UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 430-iHOUSE OF LORDSHouse of COMMONSMINUTES OF EVIDENCETAKEN BEFOREJOINT COMMITTEE ON THE DRAFT BRIBERY BILL
DRAFT BRIBERY BILL
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This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.
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Transcribed by the Official Shorthand Writers to the Houses of Parliament: W B Gurney & Sons LLP, Hope House, Telephone Number: 020 7233 1935
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Oral Evidence
Taken before the Joint Committee on the Draft Bribery Bill
on
Members present:
Memorandum submitted by Professor Jeremy Horder
Examination of Witness
Witness: Professor Jeremy Horder, Criminal Commissioner, Law Commission, examined.
Q1 Chairman: A very warm welcome to you, Professor Horder, and thank you for coming.
Professor Horder: It is an honour to be invited, thank you.
Q2 Chairman: We have a list of questions. I do not know whether you have seen it; I hope you have.
Professor Horder: I think I have what you are speaking about, yes. There is not a list of questions, as such, on my one, but there is a list of issues to be addressed.
Q3 Chairman: Is there anything you would like to say by way of introduction? I know you have sent us round a paper on this.
Professor Horder: No, I think we can start straightaway, if that is your wish.
Q4 Chairman: What about the new Bill based on bribery rather than anything else?
Professor Horder: Well, I can say certainly a bit about that by way of background. When we were asked by Baroness Scotland, when she was at the Home Office, to undertake this project, because of the pressure of time, it had to be cut down to a manageable size, so we agreed that we would concentrate on bribery rather than broader aspects of corruption, although I know that it may very well be that the law needs updating in that area too, but we had to provide a manageable focus and that is why we ended up looking at bribery, in particular. That explains that in a way, so I hope that Members will not find that the focus has been too narrow. In the time available, I think, trying to consult properly with those who had legitimate views on the subject, reporting and then producing a draft Bill which was then clearly taken over by the Ministry of Justice and turned into what is before you now, that was quite a large task in itself, without going into the broader aspects of corruption. However, as you will have noted, the current Bill, probably partly for that reason, closely reflects, I think, the Law Commission's own recommendations in its own Bill.
Q5 Chairman: Yes, but there are some changes, are there not?
Professor Horder: There are some changes and I have tried to address those to a degree, because I thought that would be helpful to you, in my paper that I circulated, yes.
Chairman: Well, I found that paper very helpful and I hope everybody else did too.
Q6 Martin Linton: Professor Horder, I see that you have been in the Law Commission since 2005.
Professor Horder: Yes.
Q7 Martin Linton: I do not know whether you will know the answer to this question, but I would certainly appreciate a better understanding of what went wrong with the original Corruption Bill because it seems from the briefings that we have had that, even just on the narrow issue of bribery, it left out some pretty basic things that we would consider bribery, such as from one head of a business to another. Was there any particular reason why the original Law Commission Report and Corruption Bill went awry?
Professor Horder: Well, I think that it was quite a cautious and conservative Bill. It focused, certainly in the private sector, on a very narrow range of cases, broadly speaking, following the existing law which confines private sector bribery to the betrayal of a principal by the agent, so an employee or someone who takes money to make a contract on behalf of their principal, something of that kind. Now, in our consultation we may have picked up on this. We also took a slightly cautious line in that regard in that we consulted on whether private sector bribery should be confined to cases where there had been a breach of trust, in the legal sense of that term, so slightly broader than principal and agent, but still a legal concept to try to provide some degree of certainty by keeping the offence quite narrow and relying on that legal concept, but, ironically, we were criticised in their response by the judges themselves on that issue. They said, "We do not think it is appropriate to have legal, already-existing civil law concepts being used to restrict the ambit of the criminal law. We think that's wrong. We would find this very, very difficult to implement in practice and, basically, you've got to go back and think again". When criticisms of that sort come from the senior judiciary, the circuit judges, you do sit up and take notice and we did, therefore, go back, not literally to the drawing board, but what we did instead, as you will have seen from the Bill, is to rely, and indeed this is what the judges suggested, on the same sort of terminology of "trust", "impartiality" and so on, but leaving those terms to be, in the end, decided by the jury once the judge has satisfied him or herself that there is sufficient evidence that a breach has taken place; that is the check, if you like. As we pointed out in our Report, that is actually the way in which the criminal law approaches other civil law concepts, like duty of care, things of that kind. It leaves it to the jury to determine, it does not force them to follow the civil law rule, and we were persuaded that that was the right approach, and that has not, in itself, proved controversial since then.
Q8 Baroness Whitaker: Would it be fair to say, Professor Horder, that the original Bill did not focus very much on bribing foreign public officials and that the present Bill takes much more account of what is, arguably, a larger field of bribery?
Professor Horder: In all fairness to the Commission in its previous incarnation, the territorial application of the criminal law was not at that stage something which was being considered as a high priority. There had at that time already been an attempt to broaden the territorial application of criminal law more generally, so I think it just really was not very high or very centrally focused on the radar, so it would not be fair, I think, to criticise them for that, but the world has moved on, so, as you will see, we have looked at the thing in a new light.
Q9 Chairman: We have still got "good faith", "impartiality" and "breach of trust" in clause 3, but those are, as it were, not technical, civil law legal terms.
Professor Horder: That is right.
Q10 Chairman: We leave it to the jury to decide whether people are in a position of trust?
Professor Horder: That is the preferred view of the judges, and we were convinced that that is the right approach. There is the check that you have got to pass the judge, as it were, if you are going to be a prosecutor making a case. What will have to happen is that the judge will have to decide that there is sufficient evidence for the jury to come to a reasonable conclusion that there was a breach of trust or of the duty of impartiality and so on, but certainly it is a matter for the jury. Now, I can see that some people might be nervous about that in terms of an element of uncertainty that it introduces. I accept that, and I have already said that that is tolerated in other areas of the law, for example, gross negligence manslaughter where the duty of care you owe to the victim, or the question of whether you do, is just left at large for the jury and it is not tied to the civil law. However, I think there is a broader point, which is that you have to take account of where we are coming from, if I can put it in that way, in that we started with a law governed by a very vague term, the notion of "corruptly", and the courts themselves could not agree what that meant in law. There are decisions saying it involves dishonesty, there are other decisions saying it does not involve dishonesty, and, even if that dispute could be resolved, it is a very vague term because it incorporates not only an idea of what somebody does, the exchange of favour for something, but also their state of mind, what their attitude was towards that transaction; it alludes to an idea of wrongdoing, but without actually saying very much about what it was. Now, that approach we bequeathed to, for example, Canada and Australia in their criminal codes, so you find it there, but it is very interesting, I think, that mainland European jurisdictions, France, Germany, Italy, they do not use that concept or anything like it. They rely on concepts of breach of a duty not to accept or a willingness to be influenced, or something of that nature, and they use language, I think, which is closer to the kind of language that we used in our Bill and the Government has already adopted, so yes, it is true that the Bill does not point you to a particular piece or a series of pieces of conduct and say, "Well, that's bribery and other things are not", but it uses general terminology which means an element of vagueness, but I genuinely believe it is a modest improvement on what is there now. I also think that, if you tried to go further and tried to list what would count as bribery and what would not, there is too much scope then for exploitation of the rules, and we know perfectly well that there are lots of very highly educated and learned lawyers out there just waiting for us to come up with a very stipulative definition so that they can find a way round it, but that is true of stipulative definitions generally, they leave gaps, that is what they do, otherwise they would not be stipulative, so I think we have tried to strike a balance. Sorry if I seem a bit defensive, but I think this is an absolutely crucial point and I hope that we have struck the balance in the right way, and I genuinely think it would be difficult to try to find some more definite way of pinning down what counts as bribery and what does not.
Q11 Lord Thomas of Gresford: So what is expected of a person in a particular position is to be determined really by the jury, having heard the evidence, and whether they find that he has not performed the activity in question in good faith or impartially or has been in breach of a trust is entirely a matter of fact for them to determine?
Professor Horder: Well, literally speaking, you are correct, yes, but there will be no doubt in the sorts of cases that are going to be taken forward, the ones with the strongest evidence, an element of legal background to that in the sense that the likelihood is that most cases that come forward with a realistic prospect of conviction will actually be the cases that would be pretty close to those that are an offence under the existing law, so an employee pocketing money in order to place a contract or someone running a trust who is benefiting personally in terms of the investments they are making on behalf of the trust, I do not see this as instituting a kind of revolutionary change in who ends up being prosecuted for bribery.
Q12 Lord Thomas of Gresford: No, the prosecutor will have some assumptions as to what a reasonable person will expect.
Professor Horder: Yes.
Q13 Lord Thomas of Gresford: Then he may or may not be upheld by a jury representing the public generally.
Professor Horder: That is right, and that, I think, is pretty much in line with how things work across a good deal of the criminal law. It is always possible to pick out an offence, I do not know, say, theft or fraud, and say, "Dishonesty - what does that mean? It could mean anything", and, in a literal sense, that is true, but, in reality, the cases that get prosecuted, and you would know more than I would, the ones that actually raise a question about what dishonesty is are very few and far between.
Q14 Jeremy Wright: Except, Professor Horder, in the context of this particular draft Bill, we introduced the international dimension, the bribery of a foreign official, and, in that context, can I ask you about the definition that you expect to be applied of "what a reasonable person would expect" because is the reasonable person the reasonable person sitting in the jury room in London, Birmingham or Manchester, or is the reasonable person someone who is located in the country where the particular act of alleged bribery may have taken place? Is it what is reasonable to the juror, or is it what is reasonable to somebody in the context of the event which is alleged to be bribery?
Professor Horder: Well, that is an extremely good point and we did think long and hard about that, but you will have noticed with the offence of bribing a foreign public official that we do not use the language of "what might be expected" precisely because there is a risk that we would fail to meet our OECD obligations actually because it would allow experienced and effective counsel to say, "Well, members of the jury, what can you expect in country X? It is only reasonable to expect that they will provide bribes and so on", so we wanted to tie that down much more specifically by talking about what was "legitimately due", so we avoid that language. However, we believe that for general offences it is more legitimate, indeed required actually, if you are going to get decent coverage of the law. In relation to the offences that apply primarily domestically, it is legitimate and reasonable to use this language of expectation and so on because, if you are not going to trust a jury to know what is reasonably expected of public servants, companies doing business, well, who are you going to trust?
Q15 Jeremy Wright: I understand that, but obviously, even within clause 3(2), it makes it clear that, in other words, the definitions which are being used, "It applies even if the function or activity (a) has no connection with the [UK], and (b) is carried out in a country or territory outside the [UK]", so, although I understand the point you are making about the bribery of public officials, if this is a private transaction, if you like, then we would presumably still be applying the definitions in clause 3.
Professor Horder: Well, it is certainly true that the general offences clearly apply to commercial activity, as indeed the existing law does now, and they will also apply if and insofar as the general offences applied overseas, that is also absolutely true, yes, that is right. What we are saying, effectively, is that, if you accept a bribe from a company to place a contract with that company rather than doing it in whatever way is dictated by the market circumstances and so on, well, that is just as wrong whether it takes place here or wherever it may be; it is a question of whether it would be an offence here. I accept that, but we are in the business of trying to enforce high standards, common standards, so that you know exactly what is expected of you wherever you are. It is not an edifying thought that a businessperson would look up on the Internet to try and find out whether this country they are about to deal with, what their sort of bribe levels are or something so that they are equipped; that is not a very attractive prospect. Perhaps I could also add, as we do in the paper, that the ability to apply the general offence overseas will also be important in some contexts to catch conduct not covered by the foreign public official offence. I think the example we give is that you are not a foreign public official if you are standing for office as a foreign public official, but we heard during consultation that it is not unheard-of for a company to make a payment to every single person standing for an election to public office because, very often, there will be a limited number of candidates, qualified persons, who can take the post and, therefore, it is actually possible to get them all in your pocket. Now, if that is not covered by the foreign public official offence, it ought to be covered somewhere and the general offence would apply there, but primarily of course what we are looking at is the bribery of a public official for the overseas offence, and I would not want to overplay that particular aspect.
Q16 Dr
Turner: Clearly, "good faith" and "impartiality" are
words which have different meanings to different people in different cultural
contexts, and it could be said, speaking as a non-lawyer looking at this Bill,
that the Bill has been carefully drafted to allow to continue present business
practices, particularly in the defence industry obviously, whereby foreign
officials expect a large commission, which, in our eyes, would be seen as a
bribe, otherwise a deal does not happen and, unfortunately, billions of pounds
and thousands of jobs are at stake. The
Bill specifically allows, on the face of the Bill, practices to be carried out
in foreign transactions which would be regarded as totally corrupt in the
Professor Horder: No, there may be an element of misunderstanding here because I think, or at least I hope, that the way in which the foreign public official offence has been drafted is to exclude any consideration of, or reliance on, what is usual, culturally accepted, politically the norm, whatever it may be, and that was the whole point about my remark that you should not be able to search the Internet and find which is the most bribe-friendly country or whatever it may be. No, you are only entitled to pay a sum of money in exchange for a contract or something if that is actually legitimate, ie permitted by law, in the country in question, and that, we anticipate, will very rarely, if ever, be the case, although there can be some instances. For example, it may be permissible by law in some countries to make charitable donations when you are investing in a major way, when you are given a contract, something of that kind, but this is a very, very narrow exception. I hesitate to correct you, but I think in relation to the foreign public official offence that you would only be able to, if you like, get away with it if you could actually point to a law in that country that permits you to make the payment you made. Now, at the risk of slightly blunting the point I have just made, it is certainly true that in some countries so deficient is the rule of law that you might struggle to find a law governing this area at all, there just is not any law there, but we did think about those situations and, to be honest, it is very hard, sitting here in England and Wales, to draft a law that is meant to have an operation in a country that does not respect the rule of law really hardly at all. That is quite a hard thing to do, I think, so there will be some elements of gap in some situations, particularly when you are dealing with countries where there is really no effective rule of law, but I see that situation as pretty exceptional and I do not believe that any other member countries in the OECD will tackle this any more vigorously or with a more imaginative and forceful approach than we will be; I do not see that.
Dr Turner: In practice, in the sorts of countries that we are dealing with, or even in our own country to a certain extent, the legal profession will say, "Well, if the law doesn't say you can't do something, it must be legal". Again, I am a non-lawyer, so I am speaking in total ignorance, but I would find it very surprising if the countries we are talking about had statutes which specifically said, "It is expected that a public official will receive an inflated commission in order to seal a deal". What it will do is not say that he cannot, and custom and practice will dictate that he is able to.
Q17 Lord Thomas of Gresford: Following that, in an actual case, would you not call evidence of foreign law to the effect that there is nothing in that foreign jurisdiction which prevents it rather than calling evidence that it is permitted?
Professor Horder: Well, I think the language of the Bill is to say that the payment must be "legitimately due" under the law of the land.
Q18 Lord Thomas of Gresford: And that is defined as being permitted or allowed, but, as Dr Turner said, you call evidence to the effect not that it is permitted, but that it is not prevented, do you not?
Professor Horder: Well, that is not the same thing at all, in my book. My understanding of that clause is that "legitimately due" means exactly what it says and does not include informal permissions or something of that kind, so it is meant to be quite a strict approach in that way, so you would not be able to say, "Oh well, the law doesn't deal with this issue. Therefore..." That is not my understanding of the way it is meant to work.
Q19 Mr George: Sorry to go back a few steps, but I am troubled by the fact that there was a foul-up somewhere in 2003. We have heard some estimations and then lessons have to be learned, so what expectation do you have? Have you consulted sufficiently widely? I do not suppose you consulted anybody on the Committee because we did not even know we were going to be on it until quite recently. To lose one Bill is unfortunate, et cetera, et cetera, et cetera, so what realistic expectation do you have that this Committee will make recommendations largely consistent with what you have said? The other point is that you speak, I would not say "reverentially" in relation to the OECD, but you obviously admire them. Well, if that were the case, in so many instances in the excellent Law Commission Report, Reforming Bribery, it was actually critical of the contents of what the OECD has actually written and what it is planning to do, so where do we stand on this? Are we obliged to follow what they say or do we have any room for manoeuvre to say, "No, frankly, we don't wish to do that because we have warned you in advance that we dispute some of the things that you recommend"?
Professor Horder: Well, that is an extremely
good question. To deal with the first
one, if I may, quite quickly, the Law Commission is in a position whereby we
can take the horse to water, but we cannot make it drink, so we made
recommendations and the Government drafts a Bill, but after that it is purely a
matter for the parliamentary process. We
are not in the business of taking it further than that, so it is your
responsibility really. Obviously, we are
disappointed if our proposals do not in the end make it into law, even in part,
but it is not our role to make that happen; our role is an advisory one,
although we have the added element that we draft bills. Now, in relation to the second one, I think
that is an extremely good question. I do
not think our attitude towards the OECD is actually reverential at all. However, what we accept is, of course, that
we must abide by our international obligations; we have signed up to the
Convention and that means we are bound.
However, what that means is that we are bound to ensure that business
standards in dealing with public officials are sufficiently high that they will
involve a level playing field, fair competition, between companies from
Mr George: Yes, more or less.
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, 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
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 readymade 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...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
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.
Q40 Dr Turner: On scope again, can you tell us how you feel the Bill approaches the question of where corporate hospitality or facilitation payments stop and bribery begins because, clearly, there is a distinct possibility that excessive and repeated corporate hospitality can be an effective mechanism of bribery of, particularly, public officials, and in fact concerns have historically been raised in quite recent times. How do you think this Bill deals with that issue?
Professor Horder: Clearly, we had long discussions about this with business organisations and what I said to them, and this was a change from what we had originally proposed in our consultation paper, was that, yes, in some circumstances, the provision of hospitality of a very extravagant kind can amount to bribery, there is no doubt about that, it can do, but what we will be saying in our Bill is that there will be a clear line in the sand which, if you cross, is bribery and which, if you stay behind, is not. That clear line is drawn in clause 1 when it says that a person, P, that is the payer, is guilty of an offence, et cetera, where he offers promises or gives a financial or other advantage and so on and intends the advantage to induce a person to perform a function improperly, so, when you lay on your corporate hospitality, it actually has to be your intention to produce an improper influence on the people there and it is not enough that you realise that it might have that effect in some speculative way. We were persuaded, and I genuinely think this is right, that that would cast the net way too wide because it would mean that even quite modest hospitality, if, for example, officials are not used to receiving any hospitality at all, might raise the possibility in your mind that they could conceivably be influenced by that. Well, that is putting too much of a restriction, I think, on what can be done and it is making liability too speculative, I think, so I am actually quite bullish about this, about the certainty that it provides for businesses and the provision of entertainment because, as I say, it is only in the case where you intended to have that corrupting effect, to use the broad term.
Q41 Dr Turner: But corporate hospitality is not done out of altruism, it is public relations, as far as the givers of corporate hospitality are concerned, and it is designed to oil the wheels of business relationships. If those relationships are with public officials and may, at some stage down the line, result in government contracts, then it is very much on the borderline of bribery, is it not? Would it not be preferable to set certain limits on corporate hospitality acceptance thereof, particularly by public officials, and the requirement for declaration and so on?
Professor Horder: Well, to take the first case first, I think that imposing a limit on corporate hospitality would be a very, very difficult, and probably unworkable, thing to do, if I may make so bold, because I just think that it all depends on the nature of what you are offering, what other people are doing, what you can afford. They are a very, very broad range of considerations that go into that and I think that to set arbitrary limits, because it is not just about financial hospitality, there may be other kinds of thing that go on that do not just involve finance, so you would have to be very careful about how you set out that definition, I do not regard that as a very promising route to go down, I have to say, and that is why we focused purely on what your intention was in giving it. I think that a jury is perfectly capable of making up its mind in a commonsense way that, if you lay on some extraordinary hospitality, to call it loosely that, in which you buy the relevant people a small flat in London as a pied-à-terre or something of that kind, well, the inference must be that you intended to influence them improperly by doing that, in other words, getting them to give you the contract purely because of the hospitality, but there is a big difference between that and what you might call 'getting to know you', which is perfectly legitimate, I think, and a very important part of business activity. I do not need to lecture you on this, I am sure, but it is much easier for you to secure contracts if you are doing it on the basis of which people know who you are and you are not just a set of proposals on a piece of paper, and that seems to me perfectly normal and acceptable actually because it will still be the case that what matters to the contractor is the merits of putting the contract your way, but it is just that now they know more about you, the nature of your business, what you do, they have talked to your partners, your employees and so on and they are in a better position to assess those matters. Now, I know one could take a cynical line about that, but the point is, I think, that insisting on, as clause 1 does, that there be the intention to influence does give companies a very large margin of appreciation within which to operate, and I regard that as reasonable, I have to say, but nonetheless says, "Be careful. Don't use this in such a way where it goes over the top and you know that actually the jury is going to think ----
Q42 Dr Turner: Obviously, if "improperly" means that it is intended to influence the choice of a contractor, for instance, clearly the hospitality has been given in the hope that it will have that effect, so you could say that it was, by definition, improper if you pursue that to its logical conclusion.
Professor Horder: I see that, but I think that
the element of impropriety there is in awarding the contract other than on the
merits, it is awarding the contract because you so much enjoyed being taken to
Q43 Dr Turner: That is entirely possible, but you would not really want to see this legislation being tested by lots of cases in the courts. Again, I am not a lawyer, but it seems to me that the best laws do not produce too many cases because they are clear.
Professor Horder: I think that will, to be honest, be the reality. I do not see in my crystal ball hospitality cases being taken through the courts purely as hospitality cases. What I do see is cases being taken where individuals perhaps, the most influential ones, whoever it may be, are provided with benefits of one kind or another, whatever they may be, either as part of, or ancillary to, the general hospitality. I can see it as being quite likely that the prosecution will seek to home in on those because it is going to be very, very difficult, once you get up to a certain level of high hospitality, to avoid actually providing specific benefits for specific people from which, the jury will infer, actually you just straightforwardly intended to do a swap, contract for bribe. That is going to be the reality, I think, in a lot of these instances, that actually, when you took the doctors to Val d'Isère for an extraordinary two-week holiday skiing, what you really were saying by that is, "Well, we want you to sell our drugs and that's what you're going to do", and they accepted that, in effect.
Q44 Dr Turner: This is precisely what happens.
Professor Horder: Well, you may be in a better position to say than I, but I think that it would not then be the hospitality, as such, which is the focus, but the actual individuals who accepted particular benefits, whatever they may be. What I am talking about is just the general run of lavish parties, meetings in hotels, flying people to expensive conferences and so on, those kinds of things which go on all the time, and I just do not really see the prosecution as having any prospect of establishing that there was an intention to influence people improperly; I do not see that.
Q45 Lord Goodhart: Is there not a problem equally with offences under clause 2, and indeed I think it could be more difficult there, where you are looking at the recipient of these benefits? The recipient is required to have an intention of performing something improperly. It is perfectly possible for somebody to say, "Well, they invited me out to Glyndebourne and Wimbledon Centre Court and skiing and so on, and I knew perfectly well what they were up to, but I wouldn't have given this contract to them, unless I was satisfied that they were the best ones to do it", and that may be totally untrue.
Professor Horder: I can see someone trying to run that argument, but the reality is that someone running that argument, mostly a public servant, is likely to be in a position whereby they fall within clause 2(3). I am sorry to be very specific. This is the one where it is actually improper to accept any advantage, or whatever it may be, so you will not be heard to say, "Oh well, I accepted the advantage but of course I was only going to deliver the thing on the merits. Far be it from me to be influenced" and so on. That is not going to happen. That clause which is mainly, but not solely, to cater for public servants has to go beyond that. We found it totally unworkable to have a public/private sector divide because there are too many people in the middle, for example chairman of trustee bodies and so on, who are not public officials but nonetheless are in pretty much the same position, private arbitrators. There is any number of a list of people. I have got half an eye on Peter over there who I know will want to disagree on that point. We found this very difficult. I think they are going to fall foul of that provision. It is exactly that kind of case, if I may say so, for which that clause was provided.
Chairman: I want to see what my
colleagues think. We have spent a great
deal of time on this, and very profitably so too, but, on the other hand, there
are questions which need to be canvassed.
Since we probably will not go on after
Lord Goodhart: Could I come in on this because it is something I have got a particular interest in.
Chairman: Could we look quickly at the questions because some of them have been covered. I do not think the question of the comparison with the present Bill and what happened in 2003 is anything we want to cover further, unless anybody wishes to ask about that.
Lord Goodhart: Questions six, seven and eight.
Q46 Chairman: We have had a very considerable discussion about question two, impartiality, good faith and so on. I suppose, Professor Horder, that in this, as in anything else, the prosecutor is going to have to be satisfied that there is sufficient evidence to satisfy the prosecutorial tests.
Professor Horder: Yes.
Q47 Chairman: The same applies to question three.
Professor Horder: I have not got these questions in front of me. They were not in my bundle of papers. Do not worry; if you just ask me the question I will try to answer it.
Q48 Chairman: This was the hospitality facilitation and that sort of thing which you have been discussing. You said ultimately it is for the jury to decide what the intention was, but equally it is for the prosecution to decide whether there is enough material to go ahead on in the first place.
Professor Horder: Yes.
Q49 Chairman: It is not a matter for getting it past the judge, it is a matter of getting it into court at all, is it not?
Professor Horder: Yes, that is right. This is always an issue with private prosecutions. It is difficult to gather evidence, there is no doubt about that. We just wanted to make sure that we got the substantive law straight, if you like. There is work to be done on trying to make sure that there are procedures in place that do not make evidence gathering too difficult but, as you know, this is treacherous territory where one encounters problems with Article 6 and so on.
Q50 Baroness Whitaker: I just wondered if Professor Horder could give his very brief opinion on that halfway house of a legal instrument between cut and dried law and prosecutorial discretion, the approved code of practice - I know legal officers do not always like approved codes of practice - weighty authoritative guidance on what is appropriate for corporate hospitality or, indeed, commissions, but not facilitation payments because to pay somebody for doing their job properly, and they will not do their job properly if you do not pay them, I think that one should be off limits.
Professor Horder: I very much laid emphasis in
my written material in relation to the adequate systems defence on the
development of guidance which is absolutely essential. You could make that self-same point about
guidance on hospitality and facilitation payments generally. There is such guidance, certainly on
facilitation payments anyway, in other jurisdictions, in
Q51 Linda Gilroy: Is it your view that bungs in sporting activities will be caught by this legislation? If so, what are the relative evidence gathering issues relating to that and the gambling industry?
Professor Horder: That is a difficult one. I understand a "bung" to be where a manager or someone who is in charge of arranging for new players and so on effectively takes a payment under the table to secure a contract for that particular player or whatever it may be.
Q52 Linda Gilroy: I think it is wider than that in terms of there has been a lot of recent concern and, in fact, an adjournment debate at Westminster Hall yesterday about bribery relating to fixing matches.
Professor Horder: I see.
Q53 Linda Gilroy: And particularly in relation to the gambling industry where in essence it probably ought to be easier to prove that there have been movements in the odds at bookmakers.
Professor Horder: Yes, particularly when it comes to gambling on the twists and turns of an individual match, so whether someone will fail in their first serve or something. The straightforward answer to that is yes, it is capable of falling within this scheme because a manager is clearly under a duty and an expectation that they will purchase players only on the basis of merit and on the other relevant considerations about how much they want to be paid and how long a contract they are supposed to sign up for, how old they are and those sorts of things, there is a clear expectation about what those are and an equally clear one that you do not take a personal payment to have that particular player in your squad. That is completely unacceptable. I would actually regard that as a pretty straightforward case. The gambling case is more difficult because expectations in that industry will change as to what is and is not legitimate. I think that is a trickier case. In general terms I think the expectation is very clear, is it not, which is that when you place a bet what you expect, and certainly from the point of view of the person with whom the bet is placed, is that there is the appropriate element of chance in whether you win or not. If that element of chance had been removed, or in effect removed, by some other person making a payment then you have behaved improperly and, again, I would have thought it is a straightforward application of the provisions in the Bill.
Q54 Linda Gilroy: And their performance would have been affected in order perhaps to lose a particular match
Professor Horder: Yes, certainly.
Q55 Chairman: We must go on with our list. We had a question about the OECD. You have already said a good deal about that and we will be hearing them anyway because they are coming. There is a question about what happened to your defence clause, which in your draft Bill was clause 5, the reasonable belief, which has been dropped.
Professor Horder: Yes.
Q56 Chairman: I wonder if you would like to comment on that.
Professor Horder: I addressed it in the written note. It almost sounds a bit like sour grapes when Government drops one of your favourite clauses and then you go around to whoever is willing to listen saying, "Really I think this ought to be reintroduced, isn't it terrible" and so on. The intention was to make it clear in my written note that I regard this as quite a difficult issue. I completely understand the Government's decision to drop this as going a bit too far. Perhaps I could start with what I do not say in the note which is that it would be right to say that the OECD was quite troubled by this, and I do mention that, but I did not say the reason why they were troubled by it. The reason why they were troubled by its inclusion was that they have a general rule that if there is a defence to bribery of a foreign public official or indeed anybody, or a corporate offence, whatever it may be, that defence must in a broad sense cohere with other defences that you allow in your legal system to other crimes. In other words, you will not be allowed to permit by law special pleading of some kind in relation to bribery that you would not allow in other offences because that looks as if you are trying to, putting it crudely, weasel out of your obligations under the OECD by providing special defences. They said they thought that this was such a defence basically, which was their objection to it. In response, I said it is true that in general ignorance of the law is not an excuse but this is not a straightforward case of ignorance of the law, there are examples of common law when in reliance on advice given by an official you will be allowed to run that excuse. It is perfectly possible in English law for that to happen, albeit rarely. As I say in the note, we thought that ignorance of foreign law is really a very different matter from ignorance of domestic law and that in practice this defence would not be run very often, but when it was run it was perfectly reasonable for a firm to say, "Well, look, the biggest law firm in the world has given us this advice that it is perfectly lawful to make this payment, what can we do? We can only rely on that". That is important because we are talking about convicting someone of a pretty serious offence. The taint of corruption is pretty significant. I think we felt, therefore, that it added, if you like, an element of balance to the fact that we were introducing an offence into a wholly new area on a new basis. The new offence was in a sense breaking new ground and we wanted to provide some kind of balance for that and it seemed reasonable that this defence was a part of that. At the same time, for the reasons I have given, I understand why the Government has dropped it. I would not want to spend time now repeating the case for having it. I accept what the Government says and that will be very pleasing to the OECD, and there you have it really.
Q57 Chairman: Do you think we ought to take it up with the OECD?
Professor Horder: They will probably be emboldened by the Government's decision in saying much more clearly that they would regard its reintroduction as unwelcome and as weakening the protections that are otherwise given that companies will not engage in bribery. They will say it encourages wilful blindness to legal provisions and so on. I would say that is not right because you have to actually show that you had a reasonable belief and so on that it was lawful. Getting into these arguments now would not be helpful. You will find your passage much easier, I think, with the OECD under the current proposals whereby the defence is not in there. We had our reasons for putting it in and they are as stated.
Q58 Chairman: Very well. I think a number of my colleagues are very interested in the provisions in clause 5. As to that, you have got the new offence of companies and partnerships negligently failing to prevent bribery.
Professor Horder: Yes.
Q59 Chairman: It would be interesting to know how you think this is going to work.
Professor Horder: The answer to that, just to give a brief bit of background, is that we believe it is not enough simply to introduce, for example, a new offence of bribing a foreign public official because under the well-understood basis for corporate liability in English law that would mean that offence can only be committed by a director or equivalent officer making the bribery either him or herself or through an agent knowingly, and that would be far too narrow, it would not deal with the basic problem that companies operating overseas almost invariably will be operating through agents, through regionally based companies and so on. It will not be the directors out there themselves doing the business in very many instances. For that reason it would very, very substantially weaken the protection that is being provided by clause 4, the foreign public official offence, if effectively you were saying it is not capable of being committed by any sort of corporate organisation unless the directors themselves intentionally committed it, which almost invariably they will not do, it will be an area sales manager or someone of equivalent standing who actually authorises and commits the offence, or there will be an agent in that country who knows the system who has been paid to secure the contracts on behalf of the company, so far so good, but then, of course, they have very wide-ranging discretion and engage in bribery in order to get ahead of other agents representing other companies. That would be a pretty standard way in which bribery occurs in these circumstances and we felt it would be wrong in principle to allow a company to escape completely in those circumstances but, on the other hand, we did not want to make them, as lawyers say, strictly liable when that happened. In other words, you should not be liable as a company effectively for bribery each and every time one of your employees or agents, and there may be thousands of those across the globe, themselves commit bribery. It is wrong to attribute that simply directly to the company, we believe, when you are not talking about an earwig getting into a tin can or something where the offence is attributed directly to the company. Bribery is a lot more serious than that and there ought to be some kind of fault at the highest level of the company. In the end, what we came up with was the idea you failed to prevent it in the sense that your systems break down or are not adequate to prevent your agent or employee making the bribe overseas, and the system breakdown was basically through your negligence, you failed to allude, to attend to that possibility when you should have done because you knew you were doing business in country X, country Y, where there was a problem. You failed to do anything about it, your systems were not up to dealing with it and bribery occurred. I think that is pretty standard how bribery is likely to occur one way or another, assuming it is not being done deliberately right from the top. We wanted to, at least in principle, catch that kind of case. Potentially that is quite a big expansion of the law. The way that we defended and explained that to business organisations was to say the prosecution has got to get over three hurdles here. First of all they have got to show that bribery took place committed by an agent or employee of yours, and that may not be easy but they have got to do that, that is the whole foundation of the thing. Secondly, they have got to show that a person responsible for preventing it failed to do so. That may not be so hard but that is nonetheless a hurdle. They have then got to show that there was negligence in that happening. Well, very often juries infer from the fact that something went wrong that it went wrong through negligence, they very often do that, but nonetheless that is a hurdle, negligence has to be shown and shown beyond reasonable doubt. Finally, the prosecution if need be will have to rebut a defence of due diligence that is asserted by the company. I am calling it "due diligence" for short but it is about the adequacy of systems and procedures for dealing with bribery. It would be for the company to show that it had adequate systems to prevent the bribery occurring and the prosecution, therefore, would have to disprove that in whatever circumstances. It would have to go some way at least to presenting evidence that that was not the case.
Q60 Chairman: If there are adequate procedures and they are enforced, that cannot very well be said to be negligence, can it?
Professor Horder: So you might think, but what we had in mind was cases where there are adequate systems but because of the devolved nature of the company the negligence is on the part of, and I think the example we gave in the report was someone who has been tempted by an offer from a rival company to go and join them and so is not paying proper attention to their duties in relation to their existing firm, something of that kind where the systems are in place but the negligence is attributable to an individual person who has that responsibility. We did not think that in those circumstances the company should be liable for that because it is really down to the individual's negligence. We wanted to provide some kind of balance whereby a company would not be liable when its systems were perfectly adequate but there was a failure solely by an individual within a company. We did not think that would be fair basically. It is consistent, but I understand what you are saying that the two will in many instances be bound up together, that is to say to show negligence on behalf of the company is almost by definition to show that the procedures were not adequate. That would be true in many instances and that helps the prosecution, but in some instances it may not be true, the two will be separate, and we wanted to allow for that.
Q61 Lord Goodhart: You seem to me to have a problem with the formula used with it. The real problem is your system requires that negligence should necessarily be attributed to one or more people who are on the staff, the management of the company, but that is going to lead to the sorts of problems that meant corporate manslaughter, for example, was virtually unenforceable because in a large company you could not find anybody who was actually negligent. The problem is that in these large companies it is because there has been a failure in the system rather than a failure in a particular individual. Would it not be better and simpler to say that where somebody acting on behalf of a company has been found to be guilty of bribery that the company should be liable irrespective of anybody's negligence unless the company can then show that it has, in fact, had in position an adequate system for preventing bribery?
Professor Horder: The short answer to your question is yes, it would be simpler, there is no doubt about that. However, our concern here was about the way that this offence looks when stacked up against other similar offences in English law. I have already mentioned the food safety case of getting an earwig in your tin where that will be attributed to the company unless they can show that they had adequate systems or exercised due diligence or something. I do not see an analogy between that kind of offence which occurs inevitably in the ordinary course of your manufacturing or business conduct and an offence like bribery where it is a very, very serious offence that carries a stigma, a taint, with it. We felt that despite the extra complication or extra hurdle that it was right, therefore to include some fault element that had to be shown by the companies, if not their officers at least someone responsible, so the area sales manager or whoever it is. We thought that extra hurdle would be fairer to businesses and would also mean that this offence was a step up, if you like, in terms of severity from those other offences of food safety or whatever they may happen to be. The model you are using is the model that is used.
Q62 Lord Goodhart: Is manslaughter not a serious offence under the Corporate Manslaughter Act?
Professor Horder: Yes.
Q63 Lord Goodhart: Where it is not necessary to attribute negligence to any particular member of the company, it is the company which is liable for the negligence. Should it not be just the same here?
Professor Horder: I am not sure I am following you now. Under the Corporate Manslaughter Act there has to be effectively gross negligence shown at least in part on the part of senior officers. It does not have to be wholly them but it has to be partly them. It was designed very specifically to catch the kind of P&O case where you had got some negligence on behalf of senior management but also negligence by employees down the line, so it is a kind of mixed thing. You do have to show gross negligence on the part at the very least of senior officers.
Q64 Lord Goodhart: Obviously you have to show there has been a fault, but here it is the fault of bribery. It may not be a senior officer of the company but it is bribery and surely it must be legitimate to say, "You must show to us that you had adequate methods for dealing with this". That is the point. It does not matter who is guilty, you do not have to find out which particular individual failed to put adequate arrangements into service, but surely that is the liability of the company and it should be the liability of the company.
Professor Horder: Personally I would not accept that because I think there is a difference here. With corporate manslaughter you are talking about a consequence that occurs as a result of negligence, so the company is negligent and in consequence someone dies. It is just a tragic event, if you like, which occurs as a result of negligence. This is not like that. This is an offence that can only be committed deliberately, a deliberate act of bribery committed by an individual under the auspices of the company, and the question now is do you attribute that deliberate act to the company. That is very different from attributing causal consequences, like earwigs in tins or deaths occurring on ships or wherever it may be, to a company. It is a whole different ballgame, I genuinely believe. You can only fairly, in my view, connect a deliberate act of bribery by an employee or agent to a company via the company's own fault, if I could put it that way, or here we have got it as "a responsible person or number of persons", so it does not have to be necessarily right up at directorial level, it can be the area sales manager, to use that example. I know this adds a complication and I am very sensitive to that point, and at the Law Commission we are all very much against complication, but there is also the issue of fairness and comparing like-with-like and I do not think you are comparing like-with-like when you compare corporate manslaughter in food safety on the one hand and on the other hand bribery, they are different sorts of offences committed in different circumstances.
Q65 Lord Thomas of Gresford: Professor Horder, you have had discussions with business organisations and the simplified constructive criminal liability would not be acceptable, I would have thought, to those organisations. They would be looking for something rather more than the constructive liability because of bribery at a lower level.
Professor Horder: To be honest, I do not believe I have discussed this specific point with them. You may be right, it is speculation. We are just trying to take a view on what is fair and what is balanced even if trying to secure those goals involves an added element of complication. We have not been pressed particularly by, for example, Transparency International or someone on what you might call the other side of the table. I do not like to speak in those terms, but if one thinks in that way they have not said, "Oh well, a negligence requirement will make the whole thing impossible" and quite reasonably not because I do not think it will. As I have already said, I think juries often infer negligence from failures in any event.
Q66 Lord Thomas of Gresford: You will recall from our seminar in Hong Kong recently that we were told in America there is a federal organisation that gives advice so that a business can go to that person or organisation - I cannot recall which particular department of state it was - and say, "Well, I have got this contract and it is suggested that I do this or that, can you tell me whether that would be all right". Is that what you had in mind in relation to adequate procedures?
Professor Horder: That is going quite a long way because that is contrary to our traditions of what public servants can and cannot do, generally speaking. For example, if I could start from a slightly different view, were we to have in this country an anti-bribery body, a commission, a semi-official body of some sort, charged with giving this kind of advice I could well see as being appropriate. For the prosecution to be giving this kind of advice, for example, would put them in a rather difficult position, would it not, and I am not sure about that. Were we to have somebody charged with giving advice of this kind I think that would be very much of benefit both publicly and to companies and would give them reassurance.
Q67 Lord
Thomas of Gresford: There is the independent Commission against
Corruption in
Professor Horder: Yes. Something of that nature here would add very much. I do not want to speculate too much about that. I have said very firmly in my written evidence that I would not be confident about letting this offence loose on the general public unless and until there has been adequate guidance agreed so that there is public confidence, business confidence in how this is going to work. It is quite clear to me from having been round City firms and talking to lawyers that there is plenty of this guidance around in relation to different companies and the big law firms all specialise in giving advice that is tailored to particular countries where particular standards are this way or that way, they are very good about that. I do not think it will be hard to find a model from which one can work, we are not starting from a basis of zero information here.
Q68 Chairman: I have got a list of people who want to ask questions but there is, however, one thing on clause 5 that I would like to explore with Professor Horder. That is the extent of the jurisdiction which is now in the Bill because it is much broader than what you had in your draft and involves the possibility of foreign companies being prosecuted simply on the basis that they have a small part of their business over here in the UK. Would you like to comment on that?
Professor Horder: We found ourselves in some
difficulty about this because we are the Law Commission for England and Wales
and it did not seem appropriate for us to be saying that Scottish companies,
say, should have liability extended to them without our proceeding fully along
with the Scottish Law Commission and Scottish legislature, but there was not
time for any of that. We had quite a
narrow understanding of where businesses should be. However, when we met the OECD after the
report - effectively the session was about "will it pass muster as far as you
are concerned" - one of the things they said was that they were a bit worried
about businesses doing business here, if you like, but not being registered
here in England and Wales, so they are a sort of outpost. What the Bill does is the Government has
extended the scope, if you like, to include companies doing business here as
well as companies registered in
Q69 Lord Williamson of Horton: This is on territorial application and nothing whatever to do with people, it is only to do with companies. The territorial application for people is very widely drawn in clause 7, and there is no problem with that at all, but a company, and I refer to a company which is operating in an overseas dependency or tax haven of some kind, those types of companies ---
Professor Horder: Yes.
Q70 Lord
Williamson of Horton: In order to fall within this they have to be a
body incorporated under the law of any part of the
Professor Horder: It is, yes. The position basically is this: as you know
perfectly well we cannot force the crown dependencies and overseas territories
to accept a bit of our law although we can perhaps apply a little bit more
pressure to the crown dependencies. If I
may quote him, probably wrongly, our Ambassador to the OECD said very clearly
to the OECD, "We respect the principle of self-determination and in the case of
overseas territories they must decide to what extent their law goes along with
what we are recommending for
Lord Williamson of
Horton: No comment, my Lord Chairman, except remember
the
Q71 Chairman: I think we ought to start drawing this to a conclusion but there is one point left that I would like to ask Professor Horder about. Broadly speaking, you have confined the consent to prosecution to the Director of either the Public Prosecutions or the Serious Fraud Squad or Revenue and Customs.
Professor Horder: Yes.
Q72 Chairman:
That
does not deal with the Serious Crime Act 2007 which still leaves the Attorney
in charge, including matters of bribery and matters which go to the economic
interest of the
Professor Horder: That is right. I would have to go back now, but I thought in our report we had said that the consent provision should apply not only to the completed offence but also to inchoate offences, but I could be wrong, that might just be wishful thinking. My position on this has been absolutely clear, and I gave evidence to this effect to the Joint Select Committee on the role of the Attorney, that there is a serious worry about the way in which a consent of prosecution will operate if the Attorney is likely to, will, may, take account of economic factors either as a result of the Shawcross exercise or in some other way. There is the perception at least that may happen. Of course, I would be perfectly happy to accept an assurance, and an assurance was indeed given by Lord Goldsmith when he held that office, that he would not take into account economic factors in giving consent. If an assurance is given by an Attorney in those terms I would accept it absolutely, but it is a sort of odd way of going about things, I suppose, having to make these assurances each and every time a new Attorney takes up office. For example, would it not be better to bring the law into line with every other offence and not make a big deal of bribery. In fact, I believe that is what the substance of the Constitutional Renewal Bill does, it moves the consent down a peg, if that is the word I am looking for, from Attorney to DPP, and that seems to me to be entirely right. It is still open, of course, for the DPP or any other prosecution officer to informally take advice or whatever from the Attorney General in appropriate cases, that should always perhaps go on. In general terms that would be my view.
Q73 Chairman: There are two points, are there not? There is the remaining power which brings in the Attorney under the 2007 Act, which is not being repealed, and there is the introduction of the economic wellbeing of the country, which is in the 2007 Act, which is contrary to what the OECD requires.
Professor Horder: It is, that is right. I was mainly addressing myself to that point. That looks just like it may be a legal gap, I suppose, something that has been overlooked and we might have to look at that. I am not sure about that, I have to confess. I do not know what the position is about the 2007 Act. I would have to go back and have a talk to the officials to see what the position is on that one, I do not know.
Q74 Chairman: I think it would be very helpful if you could do that because I believe it is an anomaly upon which we ought to comment.
Professor Horder: That may well be right. It could be I have just forgotten something and I am not being helpful. Yes, I will do that.
Chairman: I think we had better draw this to a conclusion. The next meeting will be on Wednesday 20 May in the Boothroyd Room at 9.45 which ought to give plenty of time for you to go and listen to Prime Minister's questions if you want to. To judge by the progress we have made this morning, and we have covered a good deal of the ground but not by any means all of it, I have a strong suspicion that we may have to have two sessions a day later on in the process of this investigation, so if you will brace yourselves for that possibility. We will not do it next Wednesday, but thereafter we may have to come back in the afternoon as well otherwise I do not see how we will get through all this material in accordance with the timetable that is in the motion that set us up. Perhaps you would like to bear that in mind and look at your diaries accordingly. I am very sorry but we have got a very tight timetable and there is an awful lot of ground to cover. I will adjourn until next Wednesday. Thank you all very much. Thank you very much, Professor Horder.