Joint Committee on The Draft Corruption Bill Minutes of Evidence

Examination of Witnesses (Questions 680-699)


11 JUNE 2003

  Q680  Chairman: Gentlemen, we are very grateful to you for coming and also for the very helpful papers you have put in. You have covered a great deal of ground in the papers and we have found it all extremely useful. There are a number of things which we can perhaps tidy up on. If there are other things you would like to add either by way of addition to your paper or clarification of your paper, we should be very, very pleased again. We have been looking at corruption now for some time and, as far as I am aware, nobody has tried to drive any of us with this report in mind. We cannot claim direct experience in the last few weeks, but what we would like to really know is, how far is corruption an issue in domestic business and I would like to ask you afterwards whether you think this is really a problem relating to those who trade abroad rather than those in this country. Is it a problem here? We do not see a great number of prosecutions but that does not mean it does not exist.

  Mr Cridland: Thank you for that. We are not aware that it is a major issue within the UK and, in the quite extensive consultations that we have had with breadth and depth of the CBI membership on this particular proposed Bill, the focus of our members' interest and attention has all been in the international context, which is where they see the issues being challenging and company practices as evolving over time. We have not had the same degree of comment about the domestic situation.

  Q681  Chairman: Are people anxious about this in industry and CBI? Is this something you feel we have to deal with more effectively than it has been dealt with under the present law?

  Mr Cridland: The domestic situation or corruption per se?

  Q682  Chairman: Domestic firstly.

  Mr Cridland: I think from the domestic situation, we are not aware of problems which the law does not currently adequately deal with. We do not believe there is a need for the Committee specifically to spend a great deal of time and energy on that matter. We set out in our evidence belief in the broad concepts of the Bill but that, in the matters of statute and in its international ramifications, there is a lot more that needs resolving than domestic application.

  Q683  Chairman: We will come onto the detail of the overseas situation in a few minutes. Insofar as there is commercial activity, trading and building activity abroad, what would you think are the main sectors where the problem of corruption arises?

  Mr Cridland: I think clearly companies are more likely to be exposed to the challenges of ensuring that management processes and practices work in more difficult trading environments. So, it is our members working in developing countries, working in countries with very different legal systems and very different political traditions and cultures and those are likely to be the companies particularly in the manufacturing, oil, petroleum, chemical, engineering sectors and mining ...

  Q684  Chairman: Construction?

  Mr Cridland: Construction would indeed be on that list ... they are often operating and creating wealth for Britain under very difficult circumstances.

  Q685  Chairman: Not only difficult economic circumstances but difficult competition from people who may not take the same view of corruption.

  Mr Cridland: Indeed.

  Q686  Chairman: How do we deal with that?

  Mr Cridland: I think it is why the CBI has always had a strong commitment to providing an appropriate panoply of international rules under which business operates in appropriate areas. We are strong supporters, for example, of the UN agencies, we are strong supporters of the OECD and that, as a starting point, has governed our approach to this draft Bill and we believe as far as possible that the Government should be seeking to set in place legislation which is consistent with key international principles for dealing with corruption and obviously the OECD in particular is a prime constituent, if I can use that word, and we are very interested in the extent to which this Bill would satisfy the OECD.

  Q687  Chairman: Can the law really deal with the practical problem faced by manufacturers, builders, engineers and so on that, if they do not do what every other country is doing in a particular distant country—I want to leave Europe alone—they will not get the contract?

  Mr Cridland: That is a very real concern and—

  Q688  Chairman: How would we deal with it in legislation?

  Mr Cridland: I think that there has to be a degree of flexibility in legislation as there has to be a degree of flexibility in company practice and that is why, in our evidence for example, we raised this challenging issue—to just illustrate by one specific but concentrating on the theme—of facilitation payments because, at the end of the day, a company, as statute should, can have a clear statement of its position in abhorring all forms of corruption and bribery and take very serious action against any employee who is found to be undertaking such actions, but the best company policies are the ones that do not stop at that statement of high moral principle but actually train people working on the ground in the sorts of countries you are describing as to how they deal with the varying practical dilemmas that arise from trying to do business in an operating environment which may not adhere to those rules. That is not a cop-out; it is not saying you can have a policy and then just let people not apply it; it is saying that it is not as easy as just having a simple statement of what is morally or legally allowable. You have to train people in dealing with the most difficult situations and it may be, standing in front of a roadblock being asked for money to proceed by a member of the armed forces, you have to face what you advise your own employee to do in those situations.

  Q689  Chairman: Dealing with it by way of definition of corruption in the Bill may be quite difficult but the suggestion has been made that perhaps you can deal with it by way of fairly clearly drafted exceptions, but even that presents difficulty. The simple example is the one of facilitation payments. Do you think there should be an exception in the Bill dealing with facilitation payments and, if so, what are good ones and what are bad ones? How do you begin to draw the line?

  Mr Cridland: If you will allow me to comment on the concept and then illustrate it with facilitation payments. I was taken with the comments that the minister made giving evidence to you that he had looked at the two extremes of not giving any definition or going down the route of trying to be certain on everything and gave an example of the South African model, and he felt he had settled halfway between the two. I think that, in principle, that is where our company members have come down, that we do need certain key principles defined and established in the Bill to give an element of certainty but that we cannot have absolute certainty and, in the absence of absolute certainty, we then need certain exemptions and defences. Our concern with the Bill is that we do not believe that the degree of definition that is in the Bill is sufficient and we do not believe that the list of exemptions and defences is sufficient. However, in principle, the concept is right. When we come to facilitation payments, this is clearly very difficult.

  Q690  Chairman: Let us stick with facilitation payments and then look at the others which you recommend should be exemptions. How do you define a facilitation payment if you are doing it by legislation?

  Mr Cridland: We take note of how the US administration deals with this and we also take note of what is said in the commentary to the OECD Convention but, to answer your question more specifically, Andrew Berkeley, a barrister and international arbitrator, may like to add to that.

  Mr Berkeley: If I may suggest to the Committee, the key distinction is that facilitating payments are made to a person who is already under a duty to do something and a facilitation payment is one which is designed to make him either do that duty or do it more quickly or more efficiently and this distinction, by the way, is taken in the Foreign Corrupt Practices Act of the United States. If the person is already under a duty and it is a small payment designed to make him get on with it, that is what is meant by a facilitation payment. It is not a payment, as it were, in abstracto just to have something done.

  Q691  Chairman: That does not introduce a concept of a value limit, a financial limit. Some people have suggested to us that small facilitation payments may be all right but that big ones are getting a bit dodgy.

  Mr Berkeley: I do not think it would be wise at all in any system of legislation to attempt to put a monetary value on it. The furthest you could go is probably what is done in the FCPA and use some concept such as disproportionate or—

  Q692  Chairman: The sort of examples that people have given is that a free lunch may be okay and is a perfectly normal part of trading. If somebody comes for a free lunch and then says, "I cannot stay, I have to go" and so he is given the value of the lunch in a brown envelope, is that all right?

  Mr Berkeley: This was produced in the example by the Home Office. They used the same concept in that, if you have someone along to your box at Arsenal or whatever and you get to know each other and perhaps talk about business and perhaps talk about other things but that is getting to know you. The suggestion of the Home Office was that that is acceptable. If you simply send the tickets to the man in a brown envelope or otherwise, that is not. That, to us, goes more to the meaning of the word "primarily" in the definition of the main offences rather than our point which is that we need a specific exception for and definition of, small facilitation payments.

  Q693  Chairman: Just to stick to the quantitative aspect of this, is there not a limit to be drawn somewhere between when you move out, on any view, of a reasonable payment to someone to encourage them to do what they were already bound to do. If you give someone £50 or a Wimbledon ticket or something, that may be one thing, but someone who is bound as part of his job and his duty to his employer to do a particular thing, if you give him £100,000, that is still to encourage him to get on and do his job but surely, on any view, that would not be acceptable.

  Mr Cridland: We would suggest some test of whether it was proportionate or disproportionate rather than some arbitrary financial figure within statute.

  Q694  Chairman: The other matters which you have specified in your statement are that things like corporate entertainment which is really part of the facilitation payment I suppose and promotional expenditure and things of that kind should be excluded from the definition of corruption, but would it be sufficiently precise and also sufficient to exclude things that should be excluded if we adopted the word "improper" before "advantage" and said any "improper advantage" in Clause 5?

  Mr Cridland: We are certainly strongly of the view that it is insufficient to rely upon "primarily" and that it would be a much better approach to adopt either "improper" or "undue" or some other word that has international currency from the OECD or other appropriate international bodies, but I think that we still have the concept of strengthening the definitions but also, either within the Bill or clear ministerial statements read into the debate, that certain things are not likely to result in criminal prosecutions, and our principal concern is that even sophisticated companies with suitable resources are struggling with what this Bill means, but the lay business community will not have confidence that they can train and brief their staff that certain actions will not cause them to fall foul of offence.

  Chairman: If you add in "improper" or "undue", which may be even more difficult because it is a legal concept or a moral concept, an awful lot is going to be left to judges and juries in working it out.

  Q695  Mr Stinchcombe: If I could test with you this concept of the proportionate facilitation payment. Imagine a manufacturer in England who decides to switch his factory manufacturing processes to some new economic zone in the Far East, considerable investment, and, the day before he goes into production, he is asked to make a £100,000 facilitation payment to a local administrator otherwise the plug gets pulled. Should that be a crime in England?

  Mr Berkeley: I think that posits a degree of executive authority in the person from the development area you are talking about which is not appropriate to facilitation payments because you said "otherwise the plug gets pulled." We do not mean that in the context of facilitation payments. It is simply a junior/very junior official who is paid a small sum of money to get on with what he is bound to do in any event.

  Q696  Mr Stinchcombe: So that should be a crime?

  Mr Berkeley: What you have just described should be a crime.

  Chairman: One of the hazards of this Committee is that we get divisions all the time and we now have a division, so we will have to break off for a few minutes.

The Committee suspended for a division

  Q697  Chairman: Just before we go on to the other general questions, you explained to us that the difference between a facilitation payment and a non-facilitation payment is not simply the difference between a small greasing of the palm and a big greasing of the palm. Just to move on to something that you mentioned in your paper should be a specific exemption and that is offset payments under agreement of government or procurement agencies. Could you just explain to us, what is the extent of these and what is the width of these and does it really matter to exclude them? Why should they be excluded?

  Mr Campkin: Offset agreements are fairly commonplace in certain types of contracts, normally big-ticket items and quite often in circumstances which come with it an agreement between government and the company that wins the contract to do work which is mainly developmental. And these are commitments to build things like hospitals and these sorts of projects. We believe and business believes that these are quite clearly accepted as part of international business practice and they are also one way of ensuring that, in countries where there are particular development needs, there can be some additional benefit brought through doing business. One of the ways of ensuring that offsets can be excluded from the draft Bill is to include a definition of the type we have been talking about already, related to language on improper advantage, because there is a danger that, as currently drafted, the Bill could catch legitimate offset arrangements which could lead to real difficulties for British companies getting involved in the sorts of projects which not only bring back advantage to Britain but also provide to increasing capacity in the developing world which is of vital importance.

  Q698  Chairman: Are you saying that these are always perfectly all right or that these are borderline when you are looking at what corruption is really like?

  Mr Campkin: Offset agreements are perfectly accepted as a natural part of doing business in certain sectors.

  Q699  Chairman: Supposing in the Bill the exemptions in respect of offset payments and facilitation payments were not included and there were no exemptions. What practical effect, in your assessment, would this have on British industry?

  Mr Campkin: We believe that there could be some real problems in terms of giving British business the type of certainty that it requires to go and do its business overseas. Many companies, as I am sure the Committee is well aware, have some well-developed codes of conduct for the way that they do business. They take great care in the way that they do business overseas, but any legislation, we would suggest, requires clarity and certainty, and certainly if you look at some of the definitional issues which we have touched upon already, there is a big question mark hanging over what a business should do and our great concern is that having got some international standards and having got an international test, if you like, as, for example, in the OECD Convention language, legislation in the UK should reflect that which has been agreed internationally. We believe that is the way forward in terms of giving British business the certainty it requires to continue to do what it does best which is to generate wealth and promote development.

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