Memorandum submitted by UK Anti-Corruption
Forum (BB 04)
SECTION ONE
Introduction
1. The UK Anti-Corruption Forum is an alliance
of UK business associations, professional institutions, civil
society organisations and companies with interests in the domestic
and international infrastructure, construction and engineering
sectors. Organisations which are members include the Association
for Consultancy and Engineering, British Expertise, the Chartered
Institute of Building, the Institution of Civil Engineers, the
Institution of Mechanical Engineers, the Institution of Structural
Engineers, the Royal Institution of Chartered Surveyors, the Chartered
Institute of Purchasing & Supply, Engineers against Poverty
and Transparency International (UK). These organisations represent
over 1,000 UK companies and 350,000 professionals. Members
also include many UK construction companies and consulting engineering
firms.
2. The Forum's objective is to create a
business environment that is free from corruption, giving rise
to fair competition.
3. Bribery, fraud and facilitation payments
are an acknowledged problem in the infrastructure, construction
and engineering sectors, both in the UK and overseas (although
the prevalence of such occurrences is far more significant in
many overseas jurisdictions than it is in the UK). The Forum has
extensive experience and understanding of the practical nature
of these problems and believes that it can, therefore, make a
valuable contribution to this consultation in helping to formulate
a law which addresses the main issues and which is comprehensible
to the wider public.
4. The Forum would be happy to meet with
representatives of the Ministry of Justice or other relevant body
to discuss the proposed bill or the contents of this submission.
General comments
5. The Forum supports the reform of the
law of bribery in England and Wales. It agrees that the present
law is outdated and uncertain. Comprehensive reform though the
enactment of coherent and clear legislation is overdue. At present,
the complexity and uncertainty makes it difficult not only to
prosecute bribery cases, therefore penalising companies which
do not engage in corrupt practices, but also for the public and
business properly to understand the law, and for business efficiently
to train staff.
6. The Forum also accepts that the proposed
bill would, in general, provide a modern and clearly defined offence
of bribery, and ensure bribery law is consistent with the United
Kingdom's international obligations. The Forum therefore broadly
supports the proposed bill, subject to the points made below,
and hopes that legislation will be enacted as soon as possible.
Schedule 1 attached lists the key points which the Forum
supports.
7. This submission covers the following
areas: specific comments on the proposed Bill; the treatment of
facilitation payments; and the need for a comprehensive overhaul
of bribery laws to deal with the penalty of mandatory exclusion
(debarment) from tendering for public procurement contracts on
conviction for bribery.
SECTION TWO
Clause Two: Bribery: Offences relating to
being bribed
8. The bill proposes four offences covering
the receipt of bribes, expressed as Cases. The formulations of
the offence are complex, and possibly overly so, although the
Forum accepts that it is difficult to frame legislation to cover
all of the ways in which bribes or other illicit advantages are
demanded or received. The Forum accepts that the proposed offences
are an improvement on previous proposals and on the existing law,
and are workable, both in simplifying prosecution of bribery and
in making easier for business to train staff.
9. However, the Forum submits that there
are difficulties requiring rectification with the wording of the
recipient offences. In the Case 3 and 5 offences, it
may be possible for a payment to be received as a bribe even though
it was not paid as a bribe. There are three problems with this:
(a) It may create a new offence where none previously
existed. For example, P innocently takes R out for dinner. At
the time, R intends to allow the dinner to influence him to perform
an improper act. Under the proposed Bill, R has committed an offence,
even without performing an improper act and even though there
was no corrupt intention on P's part.
(b) It may criminalise as bribery conduct which
is not bribery as currently understood. For example, a window
company offers a legitimate commission in good faith to a sales
representative based on volume of sales, but from the outset the
representative intends to and does deceive customers as to the
window quality in order to increase sales and hence his commission.
Under the current law there would be no offence until a fraudulent
misrepresentation was made, and then the offence would be one
of fraud by the sales representative. There would be no bribery
offence. Under the proposed bill, the commission could be treated
as a bribe in the hands of the representative because he agreed
to receive it "intending that, in consequence, a function
or activity … would be performed improperly".
(c) There could be reputational damage to innocent
parties. This may arise, for example, where a company innocently
pays a sum to an agent who, unknown to the company, intends to
or does use that payment as a bribe. The agent may be convicted
of bribery in relation to the receipt of the money from the company
(under the current law, the agent would only be convicted in relation
to the subsequent corrupt action, not merely for corrupt intent
in receiving the money). Whilst the paying company would not have
committed a criminal offence, it may nevertheless unfairly suffer
reputational damage by association with the conviction, as it
was the payer of the money which was deemed to be a bribe.
Clause Four: Bribery of foreign public officials
10. The Forum supports the criminalisation
of bribes paid to a foreign public official.
11. As drafted, the bill does so in two
ways. First, the general offences contained in clause 1 of
the draft bill apply to bribes offered, made, received or demanded
overseas under the extra-territorial provisions contained in clause
7 of the bill. Secondly, clause 4 of the proposed bill
contains a specific and stand-alone offence of bribery of a foreign
public official. Each offence has differing ingredients, and the
existence of overlapping offences introduces complexity which
risks confusion. The Forum agrees that a discrete overseas offence
is justified on the basis of the need for the United Kingdom to
demonstrate compliance with its international obligations to deter
and punish corrupt transactions taking place overseas, and to
assist the Courts to interpret the scope and nature of the offence
against the "evolving background" of the OECD Convention.
However, attempt should be made to reduce the risk of confusion
between the two sections dealing with overseas bribery.
12. Clause 4 of the proposed bill does
not extend to inculpate the foreign public official who accepts
the bribe. Whilst it may be rare that foreign public officials
will be prosecuted in England, the Forum sees no reason why the
possibility should be excluded. Both the payment and the acceptance
of a bribe is a corrupt act and should be criminalised, as would
be the case for bribes paid to a domestic public official. It
is possible for bribes to be paid directly or indirectly to accounts
held by foreign public officials in England and Wales. It would
be morally reprehensible for a company which pays a bribe to a
foreign official to be convicted of bribery, and as explained
below be debarred from future public contracts, and yet witness
the public official using his corrupt assets to shop freely in
London.
Clause Five: Failure of commercial organisations
to prevent bribery
13. Under clause 5 of the proposed
bill, a company or other commercial organisation may be liable
for a new offence of negligently failing to prevent bribery.
14. Under the proposed bill, it would be
a defence to show that adequate procedures had been implemented
by the company or organisation to prevent bribery. This defence
would not be available if the negligence complained of is that
of a "senior officer" (defined as a director, manager,
secretary or officer of the defendant).
15. This would be a new offence. The Forum
supports its creation in principle, as it will encourage companies
to implement, maintain and enforce anti-bribery procedures, systems
and controls. It will therefore reward companies which do so,
and penalise those that do not. The Forum believes that this is
the correct approach to corporate liability in this area.
16. However, it is not clear how in practice
the offence and the defence to it will be interpreted, and the
Forum believes that there are some significant areas which require
further consideration. Otherwise, there will be uncertainty for
business, which could result in an offence being committed inadvertently.
In particular:
(a) It is not clear what compliance procedures
will be considered as "adequate".
(b) It is not clear in what circumstances the
defence would not apply. The Forum is concerned about the inclusion
of the term "manager" in the definition of "senior
officer" in clause 5(7) of the proposed bill. This is an
imprecise term and it is unclear how widely it will be construed
by the courts. In large organisations, it could include quite
junior managers.
(c) The test of "negligence" is a very
low standard for criminal law, and "gross negligence"
would seem more appropriate for a serious offence of this nature.
17. The Forum recognises that seeking comprehensively
to deal with these issues in legislation would be difficult, and
would introduce unwelcome complexity. However, the Forum submits
that guidelines should be published which do so (ideally agreed
between prosecuting agencies and relevant business groups, and
published a reasonable time prior to the introduction of the offence).
In particular, the guidelines should describe in detail the components
of adequate compliance procedures. In the United States a degree
of guidance is given on these issues in the "Federal Sentencing
Guidelines for Organizations," issued by the U.S. Sentencing
Commission and applicable to criminal violations of federal statutes
such as the Foreign Corrupt Practices Act, which criminalises
the bribery of foreign public officials.
18. The Forum would be willing to assist
in the drafting of appropriate guidelines.
19. As explained in the section on debarment
below, it is unclear whether it is intended that mandatory debarment
would apply to conviction for the proposed offence of failure
of commercial organisations to prevent bribery. The Forum considers
that it would be unfair for it to do so.
20. The Law Commission, in a report leading
to the publication of the draft bill, proposed that the offence
of failure to prevent bribery should apply only to companies and
limited partnerships whose registered office is in England and
Wales. The Forum supports the extension of the offence under the
bill to companies which carry on business within the jurisdiction.
The Forum proposes that it is further extended to companies whose
shares are traded on an exchange in the jurisdiction, and to foreign
companies which negligently fail to prevent bribery in circumstances
where a step is taken in the jurisdiction as part of a corrupt
scheme. Consideration should also be given to extending the application
of the offence to foreign companies in receipt of UK public funds
(for example from the Department of International Department),
in relation to projects for which the funds are provided.
Clause Seven: Offences under sections 1, 2 and
4: extra-territorial application
21. Clause seven of the proposed bill would
extend criminal liability to bribes paid overseas by British citizens,
UK residents and companies or partnerships incorporated in the
United Kingdom (and other individuals listed in clause 7(4) of
the draft bill).[1]
The Forum agrees with this approach.
22. It does not however agree with the limitation
on extra-territorial application contained in clause 7(4). In
particular, it believes that liability should apply to overseas
companies with a place of business in the United Kingdom, or which
trade in the United Kingdom, or whose shares are traded on an
exchange in the United Kingdom. It should also extend to companies
incorporated under the law of a Crown Dependency or an Overseas
Territory.
SECTION THREE
Facilitation payments
23. The Forum believes that facilitation
payments must be expressly dealt with. "Facilitation payment"
means a payment made to induce a person to perform a duty which
that person is obliged to perform, without resulting in preferred
treatment, and where that payment is over and above any payment
that is legitimately due.
24. Facilitation payments are often small.
However, in some cases, facilitation payments may be very significant
in size. For example a company may be forced to make a large payment
so that an engineer will properly perform his duty to certify
that work has been completed and payment is due to the company.
25. It is important to distinguish facilitation
payments from a payment made to obtain preferred treatment, for
example to move the payer up the queue, or to obtain a license
which is not properly due. Small payments of this nature are sometimes
mistakenly believed to be facilitation payments. That is wrong.
They are bribes and are correctly treated as such in the proposed
bill.
26. Facilitation payments are both damaging
and illegal in many countries, and the Forum wishes to see their
elimination. The Forum believes that facilitation payments should
be a criminal offence if paid in the United Kingdom regardless
of their amount.
27. However, facilitation payments made
in many overseas jurisdictions are far more problematic:
(a) The payer of a facilitation payment is normally
considerably less culpable than the recipient. This is because
the payer is the victim of extortion and it is often unjust to
make a payer guilty of an offence which it may be difficult to
avoid committing. In many cases, a company may be forced to make
such payments in order to obtain import or work permits to enable
it to fulfill contractual obligations, failing which it would
incur heavy penalties.
(b) A further difficulty is that minor facilitation
payments are endemic in many jurisdictions. In addition, many
payers of minor facilitation payments are junior employees travelling
or working overseas who may be compelled to make these payments
in difficult circumstances involving traffic police or immigration
officials.
28. These and similar issues mean there
is considerable debate as to whether facilitation payments made
overseas should be criminalised and prosecuted in the UK. There
is also considerable confusion and uncertainty as to liability
for facilitation payments and whether or not they constitute bribery.
29. The OECD Convention does not require
the criminalisation of facilitation payments. Some examples of
how facilitation payments made overseas are dealt with in other
jurisdictions are as follows:
(a) In the USA and Canada, a payment made to
a foreign public official to expedite or secure the performance
of a routine government action is not prohibited.[2]
(b) In Australia, a payment made to expedite
or secure the performance of a routine government action of a
minor nature is not criminal if the payment is of a minor nature
and a record is kept of the payment.[3]
(c) In New Zealand, a payment made to a foreign
public official to ensure or expedite the performance of a routine
government action is not criminal when the value of the payment
is small.[4]
30. Facilitation payments would be criminalised
under the proposed bill. However, in its report preceding publication
of the bill, the Law Commission recognised that they pose particular
difficulties, and suggested that it "will be rarely in the
public interest to prosecute… for the payment of small sums
to secure the performance of routine tasks". It suggested
that facilitation payments are best handled through sensible use
of the discretion not to prosecute.
31. The possible options in relation to
facilitation payments paid overseas are as follows:
(1) To make all facilitation payments an offence.
The argument against this option is the injustice in making those
liable who are the victims of extortion and who have no option
but to make the payment.
(2) To make all facilitation payments an offence,
but to have an express policy that these offences will not be
prosecuted. This is the current situation in the United Kingdom,
and is the approach taken in the draft bill.
(3) To make facilitation payments an offence,
except those which involve minor payments. The benefit of this
option is that it will exclude the large majority of facilitation
payments, which tend to be small routine payments. There will,
however, be difficulty in establishing what is meant by "minor
payment", although other jurisdictions have felt able to
do so. Also it will mean that those persons who are the victims
of extortion for large payments will incur criminal liability—even
where they may have perceived that they had no choice but to make
the payment. This option would therefore unfairly favour those
who have made only minor payments when, in reality, there is no
greater culpability in being forced to make a large payment.
(4) To make all facilitation payments an offence,
but to allow certain circumstances to constitute a defence or
to be taken into account in sentencing. Circumstances which might
constitute a defence could include extortion. Circumstances which
may affect sentencing could include extortion, commercial or personal
necessity, safety, the size of payment, whether the extortion
was reported, and what efforts the person made to avoid making
the payment. For example, in the latter case, did a company approach
the authorities or its local embassy to ask for help? Whilst this
option may involve a person incurring criminal liability, it would
nevertheless provide a means of dealing more fairly with those
who have been the subject of extortion.
(5) To make all facilitation payments an offence,
except those which involve minor payments, and to allow certain
circumstances as a defence or to affect sentencing for larger
payments (as in (4) above).
32. In relation to facilitation payments
made overseas, the Forum has been unable to reach a consensus
on the correct approach due to the significant difficulties in
identifying a fair and effective solution to this issue. However,
consensus has been reached on the following points:
(a) There should be a clear distinction between
bribery and facilitation payments.
(b) There needs to be certainty as to the circumstances
in which a facilitation payment will be prosecuted, and the circumstances
in which it will not.
(c) There also need to be certainty as to how
facilitation payments should be accounted for in a company's books
and records.
(d) At present, there is considerable uncertainty
on these issues and that uncertainty will continue if the proposed
bill becomes law. That uncertainty does not assist with training
staff, implementing compliance programmes and combating bribery
and corruption.
(e) If facilitation payments are to be outlawed,
detailed guidance should be published on these issues.
(f) If facilitation payments are treated as criminal
offences, the penalty for making a facilitation payment should
be lower than that of a bribe, to reflect the fact that the payment
is normally extorted or made under urgent necessity to meet commercial
or personal obligations.
(g) The payer of a facilitation payment should
not face mandatory exclusion (debarment) from public procurement
contracts, a point developed below.
Debarment
33. One of the penalties for bribery is
the exclusion (debarment) of companies from participation in public
sector projects. The Forum supports the use of debarment as one
of a range of anti-corruption actions provided that debarment
is implemented in a fair and efficient manner, and that the penalty
is proportionate to the offence committed.
34. Some forms of debarment are mandatory,
requiring a purchasing body to exclude from tendering any company
which has been convicted of corruption. This is the case in the
European Union under directives which have been implemented in
England, Wales and Northern Ireland.[5]
35. Those regulations provide for mandatory
exclusion of a company from public sector and utility contracts
if the company, or its directors, or any other person who has
powers of representation, decision or control of the company,
have been convicted of bribery, fraud, money laundering, cartels
and specified other offences.[6]
36. There are currently potential material
injustices in the way that debarment law is currently framed:
(a) debarment under EU Directives presently applies
however minor the offence—mandatory debarment would apply
for example to conviction for making facilitation payments;
(b) no regard is had to any mitigatory factors
which should be encouraged (for example whether the company took
steps to prevent the offence, self-reported the offence, co-operated
with the authorities, has robust and effective internal anti-corruption
procedures etc).
37. These points are explained in more detail
in the Forum's discussion paper entitled "Fair and efficient
debarment procedures". A copy is attached as Schedule 2.
38. The Forum believes that a thorough review
of bribery law should consider debarment, and result in the current
law on debarment being replaced with a law which applies fair
and proportionate penalties.
39. It is unclear whether it is intended
that mandatory debarment would apply to conviction for the proposed
offence of failure of commercial organisations to prevent bribery.
The Forum submits that it would be unfair for it to do so. Further,
the Forum submits:
(a) it would be unduly harsh for a conviction
for making a facilitation payment automatically to lead to debarment;
(b) companies that can demonstrate robust and
effective internal anti-corruption procedures should not face
mandatory debarment if convicted for an isolated example of bribery.
June 2009
SCHEDULE 1
The Forum supports the following key elements
of the proposed bill:
1. The repeal of the existing common law and
statutory offences, and their replacement with a comprehensive
bill setting out the potential liability of the payer of the bribe
and the recipient, and related offences.
2. The objective of ensuring that English law
is in compliance with the OECD Convention on Combating Bribery
of Foreign Public Officials in International Business Transactions.
3. The decision to abandon the "principal
offender/accessory" and "primary reason" tests
initially proposed in the Law Commission's initial Consultation.[7]
4. Subject to the comments in the body of the
Forum's submission:
4.1the criminalisation of bribes paid to a foreign
public official (Clause 4 of the proposed bill), and the
definition of "foreign public official" (Clause 4(6));
4.2the proposed introduction of the offence of
failure to prevent bribery, in part intended to encourage companies
to implement, maintain and enforce procedures, systems and controls
designed to prevent bribery (Clause 5);
4.3the proposed extra-territorial application
of the general offences (Clause 7).[8]
5. The Forum has not reached a consensus on whether
consent should be needed to bring a prosecution, but has reached
a consensus that if consent is required it should as recommended
be that of the senior prosecuting authorities, and not of the
Attorney General.
6. The following provisions which are consistent
with the Fraud Act 2006:
6.1The proposal that an individual director,
manager, or equivalent person who consents to or connives at the
commission by a company of one of the general offences or the
offence of bribery of a foreign public official, will himself
or herself commit the offence (Clause 8)
6.2The proposed penalties (Clause 11).
SCHEDULE 2
FORUM'S DEBARMENT DISCUSSION PAPER—15.05.07
DISCUSSION PAPER
UK ANTI-CORRUPTION FORUM
FAIR AND EFFICIENT DEBARMENT PROCEDURES
INTRODUCTION
1. "Debarment" is the procedure
under which a company is prevented from participating in a project
for a specified reason (eg a corruption conviction). It is sometimes
referred to as "exclusion" or "blacklisting".
2. Examples of debarment are where:
a) Funders deny project finance, guarantees or
insurance to a company or project owner which is found to have
been involved in corruption.
b) Project owners exclude from the tender list
any company which is found to have been involved in corruption.
3. Some forms of debarment are mandatory,
and require a purchasing body to exclude from tendering any company
which has been convicted of corruption (for example, exclusion
under the EU Procurement Directives). Other forms of debarment
are discretionary, and do not rely on a conviction (for example,
debarment by the World Bank).
4. The wide-spread publicity given to debarment,
and the increase in due diligence undertaken by procurement authorities,
makes it increasingly likely that debarment by one organisation
will lead to debarment by another.
5. For a company, debarment is the equivalent
of imprisonment for an individual. It is depriving the company
of the freedom to undertake business. Debarment of a company for
any significant length of time may result in the economic destruction
of that company. It would be unable to obtain work or retain staff,
and may as a result have to be wound up, or be broken up and sold.
Its pension fund may be placed at risk. Therefore, similar principles
of jurisprudence must apply to the debarment of a company as to
imprisonment of an individual.
6. The UK Anti-Corruption Forum supports
the use of debarment as one of a range of anti-corruption actions
provided that debarment is implemented in a fair and efficient
manner. This discussion paper recommends certain minimum requirements
which are necessary for fair and efficient debarment procedures.
THE OBJECTIVES
OF DEBARMENT
PROCEDURES
7. Debarment procedures should have four
primary objectives:
a) To deter companies from committing corrupt
acts.
b) To punish companies which commit corrupt acts.
c) To encourage companies to implement effective
anti-corruption policies.
d) To encourage companies to deal promptly and
openly with any instances of corruption, and to co-operate with
the authorities in the investigation and prosecution of corrupt
acts.
THE REQUIREMENTS
OF DEBARMENT
PROCEDURES
8. In order to achieve these objectives,
debarment procedures should:
a) be implemented in accordance with good judicial
practice;
d) provide incentives as well as penalties.
These requirements are examined in more detail
below.
Good judicial practice
9. Debarment is a severe penalty. Both the
procedures for determining whether or not there should be a debarment,
and the procedures for determining the length of the debarment,
should follow good and consistently applied judicial practice.
10. Determining whether or not there should
be a debarment:
a) Where debarment is mandatory: If a company
has been convicted of corruption, and is facing debarment under
a mandatory procedure:
i)If the company facing debarment is appealing
the conviction, the debarment should not take effect or be publicised
unless and until the conviction is upheld by the appeal body.
ii)The company facing debarment should be permitted
a reasonable time, prior to the debarment becoming effective,
to introduce evidence to the debarring authority that the conviction
was obtained in a jurisdiction which did not follow due judicial
process. If the company can provide satisfactory evidence to this
effect, debarment should not be implemented under the mandatory
procedure.
b) Where debarment is discretionary: If a company
is accused of a corruption offence, and is facing debarment under
a discretionary procedure:
i)The debarring authority should provide full
disclosure to the company facing debarment of the evidence that
it was involved in a corrupt act.
ii)The company facing debarment should be permitted
a reasonable time to prepare its defence against the allegations.
iii)The company facing debarment should be permitted
to provide to the debarring authority its documentary and witness
evidence, and legal argument.
iv)The debarring authority should only debar
when it is satisfied beyond all reasonable doubt that the company
facing debarment was involved in a corrupt act.
v)The company facing debarment should be allowed
a reasonable time to appeal the debarment decision to an independent
appeal body.
vi)If the company facing debarment does appeal
the decision, the debarment should not take effect or be publicised
unless and until the debarment decision is upheld by the appeal
body.
c) Where a company has been convicted or debarred,
and the company is appealing such conviction or debarment, a procuring
entity shall be entitled to request the company facing debarment
to provide reasonable proof that it has implemented an effective
anti-corruption programme as a condition of allowing it to tender
during the period prior to the appeal being decided.
d) In the case of both a) and b) above, debarment
should not apply to contracts awarded prior to the debarment coming
into effect. However, a procuring entity will retain the right
to terminate a contract for corruption to the extent that right
is granted under contract or by law.
11. Determining the length of the debarment
period:
a) The length of the debarment should take account
of the following factors:
i)the severity of the offence;
ii)the magnitude of the loss caused by the company's
actions;
iii)whether it is a first offence or a repeat
offence;
iv)the seniority of the relevant individuals
responsible for the offence;
v)whether the board of the company had authorised
or acquiesced in the offence;
vi)the steps taken by the company to prevent
the offence occurring;
vii)whether the company itself reported the offence
to the authorities;
viii)the extent to which the company co-operated
with the authorities after the offence had been discovered;
ix)whether the relevant individuals responsible
for the offence have been dismissed or appropriately disciplined
by the company;
x)the impact on the company and its non-offending
employees of a debarment.
b) At one end of the spectrum, where all the
following factors are present, there should only be a nominal
debarment: Where the corrupt payment is of a low value, causing
minimal loss, and is committed by an employee of the company against
the company's properly embedded policies and training, and in
circumstances where the company discovered the offence, reported
the offence, dismissed or appropriately disciplined the employee,
and co-operated with the authorities.
c) At the other end of the spectrum, where all
the following factors are present, there should be a material
debarment. Where the corrupt payment is of a high value, causing
significant loss, and is committed by an employee of the company
with the authority or acquiescence of the board, and the company
concealed the offence, did not report the offence, did not dismiss
or appropriately discipline the employee and did not co-operate
with the authorities.
d) A tariff should be developed and published
which lists the approximate length of the debarment taking into
account the factors listed in paragraph 11 a). The intent
should be that the debarment creates a result proportionate to
the circumstances of the offence.
12. Reduction in debarment period:
a) Once debarment of a company has been implemented,
the company should be entitled to a significant reduction in the
debarment period if it can provide satisfactory and plausible
independent proof to the debarring authority that it has implemented
an effective anti-corruption corporate programme.
b) Prior to the implementation of the OECD Convention
on the Bribery of Foreign Public Officials and United Nations
Convention against Corruption, business was conducted in many
countries in a manifestly different international ethical and
legal environment. To take account of this fact, in relation to
offences committed by a company prior to 14th December 2005 (the
date the UN Convention came into force), the debarment period
should be terminated as soon as the company can provide satisfactory
and plausible independent proof to the debarring authority that
it has implemented an effective anti-corruption corporate programme.
Transparency
13. Debarment procedures should be transparent.
It must be quite clear to a company, and to the general public,
what offences will lead to debarment, what procedures will be
adopted to determine the debarment, the range of debarment periods
applicable, and the procedures for appealing or lifting the debarment.
The decision and reasons of the debarring authority should be
publicly available.
14. A register should be maintained which
contains details of all debarred companies, and the relevant offence,
the length of the debarment, and the reasons for the debarment.
This information should be publicly available, and be easily accessible.
Many organisations, as part of their due diligence, require to
know whether or not a company has been debarred. This register
will assist this purpose. Ideally, one international register
should contain details of all debarments, so that information
can be obtained from a single source.
15. Procedures should be implemented which
enable a company to procure correction of incorrect entries on
the register.
16. Many organisations require disclosure
by bidding companies of previous debarments. Criminal convictions
are treated as "spent", and do not require disclosure
after a certain period. Similarly, a debarment should be treated
as "spent", and should not require disclosure, and should
be deleted from the register, an agreed period of time after the
debarment has ceased.
Uniformity
17. Debarring authorities should as far
as possible co-ordinate their systems, so that debarment procedures
and penalties are applied uniformly.
18. Exceptions to debarment rules should
not be granted to companies with special political influence or
a material share of the market.
Incentives
19. Of the four objectives listed in paragraph
7 above, objective a) is to deter and b) is to punish. The
threat of debarment must be real and serious, which therefore
acts as a deterrent. However, deterrence and punishment only form
part of the objectives. As recognised by objectives c) and d),
companies must be encouraged to:
a) implement effective anti-corruption policies;
and
b) deal promptly and openly with any instances
of corruption, and co-operate with the authorities in the investigation
and prosecution of corrupt acts.
20. These aims are best achieved by rewarding
companies for acting in this way. If a company knows that it will
receive the same debarment penalty whether or not it itself uncovers
and reports the offence, it will have no incentive to undertake
internal audit and co-operate with the authorities. On the contrary,
it may be encouraged to conceal the offence, as it will be aware
that reporting will alert the authorities and result in no benefit.
As a result, corruption will be driven underground, when preventing
corruption is best achieved by bringing it out into the open.
21. The recommendations in this paper contain
significant incentives for companies to implement anti-corruption
policies, and to deal openly and actively with corruption. In
particular, the recommendations that:
a) the length of debarment takes account of mitigatory
circumstances, reducing to a nominal period in the best case (paragraph
11 b) above);
b) the introduction of anti-corruption systems
can lead to a reduction in the debarment period (paragraph 12 a)
above).
LIABILITY FOR
THE ACTIONS
OF OTHER
COMPANIES
22. One of the most difficult issues in
relation to debarment is the extent to which a company should
be debarred for the actions of another company. The deterrent
and punitive objectives of debarment would be neutered if an organisation
could set up a series of single project companies, deliberately
pay bribes to win work, and then, if one company is debarred,
continue trading corruptly though the other companies. At the
other extreme, however, it would be unfair and wrong for a company
to be debarred for the actions of another company over which it
had no control, and in circumstances where it had no complicity
in the corruption.
23. The following general principles are
suggested for further discussion with a view to achieving a fair
and transparent system of dealing with this issue.
a) If Company A is debarred for a corrupt act,
and Company B authorised or was complicit in the corrupt act,
Company B should also be debarred. This would include circumstance
where Company A is the parent or subsidiary company, or agent,
joint venture or consortium partner, or sub-contractor of Company
B.
b) The lengths of debarment of Company A and
Company B should take account of the factors listed in paragraph
11. The debarment period for Company A could be different from
that of Company B to take account of differences in the level
of their involvement.
GUIDELINES
24. The complexity of the issue, and the
need for certainty and uniformity, requires that international
guidelines on debarment are drawn up and agreed. The UK Anti-Corruption
Forum would welcome the opportunity to participate in this exercise.
CONCLUSION
25. Debarment of a company can be an effective
method of deterring and punishing corruption. It forms an important
part of an overall anti-corruption strategy. However, debarment
is a potentially devastating penalty. It is therefore vital that
debarment procedures are implemented in accordance with good judicial
practice, are transparent, are uniformly applied, and provide
incentives as well as penalties.
The UK Anti-Corruption Forum is an alliance of
UK business associations, professional institutions, civil society
organisations and companies with interests in the domestic and
international infrastructure, construction and engineering sectors.
The purpose of the Forum is to promote industry-led actions which
can help to eliminate corruption. The members of the Forum believe
that corruption can only be eliminated if governments, banks,
business and professional associations, and companies working
in these sectors co-operate in the development and implementation
of effective anti-corruption actions.
1 The proposed offences would also apply to citizens
of British Overseas Territories, British Nationals (Overseas),
a British Overseas Citizens, British subjects and British protected
persons. Back
2
Section 78dd-1(b) of the Foreign and Corrupt Practices Act 1977 and
Section 3(4) of the Corruption of Foreign Public Officials Act
1998. Back
3
Section 70.4 of the Criminal Code 1995 Back
4
Section 105C of the Crimes Act 1961 Back
5
The EU Public Sector and Utilities Procurement Directives 2004,
which came into effect in April 2004. England, Wales and Northern
Ireland implemented the Directives on 31 January 2006 by
means of two Regulations: "The Public Contracts Regulations
2006", and "The Utilities Contracts Regulations 2006". Back
6
Regulation 23 of the "Public Contracts Regulations 2006"
and Regulation 26 of the "Utilities Contracts Regulations
2006" Back
7
"REFORMING BRIBERY: A CONSULTATION PAPER" Back
8
And other individuals listed in clause 7(4) of the draft bill. Back
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