Joint Committee on The Draft Corruption Bill Minutes of Evidence

Examination of Witnesses (Questions 700-719)


11 JUNE 2003

  Q700  Chairman: You mentioned "overseas" and "international" once or twice. Is this only an activity which takes place in regard to overseas building, trade and manufacturer or is it also a consideration internally in the United Kingdom?

  Mr Campkin: You are referring particularly to the offsets issue, my Lord Chairman?

  Q701  Chairman: Do you have offset agreements in the United Kingdom?

  Mr Campkin: Not that I am aware of.

  Chairman: We will have to break again for a division.

The Committee suspended for a division

  Q702  Mr Stinchcombe: I just want to ask one further aspect about this proportionality test. In the scenario that I conjectured, we are talking about a very significant investment, maybe the future entirety of the firm, and yet I am told that because of the scale of the payment, then the making of it should, notwithstanding the consequences of not making it, still be a crime. In that case, if the whole future of the business is at stake, there is no test of proportionality at all, is there? It does not rule it out because it is a disproportionate payment of the consequences, it is ruled out simply because it is too big a payment in the first place to the wrong person.

  Mr Cridland: My answer to that would be that it is ruled out because it is clearly soliciting a bribe. The proportionality test was in answer to the Chairman's question about how you cap facilitation payments. As Andrew explained, our justification for facilitation payments and our distinction between facilitation payments and activities which may be illegal or criminal is that facilitation payments are simply enabling or procuring a service which you are entitled to anyway, which is perfectly legal, but to get it when you need it and that is quite distinct from encouraging somebody to do something which is clearly, by any definition, illegal.

  Q703  Mr Stinchcombe: In a scenario perhaps in a new economic zone, if you have gone through the legal procedures, you should be entitled to start manufacturing. You have employed local people, everything is in place, and then some administrator says, "Your licence or consent permission will be withdrawn unless you pay me." Even in those circumstances, whatever the consequences for the future of the manufacturer, the payment of that amount should be a crime in this country.

  Mr Cridland: These are desperately difficult situations but it is here that corporate policy has drawn an absolute line in the sand and responsible business should walk away from those sorts of business opportunities because, until we do, those situations are not going to be resolved. Andrew, do you want to add anything?

  Mr Berkeley: I would just add the point which I think I made before, that the statement that unless you do X, the whole permission for the project will be withdrawn implies a degree of authority in the person who made that threat, which is not meant to be the degree of authority of people who are, if you like, egged along by facilitation payment.

  Q704  Baroness Whitaker: Just returning to the grey areas, corporate hospitality and that kind of thing, your colleagues in the business world will be familiar with the concept of the approved code of practice, heavy guidance which has an evidential status, so that, if you breached it, it is prima facie evidence that you had not complied with the statute. It is used very often for law which has an impact on industry, so that they can have different ways of complying. In your opinion, might this be useful if we do not have lots and lots of separate offences to flesh out areas where there might be doubt like corporate hospitality?

  Mr Cridland: Yes, I think it might. Frankly, I think it lies outside the CBI's competence to make specific proposals as to how these matters should be dealt with in parliamentary terms. I think it is our job to throw up a problem and ask you to find the solution. We do suggest in our evidence that this particular Bill, whatever we can do to improve the quality of its definition and constitution, does need very clear guidance. I am sure that there will be a need for very clear guidance on these points and I can see the case that some of the fairly specific and technical issues we referred to could lend themselves very well to guidance. All I think I would say is that it is not a case of "do it in law or do it in guidance", I think, in our view, business deserves greater clarity from the statute and business deserves ministers to stand up and give very explicit reassurances and perhaps actually we need all three: perhaps we need a better Bill, greater ministerial clarity and better guidance.

  Q705  Baroness Whitaker: The other question that I wanted to ask was again in the overseas area. The Government have attempted to deal with bribery of a foreign public official in the Anti-Terrorism Crime and Security Act. As far as I recall, the CBI was perfectly supportive of that section on bribing a foreign public official.

  Mr Cridland: I think that is right. Andrew, do you recall any problems about it?

  Q706  Baroness Whitaker: There was no problem about it.

  Mr Berkeley: The answer is "no". The effect of the Anti-Terrorism Bill was to extend the concept of nationality jurisdiction so that any British citizen or British company, no matter where they were, were subject directly to British Law. To that, we had no objection.

  Q707  Baroness Whitaker: And it is clearly intelligible?

  Mr Cridland: I think there were some definitional issues which did not dispute the intent which we were entirely comfortable with.

  Q708  Baroness Whitaker: I just want to ask you if Clause 13 in our Bill regarding corruption outside of the UK in your view was as clear and is it easy for a business to grasp how it applied to them in comparison with Part 12 of the Anti-Terrorism Crime and Security Act?

  Mr Cridland: I do not think we had a lot of concern expressed about Clause 13, to be honest with you. I could not, in all good faith, say that it is right but I can say that members have expressed a lot of concern about certain other clauses, Clauses 3, 6, 7 and 11 particularly, but less so on Clause 13 to the best of my knowledge.

  Q709  Vera Baird: I just want to try and put a boundary around facilitation payments, if possible. You have made clear that a facilitation payment—a smallish facilitation payment the implication was—was to someone to do their job or to do it more quickly. Is it still okay if it is to do the job more quickly for you than for someone else?

  Mr Cridland: I think in practice that is almost inevitably going to be the case. The sort of examples that would appear in managerial manuals trying to guide staff as to what are the boundary lines would be examples like, you are opening a new office in the capital of a developing country, the office is absolutely up and ready to start business, you need to start business but the telephone line is not there and you know that $100 will ensure that you can open on the due day, you paid your money and it should have been opened. It is that sort of situation. I think inevitably therefore it is producing the situation where your needs are dealt with and somebody else's needs may be dealt with less expeditiously, but the intent is simply to get a service performed which is the duty of the official concerned which you should have had done by the due date.

  Q710  Vera Baird: You give a very innocuous example. What about an example where the person over whom you pay for preference is a rival?

  Mr Berkeley: I find it very difficult to answer that question, to tell you the truth. If one is talking in the context in which we are trying to put it forward, namely that you have an official who has a duty to do an action by a certain time or in a certain way, he is the junior official and you make a comparatively small payment to him in order to get him to do that he should have done anyway. Whether the people across the road did not get their telephone until a week later because of that action or not seems to me to be one of those questions more suitable for arguing in, shall we say, a philosophical way. I do not think it is something the law can take account of adequately.

  Q711  Vera Baird: That must be a real limitation on your attempt to suggest then that there can be a clear defence of making an illicit facilitation payment. It makes it unclear at the edges, does it not?

  Mr Berkeley: All I can say is that it has been in force in the United States since 1977. It is very rarely used in the United States actually and, as you know, the Department of Justice administered prosecutions under the Foreign Corrupt Practices Act. It is not a big issue and indeed facilitation payment as a word, an expression, is simply shorthand of American jurisprudential analysis of the FCPA.

  Q712  Vera Baird: One further thing—and I am going to try to fix its ambit—is the example Mr Stinchcombe gave you which perhaps helps me here. Albeit you may be paying only a relatively small amount to a relatively minor official, it may nonetheless be of very great consequence indeed and very great financial consequence to the payer. Does the amount of consequence that it has for the payer at all blur whether it is appropriate or not? It may be the difference between them being able to complete a contract before your next contract, you need to hurry him up. Is it more problematic if the consequences for the payer are greater?

  Mr Berkeley: You are positing a contract for $25 million on the payment of $100 to some junior official which would enable the $25 million contract to be completed.

  Q713  Vera Baird: You have a time limit and he is not hurrying because he knows that he has you.

  Mr Berkeley: All I will say is that it could happen.

  Q714  Vera Baird: Does that shake you at all in thinking that there can be a definition of facilitation payment which would afford an appropriate defence?

  Mr Berkeley: I would like the Committee to understand that facilitation payment is not the main trouble of the CBI in this Bill. It is a comparatively small matter and many CBI members are perfectly happy as a general policy simply to say, "There shall be no payments of any kind." It is not an important thing as far as we are concerned.

  Mr Cridland: What I would say in answer to both of your questions is that the thing that for me acts as the ring-fence is intent. There is no intent; there cannot be any intent of a legitimate facilitation payment to get an advantage to the disadvantage of somebody else, nor can there be an intent to give money to an individual which is disproportionately meaningful to the individual. It is simply a question of getting the individual to do what they should be doing anyway. I think that is somewhat clearly ring-fenced from the sort of definitions we see in the Bill that relate to activities which are clearly corrupt.

  Chairman: If I could interrupt at this stage because Dr Turner has something he would like to pursue about a remark you made earlier. You have been talking about overseas trading and subsidiaries and he would rather like to purse this before he has to leave.

  Q715  Dr Turner: The Government have made it quite clear that the crime provisions are not meant to apply to overseas subsidiaries of British companies and others have suggested that in fact this is a defect of the Bill and will undermine its efficacy. How difficult is it for UK-based companies to control the activities of overseas subsidiaries and agents and what is your view of the position of subsidiaries or agents and should they be specifically included in the Bill as, for example, they are in the United States Foreign Corrupt Practices Act?

  Mr Cridland: Our view is that they should not be included. At a somewhat simplistic essentially correct level, we believe this would be extra-territoriality. The point at issue here is that a company or organisation which is legally constituted in that other country is subject to the laws of that country. Clearly, it may well have a management responsibility to the parent organisation which may well be within UK jurisdiction and it does not cut across that, but the appropriate legal remedies lie within the judicial system of the country in which it is constituted and to blur that distinction is, in our view, highly unhelpful. Andrew, do you have anything to add?

  Mr Berkeley: It is not my belief that the Foreign Corrupt Practices Act of the United States does cover foreign subsidiaries of American corporations; I do not think that it does.

  Dr Turner: The suggestion has been made to us; I had not read it personally.

  Q716  Lord Campbell-Savours: Is it naive to ask you whether, if there were a specific exemption or defence for small facilitation payments, that it would be in conditions of transparency?

  Mr Berkeley: Could you explain slightly more what you mean by "conditions of transparency".

  Q717  Lord Campbell-Savours: That it be declared. That a declaration for such payments be declared.

  Mr Berkeley: In good management practice in many of our large corporations, the chief executive of each geographical area will, at the end of the year, sign a formal statement that no payments have been made and, if anything is on the borderline, he has to declare it and this is a matter of management practice. This is another point that we want to emphasise. True efficacy of action against corruption depends to a great extent on the skill and power of management to really deal with it because it is important. So, if that fits your definition of transparency, the answer is "yes".

  Q718  Lord Campbell-Savours: You are described as a consultant; are you a lawyer?

  Mr Berkeley: Yes.

  Q719  Lord Campbell-Savours: So the CBI consults you on legal matters?

  Mr Berkeley: Yes.

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