission
points out, the Attorney has the power to issue a nolle prosequi.
17. I have considered whether the proposed
definitions will be readily understood by Police prosecutors,
jurors and the public, and have concluded that the way in which
the proposed legislation is drafted will not, without considerable
study, be readily understood by any of those groups. In particular,
I think that extending the concept of principal and agent to so
many different relationships, particularly that between a public
official and the public at large, is likely to cause confusion
and uncertainty and may result in a reluctance to prosecute cases
where, under the existing law, prosecution would be seen to be
justified. I think it would have been preferable for specific
offences to have been proposed for specific situations.
18. New criminal offences should not, as
a matter of principle, be made retrospective. So in repealing
the old law, it will be necessary to ensure that until the new
offences become law it will be possible to prosecute under the
19. For the reasons given by the Law Commission,
I consider that it is desirable that the presumption of corruption
now be removed. The Commission cites the European Convention on
Human Rights and the difficulty of determining in current circumstances
what are, and are not, public bodies for the purpose of the law
of corruption. Many organisations which used to be publicly owned
have now been privatised. However, they still provide a public
service, although they now do so for the profit of their shareholders
(who may include the government). The question arises as to whether
they are still public bodies performing public functions. The
Law Commission also received a body of evidence from a number
of respondents with great experience of criminal trials in support
of the view that corruption is no harder to prove than some other
offences, particularly fraud, which take place in secret.