Additional memorandum submitted by ICC
(BB 23)
Supplementary Questions to Andrew Berkeley, International
Chamber of Commerce (United Kingdom)
ANSWERS
I am very pleased to answer the further questions
which were sent to me by the Clerk to the Joint Committee on 10
June 2009. Since I gave evidence, the Joint Committee has heard
evidence from Mr Nicola Bonucci of OECD. Some of his answers dealt
with the question of corporate criminal liability which was also
the context of several of the questions which the Joint Committee
put to me. Some of the clarifications which he gave are, in our
opinion, of great importance, especially in relation to the proposed
new corporate criminal offence of failing to prevent bribery.
I therefore ask the indulgence of the Joint Committee to allow
me to enlarge on these points in my answers to the questions.
First Question
The CBI has stated that it is not satisfied with
the "improper performance" test in the Bill. To the
extent that the test is unclear or unworkable, what changes should
be made to the draft Bill? Can Guidance be used to make it workable?
We asked the Clerk to clarify whether this question
related to the proposed general offence of bribery, to which "improper
performance" is, indeed, relevant, or to the new corporate
criminal offence of "failure to prevent". She answered
that the question related to the general offence.
For the reasons which we gave in our written
evidence, we do believe that the "improper performance"
test is unclear because of the nature of the definitions of "relevant
expectation". In this we agree, with respect, with Mr Geoffrey
Cox in his comments about Question 265. However, such lack of
clarity as there may be is due to the fact that the Bill is embodying
a new legal concept. We accept that, if a move is to be made away
from the principal/agent model, a new furrow will have to be ploughed.
We also accept, as does the Law Commission quoting the judges'
comments to it, "there comes a point when you have to leave
it to the jury".
Accordingly, our comments on the general offence
are of amendment only. Given that the "reasonable man"
has been employed (with which we agree), he should be able to
look at all the facts. There should be amendment, as we suggest,
to ensure that evidence of all the circumstances should be admissible.
Accordingly, the provision that the state of mind of the recipient
is irrelevant should be deleted. Evidence of all the circumstances
would, we submit, assist the court in differentiating, for example,
between innocent and improper corporate hospitality or facilitating
payments.
In the view of the above the Joint Committee
will, we hope, understand that our most earnest request for guidance
related not to the general offence but to the corporate criminal
offence and to the bribery of foreign government officials.
OECD Requirements
It is with respect to the question of the corporate
criminal offence that we find the evidence of Mr Nicola Bonucci
to be of great value.
In answer to Question 477 and, again, to Question
506 he stated the criteria required by the OECD in respect of
corporate liability for bribery. They are that a corporation should
be liable if:
1. bribery is personally committed by a
senior officer,
2. bribery is committed by a lower level
person at the direction or with the authorisation of a senior
officer,
3. bribery is committed by a lower level
person where he or she was not adequately supervised by a senior
officer or if a senior officer knew the lower level person was
going to bribe but failed to try to stop him.
These criteria are to be met in the law of each
adherent to the Convention under the principle of functional equivalence.
In the context of English law, criteria 1 and
2 relate to the direct criminal liability, as such, of a corporation.
It may be argued that they are already reflected in the common
law. The difficulty, which has been much discussed, is one of
attribution and proof. These matters are currently being studied
by the Law Commission in the context of general criminal liability
of corporations. They are not addressed in the draft Bill.
It is the third criterion which is of immediate
interest in the examination of the draft Bill.
In our written evidence and in answering the
questions of the Joint Committee we stated that the formulation
of the new corporate criminal offence of failing to prevent bribery
was draconian. We say that "prevent" means "stop,
forestall or avoid". This is an enormously high standard.
We say that, to meet it, the ship would be obliged to have so
much armour that it might sink—or that, at the least, it
would become unmanoeuvrable in the battle of international commercial
competition.
But now, having seen the clarification given
in evidence by Mr Bonucci, we learn that "prevention"
is not required of companies by the OECD. What is required, in
the clear terms, which he repeated twice, is powerful and effective
supervision by senior management—the third criterion. With
this, we are in agreement and I so stated in the course of my
oral evidence.
It may be of assistance to the Joint Committee
if I quote the German law on this point. It is contained in Section
130 of the law on "Good Order" which sanctions the breach
of the duty of supervision. The central provision may be translated
as follows:
Section 130(1): Whoever, as owner [or proprietor]
of a business or undertaking, deliberately or negligently fails
to take measures of supervision which are requisite to prevent,
in the business or undertaking, breaches of duties which apply
to the owner as such and [which] are punishable by criminal or
other fines, [such owner] acts against Good Order [Ordnung] when
such breach is committed, which [breach] could have been prevented
or significantly hindered by appropriate supervision. Amongst
such measures are the recruitment and monitoring of supervisory
personnel. (The German text is annexed hereto.)
This is a powerful provision. It was sufficient
to make Siemens settle a penalty for breach of Good Order before
the Munich State Court of several hundreds of millions of Euros.
The OECD is content with German law in this
matter.
Of course, breach of "Good Order"
("Ordnungswidrigkeit") is not known to English law as
a defined offence and it is not a criminal offence, per se,
under German law. But the principle of application of the OECD
Convention is functional equivalence. We submit that the question
before the English legislature is to find a functional equivalent
to the OECD third criterion, as enunciated by Mr Bonucci (who
was repeating the findings of the examination, number 2bis, by
the OECD of the United Kingdom).
We also submit, as our fundamental point on
this matter, that the current formulation, as contained in the
draft Bill, which depends on "prevention" goes beyond
what is required by the OECD.
The common law formulation of the tort of negligence
is based on the concept of a breach of duty. This has proved a
solid foundation which has supported development in many fields.
We would invite the Joint Committee to consider whether "negligence"
in the context of the draft Bill should be explicitly defined
as breach of a duty to supervise.
In our view, this could be a fruitful approach,
because the duty could be spelled out in the statute fairly concisely.
This would then marry well to a governmental (or novel instance)
source of guidance for companies, which we believe to be essential,
as to the actual working and standards of supervision to be observed.
It would also comprehend, in full logic, the
notion of the defence proposed in the draft Bill that the management
structure in place in a company might be a defence—in terms
of this new formulation, that the duty to supervise had been performed.
We have noted that questions to us and other
witnesses by the Joint Committee showed that some members were
troubled by our initial suggestion that the negligence in question
should be defined as gross negligence on the model of the crime
of corporate manslaughter. We made that suggestion in the conviction
that the draft Bill was too draconian and that, in some way, the
nature of negligence in it needed to be redefined. That remains
our fundamental point. But we now think that the OECD, in the
testimony of Mr Bonucci, may have pointed us towards a different
approach which may make the task of achieving functional equivalence
in English law with the OECD criterion easier.
The Joint Committee will note that the OECD
formulation of the third criterion, and also the German law, say
nothing about duties in respect of persons or entities which are
not controlled by the company accused. The extension in the draft
Bill of criminal liability for those who are "performing
services" for a company is an "add-on" It is not,
to our knowledge, present explicitly in the legislation of other
countries although the doctrine, promulgated by the Department
of Justice of the United States, of "imputed knowledge"
may tend in the same direction. We have made our point about joint
ventures and syndicates which are not under the control of a company.
With great respect, we think that those who drafted the Bill did
not know enough about the way international projects in the extractive,
construction and banking industries actually operate. Of all the
points on the draft Bill, this is the one which may have the most
practical significance.
If it is, indeed, to be the policy of the United
Kingdom to go beyond what is required of it by treaty, the model
which we here suggest of criminal liability being founded on deficient
supervision could be extended if the concept of "control"
were added. Thus, the duty to supervise could be extended to those
performing services, subject to an explicit provision that such
duty would be discharged, in the case where the company had no
control, by the adequate performance of due diligence before contract
and by reasonable and proportionate attempts to have anti-bribery
provisions incorporated in the contract. Proof of the discharge
of such duty would be a defence in respect of the actions or omissions
of all personnel in a company, including the most senior personnel.
In the course of giving oral evidence, I was
asked about contractual provisions in joint venture or similar
contracts requiring the parties not to bribe. I said that such
provisions were common. For the assistance of the Joint Committee,
I am attaching, as an example, the relevant clause from the model
form of Operating Agreement issued by the Association of International
Petroleum Negotiators (AIPN), of which I am a member. I emphasise
that the inclusion of such provisions, and their form, must remain
a matter for negotiation between parties. We would not support
any attempt to impose the adoption of any particular model. The
contracts in question are international; any attempt by the United
Kingdom unilaterally to impose requirements would be of marginal
significance only.
Since the formulation of a duty to supervise
in a statute would require full knowledge of the business context
and since, in our submission, any statutory provision imposing
criminal liability for "failure to prevent" or "failure
to supervise", would entail the provision of guidance by
government (or some new instance), we and other representatives
of industry would be very willing to consult in order to achieve
a satisfactory solution.
STRICT OR
ABSOLUTE LIABILITY
Several of the questions put to me and to other
witnesses related to the possible adoption of a model for corporate
liability different from that contained in the draft Bill. There
were suggestions that a company, upon proof of bribery, would
be automatically liable unless it could show a required standard
of due diligence. Questioners mentioned the example of various
public health laws and requirements in money laundering law for
the keeping of defined records. On this point, we agree, with
respect, with Professor Horder when he said, in answer to question
59:
"it would be wrong to attribute that [bribery]
simply directly to the company, we believe, when you are NOT talking
about an earwig getting into a tin can or something where the
offence is attributed directly to the company. Bribery is a lot
more serious than that |"
There are valid reasons why absolute liability
should attach to the failure to maintain standards in the public
health context or in the matter of administrative record keeping.
In these cases the intention of the person causing the failure,
or of the company employing him or her is irrelevant. What matters
is the failure to meet the standard. To adopt Professor Horder's
metaphor, very few people or companies actually intend to put
earwigs in a can destined for a supermarket's shelves.
But bribery is inevitably an intentional act.
The general offence, as formulated in the draft Bill, depends
on intention. We submit, with the Law Commission, that it would
be wrong to create a corporate offence of bribery where intention
was altogether irrelevant.
Second Question
Are there specific changes that should be
made to the draft Bill (besides any changes that you raised in
oral evidence)?
In our written evidence we listed the changes
that we think should be made to the draft Bill. In view of the
foregoing analysis, in particular of our new suggestion that the
duty to supervise be considered and its possible new direct relationship
to control, we are amending points 2 and 4. Our suggested changes
therefore are:
1. reinstate defence of reasonable attempt
to ascertain foreign law in the case of bribery of foreign officials,
2. define the concept of negligence in the
"failure to prevent" bribery offence to mean gross negligence,
or, in the alternative, that the duty, breach of which would constitute
negligence, should be expressly be defined as breach of a duty
to supervise,
3. return the category of persons in respect
of whose acts or omissions the "adequate systems" defence
is not available to that proposed by the Law Commission,
4. "failure to prevent" to apply
only to persons or companies over which a company has control,,
5. bribery to be proved beyond reasonable
doubt to have taken place as a necessary element of the proof
of "failure to prevent",
6. a company not to be liable for failure
to prevent bribery by its subsidiary unless the bribe was given
in aid of a business actually operated and conducted by the company,
7. in the general offence, specific provision
to be made that evidence of all the circumstances be admitted
in relation to the fulfilment or non-fulfilment of the "relevant
expectations",
8. delete provisions in section 2 (7) (8)
about irrelevance of state of mind of accused.
Question 3
Is there any further information that you
wish to supply in connection with your appearance on 2 June?
Further information is covered above.
June 2009
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