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In addition, my ministerial colleague, Claire Ward, met a wider group of stakeholders, including the Confederation of British Industry and the Federation of Small Businesses on 15 December to discuss the Bill in general. Naturally, that discussion turned to the Clause 7 offence and the need for government guidance
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We would expect our guidance to cover much the same ground as the examples to which I have referred. Among the issues that I anticipate will be addressed are: the responsibilities of an organisation's board of directors; the identification of a named senior officer with particular responsibility for combating bribery; risk management procedures; gifts and hospitality policy; facilitation payments; staff training; financial controls; and reporting and investigation procedures. This is not a comprehensive list, but it will provide the Committee with a flavour of the issues we would expect to cover. We aim in advance of Report to let noble Lords have a more detailed list of the content of our guidance. Having given an absolute commitment to publish guidance, we remain unpersuaded of the case for enshrining that undertaking in statute. I again pray in aid the noble and learned Lord, Lord Woolf, who said at Second Reading that,
The Government are often criticised, I might add unfairly, for legislating needlessly. Our submission is that Amendments 10 and 11 fall into that same trap. They are unnecessary and would create an unwelcome precedent.
I turn now to Amendment 16, which would require the guidance to address certain specified matters. The guidance will undoubtedly cover the points suggested by the noble Lord, Lord Goodhart; that is, that it will be indicative guidance setting out the broad principles and supported by a list of examples of good practice. The guidance will also be designed with businesses of all sizes in mind. What constitutes adequate procedures for one organisation will be over the top for another. The procedures put in place by any organisation must reflect the circumstances of that organisation. Indeed, the flexibility of non-statutory guidance should help to achieve that objective.
I shall address some of the specific points made by noble Lords. Again, I may not answer all of them in the detail required, but I shall write if that is useful. Under the Proceeds of Crime Act 2002, the exercise of confiscation powers is directed towards the recovery of the proceeds of crime. It is not intended to be punitive in effect. We are satisfied that the courts will take into account all relevant information-
The Earl of Onslow: Will the noble Lord give way on that? The Proceeds of Crime Act was used recently in relation to a chemist who fiddled £350-worth of prescriptions and had £212,000-worth of stuff taken
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Lord Tunnicliffe: The fact that it was overturned on appeal reinforces the assurance that I am giving in the sense that we are satisfied that the courts will take into account all relevant information to ensure that the powers of confiscation operate in a reasonable and proportionate manner. It is a matter for the courts to determine the benefit derived from an offence in any individual case.
As with everything else involved in this issue, we all agree on the sentiments; it is the detail that is the problem. Clause 7 is an important provision that concerns strict liability and is, we think, the only way to get at this type of crime that we all want to stamp out as far as practically we can. We agree that it is necessary to provide guidance and that it should come through the Government. I have given an indication of when the initial guidance will be ready, but we accept the ongoing need to look at it. To that end, we would expect that to take the form of a review at some point. The exact words I am supposed to use are these: we would certainly expect to keep the guidance under review as appropriate.
Lord Goodhart: I am most grateful to the Minister for giving way. Could he explain what seems to be the rather difficult point here? He has produced an impressive list of matters for guidance and has accepted that there will be an ongoing need to look at it. What is the objection to putting a simple provision into the Bill that would require the guidance to be made on the face of the Bill for as long as it lasts, but without imposing any duties as regards the subject matter of that guidance?
Lord Tunnicliffe: My Lords, we have made the point that if it is that simple, it is exactly the same as the assurance we have given and it is not necessary. That is the view we take on the guidance. We do not see the value of putting it on the face of the Bill.
I come now to a more important point. It seems to me that some of the probings of noble Lords have suggested that we are proposing case-by-case guidance. We are not proposing that, and I want to make it quite clear that this guidance will be about the procedures that businesses adopt in order to show in a particular case that they had those procedures in place and therefore they can pray them in aid with the defence that is contained in Clause 7.
I hope that I have covered the point about size and resources. Later in our discussions, we will come to the alternative approach put forward by the noble Lord, Lord Henley. We believe that the crime as set out in Clause 7 means that businesses will be able to take a proportionate response, judging by their own exposure to bribery the extent to which they will need to commit resources. Highly exposed companies will sensibly commit
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A number of noble Lords took the view that the guidance would be something that courts could take account of-I will not be more precise than that. We accept that the guidance will have that role. My noble friend Lord Borrie wanted me to tie it into BIS. It is not currently our intention to do that: it is our intention that the Ministry of Justice will create the guidance initially. However, we see the Ministry of Justice working together with the Department for Business, Innovation and Skills to produce the guidance.
At that point, there was an intervention from the noble Lord, Lord Henley, who said that I am a world expert on secretaries of state. I remind him that that had nothing to do with changing laws. In that particular case, the Secretary of State would personally take responsibility for significant powers, which was unusual and unprecedented. I am still smarting from the number of occasions that he ridiculed our excellent drafting on that matter.
Lord Tunnicliffe: The noble Earl touches on the difference between our two approaches. We are not proposing to put the requirement for this guidance in the Act. Therefore, there is no legal basis on which a statutory instrument would come before Parliament. If it were part of the Act, we would obviously have to reassess that. Presently, however, it is our intention that it should be a result of our undertaking, not because it is on the face of the Bill. We will seek to persuade the House of that position.
Lord Goodhart: My experience is that powers of guidance, as opposed to the creation of something that is binding as a matter of law, are not necessarily matters that require parliamentary approval. My experience in the Delegated Powers and Regulatory Reform Committee makes it clear that that is the case. While I would not object to this being done by parliamentary procedure, I would not seek to press for that necessarily to happen.
Lord Mackay of Clashfern: I must inquire why this guidance should not be statutory if it is clear that it will be taken into account by the courts. The passage that we read from the Joint Committee shows that there is a lot of guidance about. All sorts of people are offering guidance and the important thing is to have
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Lord Thomas of Gresford: I support what the noble and learned Lord, Lord Mackay of Clashfern, has just said. Would the Minister like to think about it? If there is a case against a company that is charged with an offence of strict liability-very unusual in criminal law-and it puts forward as part of its defence that it was relying on procedures that it had read about in some book or other, written by somebody with some authority and experience in the area, the judge can easily tell the jury to ignore all that. There is no force behind what an individual has written in a book or set of procedures. There is no force behind anything like that. It is very different if the guidance is under a statutory power and the judge must tell the jury that it must take into account the fact that procedures which have statutory backing were relied on-or that is the defence-by the company that stands before it, charged with a strict liability offence.
Lord Tunnicliffe: My Lords, we are coming to an area where we do not share common ground. We do not believe that there should be a reference in the Bill. We will of course reflect on everything that has been said in Committee and the force with which it was said. As I quoted, the noble and learned Lord, Lord Woolf, whom we look on as a considerable authority in this area, took the view that,
It is unnecessary to have something in the Bill to require the courts to take account of official guidance. We expect the courts to take account of all relevant information, including any official or industry-produced guidance, when determining whether a particular company's procedures were adequate. With that, I again invite the noble Lord, Lord Henley, to withdraw his amendment.
Lord Henley: My Lords, we will want to consider these matters very carefully. I will deal with the four amendments in the right order. I come first to Amendment 8, which would leave out "adequate" and is a purely probing amendment. Since I tabled it there have been further suggestions. My noble and learned friend, Lord Lyell, suggested that a word such as "reasonable" might be better than "adequate". I was much more interested to hear the noble and learned Lord himself
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More importantly, I move on to my Amendment 10 and Amendments 11 and 16 in the names of the noble Lords, Lord Goodhart and Lord Thomas of Gresford. These are about guidance and seek to get that guidance-or at least an instruction that there should be guidance-in the Bill, as well as the idea that Parliament should look at the guidance one way or another in due course. Two points were made in interventions in the noble Lord's speech that he ought to think hard about. One was from my noble and learned friend Lord Mackay, who stressed that this will be taken into account by the courts in any prosecution and therefore should be looked at by Parliament. For that reason, the amendments or some variation on them should be put in the Bill. The other point was made by the noble Lord, Lord Thomas of Gresford, who pointed out-I mentioned this in my opening remarks-that this was an offence of strict liability, which is very unusual, particularly for a company. For that reason, he felt that it was important for Parliament to take a good look at it and incorporate amendments in the Bill.
Although I will not press the amendments, as is customary at this stage and in this Room-where we can still smell smoke, although it is not billowing out-we will certainly want to have another look at them. Possibly we will want to discuss them with colleagues on the Liberal Democrat Benches. I note the assurance from the Government, which I think I have got right, that in advance of Report we will see a draft of the guidance.
Lord Tunnicliffe: My Lords, I am afraid that we have not given that assurance, much as it might satisfy people. We will produce a revised statement of the things that will be going into that statutory guidance. We are not saying that we cannot do it by then, but we are not giving an assurance that a draft will be available by Report.
Lord Henley: My Lords, it seems that the assurance from the noble Lord is that we will have a draft of what might be going into the draft-or something like that-that we can look at in advance of Report. I suspect that it will not be enough and that we will wish to come back to this in one form or another. Perhaps we might merge the different ideas behind our amendments and those of the Liberal Democrats. I beg leave to withdraw Amendment 8, but I will come back at a later stage to points raised in the debate.
9: Clause 7, page 5, line 10, at end insert "and, where A is a contractor to C or a fellow member of a consortium for the joint execution of a project or projects and C does not control A, then it shall be sufficient to establish the defence if C can prove that it
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Lord Henley: My Lords, I will speak also to Amendment 15. Amendment 9 also deals with Clause 7, which, as we have established, creates an offence of failure by a commercial organisation C to prevent a mischief done by a person A who is associated with that organisation. What I seek to explore with Amendments 9 and 15 is the nature of that association. Amendment 15 is the simpler of the two. It would simply make the determination of whether A was performing services for C subject to reference to all the relevant circumstances. Amendment 9 is more specific in extending the defence in subsection (2) to situations where C did their best to stop A, where A is a contractor or a fellow member of a consortium. I seek to tease out from the Minister how close a relationship there must be between C and A for the offence and defence to apply, and what circumstances may be considered to determine that.
I raise the subject of consortia for good reasons. Much international business in the petroleum, mineral, banking, financial and construction industries is conducted through consortia or contractors who have sole or overall responsibility for a project. The relationship with the other entities is not one of control, but regulated by contract only. In many cases, the partners may be state entities. A UK company, especially in one of the extractive industries, may have no choice but to take a state entity as a partner. It can investigate potential partners and then monitor them for bribery, using contractual provisions or by exercising its maximum influence. The latter is regarded as acceptable in United States practice, and that may be the maximum extent of the control of its fellow consortium member that the UK company would be able to exercise. Would the provisions in the Bill be sensitive enough to deal with such situations? If they are not, there is a risk that the Bill could put UK businesses at a distinct disadvantage.
The United States recognises, especially in the audit provisions, the importance of the degree of control when deciding the responsibility of the company for bribery by associates. The Bill makes no such allowance, the sole criterion being whether services are being performed. There is no doubt that partners in the industries mentioned mutually perform services. Accordingly, in certain regions and in respect of certain resources, a UK company would have no choice but to abstain from participation. The cost to the United Kingdom could be considerable. It would rise to an even greater magnitude if UK companies had to withdraw from existing groups because of the potential impact of the Bill. In any event, the place that might have been available for UK enterprise would quickly be filled by companies from other jurisdictions.
I hope that the Government have foreseen these possible consequences. If they have, I hope that the Minister will be able to point to the flexibility in the Bill that is necessary to avoid them. I beg to move.
Lord Tunnicliffe: My Lords, Amendment 9, tabled by the noble Lord, Lord Henley, seeks to address circumstances in which a bribe was paid by a contractor or a fellow member of a consortium and the bribe payer is not under the control of the defendant. It would allow a defence to the Clause 7 failure to prevent bribery offence where a commercial organisation could prove that it diligently investigated the contractor or consortium partner and conducted a reasonable anti-bribery audit during the time the bribe payer was associated with the commercial organisation, or that it had used all reasonable influence to prevent bribery. The organisation would not be guilty even though the bribe was paid to obtain or to retain business or an advantage in the conduct of business for that organisation. I know that some noble Lords, along with organisations such as the International Chamber of Commerce, have concerns about the application of the Clause 7 offence to corporate structures, such as joint ventures, where there is little or no direct control by the commercial organisation of their operations.
Our purpose is clear; we want to encourage organisations involved in joint ventures to ensure that they are satisfied that adequate procedures are built into the arrangements for the joint venture. The same can be said of any other business model. Given this overarching objective, I am not persuaded that a separate defence is necessary or desirable. The Clause 7 offence applies whenever a person performing services for a commercial organisation bribes another to obtain or to retain business for that organisation. Where that connection cannot be made, the organisation will not be guilty. However, where the organisation can benefit from a bribe that is ostensibly paid on its behalf, liability will be determined by the procedures that the organisation took to prevent such bribes from occurring. It is for the courts to determine whether a person was performing services for the organisation in question based on all the circumstances. Consideration of liability will then rest on whether the commercial organisation had adequate procedures in place to prevent bribery.
The formulation of the defence under Clause 7 is broad enough to cater for different corporate structures: including contractors, consortia and joint ventures. The Government are also committed to publishing guidance on the meaning of adequate procedures well before the offence is brought into force. We are considering what guidance may be appropriate in respect of different corporate structures. This is not a one-size-fits-all approach. The procedures should be appropriate to the circumstances of the enterprise. This issue was considered by the Joint Committee, which examined the draft Bill. The committee considered a number of suggested amendments to the draft Bill that sought to limit the offence to cases in which the commercial organisation controls the subsidiary or joint venture. The committee noted, however, that the same end could be achieved through suitable guidance. Introducing separate conditions in respect of preventing bribery by contractors, members of consortia or joint ventures will, we believe, add little of substance and risk creating confusion and uncertainty in the application of the law.
That said, the Joint Committee also noted that a parent company's liability for a subsidiary is one of the issues being considered by the Law Commission as
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Amendment 15 arguably seeks to address broadly the same issue but adopts a different approach. It would generalise the factors that a court would take into account when considering whether person A was performing services for commercial organisation C for the purposes of the offence in Clause 7. A person may be performing services for an organisation for the purposes of Clause 7 even though there is no formal relationship between them. This may be the case, for example, where the person is representing a number of organisations in a joint venture and has a formal relationship with the lead organisation but not with the commercial organisation charged with the Clause 7 offence.
We believe that the words that the amendment seeks to remove are necessary and desirable as they signal to the courts, and indeed to organisations which the offence is intended to cover, that an organisation may be liable in circumstances where there is no formal relationship between A and C.
As the clause makes clear, whether A is performing a service on behalf of C will be determined by taking account of all relevant circumstances. This includes, but is not necessarily limited to, the nature of the relationship. There are of course an infinite variety of ways in which A performs services on behalf of C, so it is right for a jury to take a view on the particular circumstances of the case.
Taking the generality of the concern expressed by the noble Lord, Lord Henley, I think that we will be seeking to help industry in this area not by varying the Bill or making special provision for consortia but by taking account of them in the guidance that we will be producing. Therefore, I invite the noble Lord, Lord Henley, to withdraw his amendment.
Lord Henley: My Lords, yet again I look forward to seeing the guidance, or rather the draft of what is to be in the guidance, that we are promised before Report. That might assist me in deciding what to do with these amendments and such matters on Report.
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