Examination of Witnesses (Questions 20
- 39)
THURSDAY 14 MAY 2009
PROFESSOR JEREMY
HORDER
Q20 Lord Mayhew of Twysden: I see
that you are thoroughly sick of this particular horse, that you
cannot make it drink, but I just wanted to follow up the questions
a minute or two ago from Dr Turner and what followed from that,
this question of the jury deciding whether the law permits the
conduct we are talking about, whether it be called "facilitating
a payment" or whatever. If you have a situation where the
law is silent on that and you, and this is the addition to the
scenario I am putting to you, have evidence called that it is
a well-established practice that the wheels are oiled in this
way, can you not reasonably expect a jury to find that the law
permits it?
Professor Horder: Well, I think
the way in which you put the question means that I can only answer
that yes, they may very well do that, I entirely accept that,
but the point you are making is, I think, a hard one to refute.
However, what, I think, we need to focus on is that you have to
imagine British and other businesses coming to this country and
the question is: who can do what in order to secure business in
this country? What we want to avoid is a race to the bottom, who
can pay the biggest bribe, who can do this, that and the other;
that is what we are trying to avoid, that is what the OECD wants
to avoid and that is what, in all good conscience, we should be
avoiding, I believe. How do you do that? Well, you try to focus
on something that is in common as between them all, which is what
is actually legally permissible in that country, not just tolerated,
permitted and so on. Now, although I accept what Lord Thomas and
others have said that there may be some more explanation or that
another look at this may need to be taken slightly to make sure
that what I am saying is accurate, I genuinely believe that, if
that is the focus, what is legally permitted, then I think businesses
from across all OECD members will know exactly where they stand
and they will not be able to take advantage of one another, at
least not under the law as it stands, by making secret payments
and so on, but that will not be permitted under the law. That
is what we are trying to achieve, if I could put it that way,
but of course I cannot rule out that a British jury will take
a sympathetic line with a British company when it says, "Well,
I was only trying to do my best for Britain" and so on; they
may, that is always a possibility.
Q21 Lord Mayhew of Twysden: Possibly,
the addition of the word "expressly" might help.
Professor Horder: Well, I have
learnt through experience not to try to suggest to parliamentary
counsel what words are necessary in order to produce certain effects,
so, if it is all right with you, I will not leap upon that suggestion
with glee and say, "Yes, that's exactly the answer that we
require" because we know, we have all learnt probably, that
that is not a wise thing to do.
Q22 Lord Williamson of Horton: Well,
we will come back again to clause 5 and we are going to come back
to it a lot of times, I may say. I interpreted the structure of
the Bill as quite deliberately drawn up in such a way that we
have the separate, discrete offence in relation to the foreign
official, and that makes possible the differentiation we have
now been discussing between the general offences and the test
of whether something is legitimately due. I think I have to give
away my position: I think that is a big step forward and, as I
understand it, the Law Commission has actually stated that something
which is customary or officially tolerated within a country does
not mean that it is permitted or required. You will find that,
I am sure, in the Law Commission Report and I think it is a very,
very important point.
Professor Horder: I remember writing
it!
Q23 Lord Williamson of Horton: That
is where the distinction really lies. We know the jury may not
actually go in that direction, but it is a very bold attempt and
I strongly support it. I do just ask you one question, and that
is the extent to which other ways of dealing with this were considered,
for example, the United States' Foreign Corrupt Practices Act
of 1977 and, as we know, there are objections to the idea of "legitimately
due" in the text from a number of important bodies and the
SFO and the Crown Prosecution Service have expressed some doubts
about it. I think it is very good, "legitimately due",
but can I just ask you whether other things, like the US practice,
were considered?
Professor Horder: Well, in some
respects, they were, yes indeed. I have talked to US prosecutors
about the whole issue. They have a very different way of doing
things out there, as you will know. There are time limits, for
example, on prosecutions, which we do not have here, which means
that cases get processed, or have to be processed, more quickly
in the sense that the prosecution must very rapidly take a decision.
Once they have taken the decision to indict, the company, let
us assume it is a company, only has a short time to decide then
whether they are going to plead or provide evidence and so on
before a point comes where they will get no credit for having
done that, so there is a very different culture and a way of doing
things out there, which I should say by way of preface. The second
thing of course is that the OECD Convention and its model offence
are very much based on the American example. You will know the
history, that the Americans passed this quite rigorous Act and
then realised that, if they abided by it and no one else did,
then they were going to lose out, but, rather than abolish it
or ignore it, they did the proper thing by making everyone else
sign up to the standards. What is interesting about the Act is
that of course it does some things differently. It has an exemption
for facilitation payments, for example, which we do not have and
part of the reason we do not have it is that it is already the
case in English law that there is no such exception, so we are
just following existing practice. Now, that is not necessarily
an excuse for anything, we are following existing practice, but
also we were troubled actually by the interpretation of this notion
of what counts as "small" in certain contexts, what
counts as a "facilitation payment". It seems like something
ready-made for litigation up and down the courts, so in this instance,
although I am always reluctant to do this and I am sure you all
would be too, we thought it best to leave the matter really to
prosecutorial discretion, not least because, in some instances
in another context, payments made by way of facilitation and so
on will have to show up in a company's accounts somewhere and
they must be in a position, at least, to say what those payments
were. I think that that will, in the nature of things, keep so-called
"facilitation payments" in check in terms of their nature
and degree, but the reality is that, for example, a firm that,
I do not know, has got a lot of aircraft or ships coming in and
out of countries all over the globe, it may very well be that
they have to give a bottle of whisky to the harbourmaster or someone
each time they go through, and really it is not realistic, I think,
to expect prosecutions to be undertaken in those cases, but it
is a case where I think it is better that the law stays silent
and we just carry on as we always have, only prosecuting where
the public interest demands that you prosecute, and that would
not be the case in such an example, I hope.
Q24 Chairman: That is one of the
things that you have been trying to avoid though, too much reliance
on prosecutorial discretion.
Professor Horder: We have, but
one of the things about American law is that they have a de
minimis doctrine, an idea that, if your offence is really
very, very trivial, then it does not even come within the definition
of the offence, and we do not have that here. I think what we
do is we do rely a little bit more, by way of contrast, on prosecutorial
discretion and that is not necessarily wrong. My standard example
is that, if I light a match from your matchbox without your permission,
I am guilty of arson, but no one is going to charge me with arson,
that would be completely absurd, but it is not a reason to change
the definition of "arson" it is just a reason to rely
on commonsense and the fact that I am never going to be prosecuted.
One has to rely on that to a degree and, although it is a difficult
question, I think, on balance, we decided not to let the best
be the enemy of the good and to rely here, as we have because
experience has demonstrated this has worked, on prosecutorial
discretion to avoid trivial cases being tried.
Q25 Baroness Whitaker: We seem to
have moved on to clause 4, so my questions are also about this
question of how it might be legitimate to bribe a foreign public
official. I would just like to explore a little bit, if I may,
the context in which you made your proposals, and I am not talking
about ordinary commissions for which there can be a framework,
I am talking about covert bribes. I just wondered whether you
had come across anywhere where it was explicitly lawful for a
covert bribe to be taken, and also, since the OECD Convention
on this is quite clear on this matter, whether any of your consultees
said, "Nevertheless, we should go ahead and make it okay
to covertly bribe foreign public officials", and indeed if
anyone suggested that it was unreasonable or unfair to criminalise
bribery in any way.
Professor Horder: Well, you will
have to remind me if I forget the order of your questions, but
in relation to the first one, I think it was Transparency International,
I cannot remember now, who told us that they did not know of any
country that actually was so brazen as to permit covert payments,
which would then not, I suppose, be so covert, so they did not
know about that. It may be that there are other legal shenanigans
going on to do with donations made to charitable institutions
that are not really charitable and so on, that is possible, but
I do not myself know of any such example. Perhaps people will
start creating them all over the place now, I do not know, but
we will see, so I do not know about that specifically. In relation
to the broader question of whether we encountered real opposition
to the broadening of the law, well, who would be the candidates
for that? I think the business organisations that we consulted
were very comfortable with the idea that doing business overseas
is not, to use that phrase again, a race to the bottom, that there
are standards that should be observed, and they have all accepted
that without reservation. What they were most concerned about,
as we were in turn, is that the standards that they should be
held to should not be higher than those of their competitors,
and that is a very difficult call and we hope that we have pitched
our clauses in such a way that, although I do not really like
putting it in this way, but I will, we have complied with our
OECD obligations, but only just or, in other words, there is no
gold-plating. I believe that to be the case, but no doubt others
more learned than I will come along and say, "Well, actually
no, you could delete this bit or that bit" and so on. For
example, we have not, to use the example I alluded to earlier,
gone beyond the OECD by including people who are candidates for
office as foreign public officials. We have not done that because
they do not do it themselves. We have tried to avoid doing that
and in that way, I hope, we have got the business community, at
least to some extent, in agreement with us. Certainly, they had
no objection to the foreign public official offence, they were
happy about that, but clearly they were not happy, well, I say
they were unhappy, they just reserved their position on the corporate
failure to prevent the offence and, so far as I know, they have
not come out and said, "That's an appalling thing. We don't
agree with it" or, on the other hand, "Yes, it's a good
idea. Why don't we go ahead". As far as I know, they have
not said, at least not to us anyway, they have not given an indication
one way or the other, though I am sure they will in due course
and we will have to see about that, but that was always going
to be the controversial clause and it involved a change of mind
on our part because originally we were not going to have it.
Q26 Lord Goodhart: Professor, I think
there is a serious problem here with the meaning of the expression
"legitimately due". My understanding of something being
legitimately due to a person is that they are entitled to it before
they receive it, but that, which would be the normal construction
of those words, is then completely altered by subclause (4) of
clause 4 which says, "A particular financial or other advantage
is legitimately due to F if, and only if, the law applicable to
F permits or requires F to accept it". That seems to me to
be an entirely different concept from what is normally understood
by "legitimately due" and I think that, if you limit
it to "legitimately due" that might come close to being
reasonable, but I think the redrafting of that in subclause (4)
causes great difficulties here.
Professor Horder: Well, I entirely
take the point, and this clause has been the focus quite a lot
today, but, if I could come back to you on that, I think the problem
would be this: that someone is entitled to something if it is
legitimate under their contract, for example. Someone could have
a public official in a foreign jurisdiction whose contract, not
necessarily expressly, but of course impliedly, allows them to
take bribes because that is the way in which their salary is made
up because of course, as you know, I do not need to tell you,
an implied term is just as much a term as an express term and,
if, when you are employed as a public servant in country X, you
get a nominal salary or not a very high one and the expectation
is, as part of the normal business practice, that you will take
bribes to supplement that salary, that is an implied part of your
contract and everyone understands that, then it becomes something
you are entitled to expect. That is exactly the kind of practice
that we did not wish to continue and that is why we have insisted
on the "legitimately due" criterion to cut out exactly
that kind of activity which, I think, is wrong and I do not think
that British businesses should be supporting it, directly or indirectly,
by making large payments that are, in effect, salary substitutes
basically, so not just bottles of whisky for the harbourmaster,
but genuine salary substitutes. I genuinely think that is wrong
and it does not help countries who are struggling to establish
the rule of law and set up proper public services, it really does
not, and I hesitate to moralise, but I think we do have a responsibility
to try to ensure that companies think about those matters and
pay attention to them. I am sorry to be a bit sharp, but I think
one does have to be quite insistent on a narrow reading of "legitimately
due".
Q27 Jeremy Wright: On the same subclause,
4(4), and back to the vexed question of whether or not a jury
might conclude, in the absence of evidence, that a particular
law in the relevant foreign country does not exclude a bribe,
common practice was that they should be accepted, and it was,
therefore, legitimately due, does this not depend on which side
of the argument has to prove what here? If the prosecution has
to demonstrate that the law applicable to F does not permit, or
require, F to accept it and cannot do so, in other words, cannot
produce specific foreign law that says that bribes are illegitimate,
then I can see there is a possibility that the jury might conclude,
in the absence of that evidence from the prosecution and in the
presence of evidence that it was going on all the time, that it
was, therefore, legitimate or, at least, not illegitimate. If,
on the other hand, the defence have got to prove what is set out
in 4(4), I can see that there is less possibility of that happening
because, if the defence have got to actually identify a piece
of foreign law that permits this specifically and cannot do so,
then obviously that defence would not be available to them. What
is your understanding of where the burden of proof lies in this
specific regard?
Professor Horder: For a lawyer,
that is a nice question to have been asked, so thank you. Formally,
of course, the burden is on the prosecution here to show that
the payment was not legitimately due, but, in a way, I think this
clause 4(4) works a little bit like a number of other elements
of unlawfulness, if you like, in offences. My example would be
self-defence where the prosecution is under the obligation to
show that someone did not act in self-defence, but all they have
to do, in effect, is say, "Well, there was absolutely no
evidence that she did", and then they can sit back and it
is for the defendant to say, "Well, actually you can see
from the medical evidence of cuts and bruises that in fact I was
struck before I struck my blow", or something of that nature,
so, in effect, what the prosecution does is to assert the negative
and then it is for the defence, in practice, to assert the positive.
I see this happening here, that the prosecution will do, no doubt,
a check on Google or somewhere to see what it says about the law
in wherever it may be and, having satisfied themselves that there
is no exception so far as they can tell, then the case will proceed
and it would be for the defence's lawyers to do some deeper digging
to try and find something. In the end, it will turn on actual
documentary evidence, so what is said in a case, what is in a
statute or the equivalent thereof in the country in question,
so I see this working in that sort of way really. In the end,
it is a legal question of course, so the jury cannot really decide
for itself that in fact, in their learned view, the law requires
X or Y. They are not, in practice, I think, going to do that;
they are going to accept what the lawyers say on this point, I
would imagine.
Q28 Lord Thomas of Gresford: Of course,
the defence have an evidential burden, as you rightly say, to
raise the point, but it is still for the prosecution to disprove
it at the end of the day. Supposing I were to defend somebody
on the basis that the contract of the foreign official permits,
either expressly or impliedly, the acceptance of facilitation
payments or bribes, or whatever you like to call it, is that not
permitted or accepted by the law of the particular country? If
the contract law can be enforced in that way, is that not enough?
Do I have to do any more than that?
Professor Horder: Well, do not
forget, we are not talking here about the prosecution of the public
official himself. That is purely a matter for the domestic jurisdiction
and we are not in the business really of targeting them.
Q29 Lord Thomas of Gresford: That
is not my point. My point is that the contract law of the country
permits a person to have, either impliedly or expressly in his
contract, the right to receive facilitation payments or bribes.
Does that not nullify the effect of clause 4?
Professor Horder: Well, no, I
do not think it does because, as I have been saying all along,
it must be the substantive law of the jurisdiction, not, if you
like, the binding obligations made through the law, like contracts,
trusts and so on. Those are a secondary kind of law, are they
not? They are a set of binding obligations made under the authority
of the law rather than something the law permits you directly
to do. My contract with the Government is not set out in some
statute, it is made under the general authority that the Ministry
of Justice and so on has.
Q30 Lord Thomas of Gresford: But
there is nothing which says in the law of the foreign country,
"You may not make a contract which would entitle you to accept
a bribe". I do not think I have got to do any more, under
this reading of it, than to show that in the particular country
it is an implied term of the contract, and enforceable, that a
person is entitled to receive bribes. Why am I wrong?
Professor Horder: I think that,
if it were given that reading, that would be not what we intended
because what we intended as to what is meant here is that the
obligation is actually contained in primary legislation or in
case-law, not something that results from an arrangement between
private citizens or a government making a contract with a public
employee; it is not meant to cover that. Your example mixed up,
and I do not mean that in an accusatory way, a facilitation payment
and a bribe. I have already said that, with facilitation payments,
we do not see those as having sufficient public interest such
that they be prosecuted, so I think one needs to concentrate on
the difficult case, which is the case where, effectively, you
are paying someone thousands of pounds to make up what would otherwise
be their deficient salary. Well, I would say myself that, if you
cannot point to a statute or case that actually authorises such
a payment to be made in whatever circumstances it may be, well,
then it is not enough for you, the British businessperson, to
rely on the contract that was made.
Q31 Lord Thomas of Gresford: I am
relying on the contract law of the foreign country, not on the
contract itself. It is not an illegal contract in that country
and, therefore, it is permitted for that person to receive the
bribe.
Professor Horder: Well, I think
you are using "legally permitted" in an extended sense
of that term, so, for example, it is true that, when I make a
contract, I can put in whatever terms I like and, as long as they
are agreed, they become legally binding, but that is because the
law gives me—
Q32 Lord Thomas of Gresford: That
is not true because you can have an illegal term.
Professor Horder: You can, but,
putting aside the possibility of illegal terms, it is the case
that I and my contract partner decided what the terms would be
and it is just that the law gives an enforcement power, it allows
me to enforce them, but I do not think, certainly on a normal
interpretation, that that means they are actually legal provisions
in the way in which, for example, Parliament passes the law or
the judges make the law; I do not believe that they are a law
in that sense. They are a factual agreement, whatever it may be,
an exchange of 90p for a newspaper or something, a factual agreement
which is then enforced by the law, which is not the same thing,
I think.
Q33 Lord Thomas of Gresford: Well,
it is pointless to have this in anyway in the sense that you have
put it because you say that the OECD cannot come up with any jurisdiction
where the acceptance of a bribe is expressly permitted, where
you are permitted to accept a bribe as some sort of statute, so
why is this in there?
Professor Horder: That is because
we are talking here about bribes, and of course no law is so crass,
no jurisdiction would be so crass as to do that, but what they
do, or may do, is provide, and this is not uncommon, it is a bit
like planning gain, I suppose, that someone seeking to invest
and, therefore, do business in a major way must subsidise schools,
hospitals, whatever it may be, something of that nature, and that,
so long as that is legitimately due in the sense in which I have
explained, which is that it is allowed by a specific law in that
country, then that should not be the subject of a bribery investigation
or prosecution. What we are trying to do here is to make sure
that good, beneficial payments that actually improve standards
and living conditions in particular countries are allowed and
that bad payments that just supplement people's salaries that
they should be getting are not allowed. That is, effectively,
what we are doing and I think that this is the way to achieve
it, but, clearly, a lot of you have some doubts about that and
it may be that more thinking needs to be done.
Q34 Chairman: Are there examples
of the beneficial version that you just mentioned?
Professor Horder: Yes, I think
there are. I am not going to name particular countries because
that then gets us all into difficulty, but certainly in doing
business in Africa, for example, it is not uncommon at all for
companies to enter into these arrangements. Now, whether those
arrangements are backed up by specific laws, I am not in a position
to say, I do not know, but that is the kind of practice which,
if permitted by law, we would think absolutely appropriate and
the right way to match up doing business and actually doing good.
Q35 Lord Thomas of Gresford: So,
if an American company says, "We'll build you a hospital",
that is all right, but what if a British company says, "We'll
build you a hospital and a school"? You are then simply bringing
in an imbalance and it is not a level playing field then because
that is, effectively, bribing the whole state that you should
have the contract. Is that what you are after?
Professor Horder: I confess, I
did not think of that example, but that is what you might call
"white" bribery as opposed to "black" bribery,
is it not, in the sense that it is good bribery as opposed to
bad bribery or something like that.
Q36 Lord Thomas of Gresford: Can
we have a "White Bribery Bill"?
Professor Horder: I am not sure
I would have an objection actually to a British firm seeking to
compete on those terms, but the reality is of course that it does
not happen.
Q37 Dr Turner: That is an important
point. The idea of planning gain exemplars comes into the realms
of acceptability at least, but my understanding is that that is
not terribly common, that the things upon which this Bill stands
or falls are very much the personal gain of foreign officials,
which would certainly not be invested in worthy, altruistic projects.
Are you convinced that the Bill, as drafted, deals adequately
with those, and what is your intention? Is it your intention to
eliminate that sort of business practice, and have you considered
the implications for, for instance, the defence industry of being
successful in that, or is it your intention to allow it, but to
just stop the worst excesses? I do not know. What is your intention
here?
Professor Horder: Well, that sounds
to me like an admixture of law and politics, which is sort of
quite heavy on the political side, which is quite dangerous territory
for the Law Commission, generally speaking. I would not be being
honest with you if I did not say that we had thought about those
very issues and how we should pitch it and so on. I think the
reality is that this Bill will stand or fall, not necessarily
perhaps by how it is phrased, but by whether or not, and the degree
to which, it is enforced. This Bill is quite interesting for what
it does not say as much as for what it does in the sense that
it does not say very much about what is now to be invested in
prosecution practice. I think in relation to corporate events
there is the mention of one or two prosecutions, something like
that, which looks very much like cutting your cloth to fit, does
it not? I think the ballpark aim is to eliminate worst practice,
the bad cases, and also, to a degree, to encourage good practice
by encouraging firms to think about due diligence, about improving
their standards, and I talk quite a bit about that in my written
note. We are trying, in other words, to persuade companies to
become engaged in the process of clean business overseas, if you
like, but what we do not want to do is to force them into it with
a whole set of extremely rigorous terms and conditions that would
go way beyond anything that the OECD provides for on the basis
that it is a kind of shock tactic or something like that. That
would have been, I think, inappropriate and, in any event, would
never have been backed up by the resources to make it really happen,
so we have tried, I think, to provide a set of provisions where
in the existing system, as it is, the distribution of resources,
the difficulty of proof and so on and so forth, this will actually
meaningfully end in some better practice being adopted, but without
a complete revolution; no, I do not see that happening.
Q38 Dr Turner: I think it suggests
also that it provides very big fees for lawyers!
Professor Horder: Yes, well, it
always seems to end there, does it not! I have been quite popular
actually on the city solicitors' circuit, talking to them about
this, because obviously, from their point of view, if clients
come along, saying, "Oh gosh, there's some new law. What
should we do?" that is all very good news from their point
of view, but it is also very good news actually generally because,
if firms are waking up to the fact that there is legal change,
that there may be prosecutions in the pipeline, so they are throwing
money at lawyers, saying, "Look, draft us up a set of provisions
about what we need to do now", well, that is good, I think.
I have learnt a lot in the time that I have spent going round
to firms, finding out what they think are the difficulties potentially
and where they have had problems and issues, and I think it has
been a helpful process, so actually, although I hesitate to say
it, lawyers may be some element of a force for the good in this
whole process, although they will make some money doing it, no
doubt.
Q39 Baroness Henig: I would like
to switch the focus to the scope of the Bill and, particularly,
to some of the more political issues, for example, first of all,
why you chose not to follow the call of the Public Administration
Select Committee where they asked for the Honours (Prevention
of Abuses) Act to be replaced by a single, comprehensive piece
of legislation and you clearly did not feel that was appropriate?
Secondly, I just wondered whether, and to what extent, future
allegations of cash for honours or cash for amendments cases would
fall within the scope of the prospective legislation.
Professor Horder: Well, that is
a good question. I think the answer is that they probably would
actually fall within it in quite a lot of instances now. Of course,
the time was in, I hesitate to call them, the "good old days",
but the time was when actually you were perfectly legitimately
entitled to sell an office or something that you had because it
was a kind of property interest that you had and you could sell
on, but those days are long gone. If I may just take a step back,
when we agreed our terms of reference with Baroness Scotland and
the Home Office, one of the things I said I did not want to do
was look at parliamentary practice because I regarded that as
a matter for Members of Parliament and not an appropriate thing
for the Law Commission to start lecturing Members of Parliament
about. Perhaps some other body could and should, but not us, so
I said that we did not want to look at that, and I also said that
we did not want to look at James Bond and what he might be permitted
to get up to in exchange for information, I did not want to look
at that either. Baroness Scotland said, "Well done, that's
fine, you just get on with looking at the commercial and private
side of things", so the answer to your question, in a way,
is that yes, we said no, but partly because, I think, we were
very conscious about our place in the role of things, if I could
put it that way.
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