Memorandum submitted by BOND (BB 33)
1. INTRODUCTION
1.1 This submission is made by Tearfund,
CAFOD, and Christian Aid on behalf of the BOND Governance Group.
1.2 Tearfund is a Christian relief and development
agency building a global network of local churches to help eradicate
poverty. CAFOD is the official development agency of the Catholic
Church in England and Wales. Christian Aid is an agency of churches
in Britain and Ireland mandated to work on relief, development
and advocacy for poverty eradication. Together we work with partner
organisations, in over 50 developing countries, including
many who focus on issues of governance and corruption and have
direct experience of the impacts of bribery.
1.3 BOND (British Overseas NGOS for Development)
is the UK membership body for non-governmental organisations (NGOs)
working in international development. Established in 1993, BOND
now has over 340 member organizations, from large organizations
with a world-wide presence to smaller, more specialist organisations,
working in specific regions or with specific groups of people.
The BOND Governance Group is a network of 35 organisations
that focus on governance within international development, both
at a policy and practice level.
1.4 We welcome the opportunity to respond
to the call for evidence by the Joint Committee on the Draft Bribery
Bill as we have deep concerns about the impact of bribery and
corruption on poverty and inequality in developing countries.
1.5 Companies operate in a global context
where business transactions cross national boundaries and legal
jurisdictions. According to the UNCTAD World Investment Report
2008, there are 78,817 parent corporations and 794,894 foreign
affiliates in the world today.1 Bribery is therefore a global
phenomenon that takes place across, as well as between, national
boundaries in both developed and developing countries.
1.6 We believe that action by the UK government
to tackle bribery is essential in the fight against global poverty.
Our work in Africa, Asia and Latin America has demonstrated that
it is the poorest and most vulnerable people in society who suffer
most from bribery—as the former Secretary of State for International
Development Hilary Benn said of bribery and corruption "in
poor countries it can kill."2 The Organisation for Economic
Cooperation & Development (OECD) conservatively estimates
that multinational companies pay bribes totalling US $80 billion
each year.3 In addition to the money lost, bribery can lead
to loss of investment and reduction in tax revenues. It undermines
public services, increases the cost of consumer goods and a higher
percentage of poor people's incomes are taken up by bribes.4 It
has a corrosive impact on governance and undermines democracy5.
1.7 For the draft bill to be effective in
tackling illicit payments to and from companies and individuals
it must be part of a broader package of reforms enabling the judicial
authorities to identify the beneficial owners of bank accounts
in any jurisdiction involved. This will require, first, that each
jurisdiction collect this information; and second, that the information
is exchanged between jurisdictions in an effective manner—ideally,
automatically on the basis of a multilateral deal such as is now
being discussed within the G20 process to tackle tax evasion.
2. GENERAL COMMENTS
AND MAIN
RECOMMENDATIONS
2.1 The BOND Governance Group supports the
reform of the bribery law in the UK. The present law is complex
and outdated and this has hindered prosecutions for bribery offences
to date.
2.2 Comprehensive reform of the UK's bribery
law is long overdue. We note the OECD Working Group on Bribery
and the US Committee on Foreign Relations criticisms of the UK's
commitment to addressing corruption and bribery.6 This has
impacted on the UK's reputation, and left it vulnerable to accusations
of hypocrisy, reducing its ability to influence other countries
on these issues. The UK's political leadership at the G20 and
at the United Nations Convention against Corruption negotiations
is, in our view, significantly undermined by the delay in incorporating
the OECD Convention into UK law.
2.3 We broadly accept the proposed bill
would, in general, provide a modern and clearly defined offence
of bribery, and ensure bribery law is consistent with the UK's
international obligations, subject to several notable concerns,
outlined below.
2.4 In particular, we welcome the proposed
creation of new offences of paying and receiving bribes. The formulation
of a discreet offence addresses the difficulties that had been
associated with current legislation, which focuses on whether
a payment to someone is corrupt without offering a definition
of "corrupt".
2.5 In addition, this new offence covers
third parties; acts done outside of the United Kingdom and; it
captures bribery carried out by agents, a major channel through
which bribes are paid. Generally, it should contribute to tackling
some of the problems associated with grand corruption which have
a direct impact on the lives of people living in poverty. Specifically,
the Group anticipates that this will serve as a deterrent and
speed up the investigation and prosecution of cases.
2.6 We are, however, concerned about the
complexity of the formulation of some of the offences. This may
create difficulties for jurors in interpretation and thus possibly
make it harder to secure prosecutions.
2.7 Finally, we encourage the speedy enactment
of the draft bill.
2.8 This submission does not cover all aspects
of the draft bill, instead it concentrates on those areas that
relate directly to our work in developing countries.
3. BRIBERY OF
FOREIGN PUBLIC
OFFICIALS (CLAUSE
4)
3.1 The Group supports the creation of a
new offence of bribery of foreign public officials. This would
ensure that the UK complies fully with its international obligations
under Article 1 of the OECD Anti-Bribery Convention.
3.2 The multi-million dollar scandals involving
big companies such as Siemens (Germany) in Libya, Nigeria and
Russia7, Halliburton (US) in Nigeria8 and irregular payments
made by a subsidiary of Balfour Beatty (UK) in Egypt are just
few of many examples of the scale of incidences with respect to
bribery of foreign officials.
3.3 The proposed provisions on bribery of
foreign public officials are derived from the OECD Anti-Bribery
Convention and it utilises language very close to the words of
the convention. As the UK's compliance with the OECD Convention
and in effect its commitment to deal with foreign bribery has
been at issue for a number of years, the Group sees this as a
welcome development.
3.4 Furthermore, the Group fully supports
the comprehensive definition of foreign public officials to include
third parties or agents. We envisage that if this bill is passed
into law the introduction of this much broader definition will
curtail the use of agents to carry out acts of inducement.
3.5 Nonetheless, the Group notes that this
proposed new offence is only committed if an advantage is "not
legitimately due" to a foreign public official, a concept
which originates from the OECD Convention. Given the fact that
cross-border bribery is difficult to tackle; that laws in some
contexts are also complex, fragmented and largely unwritten; as
is the possibility that what is "legitimately due" can
be wittingly exploited by either the bribe giver or receiver,
the Group believes this a significant loophole that weakens the
draft bill. We propose that sub-section (4) is removed and the
law that applies to person ("P") be applied in all instances
of the investigation and prosecution of bribery.
3.6 In addition, the Group proposes the
inclusion of new provisions under this clause to reflect Article
5 of the OECD Convention, thus bringing the UK into line
with its international obligations under the Convention. These
provisions are needed to enable those carrying out investigations
and prosecutions of bribery of foreign public officials to do
so without being unduly subject to considerations of national
economic interest, the potential effect upon relations with another
state, or the identity of the legal persons involved. We are of
the opinion that not introducing such provisions will undermine
the objective of preventing and effectively prosecuting allegations
or cases of foreign bribery.
4. FAILURE OF
COMMERCIAL ORGANISATIONS
TO PREVENT
BRIBERY (CLAUSE
5)
4.1 The Group strongly supports the proposed
creation of a new offence of negligently failing to prevent bribery
which can be committed by a commercial organisation. This is in
line with the recommendations of the OECD Working Group on Bribery
and Law Commission on reform of corporate criminal liability for
foreign bribery.9 We note the difficulty in bringing prosecutions
against corporate wrongdoers under the current law and the lack
of prosecutions of commercial organisations to date.
4.2 Given the global reach of many commercial
organisations, we welcome the proposed definition of a commercial
organisation to include bodies incorporated in England and Wales
or Northern Ireland, or by a partnership that is formed under
the law of England and Wales or Northern Ireland and which carries
on business there or elsewhere, and any other company which has
a place of business in the UK.
4.3 However, we believe that the offence
should be extended to apply to companies listed on a stock exchange
within the UK. The UK and London in particular, remains a global
business centre with many UK and foreign companies listed on the
LSE Main Market or the Alternative Investment Market (AIM). This
is especially so for the extractive industries, a sector particularly
at risk, as they are involved in negotiating and agreeing large
contracts with foreign governments. Extending the offence to cover
all companies listed in the UK, would significantly improve the
effectiveness of the new legislation.
4.4 We believe it is essential that the
proposed legislation covers foreign subsidiaries, wholly or part
owned by UK companies, given that many instances of bribery have
involved foreign subsidiaries, for example the Balfour Beatty
case. Current legal structures mean it is very difficult to bring
successful prosecutions against part or wholly-owned subsidiaries.
Under the section 5 supplementary provision of the draft
bill (Clause 6), an employee, agent or subsidiary performing services
on behalf of a relevant commercial organization may be found guilty
of the offence of negligently failing to prevent bribery only
if the subsidiary was performing services on behalf of the commercial
organization and the bribery was in connection with the business
of the commercial organization (emphasis added). We welcome this
inclusion, but would like to see the draft bill strengthened so
that the territorial provisions cover part or wholly owned foreign
subsidiaries.
4.5 Under the proposed bill it would be
a defence for the commercial organisation to show that it had
adequate procedures in place designed to prevent persons performing
services on its behalf from committing bribery offences in connection
with its business, but that this offence would not be available
where the act of negligence was that of a senior officer of the
organisation. The group welcomes any steps that help foster a
culture of anti-bribery and encourages companies to implement
strong preventative measures. However, we are concerned that this
would merely encourage commercial organisations to appoint junior
officers in charge of anti-corruption procedures.
4.6 The group believes it would be helpful
for the government to issue separate guidelines for companies
detailing what constitutes "adequate procedures."
5. OFFENCES UNDER
THIS ACT:
TERRITORIAL APPLICATION
(CLAUSE 7)
5.1 The group welcomes the proposed extension
of extraterritorial jurisdiction for all the offences under the
draft act, not just bribery of foreign public officials.
5.2 However, we note that the proposed legislation
does not extend to the UK's Crown Dependencies or Overseas Territories
except in so far as acts of bribery are committed in those jurisdictions
by British nationals, persons ordinarily resident in the UK or
UK companies, or where the corporate negligence offence is committed
by a company registered in those jurisdictions but also based
England and Wales, as above. We believe this is a significant
loophole, given that a significant number of parent companies
are based in Crown dependencies or Overseas Territories. For example,
the UNCTAD World Investment report shows that in 2007 there
were 1,464 parent companies based in the British Virgin Islands,
404 based in the Cayman Islands, 555 based in Bermuda
and 238 based in Gibraltar.10
5.3 We therefore believe that the new offences
proposed in the draft bill should apply to bodies incorporated
under the laws of both the UK and the Crown Dependencies or Overseas
territories.
REFERENCES
1 UNCTAD World Investment Report 2008,
page 212
2 Hilary Benn, Secretary of State for International
Development, speech on "Governance and Development"
at Holyrood, Edinburgh, 22 June 2006
3 "Corruption: Myth and Facts,"
The Irish Association of Non-Governmental Development Associations,
March 2007
4 "The Other Side of the Coin: The UK
and Corruption in Africa," Africa All Party Parliamentary
Group, March 2006
5 "From Local to Global: Stopping corruption
from stunting growth," Christian Aid, December 2008
6 OECD United Kingdom, Phase 2 Report, paragraph
255 (c), 17 March 2005 and OECD United Kingdom,
Phase 2bis Report, 16 October 2008 and "The
Petroleum and Poverty Paradox: assessing U.S. and international
community efforts to fight the resource curse," Report
to the members of the committee on Foreign Relations United States
Senate, 16 October 2008
7 In the Siemens bribery case, the German conglomerate
was alleged to have offered 12 million Euros to public officials
in Nigeria, Russia and Libya to win infrastructure contracts.
After Liechtenstein rolled back banking privacy laws post-9/11,
a flurry of transfers to and from offshore firms controlled by
Siemens execs caught auditors' attention in 2003. The scandal
ballooned as Liechtenstein froze €7.6 million in Siemens
assets and German police raided Siemens offices. For more information,
see, for example,
http://www.kommersant.com/p-11656/r_500/Siemens_bribes_/
8 The Halliburton case came to the limelight
following an investigation of Kellogg, Brown and Root (KBR) a
subsidiary of Halliburton was claimed to have issued US $180 million
in bribes to Nigerian public officials for a contract worth US
$1.6 billion. For more information see, for example, "Wanted
Halliburton: For Bribery, Fraud and Trading with the Enemy,"
Halliburton Watch, http://www.halliburtonwatch.org/about_hal/nigeria_timeline.html
9 OECD United Kingdom, Phase 2 Report, paragraph
255 (c), 17 March 2005 and OECD United Kingdom,
Phase 2bis Report, pg 25, 16 October 2008 and
Law Commission, Reforming Bribery, 19 November 2008
10 UNCTAD World Investment Report 2008,
page 211-12
June 2009
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