Select Committee on International Development Minutes of Evidence



  Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD) Evaluation of Implementation by the United Kingdom

  This memorandum evaluating the implementation of the OECD Convention by the United Kingdom is submitted on behalf of Transparency International, International Secretariat Berlin, by the TI Working Group on the OECD Convention; Fritz Heimann, TI USA, Peter Rooke, TI Australia and Michael H. Wiehen, TI Germany.


  1.  This paper comments primarily upon the text of the OECD Convention, but takes account, where appropriate, of the Commentaries on the Convention adopted by the Negotiating Conference on 21 November 1997 ("the Commentaries") and the Revised Recommendation of the Council on Combating Bribery in International Business Transactions adopted by the OECD Council on 23 May 1997 ("the Recommendation"). It will be referenced to the numbered articles of the Convention.

  2.  No attempt has been made at this stage to analyse differences between the laws of England and Wales and those that apply in Scotland and Northern Ireland. Undoubtedly there will be differences, but for the purposes of the Phase I evaluation only, assumptions will be made that the principles applying in each country are broadly the same.


  3.  The UK Government has consistently maintained that the UK's existing laws are sufficient to enable the UK to comply fully with the obligations of the OECD Convention. TI disagrees with this view. The basis of the Government's opinion has not been made public. It is thought to be based upon an interpretation of the Prevention of Corruption Act 1906, supplemented by recourse to English common law. The 1906 Act now appears rather antiquated and outmoded. The common law offence of bribery is of uncertain effect and scope. Reliance cannot be placed upon the combined effect of the 1906 Act and the common law offence to found an international corruption offence. Reference to the Hansard report of proceedings in Parliament relating to the Bill that became the 1906 Act, indicates that the principal purpose was to deal with private to private corruption; nowhere is it suggested that the Act was intended to deal with bribery of foreign public officials (FPO). It should be noted that the UK Law Commission, set up for the purpose of promoting the reform of the law in England and Wales, has recommended the abolition of the separate common law offence of bribery.

  4.  Even if, by deduction of highly technical argument, it could be demonstrated that some component or components of action leading to the bribing of a FPO amounted to an offence, there would remain insuperable hurdles to successful prosecution because of the UK's traditional adherence to territorially-based jurisdiction. Currently, a corruption offence cannot be committed under UK law unless there is a territorial connection between an element of the offence and the United Kingdom. TI regards jurisdiction as the key issue to make the Convention effective. The reality is that conduct amounting to the bribery of a FPO is likely to take place wholly outside UK. The purpose of the Convention will not be achieved unless the UK assumes for this offence a jurisdiction based on nationality.

  5.  The Government may seek to excuse the lack of clarity in the law and practice in regard to corruption by referring to the fact that the Law Commission recommended in January 1998 that the present law should be replaced by a modern statute. An inter-departmental working party has been considering its proposals and it is intended to publish a policy paper, which would allow a period of consultation. Whilst there is a superficial attraction in only legislating once in regard to a single area of law, rather than twice within a short period, the fact is that the Government can give no assurance as to when legislation might be introduced into parliament with time allowed for its processing. Law Commission proposals can remain unimplemented for many years. To legislate to implement the Convention should be uncontroversial and command all-party support and could be accomplished swiftly. The Government is intent on dealing in a single piece of legislation with UK's domestic law of corruption, the bribery of members of parliament and the creation of a new offence of the abuse of public office. Some of these proposals are likely to be controversial and demanding in their requirement of parliamentary time. It is therefore unlikely that these proposals will be enacted even in 2001-02. Implementation of the Convention merits much higher priority (see para 7 below).

  6.  The Law Commission in its report described the current legislation as "obscure, complex, inconsistent and insufficiently comprehensive". That legislation, comprising the Prevention of Corruption Acts 1889 to 1916, has been on the statute book for approaching a century. So far as TI-UK can ascertain, there has never been a single prosecution, still less a conviction, for bribing a FPO, neither under the legislation, nor for a common law offence. Although the Government's view for, the purposes of OECD compliance, is as stated in the opening of paragraph 3 above, there is a more generally held view that where the offer and payment of a bribe takes place outside of the UK, no offence is committed in the UK. This is also, for example, the view of another part of Government, as can be seen from the published advice given to HM Inspectors of Taxes (see paragraph 26 below).

  7.   TI considers that, to be compliant with the Convention and effective in countering international corruption, the UK should urgently enact a simple piece of legislation creating an offence of bribing a FPO, which would apply, even if the criminal activities take place wholly outside UK jurisdiction, provided the defendant is a UK citizen, or resident or a company incorporated in UK.


  8.  There is a need for clear legislation to create this offence (see paras 3 through 7 above). Help cannot be derived from the 1889 and 1916 Acts. References in this legislation must be presumed to refer to public bodies in UK. It would have been beyond the intention of parliament that non-UK bodies would have been included. There is an argument, but no more, that the wider concept of agency in the 1906 Act would enable some components of an offence of bribing a FPO to be caught, but there would need to be evidence of some parts of the offence having been committed in UK. The consent of the Attorney General would be required before a prosecution could be implemented. The hurdles to bringing international conduct involved in bribing FPOs within the 1906 Act offence, are such as would deter most prosecutors.

  9.  If the Convention offence were to be clearly stated in new legislation, it would be simple to ensure that complicity and conspiracy were also covered. Given the complexity and obscurity of the existing legislation, it is less clear that complicity is necessarily covered. It is noted that the 1889 Act (unhelpful for present purposes see para 8 above) provides expressly for acting in conjunction with another person to constitute criminal behaviour, whilst the 1906 Act (on which the Government purports to rely) contains no equivalent provision. The ability of UK law enforcement authorities to prosecute for conspiracy to commit offences in general outside the UK, has been strengthened as a result of a provision in the Criminal Justice (Terrorism and Conspiracy) Act 1998, but this is subject to numerous conditions and would be more readily applied to bribery of FPOs if there was a clear new offence of bribing FPOs.

  10.  In terms of the Convention definition of FPO, it is by no means clear that all categories would be covered under current legislation. An official or agent of a public international organisation would not seem to be included.


  11.  Companies or other "legal persons" are understood to be generally subject to criminal liability.


  12.  TI has the impression that the domestic law of corruption works in a generally satisfactory manner and that there are severe sanctions in place. It is not clear that the bribe to, and the proceeds of the bribery of, a FPO, or property the value of which corresponds to that of such proceeds, would be subject to seizure and confiscation. There is a provision covering some aspects of this in the 1889 Act, but for reasons stated in para 8 above, this is not necessarily helpful. Whether or not the sanctions would be effective, proportionate and dissuasive in the case of bribery of a FPO requires some informed evaluation. Sanctions could not be effective however, unless the law governing the offence itself is effective. TI believes that this is demonstrably not the case.

  13.  In terms of additional sanctions, so far as TI is aware, there are no such provisions in UK law. There are some provisions in the domestic law disqualifying holders of public office found guilty of accepting bribes, but this is not the mischief at which the Convention is directed. Nor, so far as TI is aware, has the Government given this matter any open consideration in accordance with Article 3 (4). There is much that could be done administratively (without any new legislation). For example, steps could be taken to strengthen the anti-corruption assurances required of applicants for ECGD (publicly funded) export or investment credit insurance. Where a company, firm or individual has been sanctioned by an international financial institution (such as the World Bank) for bribery or other illicit activity, steps could be taken to ensure that no other institution that has UK membership, accepts their contracts for funding without there being a full investigation of the previous alleged activity. Similar considerations could apply to funding from the Department for International Development and other government departments.


  14.    As stated in para 4 above, it is TI's view that the only way in which the Convention can be made effective is by the UK adopting nationality-based jurisdiction, in addition to its territorial basis, for this offence (see also para 7 above). The Law Commission has proposed that the new offences of corruption should be included in the list of Group A offences for the purposes of Part I of the Criminal Justice Act 1993 (CJA), which extends the jurisdiction of the English courts over offences of fraud and dishonesty committed abroad. The Government's position on this proposal is not known. Even under this legislation, there has to be one component act of the offence committed within the jurisdiction. The reality is that in significant cases of bribery of FPOs, very great care will be taken that no action occurs in the UK. There may be evidence of payment of a bribe to or for the benefit of a FPO, the potential economic benefit of which would pass back to a company based in the UK. However, there may be no evidence of any act in the UK and no prosecution could, therefore, be brought. The CJA would not therefore assist.

  15.  Likewise, it is no answer to the UK's failing to adopt nationality-based jurisdiction, that it can prosecute for conspiracy to commit a crime abroad. This merely highlights the weakness of the UK's armoury to deal with the Convention offence itself. Again there may be evidence of the substantive offence, but not of conspiracy.

  16.  Nor is it an answer to claim that the UK is more ready than many countries to extradite its nationals. Even if true, it does not deal with many cases where there has been major corruption. Countries where corruption is a tolerated practice are less likely to be inclined to prosecute for corruption offences. The UK would not extradite to countries where a defendant would be unlikely to receive a fair trial or where inhuman punishments are imposed.

  17.  The concept on which territorial jurisdiction is founded is that UK law is intended to preserve the Queen's peace. The notion that law and order can be breached only by activity within the territory of a state is no longer sustainable. Immense political and economic damage flows from international corruption. The offence is one surely meriting equal consideration with homicide, drug trafficking, terrorism and sex tourism, for which extra-territorial jurisdiction is taken. The same principles should be applied in relation to corruption offences, in accordance with Article 4 (2) of the Convention.

  18.  The preamble of the Convention, to which the Government has subscribed, states that international bribery raises serious moral and political concerns, undermines good governance and economic development and distorts international competitive conditions. These concerns merit the Government's taking nationality-based jurisdiction along the lines of para 7 above. Nothing less will render UK jurisdiction effective for the purpose of Article 4 (4) of the Convention, which required the United Kingdom to "review whether its current basis for jurisdiction is effective in the fight against the bribery of FPOs, and, if it is not, to take remedial steps." The development of information technology and speed of communication in a global economy, with corresponding criminal misuse of systems, demand enforcement systems in the UK equal to the criminal activity involved.


  19.  It should be noted (see para 8 above) that approval of the Attorney General is required before a prosecution under the UK's current legislation. There is therefore scope for the decision, whether or not to prosecute, to be influenced by considerations of national economic interest, the potential effect upon relations with another state or the identity of the natural or legal persons involved. This would be contrary to Article 5 of the Convention and para 6 of the Annex to the Revised Recommendation. The Law Commission has recommended that the requirement of the Attorney General's approval should be abolished in the proposed new law of corruption. TI would support this recommendation.


  20.  TI is not aware of any limitation.


  21.  Bribery of UK officials is thought to be a predicate offence for the purpose of the UK's money laundering legislation. Under the amendments to the UK Criminal Justice Act 1988 designed to incorporate money-laundering provisions, if the bribery of a FPO in England would constitute an offence, then it constitutes "criminal conduct" for the purpose of the money laundering provisions. If so, the place where the conduct constituting the offence of bribery occurs should be irrelevant. It would be much clearer however, if there were a separate offence as discussed above (see para 7). Moreover, the operation of the relevant provisions is impaired because they include a blanket defence where disclosure is made to the National Criminal Intelligence Service (NCIS). There is such a high volume of disclosures under this provision that it seems very doubtful whether effective action could follow on a disclosure made in respect of an offence of bribing a FPO.


  22.  Most of the accounting devices listed in the Convention would probably be caught technically by the relevant provisions of the UK Companies legislation in dealing with false accounting, although considerations of materiality in accounting and reporting practice may sometimes undermine this. It is also to be hoped that a current review of company law will call for strengthened accounting and reporting on wider issues including internal controls. Significant progress will be made in auditing guidelines and professional guidance, only when there is an appreciation that to bribe a FPO is a criminal offence. This will not occur until specific legislation is enacted.

  23.  Moreover, Article 8 of the Convention needs to be read with para 29 of the Commentaries and Recommendation V of the Revised Recommendation. Without specific legislation, UK companies will not appreciate that they may be required to include in their financial statements, when dealing with contingent liabilities, information as to potential liabilities arising under the Convention. Recommendation V requires the UK to do more than has until now been accomplished, particularly in regard to internal company controls. The UK is making some progress in regard to reporting on internal controls for listed companies, which could include standards of conduct, through listing requirements, guidance and voluntary action. However, this does not have the force of law and does not apply to unlisted companies. In view of the growth internationally in considerations of corporate governance, it is important that the UK implements Recommendation V in full.


  24.  A legal framework for MLA is in place, but consideration needs to be given to whether it is effective. TI is aware of concerns from authorities abroad when investigations are required to be directed formally to the UK, that delay frustrates progress.


  25.  Although a legal structure is substantially in place, it is advisable for the Convention offence to be expressly legislated.


  26.  The present position is unsatisfactory. Tax legislation is in place to disallow as deductions payments that are a criminal act for the payer. One of the most damaging consequences of the Government's view of the adequacy of the existing laws is that there is no clear offence of bribing a FPO. Therefore the tax legislation in this respect is ineffective. The manual of advice to HM Inspectors of Taxes states that the UK does not have jurisdiction over a corruption offence where the actual offer and payment take place abroad. Tax inspectors may be able to disallow the deduction of bribes on other grounds (for example, payment for hospitality, payment for inadequate consideration amounting to a gift), but not specifically because it is a bribe of a FPO. Moreover, where a payment is disallowed in circumstances that the Inland Revenue may suspect amount to a bribe to a FPO, it is understood they would be precluded from passing that information to law enforcement authorities because of strict rules of confidentiality. They are subject to a duty not to disclose information to any other authority, except in cases of homicide, treason, terrorism or drugs trafficking. TI would urge the Government to legislate to give international corruption equal status with these offences.

Prepared by:

Graham Rodmell, TI-UK and

Jeremy Carver, Head of International Law at Clifford Chance, London, honorary solicitors to TI-UK

Reviewed and adopted by the TI Working Group on the OECD Convention

Fritz Heimann, TI USA

Peter Rooke, TI Australia

Michael Wiehen, TI Germany

November 1999

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