Examination of Witnesses (Questions 360
- 367)
WEDNESDAY 3 JUNE 2009
MR JEREMY
COLE, MS
LOUISE DELAHUNTY
AND MR
MONTY RAPHAEL
Q360 Lord Goodhart: Would it be an
improvement if they widened the liability under clause 5 but convert
it from being a criminal offence into something that gave rise
to a civil penalty? There are precedents for that, are there not?
For example, until a few years ago that was true of price fixing
which gave rise to a civil rather than criminal offence.
Mr Cole: It still is the case.
I think that is right. I think the corporates would welcome that
because clearly they have huge concerns about their exposure to
criminal responsibility, not only in terms of their reputation
but, as I pointed out before on public procurement, it could be
a bad company-type situation. If 50 per cent of their business
comes from public procurement and that is stopped overnight, that
company will collapse. Those are high stakes that you are playing
with here. You are pre-empting the Law Commission's consultation
on criminal liability where you draw the line in the sand, which
is what we are talking about here, in terms of whether you have
a vicarious liability offence with the adequate systems defence
or whether you include some element of negligence in there. It
is almost circular and gets confusing at that point. My sense
is a civil penalty at this stage might be the appropriate answer.
Q361 Lord Lyell of Markyate: Could
we just have a very quick explanation for my benefit. What is
the law that says you are totally debarred from all procurement
and ought that law to be changed?
Mr Raphael: It is a Statutory
Instrument 2006 which implements an EU Directive.
Q362 Lord Lyell of Markyate: It is
an EU law.
Mr Raphael: As far as the EU is
concerned each of the Member States of the EU has domestically
implemented an EU Directive. We implemented it by secondary legislation
in 2006. That says if there is to be debarment, debarment may
be mandatory, it may be discretionary, and in the case of corruption
it is expressed to be mandatory.
Q363 Mr Cox: But this is not a conviction
for corruption, this is for failing to prevent corruption. That
is rather different, is it not?
Mr Raphael: It is meant to deter
but it is there.
Q364 Mr Cox: The conviction under
clause 5—
Mr Raphael: A corruption prosecution
will result in debarment. Do forgive me, if I may be permitted
to go back for a moment to Lord Goodhart's question and then come
back to yours, if I am not being discourteous. There are lots
of central problems which Parliament has to struggle with. The
first thing is that white collar crime must not be devalued as
opposed to other kinds of crime in the eyes of society. It must
not be looked on as a soft option. As far as anti-competition
is concerned and price fixing the European Union does not criminalise
it and we did not criminalise it, but we did in the Enterprise
Act and are now bringing prosecutions for it, albeit at the moment
we are being rather soft about it. It is still a criminal offence
here. The Americans were not going to criminalise corruption post-Lockheed
in 1976 until they discovered that American companies were bribing
their way into business around the world. They discovered that
because more than 400 companies applied for immunity and they
were so horrified they immediately decided that the FCPA should
be a criminal statute, and so it has remained. We are considering
a criminal statute which we are bound to introduce, particularly
about foreign bribery, because we have a Treaty obligation to
do it. Whatever else we do, we have to criminalise satisfactorily
under our Treaty obligations the bribery of foreign public officials.
It is not an option for us to have some regulatory or administrative
penalty alone. That may stand alone and it may be quite separate.
For the moment we have to consider how we are going to comply.
There seem to me to be three options which have occurred to this
Committee and the Law Commission. One is we can have this quite
new offence of negligence or we can have an absolute defence of
strict liability with a due diligence defence—it does not
matter on who the burden falls for the moment—or we can
have a look-alike FCPA which is with vicarious liability regardless
of the status of the employee who pays the bribe. That is how
the FCPA is constructed. It does not matter whether the doorman
pays the bribe, it does not have to be the directed mind, which
has bedevilled all the lawyers in this room and criminal law for
decades, and it is very difficult to secure convictions because
you cannot find the directed mind any more than you will be able
to find a responsible officer in clause 5. If I may be impertinent
enough to say that of the three options I would personally favour
the idea of having vicarious liability with the defence of due
diligence and say, "We've done everything we can. This chap
went on a frolic of his own in Siam or wherever and he went around
bribing people, but really we did everything we could to prevent
it". In those circumstances I have every faith that no-one
would be prosecuted for it. I am not a great believer in absolute
offences. As regards clause 5, I think it is very unhappily worded,
I do not know what it means. If you look at the impact statement
which Jeremy Cole has already referred to it does not appear that
whoever drafted the impact statement feels it is going to have
much of an impact because there are going to be so few additional
prosecutions, so one wonders why it is there at all other than
for some unworkable cosmetic purpose which is far from desirable.
I am sorry, that was a very long answer.
Q365 Mr Cox: Could you answer the
question, Mr Raphael, about whether it should be a civil penalty
or not?
Mr Raphael: It is very difficult
to introduce a civil penalty in this regime which is going to
be across the whole of industry and commerce because we do not
have the legislative machinery, the infrastructure, to control
the whole of our industry. The Bill deals with public law and
private law, who is going to do this? Is it going to be the Office
of Fair Trading? Maybe we should ask them to deal with it, if
they could deal with it, and we could have a separate administrative
penalty. It cannot stand in the place of a criminal penalty. It
may be something extra which will encourage people to have good
codes of practice. Yes, it will probably fill the coffers of lawyers
who are asked to draft them and it may well be that is the case,
but it cannot stand in the place of a criminal penalty, there
still has to be a satisfactory way of punishing delinquent corporations
because that is what we are obliged to do under the OECD.
Chairman: There are four more questions
and I am proposing that on questions 16 and 17 you could post
us a note. There are two further questions, if we could have swift
questions and, if possible, swift answers. Lord Mayhew and then
Lord Lyell to finish.
Lord Mayhew of Twysden: I think
we have probably covered my question.
Q366 Lord Lyell of Markyate: Mine
is to ascertain whether the draft Bill does enough to reform,
and I hasten to say I do not like those words at all, the Attorney
General's powers of consent and direction. Do you have any views
about the Attorney General's powers and consent and direction?
Ms Delahunty: I have no problem
with what is there, that the DPP and Crown Prosecution Service
will deal with it.
Mr Raphael: Subject only to constitutional
reform. I have read the evidence and this Bill has more chance
of being passed than the Constitutional Reform Bill. It is a race
between two tortoises maybe, but anyway.
Q367 Lord Lyell of Markyate: I will
make it quite clear thatI have an absolutely immense constitutional
problem with this suggestion, but we will leave it at that.
Mr Raphael: All I would say, and
I am speaking to somebody who knows more about it than most people,
is the problem is at the end of the day the Constitutional Reform
Bill envisages that there will be this residual power in the Attorney
where national safety is engaged and, secondly, there will be
difficult issues where maybe the Director of the Serious Fraud
Office or the Director of Public Prosecutions—there will
not be a Director of Revenue and Customs Prosecutions Office because
this is to be merged—would wish to refer the matter up.
As things stand at the moment under this proposed legislation,
under the Constitutional Reform Act, there will be no-one to refer
it to. My other objection is I do not like the idea that you could
have separate directors who have this discretion because how can
you guarantee that they would exercise their discretion in a uniform
manner. For example, you may have the discretion exercised by
the Director of the Serious Fraud Office in one way and exercised
by the DPP in another. I appreciate that the SFO has been given
the job of prosecuting serious overseas bribery but the SFO will
never be in a position to prosecute everything, so there may be
a mismatch.
Lord Lyell of Markyate: The nub
of the matter is parliamentary accountability, but that will be
for another debate.
Chairman: Thank you. Some of us have
to go and face our constituents and the rest do not. I wish I
was in the second category. Thank you, it has been most interesting.
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