Additional Memorandum submitted by CBI
(BB 46)
SUPPLEMENTARY QUESTIONS
TO THE
CBI AND A
FURTHER ISSUE
FOR CONSIDERATION
1. The Confederation of British Industry
(CBI) submitted written evidence to the Joint Committee on the
Draft Bribery Bill and was called for oral evidence. Following
that, we received a request for answers to supplementary questions
under cover of a letter from the Clerk on 10 June 2009 and
a request for comment on a further issue by e-mail on 15 June
2009. This note responds to both requests and , in common with
our earlier evidence, it is the result of member consultation.
2. As stated in our original evidence, the
CBI has long advocated the need for modernisation of UK anti-bribery
law. The CBI seeks a Bill that is clear, easy to understand and
able to be implemented by companies. We believe it should not
criminalise behaviour that is not intended to be criminalised.
By achieving that, the UK will apply reasonable anti-bribery measures
that reinforce compliance with international obligations whilst
ensuring that the competitiveness of UK companies is not undermined.
We consolidate our suggested changes to the draft Bill in paragraph
16 of this paper.
3. UK business has a strong anti-corruption
reputation and this is reflected in the indices that seek to compare
the image of different countries. For example, in the Transparency
International index the UK ranks above other OECD members such
as the US, France, Japan, Spain, Portugal and Italy. This puts
some of the proper context around comments that dealing with UK
companies somehow requires greater due diligence from their partners,
a charge that we strongly reject.
Question 1: 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?
4. In relation to the general offences in
Clauses 1-3, we have two concerns. The first, as we explain in
our written evidence, is with the clarity of the language related
to "improper performance". As currently drafted, there
would be practical difficulties that could lead to offences being
committed even if that activity was entirely innocent. We believe
that this situation would be significantly improved if Clause
3, sub-clause 8, had the phrase "in all the circumstances"
added. It would therefore read, "For the purposes of this
section, the test of what is expected is a test of what a reasonable
person would expect in all the circumstances". This would
ensure that evidence pertaining to all the circumstances would
be admissible and it would avoid the criminalisation of activity
that was a genuine mistake or misunderstanding, or where the activity
involves bone fide corporate hospitality or promotion.
5. The second concern relates to the lack
of a criminal mens rea in the overall formulation of the general
offences. As we pointed out in our evidence, we believe that intent
lies at the heart of criminal acts, of which bribery is one. This
is the requirement placed upon the UK as a signatory to both the
OECD Convention and the UN Convention to meet in its national
legislation. The draft Bill should be amended to reflect the nature
of those obligations, in particular by deleting Clause 2, sub-clause
7, and replacing it with: "It is a defence in cases 4 to
6 that R did not know or believe that the performance of
the function or activity was improper".
Question 2: Are there specific changes that should
be made to the draft Bill (besides any changes that you raised
in oral evidence)?
6. The CBI's written evidence suggested
a number of changes to the draft Bill, some of which we referred
to in oral evidence. We will list these at the end of this paper,
as it may be more logical to place this after our discussion of
the other questions.
Question 3: Is there any further information that
you wish to supply in connection with your appearance on 2 June?
7. We have already made comments relating
to the general offences in clauses 1-3, and we will respond to
the issues raised by clause 4 in our response in paragraphs
13-15.
8. It is important for the UK to have a
law that works, which includes penalties where appropriate. Companies
that put in place proper procedures should not be at a competitive
disadvantage. During our evidence session, we referred to the
need for guidance. This was specifically related to the Clause
5 offence, the failure of commercial organisations to prevent
bribery. We remain firmly of the view that sub-clause 4 is
unclear as to what constitutes "adequate procedures".
There is therefore no way that a company or those from whom it
seeks advice can be assured that its procedures are adequate and
comply with the Bill as currently drafted. This cannot be right.
The Law Commission has recognised this point and the Justice Secretary
acknowledged the business point in his oral evidence before the
Joint Committee. He went further by committing to investigate
this issue through consultation with business and others.
9. In order to prevent a situation where
business is unable to have the certainty it requires and the negative
consequences that flow from that, the CBI believes that statutory
guidance and a facility to respond to enquiries from business
will be required if the Bill is enacted in its current or similar
form. This will establish a common point of reference to enable
business to apply the phrase in practice. It can also be relied
upon as a defence to prosecution and it will assist a jury, or
a judge in providing guidance to a jury, in determining whether
"adequate procedures" were in place by looking at all
the relevant facts. Finally, we would hope and expect that such
guidance should be issued at the same time as the Bill becomes
law. We recognise, however, that the guidance process should have
sufficient flexibility to enable it to develop in line with emerging
best practice.
10. A related point arises here because
of evidence given by the OECD. We believe that the OECD has mis-interpreted
the draft Bill's defence of "adequate procedures". It
would only be available in the circumstances of the clause 5 corporate
offence and not, as was claimed in oral evidence, to the clause
4 bribery of foreign public officials offence.
11. There are other points relating to clause
5 that we would wish to highlight. As we have noted, an act
of bribery requires intent. The corporate offence as drafted merely
refers to negligence. We believe that it desirable to avoid automatic
criminal liability as we do not see the direct equivalence of
an act of bribery with that of public health standards or administrative
record-keeping. We would refer the Joint Committee to the Law
the Law Commission's report that relate to the need to focus on
the failure of "continuing and systemic efforts to ensure
that active bribery is not committed". We would therefore
argue for a higher standard such as gross negligence or recklessness,
which brings with it the element of intention, to apply to the
corporate offence.
12. We are concerned that Clause 5, sub-clause
5, removes the "adequate procedures" defence available
in sub-clause 4 if a "senior officer" is negligent.
This presents serious potential for confusion in circumstances
where prosecutions are being pursued against a company in more
than one jurisdiction. For example, the US Sentencing Guidelines
(Section 8 B2.1b 2 B) expressly give credit for "high
level personnel of the organization" "with overall responsibility
for the compliance and ethics program", whereas the draft
Bill would lead to punishment in the UK for doing the same thing
precisely because a "senior officer" was involved. We
believe this situation needs to be addressed, particularly since
the effect of the draft Bill would be to penalise companies that
invest time and resource in combating bribery.
13. The CBI confirms its view that Clause
5, sub-clause 7, requires clarification of the term "senior
officer" to ensure that it equates to a director or equivalent
level person. This would entail focusing on people who are, in
effect, the controlling mind of the company for the purposes of
the corporate offence.
14. We would also underline our evidence
that there is need for greater clarity in clause 6 over the
nature of control vested in the variety of business relationships
and the implications that has for the clause 5 corporate
offence. The Bill as drafted extends corporate criminal liability
even to situations where the company has no control over the entity.
The draft Bill should be amended to ensure that a parent company
cannot be held criminally liable for all the acts of its subsidiaries
or where there is a non-controlling interest. In addition, we
believe it would be helpful to include official guidance to business
on due diligence and the obtaining of appropriate assurances in
circumstances where control is not present.
Further issue for consideration: What is the witnesses'
reaction to the proposal that the "legitimately due"
test be removed from clause 4 (while keeping the clause as
it stands in all other respects)? Would it lead to the offence
being overly strict or criminalising conduct that would not be
criminialised under the present clause. If so, can the witness
provide any scenarios where unfairness may arise?
15. Clause 4—the bribery of foreign
public officials—is a new and separate offence which the
CBI supports in principle. The problem that we have identified
with this clause relates to its omission of the Law Commission's
defence of reasonable belief, accompanied by a high standard of
proof from the defendant surrounding the due diligence undertaken
into arriving at that belief, that a payment was required or permitted
under local law. We have given evidence that this defence should
be replaced in order for the clause to work in a way that meets
the UK international obligations but does not put UK companies
at a competitive disadvantage.
16. The CBI contends that the oral evidence
on which these questions appear to be based—that of Mr Nicola
Bonucci, Legal Director at the OECD—is based on a mis-reading
of the draft Bill. We believe strongly that Clause 4 must
have sub-clause 3b, where "legitimately due" appears,
retained. Its removal, as Mr Bonucci suggests, would have the
effect of criminalising any payment given or offered to a foreign
official in order to obtain or retain business or an advantage,
regardless of whether that payment was legitimate or not. "Legitimately
due" in this context reflects the requirements of the OECD
Convention and the UN Convention to enact legislation that criminalises
undue payments that obtain an improper advantage.
17. We believe that Mr Bonucci's suggestion
would have serious negative consequences in practical as well
as legal terms. The criminalisation of perfectly legal activity
cannot conceptually be right; the removal of the words "legitimately
due" would lead to situations where payments such as tender
fees, visa application fees, operating licence fees and multiple
other routine activities that equate to the normal and legitimate
costs of doing business are caught by the offence. In common with
other points that we make, the CBI view is that offences in the
draft Bill must have an element of wrongdoing and an intent to
commit a wrongdoing.
Question 2: Changes to the draft Bill
18. Given our comments here and in previous
evidence, the CBI would like to see the following changes to the
draft Bill. We list them in relation to the clause numbers:
— in Clause 2, remove sub-clause 7 that
relates to the irrelevance of knowledge or belief.
— in Clause 3, sub-clause 8, add "in
the circumstances" to the test of what a reasonable person
would expect.
— in Clause 4, re-insert the Law Commission's
reasonable belief defence. This defence should also be available
to the Clause 1 general offence to ensure consistency within
the draft Bill's structure.
— in Clause 5, ensure that the offence
of failure to prevent bribery relates to gross negligence or recklessness,
not just negligence.
— in Clause 5, sub-clause 5, resolve the
potential tension relating to "senior officer" and the
availability of the defence in sub-clause 4.
— in Clause 5, sub-clause 7, clarify the
term "senior officer" to ensure that it equates to a
director or equivalent level.
— in Clauses 5 and 6, amend the draft Bill
to ensure that a company cannot be held criminally liable where
it has no control over an entity.
— in Clauses 5 and 6, prepare official
guidance for business on due diligence.
— in Clauses 5 and 6, amend the draft Bill
to ensure that parent companies will not be liable for the acts
of their subsidiaries unless the act was in relation to a business
operated and controlled by the parent. This could be done by re-wording
Clause 5, sub-clause 1b, to read "the bribe was to obtain
benefits for a business or businesses operated by C".
19. The CBI remains at the disposal of the
Joint Committee should it require any further clarification on
points that will lead to Bill that recognises the UK's international
obligations and does so in a workable way that allows UK companies
to operate effectively and legitimately in the global marketplace.
June 2009
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