Examination of Witnesses (Questions 340
- 359)
WEDNESDAY 3 JUNE 2009
MR JEREMY
COLE, MS
LOUISE DELAHUNTY
AND MR
MONTY RAPHAEL
Q340 Lord Thomas of Gresford: Mr
Raphael referred to the simplicity of dishonesty and how it is
interpreted by juries every day in every court without any difficulty.
It is quite an easy concept, I should have thought, to consider
whether X bribed Y and whether Y received a bribe from X. These
are not difficult concepts. When we come to clause 3 where we
are asking the jury, under sub-clause (8), to apply their test,
the test of a reasonable person, what is it that they have to
look at? They have to look at whether a person comes within condition
(a), (b) or (c), whether he is a person who is expected to act
in good faith, expected to perform something impartially or is
in a position of trust. Then the jury are going to ask what is
the relevant expectation of that particular person and individual
in whatever position he is in. The summing up could be something
of a nightmare, could it not, with something as complex as this?
Mr Raphael: I think the summing
up in white collar crime is always difficult. This is central
to the issue of whether we should have jury trials at all in fraud
or related matters like corruption. It is a debate that is still
pending really in this Parliament, where we have the means to
do away with jury trials in certain circumstances but, so far,
that has not been implemented because we treasure the idea of
community justice. I can only be anecdotal about this. I have
sat through many white collar crime trials, some of them of the
most immense complexity. Where they are presented skilfully, as
they normally are in the higher courts, by skilful advocates,
where the summing up is done by extremely well-qualified and eloquent,
experienced judges—we have special training now for judges
to deal with complex cases of this kind—I myself believe
that they can be explained to a jury. I do not believe we need
special juries. All I think we need is attentive juries and skilled
advocates and the elements of the offence can be explained. I
do not say this facetiously: if the judge can comprehend the elements
of the offence, he can enunciate them to the jury. The problem
is to make sure that the judge is well-trained and used to these
concepts and can himself comprehend them. Otherwise, if we abolish
juries, we will have judges alone and of course judges will have
to tell us why they came to their conclusions. I know from my
own experience that many judges would rather not try white collar
crime because they do find it intellectually very challenging,
but we have a very high level of judiciary in this country. I
have little doubt that that could happen. I have heard very complicated
Stock Exchange frauds explained to juries who had never come across
shares before, who knew nothing about a limited company or how
it was capitalised and so on. It was Janet and John meets the
Stock Exchange and yet they were able to judge and distinguish
between the guilt or innocence of a variety of accused, acquit
some, convict others and so on and there were no viable appeals.
I have every faith in this. It is difficult. These are difficult
concepts.
Q341 Lord Thomas of Gresford: What
I am actually asking you is whether this requires all the complexity
in clause 3 and the introduction of concepts of good faith, impartiality,
positions of trust and relevant expectations or whether we could
not simplify the wording to a very considerable degree?
Mr Cole: My sense is that it is
overcomplicated. The concept of what we are talking about here,
the underlying lack of integrity, can be put in a much simpler
way, but to subdivide it into three seems to me to be overcomplicated.
I am sure, as Monty says, that we can get around that but it seems
to me we are taking this too far, it is lawyers taking this to
an extreme.
Q342 Lord Thomas of Gresford: It
is a lack of trust in the jury system really, is it not? The pressure
for trials with a specialist jury of City bankers has been slightly
eased in recent months. The concept of community justice is clearly
far better than specialist justice with people applying their
own standards. The Committee are concerned as to whether this
is overcomplicating and whether it can be simplified and presented
in a much easier way.
Mr Cole: My sense is it can is
the answer. My sense is that those three subdivisions could be
collapsed into one and still retain the very element of what you
are trying to get at through this Bill.
Ms Delahunty: I think you have
to look at what would happen with a defence hat on, what is going
to be expected of the reasonable man, and it is to be explained
to the jury. You do often get in these cases that the prosecution
will call an expert to say what is expected of the reasonable
business executive or the reasonable solicitor who is being prosecuted
for mortgage fraud, for example, what standards are expected,
but then the defence will call another expert to say—
Q343 Lord Thomas of Gresford: We
successfully managed to exclude in a mortgage fraud I did recently
a so-called "expert" solicitor to tell us what was expected.
Sorry to interrupt.
Ms Delahunty: Sometimes if they
are not excluded you can have a battle, you can have two experts.
If the jury are going to be educated on the particular business
so that they can think about what would be reasonable we want
to make sure that the prosecution do not have to jump through
so many hoops. I would advocate that this is very, very simply
defined and agree that it could be drafted in a better way.
Mr Cole: The only thing I would
add to that is the question of reasonableness and whether you
need to make some reference to what you are measuring against
and whether you need something in there along the lines of acceptable
standards of integrity, international standards of business, something
which gives it a position. That is just a suggestion.
Lord Thomas of Gresford: It might
be a question of evidence in that particular case, of course.
Chairman: Thank you. That is very
helpful but put pen to paper, please, because we have to provide,
if we can, an alternative to the Bill so we would welcome your
assistance.
Q344 Lord Lyell of Markyate: You
have got question 11 in mind. Clause 1 requires an individual
to know or intend that "improper" performance has or
will arise, but the passive bribery offence can be committed by
an individual who has no knowledge or intention of this kind.
Do you think there is a misfit between these two offences and
does it matter? I am just going to add one rider to that because
you have been saying that dishonesty is a concept which frankly
juries do not find difficult to understand. Dishonesty, although
it has been said in previous cases that it does not apply and
that in other cases it does, there is some judicial conflict on
that, is a very clear and long-established concept. With those
matters in mind and with a good deal of sympathy for your view
that this could be compacted, but a little bit of trepidation
since we have been round the course so many times, what is your
answer to question 11? Should we stick with intention or is it
sufficient that you can be guilty with no knowledge or intention?
Mr Raphael: It is always my fate
to be asked to deal with the most difficult questions on these
occasions!
Ms Delahunty: Do not worry, I
will chime in. I just thought you would say it first.
Mr Raphael: I understand what
was in the mind of the draftsman of these clauses in this way:
although quite rightly you say that dishonesty is always said
to be an unnecessary element in bribery, something which I think
the average layman finds very difficult to understand, how you
can have an honest bribe, nonetheless I can understand why it
has been framed in this way insofar as the idea really is to discourage
people from asking to be bribed in some way, either financially
or be given some other advantage. It is to discourage people from
asking for presents, gifts, advantages, tickets for Glyndebourne
or whatever it is that is thought to be heinous. It does not trouble
me for this reason: it has not caused us any problem in the area
of domestic bribery at all. We have not looked for the element
of dishonesty, although in a recent case called Kensington
it was said that you could not receive a bribe unless you were
dishonest. Leaving that on one side, I think this is really helpful
when we get to clause 4 and the bribery of foreign public officials
because we have to bear in mind that we do not want to put on
to the prosecution here any kind of burden concerning themselves
with the state of mind of the receiver of the bribe. The thrust
of the OECD is to deal with the supply side and to concentrate
on the knowledge and mental element of the briber rather than
those who receive the bribe. I am not troubled by it. I do not
think it is a mismatch and I do not think it is going to create
forensic problems.
Ms Delahunty: I have a basic concern
about a criminal offence that involves a lack of intention just
on basic principles. I know that there has been some criticism
of this saying this makes this an absolute offence without any
intention, any mens rea. I hear what Monty says about this
but I have concerns about whether this sets a precedent for other
absolute offences. I am not sure how it is justified.
Mr Cole: On a drafting point,
I think there is a timing issue here. For some of these offences,
the offence is not complete until you have intention, and an example
of that would be under clause 2(2), whereas under clauses 2(3)
to 2(5) it seems the fact is the recipient has performed a function
improperly and received money for it. It seems that in those circumstances
the offence is already complete without the intention having to
be proved, so that the recipient cannot be heard to be said, "We
did not intend there to be any connection, as it were, between
the performance and the advantage that he gained" because
it is inherent in the factual circumstances that are being suggested
under clauses 2(3) to 2(5). Just from a pure drafting point of
view it does not give me a problem.
Q345 Lord Lyell of Markyate: As you
say, 2(2) does require intention to obtain business or a business
advantage and then you have also got to give a bribe. If you intend
to get a business advantage and give a bribe there is quite a
lot of intention there.
Mr Cole: Yes.
Q346 Lord Lyell of Markyate: I would
have thought it is easy to infer dishonest intention.
Mr Cole: Which is what you have
under 2(2).
Q347 Lord Lyell of Markyate: Except
that it does not say it must also dishonestly intend. It is implicit.
Mr Cole: Yes.
Q348 Lord Lyell of Markyate: I have
a revulsion really against the use of the word "improper"
but so many academics seem to love it and the Law Commission that
we may be fixed with it; time will tell.
Mr Cole: My reaction to this is
this is not the biggest issue in this Bill by a long way. I think
some of your later questions to me give rise to far more important
points.
Mr Raphael: Can I just say this
colloquially. I think it is meant to deter people, either public
officials or those in a position of trust, fiduciary positions,
from holding their hand out. This is meant to be a deterrent,
an absolute bar, people must think twice before they ask or receive
anything. That is how I see it and I do not see the harm in that.
It may be too puritanical a view and maybe Puritanism comes with
senility, but that is the way I see it.
Q349 Mr Cox: Is not the problem that
the word "improper", which I must confess I cannot recall
in a criminal statute other than this one, covers an enormous
range of behaviour that may, while being improper, nevertheless
not be appropriately brought into a criminal court? The example
I gave to some of your predecessors yesterday was a training department
in a City bank which is doing rather well and the next door bank
rather likes the cut of their jib, so they say to one of the deputies
in that department, "Tell you what, you go and persuade your
colleagues to come over to us and we'll offer you a very attractive
set of incentives and packages that will be much better than you're
getting where you are now" and X goes into his trading department
and starts talking to his friends about leaving that bank. Now,
unquestionably he has an implied duty of good faith in his contract
of employment and you could very much argue that what he should
not be doing is going and bringing people round to the other bank.
It seemed to me to comply with every single requirement and ingredient
of clause 1. He would be offering a financial or other advantage,
the bank that is trying to poach, because it would be the package
that you are going to get when you turn up, he is breaching an
expectation of good faith because he should not be going round
in good faith to his own employer at the time and trying to help
his colleagues over to the other bank, and there may be whole
areas of life—horse racing, the Chairman suggested football—where
you are going to get types of conduct that while somebody might
regard them as improper would not necessarily be ones that we
should see in a criminal court, Mr Raphael. Certainly you and
I will not have seen those things before and perhaps we would
benefit from having them.
Mr Raphael: I can see that. May
I say with the greatest of respect that one could analyse this
piece of draft legislation and many others on the basis that it
does not fit every particular kind of model of conduct or delinquency.
The thing is that particular delinquency, as we know, is visited
very adequately by the law of inducing a breach of contract.
Q350 Mr Cox: That is a conspiracy.
The only criminal offence is a conspiracy.
Mr Raphael: No, you may sue people
for conspiring civilly, and they often are.
Q351 Mr Cox: Yes.
Mr Raphael: My only religious
faith is my belief in the integrity of our prosecution system
and I do not believe that people will be prosecuted where the
proper remedy is to leave it for the parties to take a remedy
in the civil courts for a tortious behaviour.
Q352 Lord Thomas of Gresford: Can
I take you to clause 4, the bribery of foreign public officials.
Is this something that you welcome? Does it comply with the international
obligations under the OECD Convention and so on? Do you think
that there are difficulties with it? For example, we seem to have
a different definition of what a bribe is in sub-clause (3) where
the concept of what is or is not "legitimately due"
enters in. That is further refined in sub-clause 4 which says
that the particular advantage is legitimately due but "if,
and only if, the law applicable to that person permits or requires
them to accept it". What does the prosecution have to prove?
Does the prosecution have to prove that the advantage is not legitimately
due and does the prosecution then have to go into what the foreign
law of the country is in order to prove that it is not legitimately
due and so on? I would be grateful to have your observations on
that.
Mr Cole: Certainly in terms of
the question of the legal test that should be applied my sense
is that you should adopt a written law test. I do not see how
else you can do it. To bring certainty to both the courts and,
frankly, for the clients is the way in which it is approached
under the FCPA. It talks about written laws and regulations. To
me, if you start to go beyond that then you are opening up a Pandora's
Box in terms of what is the law and you will get many, many experts
coming through the door telling you what the custom is and, therefore,
what is the law and you will never get to the end of that. My
sense is that it should be a written law test. There is a question
at the end of whether it should be a reasonable belief defence.
I am open-minded on that point because if you have a written law
test then all that a defendant has to fight about is whether he
has been reasonable in his approach. You try to find out what
the law is, so you get advice from a local lawyer and say, "What
is the law here?" and if you are advised by that law firm
in an overseas jurisdiction, "This is the law" and they
have actually got it wrong but you have placed reasonable belief
in that, maybe it should have a let-out. If you take the written
law approach the boundaries for that defence are fairly limited
and, therefore, on balance I would leave it in.
Ms Delahunty: I am concerned about
sub-clause (4) and how it is to be defined. Reading Professor
Horder's evidence, in his mind it seemed to be confined to payments
to charity, to build an orphanage or a school or something like
that. I wonder if this Committee and those involved in the drafting
of the Bill need to know more about the FCPA and how that does
work with the written law exemption and what does it apply to
and what has been accepted within that scheme. When I look at
this law I keep going back to the fact that we are trying to put
in a new law, first of all because we need a new law but, secondly,
to comply with our international obligations and perhaps to comply
with what the US would like to see of us as well as the rest of
the world. We need to see what is happening there because just
to have this in to apply to countries where you can have a contract
if you build an orphanage, I am not sure how that really works
and I am not sure how this is going to work in a trial and how
it is going to be explained. I find it quite worrying actually,
quite confusing.
Chairman: The next question is a long
question, and you have got it in front of you. I think this is
the most interesting question of all. Can you bribe and get away
with it? This is question 13: the foreign officials offence turns
on whether an advantage was "legitimately due" in accordance
with the foreign law that applies to the official.
Q353 Lord Thomas of Gresford: I trespassed
on that earlier.
Ms Delahunty: We were discussing
that earlier with all due respect, Chairman.
Mr Raphael: Can I just say one
thing about this. Every day of the week corporations take advice
on tax from tax lawyers and sometimes the tax advice is correct
and sometimes it turns out to be incorrect and is struck down
by the courts. We do not believe that should be a defence, it
is a matter of judicial discretion and so in the first instance
must be a matter of prosecutorial discretion. If we leave a reasonable
belief in a clause as such it seems to add nothing because a responsible
corporation doing business overseas will always if it is in any
doubt, and there will be very few occasions when it can be left
in any doubt as to whether what is being asked for is a bribe,
will seek local advice. Where they have sought local advice and
the instructions have been good, the advice has been unambiguous
and they have followed the advice to the letter, it is inconceivable
that they will be prosecuted. What concerns me, and I know time
is running on and if you want us to deal with it by way of written
submission so be it, is something else that was raised in your
first session with Professor Horder and that is the problem of
local partners, where you are forced to have a local partner who
is or is not related to the head of state and you are dealing
with a public procurement contract. To a large extent that bedevilled
the issue in British Aerospace, if you remember, where it was
said to be one of the problems in bringing that case forward.
What do you do when it is legitimate to the extent that it is
said you have to deal in this way and no other way otherwise you
cannot deal. The problem is not just purely one of ethics, but
once this Bill becomes law, if it does, it is a question of whether
you are going to openly commit something that will attract criminal
prosecution and conviction and debarment in this country. It is
a very tricky problem which I think needs to be considered and
I do not know whether it is adequately addressed in this particular
piece of legislation.
Q354 Lord Lyell of Markyate: It may
be adequately addressed. I have been trying to think about that
in the context of what we know, which is limited, about the British
Aerospace case. We know that Lord Goldsmith told the House of
Lords that he was not satisfied that the case would necessarily
succeed anyway, leaving aside any representations. I surmise that
is partly or perhaps wholly because the system in a country which
is run in a very, very different way from our own puts the question
of procurement into the hands of some senior member of the royal
family or somebody chosen by them and that is the way that business
is done. To say that is not permitted within the context of this
Act would be difficult, so I think it would be permitted. It may
be that if that is the only way that business is done there, that
is what Parliament would wish to achieve. The reason I am saying
this really is to get your comment to try and focus on the right
issue in law in relation to the Bill as currently drafted. On
the whole do you agree with my assessment of what "permitted"
means? I will just add one sentence. In English law if something
is not forbidden then under the common law it is permitted, there
is no law against it, no criminality. In a number of continental
systems if something is not expressly permitted by the law then
it is forbidden. I think this leads to some of the OECD problems
and I would be grateful if you had any comment on that aspect
as well.
Mr Raphael: Probably not at this
time of day.
Chairman: You will write to us.
Q355 Lord Lyell of Markyate: On the
"permitted" point, do you agree with me?
Mr Raphael: Yes, but we will have
to look because obviously clause 4, as it were, is predicated
on what went before by way of a definition in clause 1 and so
on, so we have to see if you are dealing with the local partner,
somebody prescribed to you by the head of state who says "You
must deal with this local partner" and his commission will
be paid, as was said in another session, into a Swiss bank account
or whatever. You have to look carefully as to see whether that
is offensive under the prescriptive regime of clause 1 because
if it is then you are at the mercy of the prosecution authorities
here as to whether or not they choose to prosecute you because
then it becomes a political decision which I do not believe a
prosecution should ever be, it should be capable of being predicted
by reference to a code for prosecutors and it should be reasonably
ascertainable in advance. If you are a business you should not
be at the mercy of a whim of some very difficult to predict exercise
of prosecutorial discretion, so I would agree with you. You have
to look carefully at this. I would like to have some more time
to see whether looking at clause 1, coupling it with clause 4,
you are trapped in that situation and whether that means there
are large parts of the world now where you simply cannot do business
at all and if you choose to do business there now you would be
prevented from doing business after passing this Act.
Ms Delahunty: Again, you are hearing
separately from the CBI and other trade bodies and there is the
whole question of competitive disadvantage. Just looking at this,
I agree with what you say about "permits" but, of course,
as this is a law which will affect our conduct around the world
there has to be some certainty, so I go back to Jeremy and the
need for a reference to the written law. I do not think that will
be perfect because the written law of some of these countries
may not be terribly clear in itself, but that is what is done
under the FCPA and maybe that is the best it can be.
Mr Cole: Call me old-fashioned
but I go back to the old concept of principal agent and as I understand
in the Saudi situation the idea is you bribe an agent and then
that agent can no longer be impartial in his or her advice to
his principal, but here it sounds as if the principal is fully
aware, indeed is receiving.
Q356 Lord Thomas of Gresford: The
principal is getting a cut. That was the problem.
Mr Cole: I am afraid that is where
I have problems. This is the old fundamental of what bribing meant
which was persuading an agent to act against the interests of
his principal and it seems to me you have not got that situation
if I understand the Saudi situation correctly.
Mr Raphael: In British Aerospace,
and I do not want to dwell on that, it was said that the payments
that were considered to be delinquent were made, or would have
been made, with the blessing of the head of state. That seemed
to be the mischief which Lord Goldsmith found very difficult to
deal with. I think that is what my Lord, Lord Lyell, is referring
to.
Lord Lyell of Markyate: I think
there are very real questions here because it is quite possible
for a head of state to say you must do business in a particular
way but there is still to be a bribe given within those parameters.
That could happen. I am not saying it did happen. Equally, you
could have what would be regarded as 18th century, but certainly
not 21st century, Western European conduct, or certainly not British
conduct, which was a level playing field but gave a great advantage
to what seemed to be a very senior private citizen. It is a confused
situation.
Q357 Lord Mayhew of Twysden: If we
are going to have clarity, which is one of the principal objectives
of this Bill, it is very hard to see, is it not, how a requirement
for written law is not absolutely critical because you may very
well have a situation in which corruption and bribery is part
of the system and the law of the country concerned is silent on
it. How do you overcome that point if you are the prosecutor,
the point being, "Well, the law is silent. We have orders
that this is the common practice in law"? How do you overcome
the defence point that it is permitted? It will not deal with
everything but to have an express provision in the law does seem
to me to be a necessity.
Mr Raphael: The problem is this:
you get the situation which was described by Professor Sutherland
and that is how do you judge legitimacy. Are you judging legitimacy
according to the culture of the country where the bribe has been
or is being paid or is it according to our culture here? If it
is going to be solely judged by what is permissible in the country
where the bribe is paid it is not prosecutable if there is no
written law, but if we are going to judge it by our standards
then it is prosecutable. The analogy is not too farfetched because
in the law of money laundering we have now accepted the idea of
single criminality, so even if a predicate offence of the conduct
which we say produced criminal property may have been lawful in
the place where it occurred, if we say it would have been a criminal
offence here, an acquisitive crime, then we say it is a predicate
offence. We have moved away from the old-fashioned idea of double
criminality and if we have moved away from the idea of double
criminality maybe we should move away from the idea that things
have to be doubly unethical, as it were, or doubly illegal. I
have not put it very elegantly. It is a possibility.
Ms Delahunty: But was that in
the mind of the author?
Mr Raphael: I have no idea.
Ms Delahunty: I am not sure if
it was. I think the law applicable to F is meant to be the foreign
law. That is how I read it.
Chairman: You are not going to solve
it now. I hope you will solve it by the time it gets to the full
House of Commons and House of Lords.
Q358 Lord Williamson of Horton: I
think we are going on now to clause 5. Mr Raphael mentioned that
he wanted to comment on that anyway. This is the corporate offence
clause and it is quite tricky, I think. I wonder if I could just
raise three points on it. First of all, in your view would it
be desirable to widen the offence, some people have said to us
they thought it is, which makes companies criminally liable for
bribes paid on their behalf except where due diligence is established
or adequate procedures are in place? The second point I want to
raise is whether you think guidance is needed on some of the points
in clause 5, for example on adequate procedures? I think you did
mention that earlier. Thirdly, do you think that we are going
to run into a problem over syndicates and joint ventures? There
are an awful lot of joint ventures and the extent to which they
are under the control of one company is quite tricky.
Mr Cole: Maybe I can deal with
your last question first and go in reverse order. My sense is
that if you are aware a bribe is being paid by a person performing
services on behalf of that corporate it is unclear as to what
the scope would be. I suggest a two-fold test. One is a substantive
control test or a test based on a company acquiescing in the bribery
that it has knowledge to. Rather than trying to do it by labels,
you do it by those two measurements. If it is the case that you
are in a JV and you have to have control over what that JV does
then that substantially changes how these JVs are going to be
structured, and that is not the real world. If there is a substantive
control test as a result of what you have constructed with a JV
and you do have control over the JV partner, fine, or if you acquiesce
in what they are doing you should be responsible. To me those
are the two tests you should apply.
Ms Delahunty: What I want to add
is my concern previously raised about the adequate procedures
defence. Professor Horder said it is essential to develop guidance,
but my concern is how with such a wide constituency who are going
to be dealing with risk management you are going to be able to
have some sort of uniform guidance to make this work. I am also
a little concerned, if I might say, by what you were talking about
with our predecessors, Lord Thomas, this question of whether the
defence then has to raise the issue because that begins to say
to me reversing the burden of proof, with all due respect. I am
a little bit concerned about that.
Q359 Lord Thomas of Gresford: There
are two ways: either the evidential burden which would require
the prosecution to disprove or the probative burden which would
require the defendant to prove on the balance of probability.
It seems to me the simplest thing is to say criminal vicarious
liability of an employee of yours, or someone from a subsidiary
of yours, will be imposed unless you can show, because you have
access to your own files and documents and so on, that you have
adequate procedures or have acted with due diligence. It seems
to me the only way you can deal with it. What would a company
prefer, that the police a" la Damian Green move into
the company and start searching through their files to find out
if they can prove that they have not got adequate procedures or
for the company to come forward with its own documentation to
show that they have? I would have thought that they would prefer
the latter course.
Ms Delahunty: I think for me it
is just basic principles that in a criminal prosecution the prosecution
should prove the case. I feel that if we are going to reverse
the burden we have to be very sure that it is the right thing
to do and dealing with a balance of probability test in a criminal
prosecution causes me concern. We have to be absolutely sure that
is the right thing. On your second point about would not the company
prefer to raise this themselves, Section 2 Notices from the SFO
at the moment ask for information in a very civilised way and
companies are very happy to hand that over, and that goes on in
many cases that I am dealing with at the moment. I am not sure
just because of administrative issues we should think about reversing
the burden of proof.
Lord Thomas of Gresford: You then
have to have a very specialist police force that knew what they
were looking for in terms of procedures and so on. They would
have to be looking for specific things within the broad documentation
of a company, whereas the company themselves would know what they
have got in place and could produce it in court. Reversing the
burden of proof happens all the time in all sorts of offences,
that is no strange concept at all.
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