Joint Committee on The Draft Corruption Bill Minutes of Evidence

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 it does.

  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 paid nothing.

  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 elsewhere.

  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 problem.

  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 not?

  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 in bids.

  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, would they?

  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 job.

  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 controlled market.

  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 end. [1]

  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 effective?

  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 pan-European.

  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 are some—

  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

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