Draft Bribery Bill - Joint Committee on the Draft Bribery Bill

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

14 WIDER ISSUES

Enforcement and deterrence

229. At the start of this report we argued that new legislation to combat bribery was long overdue and should be introduced as soon as possible. Not only would a Bribery Act enable the UK to meet its international obligations, it could also have a strong deterrent effect on companies and individuals who might otherwise have paid bribes. The legislation will only act as a deterrent, however, if those who bribe are convinced that their compliance with the law is being closely monitored and any offenders will be punished. Professor Horder told us that "this Bill will stand or fall, not necessarily perhaps by how it is phrased, but by whether or not, and the degree to which, it is enforced".[345]

230. Insofar as enforcement results in convictions for bribery, we attempted to establish whether a Bribery Act would be likely to generate additional prosecutions. The partial Impact Assessment produced to accompany the draft bill itself states that the Government envisages only 1.3 additional prosecutions per year for bribery offences as a result of any legislation enacted, although, as the analysis in Annex 1 shows, it is far from clear how these calculations were made. Global Witness commented in written evidence that this figure "suggests that the Bill will not act as a successful deterrent. Only properly enforced legislation will successfully disincentivise bribery".[346] Similarly, in oral evidence, Monty Raphael stated:

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231. Evidence suggests that the disincentive effect on companies of the Foreign Corrupt Practices Act in the United States has been so marked because of the effective enforcement of the law by the authorities, leading to a substantial number of prosecutions.[348]

232. We accept, however, that an increase in the number of prosecutions for bribery would not necessarily be a good gauge of the success of legislation. Professor Horder suggested to us that the aim of the draft bill was not to raise conviction rates but to change corporate culture to ensure that bribery occurred less often:

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This view was reiterated by the Secretary of State, who said: "I do not think one should measure the success of the legislation by whether there are scores and scores of prosecutions because, with a bit of luck, this legislation would have a strong deterrent and chilling effect, so it would change behaviour".[350]

233. Nonetheless, other witnesses did suggest that a lack of sufficient resources rather than the anticipation of a sudden cultural change may be responsible for the Government's modest estimate for the increase in prosecutions as a result of legislation. The Director of Public Prosecutions told us that "there would be an additional need for resources if there were significantly more investigations undertaken by the police as a result of these proposals".[351] Similarly, the City of London Police Overseas Anti-Corruption Unit told us that "the level of resource, currently available, has been sufficient to obtain the results identified thus far" but noted that an intelligence assessment would be required to identify the level of additional resources needed to combat corruption overseas.[352] The Serious Fraud Office did not give us an indication of the level of additional resource needed, or of whether it was available, instead telling us that "the SFO is facing budget reductions in line with other departments. The challenge for us is to improve our efficiency so that we are able to deliver much more than before".[353]

234. At a speech to the 5^th European Forum on Anti-Corruption, the Secretary of State said:

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We are not clear on what that £6 million will be spent if not to increase the number of additional prosecutions possible beyond 1.3 per year.

Securing compliance

235. However many prosecutions occur as a result of the proposed legislation, we accept the Government's view that the primary aim of a Bribery Act should be to deter companies from committing bribery in the first place. To make this happen resources need to be targeted not just at investigations and prosecutions but at the companies which are charged with ensuring their own compliance with the law. At the most basic level, this means generating sufficient publicity to make companies aware of their new responsibilities. Reynolds Porter Chamberlain told us that an Act arising from the draft Bill would need to be given wide publicity "to ensure that all UK businesses are aware of the need to prevent bribery and meet this regulatory burden".[355] The Government's partial Impact Assessment takes account of a one-off budget for "awareness raising" of £50,000.[356] As the Government has not provided any analysis to determine how this figure has been arrived at, we are unable to assess the sufficiency of this amount.[357] If, however, the primary aim of the legislation is to deter companies from bribing, it would be logical to publicise it as widely as possible within the business community. We think it unlikely that £50,000 would make a significant difference to levels of awareness in companies doing business in the UK.

236. It is not sufficient simply to ensure that companies are aware of their obligations with respect to legislation on bribery: compliance also needs to be monitored. The Government's partial Impact Assessment, however, states that the corporate offence set out in clauses 5 and 6 "does not prescribe any specific additional measures which a company must adopt and there will be no compliance monitoring process".[358] The Crown Prosecution Service told us that the lack of a significant increase in the number of prosecutions for bribery offences was "rather less because of shortcomings in the law […] than because of the difficulty in obtaining evidence in the first place".[359] If difficulties in obtaining evidence are the main barrier to prosecution, it seems odd that the Government is not intending to monitor compliance with the law, since this would be one of the primary means by which offences could be identified, as well as systems corrected before any breach in the law occurred. Global Witness told us that the lack of monitoring meant that:

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237. The Government's partial Impact Assessment suggests that bribery legislation would only result in an additional 1.3 prosecutions for bribery per year. This would be an indicator of success if it reflected vastly increased diligence and compliance on the part of companies. We would be troubled if this low estimate were better explained by a lack of resources available to enforce the legislation. We recommend that the Government prepare a complete Impact Assessment for any legislation that is subsequently introduced, including an assessment of the additional resources required for effective enforcement by way of publicity, monitoring of compliance and investigations. Without committing adequate resources to tackle bribery, the Government's legislation will not have the required deterrent effect.

238. The Government's impact assessment should also include a fuller analysis of the damage caused by bribery to economic and social development, to democracy and the rule of law, to individual members of the community and to businesses themselves, particularly through the distortion of competition, the diversion of scarce resources to purchase inferior products, and the harm to personal and national reputations at home and abroad. These underlying economic and human costs, felt most directly and disproportionately by the poor, must not be overlooked.

Impact on the private sector

239. The draft Bribery Bill was published alongside a partial Impact Assessment. In a memorandum to the Committee, the Ministry of Justice explained that there was only a "limited opportunity" for the Government to prepare a detailed Impact Assessment and that the decision had been taken to "publish the proposals as draft legislation and to develop the impact assessment further once it was published".[361]

240. The House of Commons Scrutiny Unit prepared an analysis of the Government's Impact Assessment, which is published as Annex 1 to our report. The analysis identifies many areas in which the Assessment requires more work. Of these, the analysis of the impact of the legislation on businesses was identified by several witnesses as being particularly deficient. The Assessment states that the new corporate offence will result in additional public sector costs of approximately £2 million per year, based on an additional 1.3 prosecutions and three additional confiscation proceedings brought by the Serious Fraud Office.[362] The Assessment also estimates additional private sector costs of approximately £3 million per year "for legal advice and possibly the preparation and communication of guidance to staff" before noting that "the impact on any individual company will depend in each case on the business sector, the degree to which it is engaged in high risk markets and the size of the company".[363] Nonetheless the Assessment also states that overall the draft Bill will have a positive impact on competition as bribery "distorts free and fair competition in the market" and "hurts honest companies".[364]

241. This analysis of the costs and benefits of the legislation was disputed by witnesses from the corporate sector. The Confederation of British Industry stated that "it is clear that the Impact Assessment very significantly under-estimates the cost and activity related to the operation of the draft bill".[365] Similarly, the International Chamber of Commerce (UK) told us that the costs set out by the Government were "wrong by many orders of magnitude", using recent litigation involving AON Ltd as a case study.[366] Guidance produced by the Defence Manufacturers' Association and the Society of British Aerospace Companies also highlights that "the costs of defending an allegation of corruption (even if not prosecuted) could be as much as £10m".[367] The Federation of Small Businesses argued that "greater clarity is needed around the costs for small businesses in the [Ministry of Justice] impact assessment along with clear and more detailed information about the specific impact on small businesses".[368]

242. The Government's partial Impact Assessment of the draft Bill leaves out much of the analysis needed to justify its conclusions and in particular takes only minimal account of the impact of the proposed legislation on the private sector. We recommend that the Government publishes a much more detailed Impact Assessment at the same time that the Bill is introduced into Parliament, taking account of all the points raised in Annex 1 to this report and paying particular attention to the impact of the legislation on business, especially small businesses.

Review

243. The Government's partial Impact Assessment for the draft Bill states that there will be a review of the effectiveness of any resulting Act after a period of three to five years, in line with guidelines set out by the Cabinet Office and endorsed by the Liaison Committee of the House of Commons. Although the Federation of Small Businesses suggested that a review of the impact of the legislation on small businesses might be more appropriate after a period of two years, we are satisfied that the period set down by Government would allow a sufficient amount of time for the effect, if any, of the legislation to become apparent.[369]

244. We are, however, uncertain about how the effectiveness of the legislation will be measured, given the lack of appropriate indicators set out in the partial Impact Assessment and the Explanatory Notes that accompany the draft Bill. Given the Government's lack of emphasis on increasing the prosecution rate for bribery, it is difficult for us to assess what success would look like. We welcome the commitment of the Government, set out in its partial Impact Assessment for the draft Bill, to review the impact of the legislation after a period of three to five years. We recommend, however, that in its revised Impact Assessment the Government generates a comprehensive set of performance indicators so that the criteria against which the legislation is being assessed are clearly understood.

Time allocated for pre-legislative scrutiny

245. The Cabinet Office's Guide to Legislative Procedure sets down a minimum period of three months for a pre-legislative scrutiny inquiry. The draft Bribery Bill was published on 25 March 2009 and, in the Orders of Reference set out for a Joint Committee appointed to consider the draft Bill, the Government set a reporting deadline of 21 July 2009. This would have allowed nearly four months for a Joint Committee to carry out its work: hardly a relaxed timetable, but one which nonetheless would have given the Committee adequate time to conduct thorough pre-legislative scrutiny of the draft bill.

246. Unfortunately, the business managers in both Houses took some considerable time to nominate Members to a Joint Committee, with Members only being nominated in the House of Lords on 11 May 2009. This left a bare ten weeks for us to meet for the first time; issue a call for evidence; agree a programme of witnesses; take oral evidence; consider written evidence; and agree a report. Nearly seven weeks were lost to the pre-legislative scrutiny process before the Joint Committee was even appointed. This repeats a pattern established in earlier years and commented on by the Commons Liaison Committee in its report on The Work of Committees in 2007-08:

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247. We regret that we were given a bare ten weeks to conduct pre-legislative scrutiny of this important draft Bill. We recommend that, in order to demonstrate its respect for the process, the Government ensure that future Joint Committees are established sufficiently promptly to allow for a minimum scrutiny period of twelve weeks from the first meeting of the committee appointed to undertake scrutiny.

345 Q37 Back

346 BB35 Back

347 Q364; See also Annex 1 Back

348 BB35 Back

349 Q37 Back

350 Q560 Back

351 BB16 Back

352 BB58 Back

353 BB14 Back

354 Information on this conference can be found at http://www.americanconference.com/anticor_fcpa/5th_European_Forum_on_Anti-Corruption.htm Back

355 BB34 Back

356 Impact Assessment, p 2 Back