Additional memorandum submitted by ICC
(BB 36)
SUPPLEMENTARY QUESTION TO WITNESSES ABOUT
CLAUSE 4 AND EVIDENCE OF MR NICOLA BONUCCI, OECD, SUGGESTING
THAT THE "LEGITIMATELY DUE" TEST BE REMOVED
ANSWER
Andrew Berkeley, International Chamber of Commerce
(United Kingdom)
Five, not four, Convention States provide an
exemption for "advantages" that are permitted under
the foreign official's home law. They are Australia, Canada, Korea,
New Zealand and the United States. As Mr Bonucci said, Australia
has modified its position to approximate to that of the United
States, which requires that the advantage be justified by written
law. Of these five States, four are mature common law jurisdictions.
We commence this evidence about the assertions
with an analysis of the way Clause 4 is drafted and its relationship
to the actual requirements of the OECD Convention. We fear that
Mr Bonucci has not fully understood the way in which the clause,
or the Law Commission recommendations, from which it derives,
would operate. We acknowledge, in setting out this initial analysis,
the advice and participation of Ms Patricia Barratt of Clifford
Chance for which we are most grateful.
Clause 4 is drafted in a very different
way from either the Convention offence or the laws of other countries,
which all include some element of wrongdoing in the statement
of the offence itself. Thus, the Convention (which, of course,
is not an attempt at legislative drafting in the same way as the
draft Bill) has two elements of wrongdoing, ie the advantage offered
to the official must be "undue" and must be made in
order to obtain an "improper" advantage. The UN Convention
also uses the language "undue advantage" to describe
the bribe, and (again) "undue advantage" to describe
the benefit sought. The Foreign Corrupt Practices Act ("FCPA")
requires the person bribing a foreign public official to act "corruptly".
By contrast, the draft Bill attempts to cut
out any element of subjective wrongdoing in the statement of the
offence; the definition of "bribe" is that P offers
or promises "any financial or other advantage", intending
to obtain "an advantage in the conduct of business".
The phrase "not legitimately due", instead, stands in
for the word "undue".
All businesses are constantly looking for an
advantage in the conduct of business—this is capitalism,
and not in any way strange or corrupt. Similarly, there will be
many occasions on which businesses will provide an "advantage"
to a foreign official—eg the simple payment of a licence
fee, paying for a visa, paying a parking fine, paying a foreign
taxation charge. Where this can be related to an intention to
retain business (and it is not hard to see how this could be the
case, entirely innocently), the initial elements of the offence
are present.
If the words "legitimately due" were
to be removed, the statement of the offence would thus potentially
catch a vastly enlarged range of activity, much of which may be
100% legal and proper. The carve-out for the giving of advantages
which are "legitimately due" is not, in our opinion,
at all intended to allow the giving of bribes in countries where
bribes are allowed, but simply to allow businesses to give normal,
legitimate payments to officials, which may otherwise be, entirely
unfairly, criminalised.
Mr Bonucci seemed to be equating Clause 4(3)(b)
with Commentary 8 to the OECD Convention, and by analogy,
to the affirmative defence in the FCPA that the payment is legal
under written law. But Clause 4(3)(b) does not act in the same
way as the FCPA affirmative defence . Mr Bonucci argued in favour
of a reference to a "written law", because of this misunderstanding.
However, as above, the function of Clause 4(3)(b) is entirely
different; it acts as the fault element that is present in the
OECD and UN language ("undue") and in the FCPA ("corruptly").
It is therefore a completely necessary part of the statement of
the offence. If "written law" were to be introduced
as the sole criterion, this would, again because of the wide compass
of the statement of the offence, be likely to criminalise behaviour
which no reasonable person would consider criminal. It would mean
that any payment, which a specific written law did not permit
or require, would be potentially illegal, whether it was improper
or not.
As for the assertion that "the exception
has never been relied upon in practice". Once again, this
seems to betray a lack of understanding. The most developed administrative
and juridical system in the field is that of the United States
FCPA. There are two affirmative defences in the FCPA. The first
is the "actions legal under foreign (written) law",
which is directly relevant to the present questions as put by
the Joint Committee. The second is "reasonable and bona fide
expenditures" relating to "promotion, demonstration,
or explanation of products or services" or to "the execution
or performance of a contract with a foreign government or agency
thereof". In order to evaluate the effect of these two affirmative
defences, it is important to realize that cases brought against
companies for breach of the FCPA only extremely rarely ever go
to full trial. They are always settled by negotiations between
an agency of the Executive, the Department of Justice, which propounds
its view of what the law is, and the accused company which is
subject to considerations of business necessity. It is recognized,
by advisers to companies accused, that the second defence, the
"promotional" exception is capable of wider interpretation
than the first "written law" exception. This is especially
so in relation to the second limb of the second exception which
has been recognized by the Department of Justice as justifying
a wide spectrum of payments ancillary to the performance of main
contracts with foreign governments or agencies. It would not be
going too far to say that the promotional exception is regarded
as vital by international business. If the draft Bill were to
be adopted, even without Mr Bonucci's suggestion, UK businesses
would not have the benefit of a promotional exception and thus
would be in an inferior competitive position to those which have
to look only to the FCPA.
It is, further, worthy of note that the administration
of the FCPA depends on the issue of Guidelines by the Department
of Justice and for the issue of specific guidance on questions
put to it by business. As an example, I attach a copy of DOJ Release
92-1 which allowed the payment of certain expenses to Pakistan
government employees and officials. It is basic to our evidence
on this draft Bill, that, if it is adopted in anything like its
present form, a statutory duty should be placed on government
departments or on some new agency, to give guidance and to answer
questions.
While it is the case that FCPA cases against
companies almost never go to court, except to register and approve
settlements reached between the company and the Department of
Justice, the same is not true of cases involving individuals.
The most recent significant case dealing with the "written
law" affirmative defence is United States v Viktor Kozeny,
Frederick Bourke Jr. and David Pinkerton decided in the Federal
District of the Southern District of New York in 2008. This concerned
Azerbijan. Payments were made to Azeri officials for participation
in a proposed privatization. The accused individuals pleaded the
defence, citing an Azeri law which, while forbidding bribery,
relieved from criminal responsibility the bribe-giver if he reported
the matter to the authorities and/or if the payment was the result
of extortion. The payments had been reported. The court held that
the defence failed because the FCPA sanctions the giving of a
payment and the exculpation of the payer, because of reporting
to authority, was irrelevant. But the question of extortion was
left open, as was the construction of other such laws. They exist,
in various forms, in other countries such as, we believe, Kazakhstan,
Ukraine, Saudi Arabia, Kuwait, United Arab Emirates, Bahrain,
Oman, Qatar and Yemen. Their proponents seek to justify them by
saying that they encourage a degree of transparency which would
otherwise not exist. We take no position on the desirability or
efficacy of such laws but the fact that they are adopted in some
countries and the question of the proper conduct of business in
such countries provide another example of an area in which the
UK government ought to give guidance. The question might present
itself as whether, if a payment was made and was duly reported
to the authorities under the anti-bribery law and the authorities
took no action, the payment was legitimately due.
During the hearing of Mr Bonucci, Lord Thomas
raised the matter of "planning gain" referring to the
almost routine practice, under UK planning, of a Planning Authority
to require the provision of some ancillary benefits as a condition
of the grant of planning permission. On the international stage,
we submit that nothing in a UK Bribery Bill should forbid the
equivalent. Frequently, in large projects, the companies are asked,
as a condition of consent to proceed, that they should provide
welfare, educational, environmental, infra-structure or social
benefits, sometimes at the instance of officials or organizations
which are not the licence granting authorities for the project
as such. Many of our members pride themselves on having agreed
to such requests. If the Joint Committee will permit, I would
like to close this submission by giving two examples from personal
experience.
Some years ago, there was a project for new,
massive, oil development in the Santa Barbara Channel, offshore
California. In preliminary negotiations, the consortium met officials
of a littoral municipality, in which the proposed terminal of
the pipelines would have been located, to discuss the question
of approach roads and access. In the course of those discussions
the officials stated that, not only would the consortium have
to pay for the approach roads, but that it would have to pay for
a reconstruction of the entire traffic control and regulation
system of the municipality, whose jurisdiction and responsibility
extended far inland from the site of the terminal. Contracts would
have to be placed with nominated suppliers for this purpose. Negotiations
were overtaken by the cancellation of the project on environmental
grounds and Federal licensing in the area was stopped by Presidential
decree. But the question had already been raised internally in
the consortium as to the status of the payments to the nominated
suppliers.
The second example concerns the UK North Sea.
The Joint Committee will be aware that the pipelines from two
of the most important fields, Brent and Ninian (and their satellites)
come ashore in the Shetland Islands and that their oil is exported
from a major terminal at Sullom Voe. Negotiations commenced in
the early 70's between the oil companies and the officials of
the Zetland County Council, led by its formidable General Manager,
Mr Ian Clark. It soon became clear that the demands of the Shetlands
would go far beyond rights of way for the pipelines, planning
permission for the terminal and compensation for damage to the
local fishing industry. They were determined to create a massive
fund for the present and future benefit of the population by levying
charges on all oil landed in and exported from the Shetlands.
The oil companies were willing to pay, subject to agreement on
quantum and conditions. It also became clear that the Shetlands
had no legal power to levy such payments. They would not have
been "legitimately due" in the words of the draft Bill.
The solution was the Zetland County Council Act 1974. It is expressly
stated in the Act that its objectives could not have been effected
without the authority of Parliament ("Whereas" clause
number 4). We submit that this Act is a classical example
of a law in writing making payments, the status of which was questionable,
"legitimately due". We say that any Bribery Bill must
contain explicit provisions giving business certainty that payments
of this kind (or the payments to nominated suppliers in California)
are not bribes.
ANSWERS TO
QUESTIONS
Accordingly, we have the following answers the
Joint Committee's two questions.
1. The "legitimately due" test should
be retained and the defence of "reasonable enquiry"
proposed by the Law Commission retained. As mentioned in our previous
evidence, we do not believe that an English court is the proper
place to decide substantive questions of foreign criminal law
and so we could support a position that "legitimately due"
was to be decided according to the written laws of the foreign
country (as provided in the FCPA) provided that the functional
equivalent of "undue", as used in the Convention, (or
"corruptly", as used in the FCPA) is incorporated in
the Bill to be presented to Parliament.
2. The question is framed in terms of "strictness"
and "fairness". This is understandable and advocacy
supporting either is not lacking. But we are concerned with having
a law which is workable for business, especially international
business, and which would not damage UK commercial interests.
The suggestions of the OECD Legal Director do not further these
objectives.
June 2009
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