Taken before the Draft Corruption Bill Joint Committee
on Wednesday 11 June 2003
Bernstein of Craigweil, L Vera Baird
Slynn of Hadley, L (Chairman)
Memorandum submitted by CBI
Examination of Witnesses
Witnesses: MR JOHN CRIDLAND, Deputy Director General, MR GARY CAMPKIN, Head of International Group, and MR ANDREW BERKELY, Barrister and Arbitrator, CBI, examined.
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 string 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 ... that 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 performing(?) 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 Berkely, a barrister and international arbitrator, may like to add to that.
Mr Berkely: 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 Berkely: 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 Berkely: 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 of what facilitated means.
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 Berkely: I thing 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 Berkely: 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 from 4.32 pm to 4.43 pm for a division in the House
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 protected from the draft Bill is to include a tiny definition of the type we have been talking about already, the 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 we 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 general development.
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 from 4.46 pm to 4.53 pm for a division in the House
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 Berkely: 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 Berkely: 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 Berkely: 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 Berkely: 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 Berkely: 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 Berkely: 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 Berkely: 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 Berkely: It is not my belief that the Foreign Corrupt Practices Act of the United States does cover foreign subsidiaries or 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 Berkely: 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 Berkely: 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 Berkely: Yes.
Q719 Lord Campbell-Savours: So the CBI consults you on legal matters?
Mr Berkely: Yes.
Q720 Lord Campbell-Savours: Mr Cridland, what would your view be on the question of policy on that issue of transparency? Small facilitation payments and the possibility of a greater regime of transparency in relation to particular contracts.
Mr Cridland: We are trying to build a construct here derived from practical experience of our member companies. So, the experience that Andrew described is very relevant here. On that basis, we are fully supportive of disclosure because clearly, every time one of these payments becomes an issue, the questions that other members of the Committee have raised are an issue for the relevant management as to which side of the line it falls. Therefore, there should never be a case where this is simply dealt with with some cover-all excuse that it is a facilitation payment. The procedure Andrew describes is right.
Q721 Lord Campbell-Savours: I thought he was talking about this statement made by the Chairman.
Mr Cridland: The chief executive of the relevant business unit, the signing off. There is usually a cascade system of signature saying, "In the area for which I have responsibility, I have checked what has been done and there is no bribery."
Q722 Lord Campbell-Savours: My question is more specific to particular contracts. Is there room there for transparency?
Mr Cridland: Are you meaning public disclosure, disclosure outside the business?
Q723 Lord Campbell-Savours: Yes, public disclosure.
Mr Cridland: I think we would be prepared and happy to consider that. I think clearly it raises a lot of issues of proportionality. If we achieve the objective that we are seeking and we are talking about a £100 or a £50 payment, then actually the appropriate place for that to be dealt with is within the business unit. Where it cascades upwards is if it influenced the size and nature of the contract as a whole, then there would be a case for public disclosure. At that point, to be honest, I think we would be back to the fact that the outside of the remit are the sort of things that we consider as facilitation payments. There is no objective in raising this issue and I agree with Andrew in the sense that because of the way in which the conversation has flowed, it has developed an importance which is out of proportion to the position it has in our evidence. There is no wish here by the CBI to use this to try and 'coach and horses' through a position which is that corruption is abhorrent and corporations should have management practices that ensure that their operatives fall within the law.
Q724 Lord Campbell-Savours: However, you have sought an exemption.
Mr Cridland: We have sought an exemption. We seek a ministerial reassurance that criminality will not be applied to matters of this kind on a de minimis basis.
Q725 Chairman: It is one thing for management to have to decide whether something is an acceptable facilitation payment is good business, good management. It is a different problem when the jury has to decide whether a facilitation payment is in fact corrupt.
Mr Cridland: Yes.
Q726 Chairman: That is a very different sort of question because the act has to cover both.
Mr Cridland: Indeed, forgive me, and that is why we believe that this matter needs explicit coverage in one way or another in statute or the process of statute.
Q727 Lord Carlisle of Bucklow: In your paper, you argued very persuasively for the fact that there should be exemptions not only for facilitation payments but also for corporate hospitality, for promotional functions and for offset payments. Yet, when we look at the individual ones, for example, we have looked at the question of facilitation payments, I think you will agree that one immediately runs into definition difficulties in defining what is a facilitation payment. If instead we took the other view which you commend and put the word "improper" before the word "advantage", would that not cover all the things you are concerned about and do you actually think yourselves that either a prosecutor, a juror or a businessman would have any difficulty in understanding what the word "improper" meant?
Mr Cridland: We believe that using the word "improper" would considerably strengthen the Bill and considerably aid in its understanding particularly in the lay community. I think we go beyond that to say that some of the specific matters need dealing with more clearly than have been dealt with to date. We leave it to yourselves to design a way in which to do that.
Q728 Chairman: You said that your task is to solve the problem. Do not feel reluctant to suggest definitions in drafting if you have ideas in your mind. We should be only too glad to hear them.
Mr Cridland: I am trying to give perhaps too clever an answer and say that we would like our cake and eat it. We would like "improper" and we would also like some of these matters clarified either by exemption or by ministerial statement.
Q729 Lord Carlisle of Bucklow: But Mr Berkely himself said that there would be difficulty writing into a Bill a quantitative test.
Mr Cridland: We are not saying that.
Q730 Lord Carlisle of Bucklow: I have faith enough in juries to believe that, if you ask a jury a question, "Was that payment improper?" they will know what is meant by that. They will know whether it was improper when it was £100,000 as against £50. I just wondered whether in fact that sort of approach would meet many of your problems under this Bill.
Mr Cridland: It would certainly go a long way. I think that we would need to consult further as to whether our member organisations felt that the Bill that might result from your deliberations better satisfied them. At the moment, I have to say that there is a relatively high level of concern about the inadequacies of the Bill and therefore we are seeking to build in as much reassurance and confidence building as we can. We would be very happy to present a slightly different Bill to the membership and see if it passes their test of clarity and certainty.
Chairman: Just before you come on to another matter, Mr Stinchcombe, do you want to pursue anything else? I know that you wanted to pick up on this point.
Q731 Mr Stinchcombe: Very interestingly, you have used the word "improper" as part of the inflection of the meaning of the words "corruption" and "corruptly". You previously, in answer to questions by my colleague Vera Baird, looked at the intention of the person who might be making the payment or doing the act. How do you actually define the word "corruption"? Does it, to you, import always an element of dishonesty?
Mr Berkely: Perhaps this is a major doubt about the Bill. It seems to us that the Bill at the moment does not have this element of requirement for dishonesty. In fact, in the Home Office's commentary, I think it says specifically that dishonesty is not a necessary ingredient of the offence. We feel that, as regards the industry, managers, people working, the ordinary person and the ordinary businessman, if it were made clear that it is dishonesty and that dishonesty is part of the thing, this would be a much more powerful tool than the rather abstract scheme which exists at the moment.
Q732 Mr Stinchcombe: You wish to see some specific reference to the moral wrongness of the Act as part of a defining element of the offences?
Mr Berkely: Precisely.
Q733 Mr Stinchcombe: And it would not worry you that the word used, whether it be dishonest, wrong or whatever, might have around it some blurred---?
Mr Berkely: We have suggested "improper" merely because that is used in the OECD Convention and we have also mentioned "undue" because that is used in the Council of Europe Convention.
Q734 Chairman: Is the objective in a corruption case to tackle what is immoral or what is illegal?
Mr Berkeley: What one is saying is that it would be more effective if the wording of the Bill, while of course being legally adequate, nevertheless mentioned something like "undue", "improper", or some note of moral condemnation.
Q735 Lord Carlisle of Bucklow: This Bill, as drafted, allows the defence that a person cannot be guilty of corruption if his principal consents to what he has done. Are you happy with that as a defence or not?
Mr Campkin: Yes, I think that on balance we are.
Chairman: We have three different offences: 1 and 2 which fall together, and Clause 3 of the Bill is a different sort of offence.
Q736 Mr Stinchcombe: You criticise the Clause 3 offence in paragraph 17 of your evidence, saying that it seems to make an act criminal before even an advantage might be being conferred and merely because of the hope that it might be conferred. I wonder if I might tease out from you exactly what your objections are. The Clause 3 offence is further clarified by Clause 10. You have to take the two together rather than in isolation. Taken together, it seemed to be to be targeting those acts whereby somebody dishonestly performs their functions, for example as an agent, in the expectation that some corrupt advantage will be conferred at a later stage --- whether it be a ticket to Wimbledon or whatever. If it is the moral wrongness of the act, the breach of the duty, with which we are concerned, I wonder why you say that should not be criminalised. I wonder further whether it is not criminalised in any event as being an attempted offence of corruption.
Mr Cridland: Perhaps I may just make a general statement about that and ask Andrew to give a more legal perspective. The concern of our member companies on Clause 3 derives from the way that, over the last several years, they have been trying to evolve sensible policies which have statements of clear intent: "We will not accept any bribery or corruption in this business. It is a sackable offence", down to, "Living with the world as it really is, dealing with some very tough and dubious situations and borderline issues". The concern of many of our member companies is that, because Clause 3 talks about "in hope", it is very difficult to apply management policies and practices to it; that it will lead to endless debate within the business; that there is too much ambiguity. That is the concern. If a way can be found in which Clause 3 can be tightened up to reduce the ambiguity, I do not think that it is the CBI's wish or intent to seek to invalidate the clause.
Mr Berkeley: If I may say so, perhaps you suggested the answer to the question yourself at the end of the question. You said, "Would it not be an attempt?". Our point is that Section 2 is probably enough, if you also bring in the notion of an attempt under Section 2. We therefore question the necessity for Clause 3. To go back to a more practical illustration, supposing that, in a company that is trying to do a negotiation with another company to have something done, the executive of this company comes back to the office one day and says, "Do you know, I think Jimmy --- whatever-his-name-is from that other company --- is after something. He's after a bribe, I think". Nevertheless, we do need this equipment. Should I, for that reason, break off negotiations --- although the company actually needs to do the deal? How is management, in the face of that, to deal with the situation? Is it going to say, "Go on with it"? He may be after a bribe, and that is an offence. Then the man from our company says, "But that would make me some sort of accessory to an offence under Clause 3". We think that (a) it is not necessary and (b) it is very difficult to manage.
Q737 Mr Stinchcombe: I think that the answer the draftsman of the bill would give to the latter point is that he has not used the word "hope", but he does invite the jury in due course to come to a conclusion as to what was the primary purpose of the ultimate act. Does that reassure you?
Mr Berkeley: The word "hope" was used both by the Law Commission in its analysis which led to this clause and I think --- I may be wrong --- that it is also included in the explanatory memorandum which is attached to the Bill.
Q738 Mr Stinchcombe: But it is not actually in the words of the legislation itself, is it?
Mr Berkeley: No, it is not actually in the words of the legislation itself. If it were, it would be the first time one of the three Christian virtues of faith, hope and charity was made a necessary ingredient in a criminal offence!
Q739 Mr Stinchcombe: And those words that make you look to the primary purpose of the act or omission in question do not reassure you?
Mr Berkeley: I must be frank and say that they do reassure me to a certain degree. That is true.
Chairman: We are getting a picture and obviously, at the end of the day, the question is what this Bill means and what effect it will have.
Q740 Lord Bernstein of Craigweil: In your written submission you say that the Bill would be difficult to understand, or something of that nature. You are not alone in saying that. Other witnesses have said something similar. In one specific case, one witness said that it would be hard for foreign businessmen to have this translated into their own language so that they can understand it. On the other hand, you did say earlier that you thought the broad approach of the agent-principal relationship was a sensible median course. Is it the agent-principal issue which is difficult to understand or is it something else?
Mr Cridland: I do not think that the Government have gone far enough on the key definitions. Hence the debate we have already had about "improper" as a proposal. We have particular problems about the overlap of clauses. We have touched on Clause 3, without re-entering that debate. There has been a lot of negative comment from employers about the ambiguity in Clauses 6 and 7 --- not necessarily the intent of that construct, but the ambiguity. I think that employers find it very difficult to get to the bottom of how Clauses 6 and 7 would operate.
Q741 Lord Bernstein of Craigweil: In effect, that is the qualification of the agent-principal relationship. It is not qualified sufficiently clearly to understand.
Mr Cridland: Just so.
Q742 Lord Bernstein of Craigweil: The word "improper" or "dishonestly" ---would that help?
Mr Cridland: Yes, it would.
Q743 Lord Bernstein of Craigweil: Are there other things that you think should be done? Are there more specific instances in Clauses 6 and 7 which should be addressed?
Mr Berkeley: Yes, there is one point which we have mentioned in our submission. That is, on the question of the principal's consent and the reservation in the Bill that the public should never be deemed to have given consent. Therefore, if somebody is acting in a public capacity, that particular defence is not available. Our point is this. It is very difficult nowadays for a company to be able to say whether it is acting in a public capacity or not. We are thinking perhaps of utility supply companies or the press or the media, the television service --- whatever. How is a company to know whether, for the purposes of the Bill, it is acting in a public capacity or not? We think that the jurisprudence which has emerged from the human rights legislation is not sufficiently clear to give a guidance on that. That is a technical point in the Bill where we really do believe that some redrafting should be done.
Q744 Lord Bernstein of Craigweil: Particularly the clarity in the relationship between public and private enterprise?
Mr Berkeley: Public and private acts, public and private capacity. You could have a private company --- that is, something owned by shareholders --- nevertheless, for the purposes of the Bill, performing a public function.
Q745 Lord Bernstein of Craigweil: I take it then that you think the agent-principal method that the Bill adopts is satisfactory, if it is qualified and if the exceptions are made clearer?
Mr Cridland: Yes, I think that is broadly our position.
Q746 Lord Bernstein of Craigweil: Then there is the big question. Will the Bill reduce corruption?
Mr Cridland: I think that is almost impossible to answer. Our members judge that a Bill is essential to modernise law in an area where there is considerable uncertainty. We are very supportive of the principle of having modern, effective legislation in this area, so long as it is clear to business what they are being expected to adhere to.
Q747 Chairman: Is this Bill going to cover things which were not corruption before?
Mr Cridland: Our policy position and the wish of our members is that the Bill should not go beyond the existing legal protections, but that it is a Bill of modernisation.
Q748 Lord Bernstein of Craigweil: To sum up and to be clear in my mind, you are very much in favour of the Bill if it can produce more certainty.
Mr Cridland: Absolutely.
Q749 Lord Bernstein of Craigweil: At the moment you are unclear about whether it will do so.
Mr Cridland: Highly doubtful. However, that is exactly our position.
Q750 Lord Waddington: Do you think that the present law is uncertain? We have heard from a lot of witnesses that in fact it does not seem to have presented any great problems to prosecutors. What is wrong with the present law?
Mr Berkeley: There is one aspect of it which definitely puts it into question. That is the Terrorism Bill, and the extension of nationality jurisdiction so that, wherever in the world he is, a British citizen is subject to United Kingdom domestic law. That means he is subject to the 1906 Act and the 1898 Act, or whatever it is. I am not sure that those would export quite as easily as, if you like, a bespoke, new Act, designed to fit in with that.
Q751 Chairman: Let me ask you something else on which we have spent quite a lot of time. That is, the agent-principal test which, at first glance, would appear to exclude acts between people who were not in a principal-agent relationship but you might think were, to say the least, dodgy or perhaps even corrupt, but they are not included in the present definition. Do you see any problems with that? Is that a lacuna, or is that desirable and we should use the principal-agency test? If you read the definition, the whole emphasis is on the principal-agent, and breach of loyalty between principal and agent. Is that too narrow?
Mr Cridland: I am not aware that we have had a lot of comment on that point. With respect, I should again put in a health warning that we have looked at this very much from a lay business point of view. I am not saying that we would have spotted everything, but I am not conscious of there being a lot of debate on it.
Q752 Chairman: Let me give you two examples we have been given. The principals of two self-owned businesses do a deal to prevent something happening and one provides the other with either money or fails to do something he otherwise could have done. Most people would say, "That is not right. It is not an honest way to behave". Should that be covered by the Act or not?
Mr Berkeley: I think my answer to that is probably not, because there are other parts of the law designed to deal with that; in particular, the law of anti-trust, competition, and other forms of business regulation, and the old torts of interference with business relations and so on that one learned as a law student.
Q753 Chairman: People always prefer to be sued in tort than to be prosecuted in crime --- but some act that is outside the principle ---
Mr Berkeley: I am being rather facetious, and I am sorry about that. I really mean to say, I think, that no, it is not necessary, because there are other parts of the criminal law which are designed to deal with it.
Q754 Chairman: If it is corrupt in the sense intended, from what you have been saying and what the Law Commission said, why limit it to the principal-agent relationship?
Mr Berkeley: If it is already covered by other legislation or other common law offences, and so on, why try to extend a new Act, which is dealing with a very serious problem, to this --- if one may call it such --- extraneous?
Q755 Chairman: I suspect that if it would be criminal between two principals elsewhere, it might equally be criminal elsewhere as between principal and agent.
Mr Berkeley: Perhaps.
Q756 Lord Carlisle of Bucklow: I have just been contemplating what you were saying. Is the principal-agent basis essential for this Bill? As my Lord Chairman has said, you can have corruption between two principals: one making a payment to another to persuade him not to tender for the same contract that he is tendering for, or something of that nature.
Mr Berkeley: The other structural way of dealing with this topic of the Bill is the concept of breach of duty which, for instance, is used in the Council of Europe Convention; but breach of duty has its own limitations as a principle, as no doubt you have discussed.
Chairman: There are some defences in the Bill, of course. Lord Carlisle, would you like to pursue that?
Q757 Lord Carlisle of Bucklow: I think that we dealt with the defence that if, for instance, the principal is aware of the agent's actions then you see no difficulty in that, even if the agent is personally taking backhanders --- if it is to the knowledge of his principal.
Mr Cridland: Yes.
Q758 Lord Carlisle of Bucklow: Because you think it is reasonable, or because you think that it is covered by some other criminal offence?
Mr Berkeley: The actual illustration given by the Home Office says that in certain cases --- you used the word "backhanders" ---this payment to the agent is part of his remuneration and is recognised as such by the principal. That is the Home Office's interpretation.
Q759 Lord Campbell-Savours: Can I take you back to this question of principal-to-principal and give you an example, Mr Berkeley? Supposing a principal set out to bribe another dozen principals not to bid for a particular contract. He wanted everyone out of the field and he bribed everyone. Where would that be dealt with within the law? You were saying that there is other law that could deal with these problems. What actual law would do that?
Mr Berkeley: You are talking, for instance, about four or five contractors, equally principal, and they agree amongst each other that they will not offer x, y and z to any bidder. Is that the sort of thing?
Q760 Lord Campbell-Savours: Yes, and one might pay the other four not to bid.
Mr Berkeley: That sort of refusal to supply, and so on, is an ingredient of anti-trust offences, competition offences.
Q761 Chairman: But why is it not also corrupt or capable of being corrupt?
Mr Berkeley: I think that the point I am making is this. The Bill already has a very heavy jurisprudential load to bear. It is trying to simplify and bring together a very wide activity. If you put on top of it something which is more properly --- at least in our view --- part of competition law, then I think that you are overloading the donkey.
Mr Cridland: I would not want to leave any impression on this issue that we had some philosophical problem with the line of questioning or one or two of the suggestions. Frankly, these are not issues which we covered in our own evidence and we are giving an initial response. Andrew is entirely right that the objective of the CBI membership has been to clarify the legislation. We have been trying to work with government and therefore we have not said, "Put this on one side and start again". We have tried to narrow down our list of concerns to a practical list, which we hoped you would entertain. This is, if you like, a bit off-line in that respect. We are happy to consult further, but I do think that the thrust of our membership consultation has been that they want the law modernised, clarified, simplified, and that the trend of the questioning is to add a considerable extra construct. I do not think that we have a philosophical problem with that necessarily. We would come back to the fact that member companies would see that dealt with in other principal areas of law, but we are happy to consult further if it is a matter of particular interest.
Q762 Chairman: I am not sure I understand the full import of the word "modernise" as opposed to "change", but if you work out your concept of what corruption is really trying to deal with, and you come to the view that there is a wider range of activity falling within your concept of corruption, is it really an answer to say, "You can deal with this in other aspects of the law" ---when you could probably also deal with the particular matters that are included in the Corruption Bill?
Mr Cridland: We would be quite pleased to consider that point. We have not consulted our members specifically on it. I think that it raises all sorts of issues.
Q763 Chairman: I can well understand the argument that you should not go on duplicating crimes to cover the same act, or that if you have a perfectly adequate system --- anti-trust law or some other civil law --- it may be enough. However, one needs to be really sure that the agent-principal test is not too narrow.
Mr Cridland: I respect that point.
Q764 Mr Stinchcombe: Can I test that a stage further, just a short distance? If we were to take your evidence and conclude that we could simplify this Bill, first by importing some word such as "improper" and thereafter by deleting the confinements of the agent-principal relationship --- so all hinged on whether there was an improper advantage that was conferred --- and, by a side wind thereby, create the possibility that what might already be a wrong under competition law and anti-trust law might thereby also be included as an offence of corruption, would that side wind effect be something that you would fear? Would it be positively damaging, or would it be an acceptable risk for having a simplified anti-corruption Bill in the first place?
Mr Cridland: I think that we would need to be convinced that it did not unnecessarily duplicate existing law, or that it produced inconsistencies of application. That is something that our membership might well be concerned about, but we would look at it on its merits. I do not think there is a philosophical hang-up on this.
Q765 Mr Stinchcombe: Do you have the same concerns of duplication about the economic torts, as Mr Berkeley mentioned? They have a fairly abstract content. As I understand matters, at the moment it is not unlawful in any way under civil or criminal law for, say, one principal to offer another principal £30 million to induce breach of contract of employment. Given that it is of uncertain remit, do you have exactly the same concerns that we should not duplicate the economic torts also in this legislation?
Mr Cridland: I think that the point is more about the interrelationship with anti-trust and competition law specifically, although clearly you are asking us questions on which we have not consulted and we would need to check where the business community was.
Q766 Mr Stinchcombe: But you are broadly concerned about duplication and you are also concerned that we should not unnecessarily legislate for something that is already covered by the competition law.
Mr Cridland: Absolutely.
Mr Stinchcombe: That is the principal concern.
Q767 Lord Carlisle of Bucklow: If you asked the Law Commission, they would say, would they not, that their fundamental purpose is the codification of the criminal law? If that is so, is it possible and right to codify one aspect without looking at other similar aspects at the same time?
Mr Cridland: You have raised a question we have not previously considered, but which we would be happy to consider. In the work we have done on this Bill that issue has not been considered by the CBI.
Q768 Lord Carlisle of Bucklow: So you would say that you have no considered view on that?
Mr Cridland: We have no mandate. I can express an opinion. I have done, but I do not have a formal policy because the CBI has not ---
Q769 Lord Carlisle of Bucklow: Would you like to see general codification of the criminal law?
Mr Cridland: It is a very big question.
Q770 Baroness Whitaker: Would it be helpful to business and industry if fraud were also contained in an anti-corruption Bill, because they often occur at the same time? I think that there is no substantive offence of fraud, and this could be an opportunity. Would it be helpful to roll them together?
Mr Berkeley: I think that I have seen a Law Commission study on fraud. If I may take that as a policy question rather than a legal one, it is hard on management if they have too much to absorb by way of legislation. From a management point of view, therefore, I would say that a pragmatic, bit-by-bit approach is certainly easier and may even be more effective.
Q771 Baroness Whitaker: It is easier to have separate chunks than one coherent piece?
Mr Berkeley: Yes, because it would need more work from legal departments, from legal advisers, from management to make the necessary decisions, and then from the people who are concerned with writing codes of conduct. It would be quite a burden on companies in doing that --- and on the CBI. They would probably have to increase their staff!
Q772 Chairman: I suppose it might be said that fraud is a very much wider concept than corruption, and indeed the number of prosecutions for fraud is infinitely greater than the number of prosecutions for corruption. The effect of fraud in the civil law, of course, is fairly extensive. It is a possibility to bring them all together but, as you say, there are some problems. There seem to be no other questions. This has been a most valuable meeting and we are very grateful to you for the help you have given us. If, on reflection, you think that there are things on which you would like to elaborate further, or any other matters you think we have not touched on that we should have touched on, we would very much appreciate a note from you to let us know. It has been very valuable.
Mr Cridland: Thank you for the opportunity.