UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 430 viHOUSE OF LORDSHouse of COMMONSMINUTES OF EVIDENCETAKEN BEFOREJOINT COMMITTEE ON THE DRAFT BRIBERY BILLDRAFT 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:
Witnesses: Mr Dimitri Vlassis, Chief, Crimes Convention Section, Treaty and Legal Affairs Branch, Division for Treaty Affairs, UN, Mr Nicola Bonucci, Director of Legal Affairs, Ms Christine Uriarte, General Counsel, Anti-Corruption Division, and Mr William Yiu Wah Loo, Policy Analyst, Anti-corruption Division, OECD, examined.
Q474 Chairman: Good morning. Thank you all for coming. It is quite an important contribution that you have got to make to our considerations, so you are very welcome indeed. Could I start by asking for a general overview? You have already provided us with something of the kind and there is a piece of paper which I think says very much the same that you have supplied us with today. Would anybody like to do a general introduction to your views about this legislation?
Mr Bonucci: Thank you, my Lord
Chairman. With your indulgence I will
make a general introduction but I will try at the same to answer questions 1
and 11 of your suggested questions on our general reaction vis-à-vis this Bill. Let me
first say that I am Nicola Bonucci and I am the Director of Legal Affairs at
OECD. On my left I have two colleagues
from the OECD. I woke up at 5.30, I took
a train, I walked one hour to get here, so I think this is already an
indication of the importance that the OECD attaches to this particular
issue. The importance is reflected in
all our written reports, which I am sure you have seen, about the necessity for
the
Q475 Chairman: Do you not think that there will be points arising in the course of the other questions?
Mr Bonucci: Yes, naturally, but this is
on the general aspect. As I said, this
will be an important improvement and will enhance the credibility of the
Chairman: I think we are trying to address it and with your help we will address it further. Shall we go on then to this question of clause 4, "foreign public officials"?
Q476 Baroness
Whitaker: We hope that this clause satisfies the
Mr Bonucci: I think clause 4 is a major improvement over the current law for the following reasons. It abolishes the reference to the concept of agent and principal and therefore eliminates the risk of --- I will stop there; I will not enter into details. It expressly states that bribes that are paid directly to third parties with the approval of the foreign public official are captured by the offence. In terms of the definition of the offence, it uses a lot of the terminology and the concepts that are used in the Convention, so we are quite happy with that. There is one caveat and I can address it now or I can address it later on at the request of the members of the Committee, which is something which is also touched upon in question 3, which is on the concept of "legitimately due".
Baroness Whitaker: Please do raise it now.
Q477 Chairman: Bring them together.
Mr Bonucci: Okay. Let me first finish my conclusion. On Article 2, we are overall quite satisfied with this caveat. On clause 4 and vis-à-vis Article 2 of the OECD Anti-Bribery Convention, again this is a major improvement over the current state of the law. For the moment the only theory which can work in order to trigger the liability of the legal person is identification. By adding the failure of a commercial organisation to prevent bribery under clause 5 you will be meeting what are the standards of the Working Group as they have defined them in an exercise which we call the mid-term study. Let me recall what the standards are. The bribery of a foreign public official committed personally by a senior company officer should be covered, but also the bribery by a lower level person at the direction or with the authorisation of a senior officer, and the bribery by a lower level person where he or she was not adequately supervised by a senior officer or a senior officer knew the lower level person was going to bribe but failed to try to stop him. We believe that with the new clause 5 you will be capturing all those figures. May I say a word on "legitimately due" and the Convention?
Q478 Chairman: Please would you because this is quite an important point from our own legal point of view?
Mr Bonucci: And we understand that. The draft as it is goes a long way to replicating
the language of the Convention and the concept of the Convention. However, one simple word which is missing but
which I must say we would strongly prefer to see is "written". If you look at commentary 7 and commentary 8
to Article 1 of the OECD Anti-Bribery Convention, in particular commentary 8,
it says, "It is not an offence, however, if the advantage was permitted or
required by the written law or regulation of the foreign public official's
country, including case law", case law in the sense of written case law, that
is. This express reference to written
law does not appear in the draft as it is.
Paragraph 36 of the explanatory note to the Bill refers to "custom or
tolerance". While it says that "custom
or tolerance" is only there in order to demonstrate that it is the law, we
believe that there might be some confusion and I would like to make it very
clear that the Working Group has been very clear on a number of occasions that
this was a very restrictive exception. In
2006 the Working Group on Bribery recommended to
Q479 Chairman: Yes, but that is the common law position, is it not?
Mr Bonucci: But, as I say, this was not
the reading of the Working Group.
Q480 Baroness Whitaker: We do have two concerns in this matter. First of all, there is, as you referred to, the system that in the common law countries what is not expressly forbidden is permitted, which might give a British company the feeling that they could go ahead, but my own feeling is, what would happen if we were to do away with the exception "legitimately due" entirely? Could you give us examples of what is legitimately due, and have any of the other common law countries run into difficulty with this concept?
Mr Bonucci: Of all the 38 parties to the
Convention the ones that in their legislation have made reference to the
concept in commentary 8 are
Q481 Chairman: Are there countries where that is provided? Do some jurisdictions allow payments of this sort as well as written law?
Mr Bonucci: If I may say so, you might be
the one in the future because you have a clause which authorises the Secret
Service to pay bribes. This would be one
case in which a foreign country would say, "I am relying on the
Ms Uriarte: Good morning. My name is Christine Uriarte and I am the Legal Counsel for the Anti-Corruption Division at the OECD. If I could just complement what Mr Bonucci said, I think the problem is that perhaps there is a bit of a misunderstanding about what the exception in commentary 8 is supposed to capture. What we are talking about here is a law expressly in writing permitting the specific payment that was made in a specific case by a company or an individual to a foreign public official. It has to be extremely individualised and I think the reason why so few countries have decided to put this exception in their law is what is the chance that the law of a foreign country is going to say that in this specific case this public official is permitted or required to ask for the payment in question?
Q482 Baroness Whitaker: So why is it in the Convention, may I ask?
Mr Bonucci: You may, and I will be very
frank. This was a provision which
existed in the
Q483 Chairman: I think the way in which it is being put is, "If you are going to get this contract you will provide us with a school and some other public facility".
Mr Bonucci: Again, we are not aware (and I am not saying that this does not exist) of any such requirement existing in any written law. It might be part of the deal but this is where we enter a grey area.
Q484 Lord Thomas of Gresford: Supposing there is a contract between a supplier in this country and someone in a foreign country in which it is a term of the contract that a payment be made or the building of a school be provided or something of that sort, and that contract is not void for illegality in the particular country. There you would have a term in writing which would permit the payment of a sum of money or the provision of a facilitation of some sort or another. Would you say that that would be captured by the exception in clause 5?
Mr Bonucci: As I indicated, it is the written law or regulation of the foreign public official and not the contract. The validity of the contract is another issue. In fact, you have had cases, for example, in ICSD, the International Centre for Settlement of Disputes, in which even a contract tainted by bribe was deemed to be a valid contract in terms of contract, but still it was a contract tainted by bribe, and you have at least one counter example in ICSD, which is a very interesting case. It is War Duty-Free v Kenya(?), in which the arbitral tribunal considered that a contract tainted by bribe was null and void and could not be enforced.
Q485 Lord Thomas of Gresford: So are you telling us there are decisions both ways, that there are contracts which have been upheld although -----
Mr Bonucci: In the past, yes.
Q486 Lord
Thomas of Gresford: ----- although they have a bribe, but that a
recent case involving
Mr Bonucci: Yes.
Q487 Lord Thomas of Gresford: If the contract is valid is not the sum of money legitimately due? I am using the expression that is contained in the proposed Act.
Mr Bonucci: But that is exactly what we want to avoid. That is why we would prefer the legislation to refer, as in commentary 8, to the notion of written law or regulation rather than to a not very clear notion of what is legitimately due or not.
Q488 Lord Thomas of Gresford: So as to exclude any written term which might amount to a bribe or facilitation payment? You do not want to see that at all? Is that right?
Mr Bonucci: The strong preference would be to stick with the written law. If there were to be an exception, which, as I said, is a minority view in the Working Group on Bribery; only a few countries have that, - actually, you might want to ask Mr Vlassis if there is such an exception in UNCAC, which is not clear - clearly it should be in conformity with commentary 8. Let me record that commentary 8 is preceded by commentary 7 which says clearly that it is an offence irrespective of the value of the advantage, its resolved(?) perception of local custom, the tolerance of such payments by local authorities or the alleged necessity of the payment in order to obtain or retain business or other improper advantage, so the boundaries were very clear.
Q489 Lord Thomas of Gresford: Mr Bonucci, does it not follow from what you say that the use of the expression "legitimately due" in this Bill is ambiguous because it could be legitimately due under the contract but, because it is not validated by a written law, it would fall foul of the provision? It is ambiguous as it is currently written in this Bill, is it not?
Mr Bonucci: I would concur with you that we would prefer the notion of "legitimately due" to disappear and to have a simpler reference to the written law.
Q490 Baroness Whitaker: That is very helpful. Perhaps we could also ask Mr Vlassis what is the UNCAC position.
Mr Vlassis: Thank you and good morning. Let me start by expressing my sincere gratitude for the honour that you have done me by having me here today. I have been very excited to be able to come and be with you, especially since it seems that in the drafting of the Bill the provisions of the United Nations Convention against Corruption it does not appear from the documentation were looked at, and I think that a number of answers might have become more evident had this not been the case. I understand that the Bill is intended to answer some quite significant criticisms levied against the United Kingdom by the Working Group on Bribery of the OECD, but I also see that there is a very strong desire, which I believe is shared by the Government and Parliament, to make sure that the United Kingdom is in full compliance with its international obligations in general. In fact, I also detect the desire for the United Kingdom not only to be compliant but to be in a leadership position when it comes to this, and that is not only through reading the material that was provided to me in preparation for my presence here but also in my experience with the United Kingdom in terms of support to the Convention and support of the development of an effective monitoring mechanism for the Convention. Having said this, many of the issues that have been raised here this morning are dealt with perhaps in a more straightforward manner in the Convention. One example is that the Untied Nations Convention does not include anywhere even the notion of facilitation payments. They do not exist for the Convention. The Convention only recognises a bribe. A bribe is a bribe and that is it. The Convention has, which I think is pertinent to the discussion up to now, a definition of "foreign public official". I believe the Bill comes very close to the definition of the Convention, but the Convention also includes, for example, a definition for the first time of an official of a public international organisation, so there are a number of differences, as it were, which might simplify the work of this Committee and the passage of the Bill. Coming to your specific question about "legitimately due" or not, this is not an expression that the Convention uses. The Convention uses the expression "undue advantage" and I must confess the example that was used just now about the building of the school I found a bit difficult to understand as to how this can qualify in the discussion of the provision of an undue advantage to a foreign public official to do or to omit doing something. My understanding of this is that we are speaking about an advantage that is intended in some way to benefit that official himself or another, so it is a bit more personal, but, of course, I will defer to your views on the matter so that we can perhaps clarify this a bit further.
Q491 Earl of Onslow: I was going to come back exactly to this school argument. Let us take an example, say, of a large contract which is going to involve a lot of workers in a less developed country. It would seem to me completely legitimate for the government of that country which is giving a contract to say that construction company A will provide schools for the workers' children or hospitals which they will leave behind after the completion of the contract. In English law that is perfectly acceptable. In planning law local authorities are always getting what is called planning gain, in other words, making you, the developer, provide services for the community. What on earth is wrong with that?
Mr Bonucci: Nothing, and this will never be captured -----
Q492 Earl of Onslow: I am sorry, Mr Bonucci; that is exactly what I thought you said.
Mr Bonucci: No, no.
Q493 Earl of Onslow: You mentioned the word "school".
Mr Bonucci: No, no, I did not mention the
word "school". It was your
Committee. We are talking hypothetically
but let us be very concrete. There was a
case a few years ago in
Q494 Earl of Onslow: That is totally understood. That is obviously bent, is it not, "You will employ my cousin"?
Mr Bonucci: Unfortunately, these kinds of things happen.
Q495 Chairman: I want to get this absolutely clear. It has got to be a generalised written law, is that right, not specific to the individual case?
Mr Bonucci: That is correct.
Q496 Chairman: You see, in this country Lord Onslow was talking about planning gain. That is in general law. It is a power that a local planning authority has to ask for extra things in return for benefit, but it is only in that sort of situation that you envisage it as being legitimate, is that right?
Mr Bonucci: That is absolutely correct.
Q497 Lord Mayhew of Twysden: Mr Vlassis, I confess I have not given the attention that I know it deserves to the UN Convention, but you have made the point that "legitimately due" is not an expression found in the UN document, which uses the words "undue advantage". Do you really see any significant difference or any difference at all because a due advantage is one which is owed or is legitimately due? "Undue" is the opposite. Is there really any distinction between those two concepts?
Mr Vlassis: There is supposed to be a distinction and that is the reason that the expression was used consistently in all of the criminalisation provisions in both offences that the Convention foresees, that is, the bribery of a national public official and the bribery of a foreign public official and so on. That is the expression you will find there. It was felt during the negotiations that there had to be some qualification of the advantage. Much to the objection of a number of negotiators (who also happened to be practitioners) who were advocating the view that every time you use a term which has some form of value judgment in it you run into difficulties of interpretation, "undue" was left at that without a reference to any specific legislation because it was felt that it was sufficiently clear, even if it was a term that implied some sort of value judgment, to stand and to be guidance enough for countries when they wished to legislate. The negotiators did not wish to go any further and qualify this, or, for that matter, define it again because they felt that it was sufficiently clear. I believe, from what I have seen in the documentation that was provided to me, that the approach that the new draft Bill is taking in qualifying what is an undue advantage is probably going to become guidance for other legislators in the future.
Chairman: This is an important point but we must make some progress. Nevertheless, Lord Sheikh and Lord Lyell want to pursue this matter.
Q498 Lord Sheikh: Under sub-paragraph 4, the exception we have, as we all know, is permission or requirement to accept this. There are things which happen in overseas countries with regard to customs and with regard to things being done. Do you come across in your international work an overseas country where things are written, where they do admit that it is permissible, or otherwise it may cause a problem with regard to these exceptions?
Mr Vlassis: I have never come across any country that has any legislation or any other regulation that allows public officials of any sort to receive payments above their normal salaries.
Q499 Lord Sheikh: We may have problem in saying it is an exception and use that to say, "Yes, a man was allowed to do this".
Mr Vlassis: How would you provide the certainty that is required for any court or any jury that this was indeed being allowed? The moment you introduce the exception you provide the possibility for large companies to find ways to escape the law, and this is why it needs to be unqualified.
Mr Bonucci: If I may complement what Mr
Vlassis said, based on our experience, as I indicated before, out of the 38
countries only
Q500 Lord Lyell of Markyate: Would you be able to provide us with the written laws of these four countries to which you are referring because there would be common ground that bribes of individual officials, for example, would be completely unacceptable? Do they make provision, for example, for commissions which in some senses are of a more public nature? Does that happen? You are quite good on practical cases. What actually happens? Are there things that happen which you do regard as legitimate, and obviously there are other things which are illegitimate? Can you give a little explanation?
Mr Bonucci: Certainly we will provide you with the relevant pieces of legislation. Turning to commissions, again, commissions are of two sorts - bona fide or not bona fide. If you are paying an agent to perform his or her work as an agent and you are paying a commission, that is perfectly legitimate; there is nothing against that and no violation, no bribe. If, on the other hand, you are using the disguise of an agent to effectively pay what you qualify as a commission but is effectively a bribe, which is one of the main vehicles which is used, then there is an issue. No country as far as I know would say that any payment for anything which is called a commission is ipso facto legitimate because it depends on the facts and circumstances of the case. You might have very well presented this as a commission but in fact it is a bribe, or you might have indicators, which we have had in past cases, of contracts in which the amount of commission was 25 per cent of the value of the contract. It is difficult to imagine that there would be legitimate business reasons to pay 25 per cent of the value of the contract in so-called commission. The answer is that I do not think any country allows payment of commission to be legitimately due in abstract.
Ms Uriarte: Can I add to that,
please? I think part of the discussion
here is a result of this very UK-specific wording of "legitimately due", and I
think it needs to be clarified right from the beginning that the OECD
Anti-Bribery Convention, in Article 1, where it defines the elements of the
offence, does not use the terminology "legitimately due". It is "improper advantage", and so it is very
difficult, I think, to compare the
Chairman: We would like to look at the texts of these other laws you have mentioned because we need to be satisfied that this is transferable into British legal parlance, but I would now like to go on, if I may, to the next point, which is the defence that the Law Commission suggested, which has now been taken out, I think partly because you objected to it.
Q501 Earl of Onslow: The Government has dropped the "reasonable belief" defence which was originally proposed by the Law Commission. Would it be acceptable to the OECD and the UN if this defence was reintroduced in order to protect businesses that take efforts to comply with the foreign official's law but who, for example, get bad legal advice and they have no way of checking that that legal advice is bad?
Mr Bonucci: This is indeed one area in
which the draft legislation which was submitted to the Joint Committee is an
improvement in the eyes of the Working Group and vis-à-vis the Law Commission.
I cannot really speak on behalf of the Working Group but it is pleased
that it is changed and thanks the Government for taking this into account. The reasons why the Working Group on Bribery
is not in favour of such a defence are indicated in the Phase 2bis report in
paragraphs 60-62 and they are two-fold. The
first one is that this defence is not contemplated in the OECD Anti-Bribery
Convention. In fact, defences not
exactly of that sort but of a similar sort which have been introduced into
other countries' legislation have always been criticised by the Working Group
on Bribery, which systematically asked the countries to remove those
possibilities. The second reason why the
Working Group on Bribery was not in favour of this defence is the fact that
this would appear to be a defence which is not a general defence under
Earl of Onslow: May I interrupt you here? You said just now that you as a lawyer know how to give advice which would suit your clients; that is in effect what you said. Surely you should not go to a lawyer who takes that cavalier view of his duties to the law. It is as simple as that. If you go to a reputable lawyer who is not going to advise you in effect how you want to be advised rather than what the law is, then you must indicate reasonable belief and that surely should be a proper defence. If you go to proper people who give proper and honest advice then that should be a proper legal defence because you have every good reason to believe that.
Q502 Chairman: Could I ask the team to address this slightly more generally? We have had a lot of requests from commercial witnesses. They want a defence. This one apparently will not do. What can be available to a commercial company so that although they are doing their very best to comply with the law they nevertheless receive advice or guidance or something? Is there any way of getting round this which is legitimate?
Mr Bonucci: What you are saying is that a company will take a specific course of action based only external legal advice that they would have sought?
Q503 Chairman: No, I am not saying that. I am saying that is one of the methods that might be used, but there might be others.
Mr Bonucci: Absolutely, and that is why I think clause 5 is exactly what the draft tries to provide to companies. What is clause 5 at the end of the day? The company would be liable except if it proves that physically it acted diligently and it had a system in place which would be effective. This is the real defence. If a company has done all it has to do to verify, to counter-check, to have a system in place, and you have a case of a rogue employee, which happens, even though in ten years I have never met one but let us assume, then yes, this would be the defence. I do not think this draft has introduce the vicarious liability concept; this draft is saying the company should be liable, either because the bribe was made by a senior official and therefore the senior official engaged a company, or, if it was a lower level official, because the company did not have a system in place which prevented this from happening. If, on the other hand, you have done all your duty, and I would say your duty might be more than relying simply on external legal advice, this would amount to exonerating the liability of the company.
Q504 Earl of Onslow: I am sorry; I still am unhappy with the concept that it is the advice that you get from your lawyer, you have no possible reason to believe that it is not anything other than clean and above board, that you cannot say that you reasonably believe that advice was right, and that in my view should be a defence.
Mr Bonucci: One of the difficulties in this area is that we tend to go into hypotheticals but we are dealing with real issues. You would have a company that has no compliance system at all, no control system -----
Q505 Earl of Onslow: I am not saying that. I am saying exactly the opposite of that. You have gone through all the hoops, you have done everything.
Mr Bonucci: Then you do not need the reasonable belief. Then you have, as I said, the defence which is provided in clause 5.
Chairman: Mr Bonucci, I think we are going to have to pursue this on another occasion because we must get on with the other questions on which your evidence is going to be very important. Could we turn to the question of corporate liability?
Q506 Lord
Goodhart: We have dealt with the cases just now where
the company itself was plainly liable for committing bribery and we have moved
on to clause 5 which deals with the failure of the company to prevent
bribery. What you have said about this
in the OECD report of October 2008 at page 25 was, "The examiners are seriously
concerned about the lack of reform of corporate criminal liability for foreign
bribery and they consider
Mr Bonucci: As I indicated in my introductory statement, this is one of the clauses which I think is untouched between the Law Commission report and the draft which has been submitted to your Committee, and the Working Group per se has not taken a final view because, as you know, the Working Group expresses itself on pieces of legislation, not on actual drafts, but the team which visited the UK in January, to take its language, "was largely of the view that the Law Commission recommendation relevant to foreign bribery" - and this would include clause 5 - "taken as a package would address a number of the Working Group concerns". We consider that this clause 5 would meet the minimum standards that the Working Group has set. Let me record again what those minimum standards are. "The offence shall cover the bribery of a foreign public official committed personally by a senior company officer. The offence shall cover the bribery by a lower level person at the direction or with the authorisation of a senior officer, and the offence shall cover the bribery by a lower level person where he or she was not adequately supervised by a senior officer, or a senior officer knew the lower level person was going to bribe but failed to try to stop it." On paper clause 5 appears to address all those points. One of the difficulties again in assessing a piece of legislation is that a lot will depend on the implementation of this legislation and on the interpretation that the courts will make of this legislation, but certainly on paper and based only on what we have now in place in the UK and what clause 5 seeks to introduce, it will be a vast improvement in terms of the liability of legal persons.
Q507 Chairman: Would it be an even greater improvement if we required gross negligence?
Mr Bonucci: What is important for us is a system. As you know, the Convention is pretty flexible on that because we have countries with civil law, countries with common law; it does not need to be a criminal liability. What is important for us is to meet the three categories of cases that I indicated. I do not know if by introducing gross negligence you would put a threshold which is higher than what the draft is, and so personally I would stick to the draft as it is.
Q508 Lord Goodhart: Can I ask you whether clause 5 could be strengthened in this way? At the moment there are three steps. The prosecution has to prove that there is bribery; that I think is obvious. Secondly, it has to prove that the responsible person was negligent and failing to prevent the bribery, and thirdly, there is a defence for the company to prove that it had adequate procedures in place. Two and three seem to really be dealing with very much the same point. Might it not be an improvement to remove one of them?
Mr Bonucci: You are stretching my ability to respond. Would you like to receive my personal opinion or would you like to receive the opinion of the OECD?
Q509 Lord Goodhart: The OECD I think has not addressed it.
Mr Bonucci: To be very frank with you, this is a very interesting proposal and the OECD as such has not addressed it, so I would refrain from -----
Q510 Chairman: If you would like to give a personal opinion please do.
Mr Bonucci: My personal opinion is that
there are countries which have basically insisted on three more than two. In
Mr Yiu Wah Loo: But
Mr Bonucci: But if the question was would we think as professionals that the Italian model would be better, my personal opinion would be yes.
Mr Vlassis: Now we must go on, please, to the Attorney General.
Q511 Lord Lyell of Markyate: The question which you have got in front of you, and I think it is helpful just to put it in exactly that form to start with and then perhaps to probe a little, is to explore whether the draft Bill goes far enough to reform the role of the Attorney General, including powers of consent and direction. What is the OECD's and the UN's view on that?
Mr Bonucci: As you know, this is one issue which has been tackled at length by the OECD Working Group on Bribery. In the Phase 2bis report I would like to refer you to paragraphs 119-128 of the report. I think we are very happy - I can say that - that the AG consent has been removed in the draft that we have now. Your question is, does this go far enough?
Q512 Lord Lyell of Markyate: Yes. The question is whether it goes far enough to satisfy the OECD.
Mr Bonucci: Certainly the fact that the AG consent is removed in this draft is a major step in the right direction. There are, however, a couple of points which have been raised in the Phase 2bis report which are not addressed in this draft. One is the power of superintendence of the Attorney General over the Director of SFO. The boundaries of this power are still a bit unclear, in particular on issues like termination or suspension of investigations. Those are in paragraphs 109-112 of the Phase 2bis report. The second point which has not been explicitly addressed in the draft Bill is the role of the Attorney General in the appointment of the Director of SFO, paragraphs 116-118. Then there is the fact that there would still be, at least this is what we understand, a consent of the Attorney General for extraterritorial cases under the Serious Crimes Act of 2007, which is referred to in paragraph 129. There is also another point, but I say it only for the sake of completeness. I understand it is outside your remit so I will not ask you to address it. We know that there is another Bill, the Constitutional Renewal Bill, which maintains, and one could possibly say expands, the power of the Attorney General in relation to a specific field, which is the national security consideration. So the Attorney General would have the power to stop or terminate any kind of investigation if it were to deal with national security. As you know, this would open wounds in the Working Group on Bribery.
Chairman: We really must move on. We have got a lot of important questions and we have got the other panel waiting. I wonder if I could ask Mr George to deal with Article 5 of the Convention.
Q513 Mr George: We are hopelessly behind and the only chance we have of treating the following group with deference and respect is if we ask just the main question and no supplementaries. I am not usurping the Chairman's role, but we will go on until Christmas if everybody joins in with every question. Question seven, Sirs, Madam, you have the question, would you please answer it. I am not asking any supplementaries and I hope my colleagues follow suit.
Mr Bonucci: I will try to be as quick as
possible. The views of the Working Group
are fully set out in the Phase 2 report, paragraphs 94-108. Certainly anything which goes in the
direction of giving formal status under domestic law would be applauded. This is a request which has been made by the
Working Group on Bribery in the code for criminal prosecutors. As far as introducing this into law itself,
you will see that the Working Group on Bribery does not explicitly request the
Chairman: Thank you, Mr George. I do not know whether you want to pursue question eight or not?
Mr George: No, I withdraw that question, my Lord Chairman.
Chairman: I do not know whether nine is important, but I do think that ten is. Lord Mayhew is going to ask about the security services.
Q514 Lord
Mayhew of Twysden: Could you help us with this, if you
please. Is the power to authorise
bribery by the security services compliant with the
Mr Vlassis: Obviously this is an area,
particularly the security services, which is not specifically covered in the
Convention. I find myself at a loss to
respond as to whether any authorisation for bribery would comply. On its face I would say not. I do not see why security services ought to
be treated different from any other public service. The only exception that you might read into
the Convention, you would have to read it by reading several Articles of the
Convention together. Let me give you an
example if I may. The Convention against
Corruption defines in Article 2 the concept of "controlled delivery" which is a
concept that you will find in other Conventions more recently than this: the
Convention against Transnational Organised Crime, which the
Q515 Chairman: I think that must be a matter then for our own jurisdiction to decide.
Mr Vlassis: Precisely.
Q516 Chairman: I am afraid that we must move on to the next panel because there is a great deal to ask them. May I say, Mr Bonucci, we will look at the passages in the report to which you have specifically drawn attention and that will be very helpful for us. In the meantime, may I thank all of you very much indeed for coming and assisting us. We are trying to comply with the Convention, as you see, but there are problems.
Mr Bonucci: Thank you very much. Thank you for asking us to come.
Mr George: Thank you very much.
Witnesses: Mr Jeremy Carver, Board Member, and Mr Mark Pyman, Director, Defence Programme, Transparency International; Ms Sarah Sexton and Mr Nick Hildyard, Director, The Corner House, examined.
Q517 Chairman: May I welcome our four new witnesses. I hope you have a list of the questions that we would like to ask you. The first one, your overall reaction to the draft Bill, is something that I think we would like you to deal with fairly briefly because there are a lot of other detailed questions to come.
Mr Carver: Thank you, my Lord Chairman. May I take a small amount of licence on that because I think the answer I would like to give to that question will, in fact, inform the answers that I would give on behalf of Transparency International to all of the other questions. First of all, I would like to pay more than lip service but my appreciation on behalf of Transparency International UK for being invited to provide evidence to this Committee. To us, this is a most important function, a very important role that you play here. As an organisation we have been combating corruption internationally since we were founded in 1993. Initially we addressed primarily the demand side, the receipt of bribes, and it was not for a couple of years before we realised that you could not address one side of that equation, you have to deal with both. You have to deal with the supply side as well as the demand side. You must tackle the payment of bribes as well as the receipt of bribes. If you do not, you have an imbalance, an imperfect situation, an oddity, and it does not work. There has been a lot of evidence that you have received over the last four weeks and I have enormous sympathy for the Committee, some of whose members are very experienced in these matters and some less so. With a very short timetable you have been inundated by a huge amount of material to absorb and a huge amount of submissions. These submissions all start with one basic statement, which is "We welcome the Bill". At that point, beneath the welcoming of the Bill, there is a major division and it is that division that I want to explore just for a second if I may, my Lord.
Q518 Chairman: Please do.
Mr Carver: Effectively, the division comes
between those who say, "We really do need proper
Q519 Chairman:
Just
before you do that, the result of the SEC's intervention presumably was the
1977 Act in
Mr Carver: Correct.
Q520 Chairman: You do. We are trying to do something similar, but it may not be the same. Now you come on to the provisions of our Bill.
Mr Carver: I would say this in a general
nature about the Bill. Since December
1997 when we signed in
Chairman: Mr Carver, we would like to come on to some of the nuts and bolts of the new legislation, and Mr Borrow would like to ask some questions about those.
Q521 Mr Borrow: I am going to cover questions 13 and 14, which I think you have got, which are basically looking at the extent to which the legislation is clear and predictable. One of the issues that we have explored with a number of witnesses is whether the actual words in clauses 1-4, things like "improper" performance, reasonable person's "expectation" of "good faith", "impartiality" and "trust", are actually predictable enough in ensuring that people know what is meant to be captured and, if not, whether some sort of guidance as an addition to those clauses would be a good or bad thing. Initially we would be interested in your comments on that particular area.
Mr Carver: We are satisfied with the
predictability of the language in the Bill. Let me just amplify that to a small
extent. This Bill, because it has been
through 12 years of consultation, represents a whole series of compromises,
compromises that have been made sincerely and earnestly by successive subjects
of consultation process. The Law
Commission in particular has tried to balance the contending views that I have
described and have arrived at these series of compromises. To our mind, this is a perfectly acceptable
compromise. What I am particularly keen
to convey to the Committee is the paramount urgency of having legislation. It is far more important to have legislation
that effectively modernises, brings up-to-date and compliant our law on bribery
than the precise detail of the Bill. The
Bill has imperfections, and I am not in any way suggesting that you as a
Committee should abdicate from your responsibility in making sure that the Bill
in your recommendations back to the Government is as good as you think it can
be made, but where I worry is every single one of the witnesses who have been
before you has appeared in every single consultation that has taken place in
anticipation of this legislation. Every
one of them has put their point of view and every one has been compromised in
the process. Of course, Parliament has
its own responsibilities and duties to produce the right answer but this
language, and most of the language of the Bill, does satisfy us because it
satisfies the OECD and what we believe are our international responsibilities. Even if it does not, we think it would be an
enormous improvement on what it is at present. If we do not have this window
for legislation I fear that we, the
Q522 Chairman: Mr Carver, I do not think you need to convince us about the urgency of our timetable, we are sitting day and night some of the time. Also, I take the point that we do not want to get involved in massive amendments in the parliamentary process because that is clearly going to take a lot of time. For the moment you are saying that the various formulations that appear in the Bill are worth having, are they?
Mr Carver: Yes. I would prefer some of them missing, but I am content with the Bill as it is at present because I believe it is much more important to have a Bill and the only hope, I think, there can be of having a Bill is if this Committee can produce a simple, clear recommendation, with some improvements no doubt, that, "This is what we as a Committee representing both Houses and all parties feel is the right process for the Government to go ahead with now".
Q523 Chairman: Does Corner House want to come in on this?
Mr Hildyard: We would, thank you.
Q524 Chairman: We would like you to do so.
Mr Hildyard: We will be as quick as we
can, but we would also like to make a few introductory remarks if
possible. As you probably know, Corner
House is a human rights environment and development group and our concerns on
bribery arise from working with those at the sharp end of its impacts. Those impacts are very real. Bribery is not a victimless crime, "it
kills". Those are not my words, those
were the words of Hilary Benn when he was Secretary of State for International
Development. It kills because money
meant for drugs, say for a small sick child, gets siphoned off to build a
luxury hospital. It kills because it
diverts expenditure towards high kickback areas: defence rather than less
lucrative sectors such as health or education.
It kills because it bumps up the price of projects which the poor then
have to pay for because of cutbacks in social services to pay off debt. The blame for corruption is often put almost
exclusively out there with greasy foreign palms, their customs, the way they do
business, "we have to pay the bribes", but it always takes two to tango and
very often it is Western companies who initiate the dance. I have been told many times working in the
developing world that the first question many Western companies ask when they
come in is, "Who do I pay?" If you
approach contracts and business like that there is a dynamic and that dynamic
is that it does not take long before you squeeze out officials in public
institutions who have integrity, you self-select for those who will take a bribe. From my experience, the vast majority of
people in developing countries actually have great integrity - to use a local
analogy - just as most MPs are not on the take and most Lords are not paid to
lobby, despite the reputation that may have been garnered over the last few
months. Every country I have worked in
from
Q525 Chairman: Thank you for that background but we want to come on to exactly these detailed points. Do you want to say anything more about the tests of the pathways to criminality in the Bill that Mr Borrow has asked about?
Mr Carver: What might be most helpful to
do, my Lord Chairman, would be to give my brief - and I mean brief - answers, a
few words only, and pick up if anyone wants to explore them. I have been very discourteous to my colleague
here, Mark Pyman, in not introducing him.
Mark Pyman is the Director of TI
Q526 Chairman: These are the questions?
Mr Carver: These are the questions, yes. Question 16 [to ascertain whether there is an inconsistency between the mens rea of the active and passive bribery offences; and whether this is problematic] - I do not find such an inconsistency. Question 17 [bribery of foreign public officials (clause 4): to examine how the "legitimately due" test would operate in common law countries and whether the draft Bill should refer instead to the "written" foreign law; to ascertain whether guidance is needed on what is permitted under the law in countries around the world; and to explore whether the use of different legal tests under clauses 1 to 3 and clause 4 will cause uncertainty] is important and it was the subject of the discussion that took place earlier this morning with the OECD and UN ODC representatives.
Q527 Chairman: It is very clear that they want a written general prohibition.
Mr Carver: If I can just say one extra thing which might help the Earl of Onslow. In 40 years' law practice I have never come across a law anywhere which sanctioned the payment of bribes. This needs to be understood because when Mr Bonucci pointed out that in his experience, looking at this responsibly on behalf of the OECD, the only suggestion of sanctioned bribery is what is contained in the section of this draft Bill to sanction it on behalf of the security services, that is a very impressive point. I am not aware of any sanctioning of bribes. Indeed, for instance, to take a country that is a very active customer for British defence materiale, in the Gulf, in their constitution they have a plain provision which says that nobody may take a bribe, it is absolutely clear, but a defence contract was placed and the usual arrangements were made so that a company was formed and so on so that commissions could be paid and, of course, it got trapped in Jersey and that produced an investigation and ultimately the cover-up, as it were, had to be that the ruler of the particular state had to pass a special decree authorising the payment. Companies who operate proper compliance systems know perfectly well what they are supposed to do. There are two simple tests in the payment of any advantage, any bribe: "If I write and tell your prime minister, is this all right?", if it is the prime minister, "If I write and tell your president or the chief justice, is that all right?", and if he is the recipient of the bribe, "Is it all right if I put it in the newspapers?" That will answer most questions about whether or not this is appropriate.
Chairman: Mr Carver, we have got as far as question 17 which a number of my colleagues want to come in on.
Q528 Baroness Whitaker: Following what the OECD said to us, I just wonder whether you think we could leave out the "legitimately due" defence. If not, why not? If so, should we narrow it? I would be very happy for both organisations to reply.
Mr Carver: I would prefer it omitted.
Q529 Baroness Whitaker: Omitted, thank you.
Mr Hildyard: I think it is essential that it is omitted. It is a real Trojan horse. If you have "legitimately due" and you have an undemocratic government with a dictator who wants to allow bribes, the law gets passed in that particular country. It is opening the way to making bribery more feasible.
Q530 Lord
Lyell of Markyate: What you are saying is extremely helpful, but
your last point reminded me that the Soviet constitution was impeccable as far
as human rights were concerned and almost everything else. You will not find laws saying they permit
bribery. Indeed, in a funny way it may
be a credit that this law suggests that there should be some openness in a
narrow area, but that is a different point.
Is not the problem that if you call it a bribe it will never be sanctioned,
but if you call it a commission or something else it may be sanctioned? The objective of this Committee and the
House, and
Mr Carver: I am happy to clarify that.
Lord Lyell, you and I, as it were, had an experience in the
Q531 Lord Lyell of Markyate: I understand that, but Mr Bonucci was saying he wanted something saying that it should be a written law.
Mr Carver: I think what he was saying, with respect, Lord Lyell, was that the OECD Working Group would prefer, like the majority of their members, not to see such an exception written in. If it is written in it should be on the basis of a very specific and clear written law, not on the basis of some legal opinion.
Q532 Chairman: I think what they said was they wanted a general written law, not applying to your apparatchik.
Mr Carver: Yes.
Q533 Lord Lyell of Markyate: Do you agree?
Mr Carver: Yes, I do.
Q534 Earl of Onslow: I want to make absolutely clear your division of the two choices. I come down totally and absolutely on the side of the angels in what you said, but I think it is equally and vitally important that it is very, very clear to anybody who is doing business exactly what is and is not permitted, so if they do go through all the hoops that are required, and I hope that we will in due course ask our Government to do what the American Government does, which is to produce the list of guidance, one wants it to be as clear as possible so that the defence which can be run is a clear and proper defence and there is the minimum amount of uncertainty at the edge of what is and is not a commission and what is a bribe, et cetera, because we all know that people try to merge this to make it look legitimate when it is not. As I say, I am on the side of the angels but I want as much clarity as it is possible to get in law.
Mr Carver: Professor Horder, in his
supplemental written submission to you, made a comment about the dangers of
additional detail. The more complexity,
as it were, it opens up more gaps. There
is a danger here. I appreciate there is
an enormous amount of guidance. One of
the great senses of vitality, particularly in this country, is a very quick
response to problems. There is an
enormous service sector ready to jump in and come up with answers. The
Chairman: To some extent what you have just said deals in part with question 18. Lord Williamson might wish to pursue that a little further.
Q535 Lord Williamson of Horton: Do you think the famous "reasonable belief" defence which exists in the Law Commission's report could be reinstated? A lot of people do not see any good reason for that, but we have had evidence from people who think it would be a good idea. I just want a straightforward opinion from you: scrap it or keep it?
Mr Carver: Scrap it.
Mr Hildyard: Scrap it.
Lord Williamson of Horton: That makes two of us. Thank you.
Q536 Chairman: Let us go on to the question of "negligence" and "gross negligence". Would the addition of "gross negligence" be a help to the prosecution?
Mr Carver: It would be a move in the wrong direction. It would impede prosecutions and it would be the wrong move to take. I would remove "negligence" altogether.
Chairman: You say guidance is already dealt with. I do not know whether Lord Goodhart wants to say anything more about this.
Q537 Lord Goodhart: There are two kinds of guidance, one is codes of conduct which are available to any interested party and the other is clearances for particular projects on application to some public authority. Do you think either or both of those are needed?
Mr Carver: You are not going to stop the proliferation of guidance of an informal sort, private sector guidance.
Q538 Lord Goodhart: Needed in this Act.
Mr Carver: The trouble with the provision of guidance is that it becomes a vehicle, a forum for the attempted erosion of the impact of the Bill.
Lord Goodhart: I am sorry, when I first spoke I should have declared my interest as a member of Transparency International.
Chairman: If any of you have got interests to declare it would be a good thing if you did, please.
Baroness Whitaker: Perhaps I should have reaffirmed my membership of the Advisory Council of Transparency International.
Lord Williamson of Horton: I declared my interests at the beginning.
Chairman: Not "gross negligence" you say. Guidance, you have answered that. What about the Attorney General?
Q539 Mr George: I will forego my half an hour eulogy on Transparency International in the interests of getting away at the right time. Question 21, there are two parts, please answer. You are well-prepared, you can read out your brief.
Mr Carver: The Bill has eliminated the need for Attorney General's consent and it should remain as that. I would hate to see it come through the back door via the Constitutional Renewal Bill, quite unacceptable.
Lord Lyell of Markyate: Can I just check that?
Q540 Mr George: Excuse me, can I finish my question and you can carry on afterwards? National security interests, you do not pay much attention to that, do you?
Mr Carver: If national security has a place in this it is not surely in an anti-bribery bill, it is to be dealt with with the quite different processes that legislation specific to national security has to deal with where submissions can be properly tested in whatever appropriate in camera arrangements are there. It is not something that should feature and it flies a very nasty flag to the world to say that we sanction bribery.
Q541 Chairman: Mr Hildyard, you wanted to add something on this, I think.
Mr Hildyard: First of all, I should say that we welcome the Attorney General's consent being removed, that is a very necessary step. We are concerned about the Constitutional Renewal Bill and some of the clauses there, but that is to be dealt with at another time. There is a real concern that national security can be invoked to get a government out of an embarrassing situation, whether it is because it is causing a diplomatic ruckus if a bribery prosecution goes forward or, indeed, whether it is because a major industry may be economically affected.
Q542 Chairman: Is that what you are saying happened in the BAE case?
Mr Hildyard: I would not want to rerun the
BAE case here. The security advice was
never tested in court. The Director of
the Serious Fraud Office never saw the security advice; he only had it
second-hand. The ambassador, who relayed
it to him, as far as we know, never saw the security advice. We do not know what the security advice
was. The Parliamentary Intelligence
Committee never saw the security advice. What we do know from the court
proceedings is that whatever threat was made, it was not imminent. Our position, and it has been confirmed, and
the interpretation of the OECD Convention Article 5, the OECD Phase 2bis
report, very much takes the same line that our lawyers took, is that there is
not a national security exemption in Article 5 but it is a matter of custom and
international law that a state can always invoke necessity in order to derogate
from an international obligation if doing so is the only way to safeguard an
essential interest against a grave and imminent peril. There are two tests. First of all, have all the alternatives been
considered? Our view in the BAE case was
that they had not. Secondly, is a threat
imminent? There is always a possibility
of closing down an investigation on national security grounds as long as it
meets those two tests. Because Article 5
is not part of domestic law neither the High Court nor the Law Lords ruled on a
construction of Article 5. Had it been
part of
Chairman: Mr George, do you want to pursue Article 5?
Q543 Mr George: No, I think most of the questions have been answered.
Mr Carver: Can I just add one
supplemental answer because I did not answer the second part of Mr George's
question. As an international lawyer I
do not recognise the derogation that was discussed at length that there was
some permission under the OECD Convention to do what the
Q544 Chairman: That would be the place to put it, would it?
Mr Carver: In my view.
Mr Hildyard: In our view that would be insufficient. The OECD has repeatedly asked for the code to be amended but it has not happened yet and there are no signs that it is going to be. In any event the code is merely guidance, it is not binding. It lacks effective force of primary legislation. As I have just mentioned, the Director of the Serious Fraud Office declared that he would have ignored Article 5 even if he thought his decision was in breach of it, and he presumably would have done so if Article 5 was in the code because it is not binding. In our view only primary legislation will stop this. Moreover, primary legislation would allow the courts to decide on the meaning of Article 5 and not leave interpretation of Treaty obligations to a prosecutor or, indeed, to the executive. It is really important that the courts should be able to have a say in the interpretation of those particular clauses.
Q545 Chairman: They would not if it was just in the code of practice.
Mr Hildyard: I am not a lawyer. We have asked for a legal opinion which we will give to you.
Q546 Mr Borrow: If you like, as a non-lawyer I just want to throw in the politician's point of view which is that if you are the prime minister and you feel that something is a threat to national security then you want to have the freedom and the power to do what is necessary to protect the nation without having lots of laws and restrictions which would actually force you to demonstrate in public a lot of stuff which may undermine that national security. I understand the way you are arguing on that point, but I am saying as a backstop, at the end, at some point the person in No 10 needs to be able to say, "I need to be able to pull that lever to stop that in order to protection national security".
Mr Carver: Prime ministers have to act
according to the constitutional remit and powers that they have. Governments commit the
Q547 Chairman: Mr Hildyard, I am terribly sorry but I have got an eye on the clock and the Committee is beginning to vote with its feet. Be very quick, please.
Mr Hildyard: National security is very, very important and our point would be that it is extremely important for the public to trust the judgments that are made about national security and to have confidence that the power to invoke national security is not being abused, and that is why you need the checks and balances.
Chairman: There are a number of questions which we have not yet reached. Parliamentary privilege, I dare say you ---
Lord Lyell of Markyate: My Lord Chairman, I am sorry. May I ask a very short question?
Chairman: Yes, please.
Q548 Lord Lyell of Markyate: We are a parliamentary democracy. If you remove the power, and hence the responsibility, of the Attorney General, how do you get parliamentary accountability?
Mr Hildyard: This is ---
Q549 Lord Lyell of Markyate: I would quite like Mr Carver to answer.
Mr Hildyard: Okay. You have got little time so go for Mr Carver. I have a view.
Mr Carver: Parliament is sovereign here. It has its own rights and responsibilities. When you enter into an international commitment you are answerable to a wider public than just this one. That is where you have to answer to and you are accountable there. It takes it into a different framework. You may, as it were, argue as to whether it is sufficient but I think that Parliament has to be able to scrutinise the actions of ministers. I do not see any absence of being able to do so because it has been vested in the power of the Attorney General. I was not very convinced, frankly, by the extent to which the Attorney General at the time really was accountable for his actions.
Q550 Chairman: Could I ask our witnesses this: we have got four questions left which we have not touched on yet and I do not think we have got time, to be perfectly honest, for verbal answers. Would you be prepared to express your views in writing about those last four questions because I think that would be very helpful to us?
Mr Hildyard: Yes.
Mr Carver: Yes.
Q551 Chairman: I am sorry this has overrun a bit but it was important to hear what you had to say. We are very grateful to you for coming and saying it. We will read particularly carefully in the transcript what has happened this morning.
Mr Pyman: My Lord Chairman, if I can just make one comment at the end dealing, as I do, with defence matters.
Q552 Chairman: Yes. You have been very silent, so of course you may.
Mr Pyman: You have heard a lot from
defence companies over the last few weeks strongly supporting this Bill, and I
am delighted to see it. A voice that you
have not heard, which I deal with every month, is the people who buy the stuff,
the governments doing the purchasing. I
am asked almost every month by that purchasing community, the director general,
minister of defence, "Why isn't the
Q553 Chairman: Thank you very much. We have got one matter of private business, if my colleagues could stay for a moment. In the meantime, I thank our witnesses very much indeed for what you have had to say with some force and with much appreciation from us. Thank you very much.
Mr Carver: My Lord Chairman, thank you very much indeed for your time and attention.