Draft Bribery Bill - Joint Committee on the Draft Bribery Bill

Draft Bribery Bill - Joint Committee on the Draft Bribery Bill Contents

2 BACKGROUND

5. The World Bank estimates that around a trillion dollars' worth of bribes are paid each year.[1] This adds 10% to the cost of doing business globally and as much as 25% to the cost of procurement contracts in developing countries.[2] We were told by Global Witness, among others, that these financial costs translate into human suffering through the diversion of resources, the distortion of free markets and damage to society:

6. The United Kingdom routinely ranks as one of the least corrupt countries in the world, but it has not escaped damaging scandals affecting British industry and politics.[4] The International Chamber of Commerce (UK) told us that bribery inside the UK tended to be viewed as less of a problem than bribery by businesses competing in the international arena, while James Maton of the UK Anti-Corruption Forum stated that bribery by UK companies was not commonplace.[5] He emphasised, however, that "there is a minority, perhaps a significant minority, that are engaged in corrupt practices and there is probably a larger number of companies that do not have adequate anti-corruption procedures, systems and controls".[6] Some estimates place the overall annual cost of corruption to the UK economy as high as £13.9 billion.[7]

The need for law reform

7. Bribery has been illegal under UK domestic law for centuries. A process of ad hoc reform has led to a "patchwork" of offences under the common law, the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Act 1906 and the Prevention of Corruption Act 1916.[8] There have been few developments in the law for over 90 years, aside from the jurisdiction of these offences being extended in 2001 to include acts done abroad by UK citizens and companies.[9]

8. The Law Commission recently described the law of bribery as "riddled with uncertainty and in need of rationalisation".[10] All witnesses supported the case for reform, reflecting calls that were first made by the Royal Commission on Standards in Public Life more than thirty years ago.[11] Particular criticisms of the current law include: the use of inconsistent terminology; an artificial divide between the public and private sectors; and a focus on whether or not an individual is acting as an agent on behalf of a principal, a concept which is both complex and leaves gaps in the law.[12]

9. Few individuals have been prosecuted under the existing bribery legislation in recent years, although a number of allegations have been pursued as part of a fraud charge. We also note that no company has ever been convicted under the current law, aside from Mabey and Johnson Ltd which recently pleaded guilty to making corrupt payments after self-reporting them to the Serious Fraud Office.[13] This does not reflect the scale of the problem represented by bribery and may, in part, be attributed to the difficulty in gathering evidence to support a prosecution.[14] While the new Overseas Anti-Corruption Unit of the City of London Police is starting to have an impact, the Serious Fraud Office told us that inadequacies in the law had stood in the way of securing a conviction on several occasions since 2005.[15] The UK Anti-Corruption Forum added that:

Pressure for reform has been growing at an international level since the United States introduced the Foreign Corrupt Practices Act (FCPA) in 1977.[17] The "lay person's guide" to this Act is included as Annex 2 to our report. The United Kingdom has since joined other nations in negotiating anti-bribery conventions in its role as a member of the Organisation for Economic Co-operation and Development (OECD), the Council of Europe, the European Union and the United Nations.[18] Each convention is different in scope but they share the common aim of raising standards and creating a level playing field on which businesses compete solely on the basis of merit.

10. The OECD's Working Group prepared reports in 2003, 2005 and 2007 that have been particularly critical of "deficiencies" in the UK's bribery laws.[19] Most recently, in October 2008, the Group stated that it was "disappointed and seriously concerned with the unsatisfactory implementation of the [OECD] Convention by the UK". It called on the UK Government to enact, among other things, "modern bribery legislation and establish effective corporate liability for bribery as a matter of high priority".[20] It warned that:

At no stage has the Government accepted that the UK is non-compliant with any of its international obligations, but it has acknowledged that failure to implement law reform could "bring into question the UK's commitment to the [OECD] Convention".[22]

11. The first significant step towards reform was taken by the Law Commission in the late 1990s, leading to the publication by the Government of a draft Corruption Bill for pre-legislative scrutiny in 2003. It was heavily criticised by the Joint Committee that was appointed to carry out this task, primarily due to the continued reliance of the draft Bill on the agent - principal relationship.[23] The current Criminal Law Commissioner, Professor Horder, described the 2003 Bill as quite "cautious and conservative".[24] It was not proceeded with and, although some of its elements have re-emerged in the new draft Bill, an alternative approach has been sought.

The draft Bribery Bill

12. The draft Bribery Bill is based largely on a second set of proposals developed by the Law Commission, which launched a consultation exercise in 2007 resulting in a report published in October 2008.[25] Among other things the draft Bill would:

Repeal the existing common law and statutory bribery offences and replace them with two general offences of bribing and being bribed (clauses 1 and 2);
Introduce a specific offence of bribing foreign public officials (clause 4);
Create a new criminal offence for companies and partnerships that negligently fail to prevent bribery by persons performing services on their behalf (clauses 5 and 6); and
Make supplementary provision for the jurisdiction of the offences (clause 7), the application of parliamentary privilege (clause 15), the role of the Attorney General (clause 10) and the powers of the security services (clauses 13 to 14).

13. The general reaction to the draft Bill has been positive. For instance, the OECD's Legal Director, Nicola Bonucci, stated that it represents an "important improvement and will enhance the credibility of the UK legal framework".[26] Some business and legal representatives, however, gave the draft Bill a more cautious welcome. This included Gary Campkin of the Confederation of British Industry who maintained that the draft Bill needed "quite a lot of work" to resolve legal and practical issues.[27]

14. There was general recognition that the draft Bill should be introduced promptly in view of what the Ministry of Justice described as the "protracted and faltering history to proposals for reform".[28] For instance, Transparency International UK stated that although the Bill was not perfect, "it is far more important to have legislation that effectively modernises, brings up to date and [makes] compliant our law on bribery than the precise detail of the Bill [sic]".[29]

15. Others preferred to highlight the risk of legislating in haste before repenting at leisure.[30] For instance the law firm, Clifford Chance, stated:

The Attorney General, Baroness Scotland of Asthal, emphasised the high priority given to the Bill by the Government, although she noted that pressure on the legislative timetable was a challenge to be overcome.[32] The Secretary of State for Justice, Jack Straw MP, told us that he was determined to secure the Bill's enactment before the next general election, including, if needed, introduction in the current parliamentary session for "carry over" into the next session.[33]

16. We welcome the draft Bribery Bill as an important opportunity to modernise the criminal law of bribery; this will assist in fulfilling the United Kingdom's international obligations more effectively. We urge the Government to introduce the Bill as soon as possible in view of its protracted and faltering history and to take full account of our recommendations.

The Defence Industry: a case study

We took evidence from representatives of the defence industry to explore attitudes and experiences in one of the sectors historically associated with corruption. In particular, a series of scandals surrounded Lockheed Martin in the 1970s concerning payments to foreign officials to gain contracts for the sale of military aircraft. Since then other defence companies, both in the US and Europe, have been accused of engaging in corrupt practices. The Al Yamamah contracts entered into by BAE Systems in 1985 sold Tornado aircraft to Saudi Arabia in a deal that was eventually worth more than £43 billion. It became particularly controversial after 2001 with allegations of illegal payments being made. The Serious Fraud Office opened an investigation into these allegations in 2004, then halted it in 2006 as we outline in chapter 10. As a consequence of the political controversy surrounding this, and other, allegations BAE Systems initiated its own report into business ethics. The result was the report of the Woolf Committee, which set out a number of principles and recommendations that apply to defence companies operating in the global environment[34].

Lord Robertson, the former Defence Secretary and Secretary General of the North Atlantic Treaty Organisation, viewed the level of competition and the high value of contracts as the combined source of the historic problem in the defence industry. He described bribery as being "both morally indefensible but also hugely wasteful and unfair in the international market place".[35]

The Society of British Aerospace Companies told us that the culture within the defence industry had been cleaned up over the previous 20 years.[36] Alan Garwood of BAE Systems stated: "one of the things we have learned is that the reputation of our company and how we are seen to do business is as important as what we do". He emphasised that trade tainted with corruption is not worth having: "it is bad for Britain and for British industry to take business on those terms".[37]

Thales UK, BAE Systems and Lockheed Martin described the strict anti-bribery procedures that they now have in place.[38] The carefully drawn recommendations of the Woolf Committee, which many of our witnesses viewed as an extremely valuable contribution to the development of best practice, have provided the impetus for a number of defence companies to review their policies on a range of ethical issues and instigate new procedures. Many of these involve policies to insulate the companies from pressures of bribery. In particular, BAE Systems, following the controversies over the Al Yamamah arms deal, instigated the Woolf Committee investigation and has now tried to go further than the Woolf recommendations to make itself the market leader among defence companies in ethical practices and a resistance to pressures, and allegations, of bribery. We note, however, that the real test of whether the industry has embraced a new culture will depend on old habits being abandoned permanently. Only time will tell.

There are signs of real progress. In particular, we applaud the efforts of all those involved in developing common industry standards (CIS) across the defence sector in Europe and the United States. While Lord Robertson highlighted that this does not yet represent a truly global commitment, it is a valuable step towards creating a level playing field on which businesses engage in a "fair battle" for trade.[39]

The Defence Manufacturers Association re-iterated Lord Robertson's view that ultimately the aim is to make good business ethics a "competitive advantage":

Transparency International UK's Defence Programme Director, Mark Pyman, stated that the governments which purchase from defence companies are routinely calling for the United Kingdom to be "clearer and stronger on defence anti-corruption".[41] We hope that the Government and the defence industry heed this call by continuing to develop a firm and effective response.

1 Department for International Development, Press Release, available at http://www.dfid.gov.uk/Media-Room/News-Stories/2009/New-draft-Bribery-Bill-to-support-international-fair-trade/ Back

2 Impact Assessment, p3; Department for International Development, Press Release, available at http://www.dfid.gov.uk/Media-Room/News-Stories/2009/New-draft-Bribery-Bill-to-support-international-fair-trade/ Back

3 BB35 Back

4 See the annual perceptions of corruption index published by Transparency International, available at http://www.transparency.org/news_room/in_focus/2008/cpi2008#pr Back

5 See the annual perceptions of corruption index published by Transparency International, available at http://www.transparency.org/news_room/in_focus/2008/cpi2008#pr; Q227 (James Maton) Back

6 Q227 (James Maton) Back

7 Association of Chief Police Officers, The nature, extent and economic impact of fraud in the UK, Febraury 2007, available at http://www.acpo.police.uk/asp/policies/Data/Fraud%20in%20the%20UK.pdf Back

8 Q76 (Colin Nicholls QC) Back

9 Anti-Terrorism, Crime and Security Act 2001, Part 12 Back

10 Law Commission, Reforming Bribery, No 313, November 2008 , para 1.1 Back

11 Royal Commission on Standards in Public Life, Cm 6524, 1976; since repeated in 1995 by the Committee on Standards in Public Life, Cm2850. Back

12 Law Commission, Reforming Bribery, No 313, November 2008, paras 2.23 to 2.33; Joint Committee on the draft Corruption Bill, HL 157, HC 705, July 2003, paras 10-14 Back