Memorandum submitted by Global Witness
(BB 35)
INTRODUCTION
Global Witness is an NGO that exposes the corrupt
exploitation of natural resources and international trade systems.
We obtain evidence which we use to drive campaigns that end impunity,
resource-linked conflict, and human rights and environmental abuses.
Global Witness was co-nominated for the 2003 Nobel Peace
Prize for its work on conflict diamonds. We welcome the opportunity
to comment on the UK Draft Bribery Bill.
We have carried out numerous investigations
concerning allegations of bribery and corruption on the part of
companies or public officials around the world, whose findings
we make public in our reports. Our work has given us a detailed
understanding of the anti-corruption laws of different countries
and of the practices of corporations in respect to bribery and
corruption.
Bribery, particularly the bribery of foreign
public officials, by multinational companies, is prevalent in
many developing countries, including countries rich in natural
resources where our work is concentrated. Bribery undermines the
rule of law and the principle of fair competition and entrenches
bad governance in such countries, hindering their efforts to alleviate
poverty and often contributing to instability and human rights
abuses.
Bribery can lead directly to human suffering
and death, for example where it results in government contracts
being awarded to companies that perform substandard construction
work or provide substandard goods and services in the health sector.
Bribery of foreign officials can help to entrench corrupt elites
by providing the incentive and the means to maintain a tight grip
on power, particularly in natural resource rich states where the
stakes and potential rewards are higher.
Thus bribery is not a victimless crime or a
regrettable but unavoidable cost of business for companies overseas.
It is a morally poisonous and economically destructive crime which
contributes, directly and indirectly, to poverty and human suffering.
We strongly believe that the UK has an obligation
to ensure that companies based here do not contribute to corruption
in foreign countries through bribery, or other means, and we welcome
the commitment on the part of this government to tackling this
issue.
Furthermore, as a signatory to both the UN
Convention against Corruption and the OECD Convention on
Combating Bribery, the UK Government has an international
duty to ensure that these crimes are adequately investigated and
prosecuted. Past evaluations indicate that the UK Government has
failed to fulfil this obligation thus far and have questioned
the government's commitment to doing so.[177]
The Bill is an important step towards tackling
bribery by UK companies, however more must be done to ensure that
companies that facilitate and/or engage in high-level corruption
are formally investigated and held to account in UK courts. We
note with disappointment that the current Bill does not address
broader concerns relating to UK companies' relationship to corruption
around the world or provide additional resources for enforcement
agencies and prosecutors.
We broadly support the introduction of a Bill
and commend a number of its clauses. However, we are concerned
that the Bill may not be effectively implemented without further
changes. As such our submission is split into two sections. The
first section is a series of positive endorsements of the provisions
in the Bill which we hope will remain in the final version. The
second section outlines our concerns about its inadequacies and
makes recommendations for improvements.
Section 1—Positive developments relating
to the Bill.
We acknowledge that the language of the Bill,
for example in its definition of the offence of bribery, does
bring the UK largely in line with its obligations under the OECD
Guidelines on Combating Bribery and modernises the crimes of corruption
and bribery in the UK. We also commend the following points made
in the Bill
1.1 The broad definition of bribery as set out
in Sections 1 and 2. The definition of a bribe as "a
financial or other advantage" is broad and should, if properly
applied, make it harder for companies to circumvent the law by
paying bribes in forms other than cash payments, for example;
payments in kind.
1.2 The inclusion of third parties within the
remit of the Bill; Section 1(4) and 1(5). The fact that the Bill
prohibits bribery of, or via, third parties, not just direct payments
to foreign public officials by the person paying the bribe. The
act of bribery should therefore cover bribes paid to relatives
and close associates of foreign officials, not just the officials
themselves. This is a crucially important provision because it
would otherwise be easy for companies to circumvent the law by
ensuring that bribes are not paid directly to foreign public officials
but to their relatives or associates.
1.3 The broad definition of the function or activity
to which a bribe relates as described in Section 3.
1.4 The inclusion of Section 4—"Bribery
of foreign public officials" which we believe to be of particular
importance in tackling corruption and poverty in areas of high
level corruption and commodity fuelled conflict. We also welcome
the broad definition of foreign public official in this context.
1.5 The clarification in Section 7 that
offences under sections 1, 2 and 4 will apply on an
extra-territorial basis.
1.6 The inclusion of Section 5—which should
give companies an incentive to prevent bribery on the part of
their employees. We see this as an essential component in stopping
the practice of bribery.
1.7 The defence available under Section 5—"Failure
of commercial organisations to prevent bribery", that payments
to foreign public officials have to be allowed or required by
the foreign country's law in order to be deemed legitimate. This
is an important point because it should prevent payers or recipients
of bribes from attempting to justify them by the claim that such
payments are customary or acceptable within the culture of the
foreign country concerned.
On this basis we welcome the introduction of
the draft Bill and we call on the government to provide a timetable
for the Bill's passage through parliament which will see the Bill
passed in the next parliamentary session. However, we do have
a number of concerns and recommendations which we would like to
see taken into account.
Section 2—Inadequacies relating to the Bill
Our overriding concern relates to the weakness
of the provisions included under Section 5—"Failure
of commercial organisations to prevent bribery". Although
the creation of this offence is welcome and vitally important
in principle, we are concerned that as drafted, the Bill will
not lead to significant numbers of prosecutions under this offence
and thus will fail to be an effective deterrent to corporate bribery.
Our concerns predominantly fall into three areas.
(1) The lack of clear reference or clear application
to subsidiaries of UK companies. Our concern is that this will
allow companies to circumvent the law by using their foreign subsidiaries
to pay bribes, thus defeating the spirit and purpose of the law.
(2) Section 5: The lack of sufficient obligation
and accountability on the part of companies, and individuals within
the companies, specifically senior corporate officer, to actively
record and actively provide i) information that proves that "adequate"
measures were in place to prevent bribery, and ii) evidence of
any payment of bribes associated with the company. Without active
obligations on companies the Bill lacks teeth. Multinational companies
typically employ a variety of measures against bribery by their
employees, including codes of conduct, internal training and compliance
monitors. Such measures might be deemed "adequate" on
paper but in practice we have seen significant cases where such
measures have failed to prevent bribery as a matter of de-facto
corporate policy. We would be happy to provide specific evidence
of such cases, if it is useful. We believe that a greater onus
and responsibility to self-monitor, record and report any suspicious
activity must be placed on a senior corporate officer to ensure
the successful application of the law.
(3) The lack of additional resources for the
enforcement of the legislation. According to the impact assessment
for implementation stage, under the legislation proposed in the
Bill, there is likely to only be 1.3 additional prosecutions
a year which suggests that the Bill will not act as a successful
deterrent. Only properly enforced legislation will successfully
disincentivise bribery. The notion that bribery is not a problem
for UK businesses is challenged by recent research by US law firm
Freshfields Bruckhaus Deringer, which shows that 16 out of
29 investigations currently being conducted by the US government
into corporate bribery are focused on companies based in the UK,
Bermuda or the Cayman Islands. We find it deeply disturbing that
a foreign government is investigating allegations of corruption
by British companies, while Britain is not: this amply demonstrates
the need for enforcement of the new law to be adequately resourced.
Our concerns are further elaborated below.
Section 5—"Failure of commercial organisations
to prevent bribery"
a. As per 2) above. Under Section 5—"Failure
of commercial organisations to prevent bribery" there is
no equivalent to the "books and records" provisions
of the Foreign Corruption Practices Act FCPA in the United
States, which make it an offence for a company not to keep accurate
records of its payments. There is therefore an insufficient onus
on the company itself to uncover corruption on the part of its
employees and disclose it to the authorities. In the U.S. system
self-reporting by companies is a major source of FCPA cases and
usually earns more lenient treatment for the company concerned
hence providing an incentive to act. It is our firm opinion that
a robust obligation must be placed on companies and its senior
corporate officers to demonstrate that they have kept accurate
records of their payments with the specific aim of preventing
bribery by their employees.
b. Particular concern arises with respect to
the interplay between Section 5(4) and Section 5(5) such that
the implication will be that the responsibility for implementing
"adequate procedures" to prevent persons from committing
bribery will be designed to middle management and not to directors,
managers, secretary or other similar level officer in the company.
Alternatively, Global Witness recommends that the text of sub-section
(5) be modified to reflect that a senior corporate officer will
be responsible for ensuring that adequate procedures are in place.
This will have the double effect of (i) ensuring that adequate
procedures are, in fact, put into place, and (ii) ensuring that
the defense of adequate procedures is not abused. In the U.S.
the Sarbanes-Oxley requirements require company executives to
confirm that the company's records are accurate It is vital that
under the provisions of the Bill senior executives are liable
for ensuring that rigorous and adequate procedures are in place
to prevent bribery occurring within their organisations.
c. According to the notes accompanying the Bill
(98): "The corporate offence is not regulatory in nature
and there will be no monitoring of compliance." So there
is no obligation on companies to report bribes by their employees
and no onus on the authorities to monitor whether or not companies'
anti-bribery mechanisms are "adequate" or not. Once
again it seems that there is little incentive for compliance.
ADDITIONAL RESOURCES
AND POTENTIAL
PROSECUTIONS
a. As per 3) above. According to the notes, the
government believes that there will only be "a small number
of additional prosecutions a year arising from the introduction
of the new corporate offence" (note 94)". We are dismayed
that the government appears to have decided, a priori, that the
new law will not significantly affect a dismal record of anti-corruption
enforcement which has been condemned in detail by the OECD, and
which the new law is itself supposed to redress. As previously
mentioned, in 2005, the OECD Working Group on Bribery criticized
the UK Government's lack of prosecutions for bribery.[178]
b. This view has an alarmingly self-defeating
quality. The corporate offence rests entirely on the premise that
a fear of prosecution might lead companies to tighten their anti-corruption
measures, but the government itself appears to believe (and is
stating quite publicly to all those who read the draft bill and
its notes) that there will not be more than a handful of prosecutions.
We contrast this to the United States where anecdotal evidence
suggests that U.S. companies do fear the FCPA, because
they are quite aware that investigation and huge fines are a real
possibility. The effectiveness of law often lies in its deterrent
effect. Without real threat of prosecution, when weighed against
the financial incentive for bribery of foreign officials, companies
will continue to pay bribes.
c. Given that there is insufficient onus on companies
to report bribery, and given that the government envisages little
in the way of extra resources for prosecutors to investigate,
then the two most likely routes for bribery cases to emerge are
from corporate whistleblowers or investigative reporting. We know
from our own experience that it is almost impossible for investigative
reporters to obtain evidence of bribery because financial transactions
through the banking system are, by their nature, secret. We also
know from our work that banks cannot be relied on to spot and
report on potentially corrupt transactions. This leaves only corporate
whistleblowers. In the absence of any incentives for whistleblowers
to come forward, it seems unlikely that the Bill will have any
tangible effect on the payment of bribes to foreign officials.
The hope that individuals within companies will choose to come
forward is an alarmingly thin basis for the application of a law
that is supposed to demonstrate Britain's commitment to fighting
corporate bribery.
d. We believe it is vitally important for the
credibility and reputation of the British government and British
business that this Bill and its implementation be seen as a serious
deterrent to corruption. This is why we are at the same time encouraged
by the fact of this Bill, and impressed by some of its elements,
while remaining deeply worried about whether it can achieve its
stated purpose.
We have a genuine concern that the flaws in
the current Bill will seriously undermine its effectiveness. We
would therefore strongly encourage the Joint Scrutiny Committee
to reflect our concerns in their recommendations on the Bill.
We hope that these recommendations will be reflected in a final
draft of the Bill and in the UK's broader anti-corruption strategy.
We very much hope that a final draft of the Bill will be presented
to Parliament with a time table to pass before early next year.
June 2009
177 Joint Statement, Call for UK Government Action
on Bribery located at http://www.thecornerhouse.org.uk/item.shtml?x=369017 (last
accessed 17 June 2009). Back
178
http://www.oecd.org/dataoecd/62/32/34599062.pdf
(last accessed on 17 June 2009). Back
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