Examination of Witness (Questions 160-179)|
20 MAY 2003
Q160 Lord Carlisle of Bucklow: What
is the position of the man who says it to you? He is doing it
openly, so does he look upon it as corrupt or dishonest or does
he look upon it as merely a part of business life in that part
of the world?
Mr McKittrick: He looks on it
as the situation and this is one of the problems.
Q161 Lord Carlisle of Bucklow: And
he cannot be prosecuted under this Bill? Presumably not.
Mr McKittrick: No, because he
is Indian or Indonesian or whatever.
Lord Carlisle of Bucklow: So he says
back to your firm, "I am very sorry, but if you are not prepared
to do that, I am afraid I will give it to another company which
is prepared to agree to those terms", and you risk the contract.
Q162 Mr Shepherd: Can I reinforce
that by putting it another way. I am an agent and I actually say
up-front that in order to secure this contract, my agent's fee
is 15 per cent. It is well known across business that of that
15 per cent, 12 per cent will go to whoever is dealing on the
other side of the account. This Bill does not remotely address
situations like that or do you think it does?
Mr McKittrick: I do not think
Q163 Mr Shepherd: No, I see that.
Now, the other thing is the cultural disposition of many countries
where they always say in international fora or forums, and I remember
this personally from being a student in Sierra Leone in the 1960s,
that in order to get goods through the port, you had to provide
a dash (a bribe) and the rationale behind that from experienced
old hands was that, you have to understand, these officials are
Mr McKittrick: Correct.
Q164 Mr Shepherd: The nature of the
society, whether we regret it or not, is that the whole firing
down is done by the apportionment of rents or receipts on the
part of the public purse. Now, the international organisations
say that this is improper, the United Nations, et cetera,
and we can see the effects of corruption, but I am not sure how
this Bill reaches out and condemns practices in Saudi Arabia and
Chairman: Would you hold your answer.
I would then like to turn over to looking at the draft Bill and
how far it is going to be effective to deal with this sort of
The Committee suspended for a division
Q165 Chairman: I am going to ask
a number of related questions. Let's turn to the Bill for the
moment. In your paper you say, "I do not consider that the
proposed new Corruption Bill will have any effect on the current
practices of corruption that take place in consultancy outside
of the UK." Is it the same in respect of inside the UK or
Mr McKittrick: I am unaware of
actual corruption within consultancy projects in the UK.
Q166 Chairman: We have been talking
about corruption and you have given illustrations of a number
of acts which you say amount to corruption. What is the essence
of this? What are we really trying to hit when we are saying,
"Let's have a crime of corruption"? What is corruption?
Mr McKittrick: Well, in my mind,
if someone offers money in order to win work which they would
not win otherwise, then that, to me, is a corrupt act.
Q167 Chairman: But that could be
quite innocent, could it, if you leave it in that way?
Mr McKittrick: Tell me how.
Q168 Chairman: If you get a contract
which you would not otherwise have got, there might be a lot of
reasons why you get a contract which you would not otherwise have
got which need not necessarily be corrupt.
Mr McKittrick: In this commercial
world people talk about quality, they talk about all these other
things, but the bottom, right-hand corner is all that matters
Q169 Chairman: But it has got something
to do with the intent or the state of mind or not?
Mr McKittrick: No, it is all to
do with lowest price.
Lord Waddington: But let's think about
this for a moment. I can offer somebody money to get a service,
which I am entitled to in law, my contractual right, and yet I
offer him money because he has been very slow in delivering. Nobody
would suggest that there is any moral obloquy in that, so surely
when one is defining the offence of corruption, one has got to
look for some sort of guilty mind, either an intention to do something
wrong or a wish to make the recipient of the bribe act contrary
to his duty, moral or legal. There has got to be something, otherwise
you are going to condemn as corrupt, and I have used this illustration
on many occasions, my paying a baggage handler at Heathrow £10
to get him to hurry up and find my bag behind the carousel, and
nobody in his right mind would say that was a criminal offence,
Q170 Chairman: Could I just add that
if the definition would be that you pay money to get something
which otherwise you would not have got, if you take it literally,
presumably like going into a restaurant and paying the actual
cost of the meal, you would not get it if you did not pay the
money, so there is no corruption there. There must be some element
of some intent, some state of mind.
Mr McKittrick: Maybe it is my
Scottish upbringing and I use language in a different manner.
Q171 Baroness Whitaker: Is it something
to do with subverting best value, value for money, by this process
because the tender process is perverted because the successful
tender is not the best value?
Mr McKittrick: The tender process
generally on overseas work is what is called "two envelope".
The quality envelopes are meant to be opened first and you choose
the best quality. You then open the financial envelope of those
of best quality, and if it is acceptable to you, you accept the
job, they say. We know that does not happen. We know that there
are many, many ways of distorting quality. You can easily change
the quality of a bid if the money is not to your liking or somebody
has not given an adequate amount of dash (a bribe), so quality
is so, so, so subjective. You cannot do quality in an objective
manner and hence it enables people to manipulate who wins the
Q172 Mr Garnier: What seems to be
behind it? I do not want to be rude about this, and I am perhaps
being not very sensitive and deliberately provocative, but what
it seems to me is that you are trying to erect a Soviet-style
Mr McKittrick: No.
Q173 Mr Garnier: If a British company
or an American company or a French company wants to do business
in a particular market, good luck to it, you might say. If that
requires them to pay the minister for engineering or energy a
lot of money, good luck to them. That does not do anybody any
damage other than the shareholders or profit line of that particular
company. Why does your corruption in a foreign country affect
the British public interest?
Mr McKittrick: Because you folk
have decided to bring a draft Bill into Parliament or somebody
has decided to bring a draft Bill in and I have been asked to
give evidence about corruption. I have come and I have told you
my views. I am not talking about setting up a closed-ring, Soviet-style
something or other. I am simply telling you the way it happens
in the real world out there. I happen to have been at the sharp
Q174 Chairman: Let's proceed on the
basis of what you say corruption amounts to and come back to that
debate to see whether there are any other elements. Our job is
to say whether the Bill is going to be effective to deal with
such corruption which at the end of the day we think exists either
in this country or in British companies operating outside. You
say that the Corruption Bill will not have any effect on the overseas
position. What can we do to this Bill to make it better, more
Mr McKittrick: I do not think
it will have an effect unless it is pan-European, certainly pan-European,
and probably across the whole world. If it were pan-European,
there would be quite a strong chance because we do not tend to
compete in our industry against too many Americans. It is the
Swedes, the Germans, the Italians, the French, the Spaniards.
Q175 Mr Shepherd: The Japanese?
Mr McKittrick: On the very odd
occasion it is against the Japanese, but they have got it pretty
tightly stitched up. Unlike ourselves in DfID, their money still
tends to follow the Japanese consultants, whereas DfID of course
has untied the funding here.
Q176 Lord Campbell-Savours: Clare
Short did it.
Mr McKittrick: Yes, indeed she
untied it. I think you would go 90 per cent of the way if it were
Q177 Chairman: That might make it
better, but what about the actual techniques which this Bill is
seeking to use?
Mr McKittrick: First of all, if
it were written in plain English, it would help. It is absolutely
awful. If a colleague of mine knew of somebody else or thought
somebody else was corrupt and turned to this Bill in order to
be able to phone the police and say, "Hang about, so and
so is corrupt", they would not have a chance. They would
just give up.
Q178 Chairman: Give me a couple of
illustrations of what you say is just awful language.
Mr McKittrick: The whole thing,
the fact that you have got to try to read guidance notes alongside
the Bill, the fact that the Bill sometimes gives examples and
at other times completely ignores examples. It talks of "person
C and person A and boom, boom, boom, boom, boom", and there
Q179 Chairman: "Boom, boom,
boom, boom, boom" is not going to be very intelligible. Give
me an actual phrase which you say is awful language.
Mr McKittrick: If you let me read
my paper, I will give you a phrase. "Clause 4(1)(a) [of the
Bill] gives an example of doing something which confers an advantage",
so if we go to 4(1)(a) of the actual Bill, "he does something
(for example, makes a payment) or he omits to do something, which
he has a right or duty to do", so it gives an example of
doing something, ie, making a payment, but it does not then give
an example of something which he omits to do.
1 Note by witness: Mr Garnier asked why corruption
in a foreign country affects the British public interest. On reflection,
I meant to say that corruption is immensely damaging and costly,
particularly in countries where the true victims are the poorest
and most vulnerable. Uneconomic or unnecessary projects are undertaken
which create demands on scarce foreign exchange while the bribes
are paid off-shore and never enter the host country. Contracts,
whether consultancy or construction, cost more than they should
by around 15 per cent. Tax revenue is lost. Poorly qualified officials
are appointed to senior posts and there is a general lowering
of standards in government. Corruption can contribute materially
to the collapse of economies and the downfall of political regimes.
Surveys have shown that the biggest single deterrent to inward
investment in a country is the perceived level of corruption.
Corruption results in the misuse of a company's capital, which
is invested for corporate purposes. If it is known within a company
that its foreign subsidiaries or joint ventures routinely win
business by paying bribes, the corporate culture of that company
is tarnished. Corruption distorts markets and is therefore the
enemy of fair competition. The ease with which the proceeds of
corruption can be laundered fuels extortion and has the potential
to damage banking reputation and financial markets. British companies
involved in corruption suffer in the manner detailed above, and
hence corruption does affect the British public interest. Back