Joint Committee on The Draft Corruption Bill Minutes of Evidence

Examination of Witnesses (Questions 460-479)


4 JUNE 2003

  Q460  Chairman: Just thinking again about the definition, one problem which has been raised a number of times is the retention of the agent/principal concept. Sir David Calvert-Smith told us: "I am sure it would be easier for prosecutors were we to focus on the passing of the bribe rather than on the agent/principal relationship. It is easier, I would say, for ordinary folk to understand that when the money changes hands, that is when the offence is committed, rather than in the breach of trust between the agent and his or her principal." Do you think that it would be possible to place the offence on the passing of a bribe rather than on this concept of principal and agent and breach of trust?

  Lord Falconer of Thoroton: We thought about that and we thought about it again after Sir David had said that. I do not know if you have seen the example of "I want my house surveyed". There are two surveyors and one surveyor says, "If you have me as your surveyor rather than the other surveyor I will give you free tickets to Arsenal football ground for the next year". There is nothing wrong with that because I am the only person involved. You might say in common parlance there is a bribe, but there is nothing corrupt about it. Whereas there would be corruption if, instead of having the house surveyed for myself, I was having the house surveyed, for example, for a company for whom I worked. I would then be putting my own personal interest above my duty to the company. We think if you apply that to the public sector, where you say to a public official, "Will you give me this particular licence because I will give you free tickets", again the public is not getting the attention it is entitled to. It is difficult to think of occasions when the essence of corruption is not cheating on the person who you should be looking after.

  Q461  Chairman: The person you work for, your principal?

  Lord Falconer of Thoroton: Exactly.

  Q462  Chairman: It does mean sometimes that a deal between two principals where there is not an agency relationship might slip through the net.

  Lord Falconer of Thoroton: I am sorry, say it again.

  Q463  Chairman: Unless you can find a relationship between the principal and agent then I am suggesting that many cases might slip through the net if you had negotiations between two principals. We will come on to a detailed example later. That would not necessarily be covered by your reliance on the agent/principal concept.

  Lord Falconer of Thoroton: Let us hear some examples. There is obviously an issue about the public. If I am the chief executive of some public sector organisation, even thought I might be said to be acting as principal, if I have got an obligation to the public, and we make that clear in the Bill, that should be corruption as well.

  Q464  Chairman: A number of difficulties have been expressed to us about this definition and we will come on to specifics but I want to do a general review to begin with.

  Lord Falconer of Thoroton: My answer in principle—meaning it in a different way—is we think the essence of corruption is cheating on the person who trusts you or cheating on the public. That is why we have focused, as you rightly say, on the principal/agent or agent/public relationship.

  Q465  Chairman: Could you not do that by a definition which picks up the trust concept rather than the principal/agent concept?

  Lord Falconer of Thoroton: We think at the moment that the principal/agent or public/public servant relationship is the best way to do it. If there is a better way of doing it we will obviously consider it.

  Q466  Baroness Whitaker: Nice to take your views twice in one month, Minister. I rather missed in the Bill the idea of the person bribed having a private advantage at the expense of a public or organisational benefit and that is not captured in 5. I am not asking for an immediate answer now but I just wondered if you could consider how that could be captured because there is nowhere in the whole Bill the idea that somebody makes into their private pocket something so that the public gain, or the intention of the whole organisation, is thwarted or skewed.

  Lord Falconer of Thoroton: We were very keen to capture that and when we talk about "agent for the public", that is what we are talking about. Take the obvious case: if a local authority planning officer gives planning permission for money rather than the merit of the planning application, that would be a plain example of somebody putting his private advantage above his obligations to the public, he is an agent for the public in those circumstances, that is plainly caught.

  Q467  Baroness Whitaker: I think it is because we know what corruption is that we understand clause 5 but if you were in a different country I wonder because it could cover planning gain, perhaps.

  Lord Falconer of Thoroton: Taking the planning officer example again, and I may have got the basic structure of planning wrong, if he said "I will not charge you any planning gain in giving you this planning permission because you have given me free tickets to Arsenal for the next year", that plainly would be corrupt and would be caught.

  Q468  Baroness Whitaker: If a local authority says "We will give you the contract if you not only put up these buildings within our price range but you also contribute to our sports ground or you do not build on the adjoining land", none of which goes into any private pocket, nevertheless it enables somebody to get the contract.

  Lord Falconer of Thoroton: That is perfectly legitimate.

  Q469  Baroness Whitaker: That is not corrupt at all.

  Lord Falconer of Thoroton: Not at all.

  Q470  Baroness Whitaker: But is it not thwarting 5?

  Lord Falconer of Thoroton: No, most certainly not, because there, plainly, the agent in seeking to extract the planning gain is acting on behalf of the public.

  Q471  Chairman: Can you say that any deal done where the aim is to confer a benefit in the third person, here talking about a sports field or something, is irrelevant for the purposes of corruption?

  Lord Falconer of Thoroton: No, you cannot, but I am not saying that.

  Q472  Chairman: No, you are not. I am moving from the particular example to a general statement of principle.

  Lord Falconer of Thoroton: In some cases if a benefit would be conferred in the third person then it would be a bribe in effect.

  Q473  Chairman: Can I just ask you two or three questions which arise, again, out of evidence which has been given. In the Explanatory Notes to the Bill it is suggested, I think, that the impact of the Bill, the changes in law, on businesses and the voluntary sector and charities, is negligible. We have been told two things. Firstly, we were told by one organisation that it was very surprised that there had not been a Regulatory Impact Assessment. The second thing we were told by two organisations was that they really needed clarification of the scope of the Bill and in particular its effect on the payment of commission in the financial service and insurance industries. The Association of British Insurers in their statement said: "the abstract way in which the new offences in the Bill are framed may lead to certain activities being caught inadvertently". The Investment Management Association said: "as it stands, many such commission payments could be deemed `corrupt' unless the defence could establish that the agent's principal knew all the material facts and had consented to the specific payment." In the first place, was there wide consultation of industry and commerce about the definition in the Bill?

  Lord Falconer of Thoroton: There was. You know the history: the Law Commission's consultation paper, the Law Commission's final paper, the Government's White Paper in 2000, response to the White Paper in 2000 and now pre-legislative scrutiny. The process of the matter being looked at has been going on for in excess of five years.

  Q474  Chairman: I was thinking more of the actual terms of the draft Bill. The Law Commission's report is quite a long time ago now.

  Lord Falconer of Thoroton: But the Law Commission's report does have a draft Bill annexed to it, which is quite similar to the Bill we have gone with today, and the White Paper produced in 2000 also has a Bill attached, or indicates it is going to go with the Law Commission Bill. The Law Commission consulted the Institute of Chartered Accountants, the Institute of Directors, a number of corporations, such as Kingfisher and Lloyds plc. You referred in your second point to the insurance industry and the Association of British Insurers first responded with that point after the publication of this particular Bill, but I venture to suggest that the issue was already apparent on looking at the Law Commission Bill. That is not an answer because, however we have got here, we need to talk to everybody. We have spoken to these people and inevitably as you go through pre-legislative scrutiny new points arise.

  Q475  Chairman: Perhaps the draft Bill at the end of the day, because it is a lot shorter, draws people's attention to things more precisely than the Law Commission's report?

  Lord Falconer of Thoroton: This is a lawyer's point which you will find deeply unattractive, but it is not that much shorter than the draft Bill in the Law Commission's paper; indeed it is slightly longer. The point was there in the Law Commission's paper.

  Q476  Chairman: They asked whether a Regulatory Impact Assessment should have been carried out: should it?

  Lord Falconer of Thoroton: The view we have taken is no, because the purpose of the Bill is to codify and clarify and we believe that the effect will be not to capture any significantly greater series of cases than are already captured. Do you want me to go on to the second point, which is the financial services?

  Q477  Chairman: Yes.

  Lord Falconer of Thoroton: I assume that what people have in mind in relation to the financial services issue is where an independent financial adviser advises his customer "Go with this pension" or "Go with that mortgage", and, in fact, instead of advising the customer to do it on the basis of what is in the customer's interests, he does it on the basis he gets a higher commission from mortgage company X than he does from mortgage company Y. If that is the reason why my own independent financial adviser has given that advice then that potentially is corrupt under the Bill. Does it lead to a greater risk of prosecutions than previously, I am not sure that it does and I am not sure that the Association of British Insurers are saying they would necessarily want to countenance independent financial advisers giving, as it were, their own clients advice based on the levels of commission.

  Q478  Chairman: One has obviously got to be careful that legitimate commission payments in the financial sector are not caught by this. Have you considered whether this Bill is more or less likely to pick up legitimate commission payments?

  Lord Falconer of Thoroton: How does one put this? If my motivation, as the independent financial adviser, in giving you the advice is solely because I get a higher commission, I am not sure you would describe the commission as illegitimate but, nevertheless, I am not acting pursuant to the trust you place in me in those circumstances. That should not be lawful anyway at the moment.

  Q479  Chairman: Very much in this area too, one question which we have been asking, and people have raised with us, is the question as to what sort of activities which now would be lawful, apart from the position of MPs, would become unlawful under your Bill? Perhaps even more important, what offences cannot in practice now be followed through and prosecuted which will be caught by the Bill and will enable prosecutions effectively to take place?

  Lord Falconer of Thoroton: There are certain things on the margins. For example, the 1906 Act does not extend to bribery of a third party, whereas the 1889 Act does. In the public sector, bribing a third party does constitute a crime where it does not in relation to the private sector, but that, I accept, is pretty on the margins. Again, I have asked the question that you have asked, what does this cover which it did not cover before, and it is very hard to identify specific cases. I have not got any specific cases, apart from the very marginal legal issues that I have just referred to. We do think it is of benefit to do this because of the codification and the clarification. It is because we do not think that there is a substantial increase in coverage that we did not have a Regulatory Impact Assessment.

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