The
Committee consisted of the following
Members:
Chairs:
†Sir
Nicholas Winterton
,
Joan
Walley
†
Bain,
Mr. William (Glasgow, North-East)
(Lab)
†
Cryer,
Mrs. Ann (Keighley)
(Lab)
†
Djanogly,
Mr. Jonathan (Huntingdon)
(Con)
Harris,
Dr. Evan (Oxford, West and Abingdon)
(LD)
†
Heald,
Mr. Oliver (North-East Hertfordshire)
(Con)
†
Hill,
Keith (Streatham)
(Lab)
†
Howarth,
David (Cambridge)
(LD)
†
Howell,
John (Henley) (Con)
†
Jones,
Helen (Vice-Chamberlain of Her Majesty's
Household)
Kilfoyle,
Mr. Peter (Liverpool, Walton)
(Lab)
†
Levitt,
Tom (High Peak)
(Lab)
†
Syms,
Mr. Robert (Poole)
(Con)
Ussher,
Kitty (Burnley)
(Lab)
†
Ward,
Claire (Parliamentary Under-Secretary of State for
Justice)
†
Wills,
Mr. Michael (Minister of State, Ministry of
Justice)
†
Wright,
Jeremy (Rugby and Kenilworth)
(Con)
Eliot Wilson, Committee
Clerk
† attended the
Committee
Public
Bill Committee
Tuesday
23 March
2010
[Sir
Nicholas Winterton
in the
Chair]
Bribery
Bill
[
Lords]
10.30
am
The
Chair:
I bid good morning to all members of the Committee
who are here; no doubt we shall greet those who are not here a little
later. Excellent progress has been made, and I commend the Committee on
how it has dealt with this important Bill. My first duty is to ask the
shadow spokesman, the hon. Member for Huntingdon, to move new clause 3
formally.
Mr.
Jonathan Djanogly (Huntingdon) (Con):
I do not wish to
move new clause 3, Sir
Nicholas.
New
Clause
4
Facilitation
payments
‘A person is not
guilty of an offence under sections 1, 2 or 6 if the offer, promise or
giving of a financial or other advantage
is—(a) necessary to
expedite a routine government action or to prevent damage to an
important commercial
interest,(b) reasonable in
amount given the
circumstances,(c) a single
payment,(d) considered
customary in the situation by those usually subject to such routine
government action, and(e) the
person has no other reasonable alternative in the circumstances to
expedite the action referred to in paragraph
(a).’.—
(Mr.
Djanogly.)
Brought
up, and read the First
time.
Mr.
Djanogly:
I beg to move, That the clause be read a Second
time.
The
Chair
:
With this it will be convenient to discuss
the following: new clause 5—Hospitality
payments—
‘A person is
not guilty of an offence under sections 1, 2 or 6 if the offer, promise
or giving of a financial or other advantage is a reasonable hospitality
payment as specified in the guidance to be provided pursuant to section
9.’.
New
clause 6—Extortion
payments—
‘A person is
not guilty of an offence under sections 1, 2 or 6 if the offer, promise
or giving of a financial or other advantage is the subject of an act of
extortion as specified in the guidance to be provided pursuant to
section
9.’.
Mr.
Djanogly:
Bribery is, of course, a crime that undercuts
competitiveness, derails honest companies and distorts the marketplace.
Those who bribe and those who are bribed, whether in commercial
organisations or governmental institutions, are thereby diminished by
their actions, such that their legitimacy is called into question and
the confidence of consumers and the public is weakened. Bribery also
undermines the societies in which the bribes are made. Under the Bill,
Parliament is no longer accepting the excuse of local practice, but
tying our flag to the highest levels of international
probity—action that is welcomed by the Conservative
party.
Part
of corruption and bribery’s inherent problem is that it covers a
staggering breadth of behaviour and a multitude of different actions
that might be dependent on the circumstances for their criminality. We
are talking about a worldwide phenomenon that is not limited by
language, geography or political ideology. It is frequently difficult
to distinguish between valid payments, such as a legal, agent’s
commission, and the illegal bribing of key individuals in business or
public office. Furthermore, variations in the scale of payments or
actions hinder easy or clear classification. Bribes are often context
driven, and can vary from substantial bribes for multimillion or even
billion pound contracts to small denomination bills tucked in the pages
of a passport at a pseudo-police checkpoint on a deserted country road
in the developing world. Those factors combine to make it exceedingly
difficult to pin down exact figures or, indeed, general trends in
bribery and corruption practices worldwide, let alone on a
country-by-country
basis.
I
now come to the issue of facilitation and promotional payments, which
was considered to some degree in the pre-legislative process in the
other place. I also touched on it when debating my amendments to
clauses 1, 2 and 6 in our earlier proceedings. Despite that, we remain
sympathetic to the airing of the continued worries of business in this
area. The International Chamber of Commerce is just one such
organisation that has been in contact with us highlighting the fact
that there must be an explicit recognition of the need for legitimate
promotional expenditure. The ICC gave the example of a United Kingdom
company that wished to sell a process to a foreign state company. That
company may have to pay experts and purchasing officials in order to
travel and stay near the foreign company’s facilities, so that
the process can be demonstrated. In the United States it would be
possible for an American company to obtain clearance from the
Department of Justice for such activity. Contracts of considerable
economic importance to the UK could be at stake. Of course, the
Under-Secretary explained why she does not like the idea of an advisory
service, but after our debate it might have to be
reconsidered.
Businesses
argue that, without spelling out a defence for legitimate promotional
expenditure, it is not sufficient to leave companies to the hope that
prosecutors may take a reasonable view. The ICC does not agree that
including a facilitation payment provision would be a retrograde step.
The offence under clause 6, to which such an exemption would relate
directly, is, by the Government’s own admission, an independent
provision standing apart from the more general law of bribery as laid
down in earlier clauses. The ICC feels that the potential economic
disadvantage to the UK of allowing the Bill to remain unamended or
unexplained in that context outweighs any such
considerations.
The
real point is about proportionality, which goes to the very issue of
whether there needs to be an element of dishonesty or corruption in the
individual’s mindset. We have shown in earlier debates that we
support the need to include such a distinction in the offence, although
the Committee has come to the conclusion that it will not go into the
Bill, and I shall not reopen that discussion. It is certainly arguable
that facilitation payments should be outlawed altogether, as a matter
of policy. We accept
that: such payments invariably violate the law where they are made, and
creating a defence under English law for actions that are criminal in
the jurisdiction in which they are committed is questionable. Those
making such payments might not be able to be prosecuted in their home
country, but they would have to keep in mind that, from that moment on,
they would be liable to prosecution in the country in which the bribe
was
made.
The
inclusion of a facilitation defence is also seen by some as an
invitation to books and records violations, as employees rarely record
grease payments accurately in company records. Such payments, it is
argued, set a permissive tone, which leads to ever-increasing demands
and might corrode the foundations of good governance within the paying
corporation. However, that does not account for the realities of global
business or travel in developing countries. We also accept that there
are a number of cogent arguments in favour of including such an
exemption in the Bill. Such payments, given their immaterial size, do
not tend to distort trade or the economy, nor to damage economic
development in host countries. Unlike major bribery, facilitation
payments are not intrinsically anti-competitive, as they rarely create
a competitive advantage in contract procurement. Facilitation payments
tend to secure for their maker the services to which they are entitled
in any event, and no
more.
Furthermore,
an outright prohibition on facilitation payments might be considered
impractical at this time. Such a ban is unrealistic in those countries
in which payment of such bribes is endemic. Other countries will not
immediately follow the UK’s lead and restrict their companies
from making such payments, so British businesses would operate at a
disadvantage. A prohibition on such payments could be better dealt with
multilaterally, at the treaty level, rather than through a unilateral
English law, but we do not live in a perfect world. I understand that
there are some 35 signatories to the OECD convention, but only eight
other states have criminalised facilitation payments: Belgium, Finland,
Italy, Luxembourg, the Netherlands, Norway, Slovenia and
Spain.
Moreover,
an exemption would not exempt a company making payments from being
prosecuted under the laws of the state in which they were made, if they
were illegal. The company would not be prosecuted in the UK, but such a
defence would not exclude it from liability in the foreign
jurisdiction. One of the great attributes of modern Britain is its
acceptance of other cultures and societies. If facilitation payments
are legal and accepted in foreign cultures—so the argument
goes—is there really a need for Parliament to act in such a
sanctimonious fashion and decree that British business cannot
adapt?
David
Howarth (Cambridge) (LD):
Will the hon. Gentleman concede
that, according to the written law of the countries that he is talking
about, facilitation payments are not
allowed?
Mr.
Djanogly:
Yes, I accept that, but I am saying that there
are two sides to the
argument.
Lord
Mackay, speaking in the other place, provided two examples, one of
which was borrowed from Lord Robertson’s evidence to the Joint
Committee:
“He
referred to the captain of a ship who, when seeking to have its cargo
unloaded, was told by the stevedores at the port that it would be
unloaded only on the condition that a payment was made to someone
nominated by the stevedores, not necessarily to the stevedores
themselves. That is a very difficult position for the captain of a ship
to be in, and yet, if he paid, the Bill would criminalise his payment.
Another example I have come across—there are quite a number in
this general area—is that of someone on a business trip who, in
order to board the aeroplane at the airport, has to get a boarding
pass. He is asked by the official issuing the boarding pass for money,
not to pay airport taxes but as a payment to the man
himself”.—[Official Report, House of Lords, 9
December 2009; Vol. 715, c.
1089.]
US
companies would of course be permitted to make such payments, despite
the prohibition on bribery in the Foreign Corrupt Practices Act. At the
working level, such payments are often important for companies that,
although not of vast size, have some external trade or contract. Such
companies need to be clear that they will be treated
fairly.
Lord
Henley gave an example on Report in the other place that drew on the
overlap between clause 6 and the issue of facilitation payments. He
showed that facilitation payment scenarios are not limited to
businessmen from the developed world taking advantage of third-world
countries, but can apply in equal measure where the transaction is
designed to improve the provision of health care or living standards.
Lord Henley
said:
“As
an illustration…in the pharmaceuticals sector, to the extent
permitted by local laws in each relevant country, companies operate in
line with strict internal codes which usually observe global industry
standards around the engagement of healthcare practitioners. In many
countries, healthcare practitioners would come within the definition of
a foreign public
official,”
and
would therefore fall within clause 6. He
continued:
“The
Bill could therefore criminalise what is currently the honest, lawful,
well intentioned promotional detailing of products to doctors in
countries such as China, where healthcare practitioners will, for the
most part, be employees of a state organisation. In these
circumstances, a United Kingdom company could, therefore, not only
commit a technical offence under this legislation but also be placed at
a disadvantage as against foreign
competitors.”—[Official Report, House of Lords, 2
February 2010; Vol. 717, c.
124-125.]
The
Government will no doubt respond that it will be for prosecutors to
distinguish between legitimate and illegitimate corporate hospitality,
and to decide whether it would be in the public interest to bring a
prosecution, as Lord Tunnicliffe indicated to Lord Henley in the other
place by letter on 14 January 2010. However, the argument is that that
might not be sufficient, which takes us back to the problem with
prosecutorial discretion that we have outlined throughout these
debates. We believe that it is not correct to expect businesses to
instruct employees that a certain course of action, while theoretically
falling foul of the legislation, may nevertheless be proceeded with
because prosecution is unlikely. Will the Under-Secretary specify
whether prosecution policy will be issued on that area? For example, if
a certain degree of hospitality is allowed, will a certain level of
facilitation payments be ignored? To allow one but not the other could
be called inconsistent.
In 1999,
Australia became party to the OECD convention on combating bribery of
foreign public officials in international business transactions. The
Australian Government subsequently introduced changes to the relevant
tax and criminal legislation. The Commonwealth Criminal Code Act 1995
makes it a criminal offence to bribe a foreign public official, whether
in Australia or
elsewhere. That means that Australian citizens and corporations can be
prosecuted for actions undertaken overseas. The penalties for bribery
include up to 10 years imprisonment and substantial fines.
Division 70.4 of that Act provides a defence for facilitation payments,
stating that a person is not guilty of an offence if:
first,
“the
value of the benefit was of a minor
nature,”
secondly,
“the
person’s conduct was engaged in for the sole or dominant purpose
of expediting or securing the performance of a routine government
action of a minor
nature,”
or
thirdly,
“as soon as
practicable after the conduct occurred, the person made a record of the
conduct”.
In
the USA, the Foreign Corrupt Practices Act exempts
“facilitation
payments for routine government action.”
A note from the US
Department of Justice explains that that would include such action as
the payment of bribes for loading and unloading cargo, as well as
similar activities, just as Lord Mackay pointed out in the other place.
However, one aspect of the US Act that has seemingly been overlooked in
the debates to date is the time at which the exemption for facilitation
payments was introduced. For decades the US was the only country to
have made it a criminal offence, under the Foreign Corrupt Practices
Act, for its citizens or corporations to pay bribes abroad to foreign
public officials.
The FPCA was
a response to the involvement of some of America’s largest
companies in massive bribery scandals domestically and abroad. US
businesses protested against the restrictive and unclear provisions of
the FCPA, claiming that they reduced the competitiveness of American
companies operating internationally. The US Omnibus Foreign Trade and
Competitiveness Act 1998 was passed to meet those concerns.
That Act made a number of amendments to the FCPA, which included
clarifying the exemption for small payments—so-called
facilitation payments—by American companies to secure the
provision of routine governmental services abroad. My point is that
this could be a wasted opportunity if we do not learn the lessons from
the US. It took the United States 11 years to realise that a blanket
prohibition on bribery was impractical in a globalised corporate
world.
10.45
am
If I may, Sir
Nicholas, I should like to turn briefly to the Joint Committee’s
findings on facilitation payments, as I suspect that the
Under-Secretary will want to address them. We accept that the Joint
Committee came down in favour of criminalising facilitation payments,
but that conclusion was not unqualified. In highlighting the problems
it recognised, the Committee referred to various pieces of evidence,
and its report
states:
“The
law firm, Reynolds Porter Chamberlain, expressed ‘grave
concerns’ that UK business would be put at a competitive
disadvantage compared to businesses from states - such as the US -
where a legal exception was provided. It called for the draft Bill to
include a defence similar to that in the US. It also noted that
reliance on prosecutorial discretion caused difficulties for
organisations with reporting obligations under the Proceeds of Crime
Act
2002”—
we
shall come on to that. It also
states:
“There
are undoubtedly difficult and unanswered dilemmas facing business, as
Lord Robertson illustrated: ‘stevedores on the docks of a
country say they will not unload your ship unless a
payment is made to their union or to their corporate organisation, what
do you do? You say, ‘No. We will just let our ships lie
there’.’”
The
report
continues:
“These
dilemmas were manifest in the fact that the UK Anti-Corruption Forum's
members were unable to reach consensus on the approach that should be
taken. While the Forum is strongly in favour of treating facilitation
payments as an offence for acts within the UK, it noted the need for
caution in the international arena: ‘It is an extraordinarily
difficult problem and [… t]here is a range of opinion from those
who feel that facilitation payments should be outlawed to those who
feel that they should not be a matter for the criminal law…Very
often, the person who is paying the facilitation payment is, in effect,
the victim of extortion and very often that is junior employees in
quite difficult situations with traffic police or immigration officers,
or whatever it may
be.’”
Those
submissions, along with a number of others, led the Joint Committee to
qualify its recommendations by
stating:
“At
the same time we recognise that business needs clarity about the
circumstances in which facilitation payments will be prosecuted,
particularly given the difficult situations that can arise. Therefore
the basic principles of prosecution policy, which we would expect to
adhere firmly to the concept of proportionality, must be made
clear.”
The
new clauses that I have tabled on hospitality and extortion payments
pick up some of the ideas that came through in the evidence and the
debates in the other place, and represent an attempt to consider the
problem from a different perspective. For instance, the UK
Anti-Corruption Forum thinks that when a facilitation payment is paid
as a result of extortion, the payer, far from being a criminal, is
actually the
victim.
The
Joint Committee recognised that the hospitality payment was a
legitimate part of doing business at home and abroad, provided it
remained within appropriate limits. There was considerable support for
a defence for reasonable hospitality payments. The director of the
Serious Fraud Office believed that that was a sensible approach
since
“most
routine and inexpensive hospitality would be unlikely to lead to a
reasonable expectation of improper conduct. This would therefore not
trigger the general
offences."
The
Joint Committee sought to rely on the fact that
the
“general
offences impose an appropriate limit on this activity under the
‘improper’ performance test. However, the main limit
under clause 4 is based on prosecutorial discretion. We are content
with this and call on the Government to reassure the business community
that it does not risk facing prosecution for providing proportionate
levels of hospitality as part of competing fairly in the international
arena.”
For
the reasons that I have noted, we are unhappy to place such heavy
reliance on prosecutorial discretion and would rather see certainty for
businesses encapsulated in the Bill, or described in
guidance.
As
legal commentators have stated, it is important that a “bright
line” is drawn
“signalling the point
past which individuals subject to that law cannot go. This is
particularly so when there are serious criminal sanctions for crossing
the line. Clear standards make it easier for companies bound by the
rule to ‘manage across a variety of cultures and
regimes’.”
The
Bill effectively suggests that the answer to the facilitation payment
problem lies in the reasonable exercise of discretion by prosecutors,
and that there will be prosecutions only if large payments are made to
foreign officials to secure major contracts at the expense of
competitors. However, we need to recognise that many companies and their
officers are wary of relying on prosecutorial discretion without
guidance and without knowing where they stand, which is why it is right
that I raise these concerns today. I would be grateful if the
Under-Secretary gave such companies some
reassurance.
David
Howarth:
The arguments have been rehearsed not only during
the Bill’s passage through the other place, but during our
previous debates in this Committee, so I will be
brief.
The
hon. Gentleman was right to concentrate solely on clause 6, because all
his points applied only to clause 6, although his new
clauses also apply to clauses 1 and 2. Under clauses 1 and
2, the intent to induce improper conduct deals with all his points, so
we are really talking only about clause 6, which is about bribing
foreign officials—the most serious of the crimes that we are
creating in the Bill. Such bribery is not only about the economic
situation that the hon. Gentleman mentioned; it is about the corrosive
effect on good government in those countries. For that reason, we
should not be tolerant of any form of bribery of foreign officials
at all.
The
straightforward fact about facilitation payments is that they are
bribes. They are a slightly different type of bribe, in that they get
someone to do something that they should have done anyway, as opposed
to something wrong that they would not otherwise have done. Both,
however, are examples of doing the wrong thing for money, which is
properly covered by the description “bribe”—the
type of thing that the Bill is trying to stop. I tried to make it clear
in my intervention on the hon. Gentleman that so-called facilitation
payments—he readily concedes this—are illegal according
to the law of the countries that he
cited.
That
leads me to the point that the hon. Gentleman tried to make about
custom and practice in other countries. The only authoritative guide
that we in this country can apply to the public policy of another
country is what its law says. If its law says that such payments are
illegal, we are not in any way denying the validity of its culture by
going along with its public policy. As long as its public policy says
that the payments are illegal, that is what our law says as well. That
is why clause 6(3)(b) deals with whether action by a foreign official
is
“neither
permitted nor required by the written law applicable
to”
that
official to be influenced by the gift. That is the point of the
provision.
The hon.
Gentleman says that it is all about prosecutorial discretion, but it is
not. It is also about the burden of proof, because under that clause
the burden of proof of showing that whatever was done was contrary to
the law of the other country must be on the prosecution, and that must
be proven to the criminal standard. The questions that the hon.
Gentleman raises will therefore not arise in practice. It will not be a
matter of prosecutorial discretion; it will simply be a matter of
whether there is proof that what was done was contrary to the written
law of the other
state.
Extortion
is not a crime in England—it was abolished under the Theft Act
1968—but it is a crime in Scotland, so it is interesting that
the hon. Gentleman is using Scottish criminal concepts in a British
statute—
[
Interruption.
] If a legislative consent order
comes through, it would be British. It is interesting that his attitude
to devolution seems to be changing, as he is now adopting criminal law
concepts from Scots
law.
Mr.
Djanogly:
I went further than that. I gave the hon.
Gentleman some useful Australian and American law as
well.
David
Howarth:
The point is that English law has the concept of
blackmail, which replaced extortion in
1968.
The
debate raises a more serious issue: should people be excused a breach
of the criminal law because of circumstances in which they are
threatened by criminal acts carried out by other people? We in this
country have always taken a very strict view on that. The defence of
duress in criminal law basically applies only to people who are
threatened with serious injury or death. That might be the case in some
of the examples that the hon. Gentleman cited, but we have never gone
beyond that view for the very good reason that people of reasonable
fortitude with a commitment to the rule of law do not give in to
demands that they commit criminal acts except in the most dire
circumstances. For that reason, I oppose new clauses 4 to
6.
The
Parliamentary Under-Secretary of State for Justice (Claire
Ward):
It is good to have you back in the Chair, Sir
Nicholas.
While
listening to speech made by the hon. Member for Huntingdon, I was at
first rather hopeful because it seemed that he understood the policy
objectives of the Bill and that he was setting them out clearly.
However, new clauses 4 to 6 would drive a coach and horses through
those policy objectives. Frankly, they would create exceptions for
various payments and expenditure on the part of commercial
organisations that would be not only unnecessary but undesirable if we
are to uphold the Bill’s clear policy objective that bribery is
unacceptable.
New clause 4
relates to small-scale bribes that are paid to expedite action by
Government officials or to prevent damage to an important
interest—effectively facilitation payments. The new
clause’s drafting illustrates the problems encountered when
trying to create an exemption for facilitation payments. For example,
the new clause appears to cover bribes paid to expedite routine action
on the part of both foreign and domestic public officials, but I am not
sure whether that is the hon. Gentleman’s intention. Moreover,
the conditions set out in paragraphs (a) to (e) are open to wide and
subjective interpretation. What are companies and courts to make of
terms and ideas such as “reasonable in amount”,
“customary in the situation” or the
only
“reasonable
alternative in the
circumstances”?
The
new clause would have an adverse impact on the effectiveness of the
Bill. In particular, it would jeopardise one of its key policy
objectives of supporting national and international efforts to bring
about a shift away from a culture that tolerates bribery. We understand
that petty corruption in emerging markets and other countries can be a
problem for UK companies. There is no doubt that they occasionally face
demands for facilitation payments in the sort of circumstances that the
hon. Gentleman described that amount to blackmail or
extortion—if we are using the Scottish term. The answer,
however, is not to create exemptions such as those in the US Foreign
Corrupt Practices Act, which have created
artificial distinctions. The answer is to face the challenges head on.
That is the approach of the OECD, which recently issued a
recommendation calling on member countries to review their policies and
approaches to small facilitation payments periodically to combat the
phenomenon effectively.
We do not
want to be in the situation in which the Americans will no doubt find
themselves over the coming years of playing catch-up to raise
standards. We need to take the opportunity to legislate to set the
highest possible standards and to send a clear and unambiguous message
that bribery in whatever form, and whatever the size of the payment, is
a crime. A payment, no matter how small, that is made to a foreign
public official—for example to induce an official or to reward
the improper performance of their functions—will be an offence
under clause 1. Payment to facilitate the performance of that
official’s functions to secure an advantage in the conduct of
business will be an offence under clause 6, unless the local written
law permits the official to be influenced by the payment.
All
prosecutions in the UK are, however, subject to review under the
principles set out in the code for Crown prosecutors. If a case
involving such payments came to the attention of prosecutors, it would
be subject to review by a Crown prosecutor applying both the evidential
and the public interest test. I should add that, typically, it would be
for the Crown Prosecution Service rather than the Serious Fraud Office
to look at such cases, as the SFO has a £1 million case
threshold. In any event, should the CPS consider a case of this kind, I
would expect factors such as the small scale of the payment or the
presence of circumstances that amount to extortion on the part of the
receiver of the bribe to weigh heavily against a prosecution. I must
stress, however, that such decisions are entirely a matter for the
independent prosecuting authorities, and I believe that that is the
right way to
proceed.
11
am
New
clause 5 seeks to create an exception for corporate hospitality that
would apply both to the recipient of hospitality and the provider. I
want to make it clear to the Committee and to businesses taking an
interest in the Bill that it is not our intention to inaugurate a crack
down on reasonable corporate hospitality, we do intend to put in place
a law that is clear, certain and unambiguous and this exception,
however the hon. Gentleman describes it and whatever the motivation
behind it, will introduce ambiguity and
uncertainty.
It
is important to make clear the way in which different offences in the
Bill engage with corporate hospitality. Under the general offences in
clauses 1 and 2, the hospitality would have to be given and received
with the intention of inducing someone to perform a function improperly
in order to attract liability—the very point that the hon.
Member for Cambridge was making. It would therefore need to be given or
received in order to induce a breach of an expectation that someone
would act impartially, in good faith or in accordance with a position
of
trust.
In
some cases, the receipt of hospitality itself may amount to an improper
performance of a relevant function, and in those circumstances the
provider of the
hospitality would need to be aware of that fact. Hospitality that is
commensurate with the prevailing norms is very unlikely to give rise
even to a suspicion of either of those sets of circumstances. The
measure would only apply where there is a clear evidential link between
the hospitality and improper conduct—in circumstances, perhaps,
where the hospitality is wholly excessive could any question of
impropriety possibly
arise.
The
situation under clause 6 relating to bribery of a foreign public
official is different, as the focus would be on hospitality provided to
a foreign public official with the intention of influencing that person
in his or her official capacity to obtain business or an advantage in
the conduct of business, where the local law does not require or permit
the official to be influenced by the hospitality. Corporate hospitality
will invariably be provided to make potential customers, whether
foreign public officials or anyone else, more favourably disposed to
the provider of the hospitality in the hope that that will lead to a
future commercial opportunity or advantage. To the extent that
reasonable hospitality is a normal part of business, we are not seeking
to discourage such
practices.
Let
us be clear, however, about this. Where the facts disclose that
excessive hospitality provided for a foreign public official was
significantly instrumental in securing business, we consider it right
to regard that as bribery, unless the local law expressly permits or
requires the foreign public official to be influenced by corporate
hospitality. In any event, I can assure the hon. Member for Huntingdon
that any case coming to the attention of the police or prosecutors
would be examined on its individual merits. If a case involving
corporate hospitality came to the attention of the investigating and
prosecuting authorities the public interest might not be best served by
a prosecution unless, as I have already said, the hospitality was
excessive or
unreasonable.
There
is another aspect of new clause 5 that warrants mention—is the
phrase,
“as specified in
the guidance to be provided pursuant to section
9”.
I
assume that that references is intended to inject an element of
certainty, but it misconceived. As I have already stated, the guidance
to be issued under clause 9 relates to procedures that commercial
organisations can put in place to prevent persons associated with them
from bribing on their behalf, as mentioned in clause 7. There has never
been any intention on our part to specify what may amount to reasonable
hospitality and we have never given any contrary
indications.
Finally,
new clause 6 seeks to create an exception for any bribe paid under
circumstances that amount to an act of extortion. Curiously, it would
also provide a defence to the recipient of the bribe who presumably is
the person seeking to elicit the bribe through blackmail or extortion.
However, setting aside that strange aspect of the clause, that
exception would serve no useful purpose and would introduce a new
subjective element to the definition of the offences that could be
exploited by the unscrupulous.
In
considering any case of bribery, prosecutors would be under a duty to
consider all factors relevant to the question of whether the public
interest demanded a prosecution. The hon. Gentleman asked whether we
would issue guidance to the Crown Prosecution Service or to other
prosecuting authorities. As I am sure he is
aware, it is a matter for the directors of each of the prosecuting
authorities to determine the appropriate guidance required by their
prosecutors. It is not for the Government to issue such detailed
guidance.
Clearly,
the presence of facts that could amount to extortion on the part of the
payee is a factor—as I have already mentioned when addressing
facilitation payments—that would weigh quite heavily against the
prosecution of the payer. On the other hand, the use of a subjective
term such as “extortion” in statute would create
ambiguity and uncertainty in the law. The hon. Member for Cambridge has
already given other reasons why there may be an issue with it. Finally,
new clause 6, like new clause 5, includes the
phrase,
“as
specified in the guidance to be provided pursuant to section
9”.
I
simply reiterate the point I made about the guidance that we plan to
produce.
I
hope I have persuaded the hon. Member for Huntingdon that this is not
the way to proceed with the legislation. I do not think that his view
is widely shared, even by those in other parts of the Conservative
party who take an interest. The Conservative party’s working
group on responsible business produced a report, which it hopes will
provide a basis for a future Conservative Government—it can
dream on. The report recommended that
“a future
Conservative government demonstrate its commitment to ensuring that
British companies are not engaged in corruption by rigorously enforcing
those elements of the 2001 Act that embody the OECD anti-corruption
convention”.
While
it will have a long time to wait for a Conservative Government to be in
such a position, the reality is that these proposed new clauses do not
rigorously enforce the elements of the 2001 Act, by providing the sort
of exemptions that the hon. Gentleman wishes to see. On that basis, I
hope that he will withdraw
them.
Mr.
Djanogly:
I should start by saying that I was the only MP
on that Conservative group for responsible business, so the
Under-Secretary can see where my personal opinions lie—I endorse
the group’s
findings.
Let
me run through a few points that came up in a helpful debate. I shall
begin with the remarks of the hon. Member for Cambridge, who said that
the proposed new clauses did not apply to clauses 1 and 2. I am not
sure if that is the case, but I accept that the question would be, for
example, whether hospitality would be improper under those clauses. I
think he implied that the provisions were not relevant and therefore
should be stripped
out.
David
Howarth:
I simply said that all the hon.
Gentleman’s arguments would fall under clause 1, and that it
would be impossible to prove the necessary intent. Obviously, his new
clauses do technically apply to those parts of the Bill but his
arguments did not work for
them.
Mr.
Djanogly:
I thank the hon. Gentleman for his
clarification. I accept that the issue mainly relates to clause 6. I
think the hon. Gentleman’s main point is that the proposed new
clauses did not work because we had to look at the law of the country
concerned. I am not saying that we should not, under the Bill, be
looking at anything other than the law of the country
concerned.
The question
posed by the new clauses is whether there should be a de minimis
carve-out. It is not a question of the principle; it is the question of
the carve-out. Clearly, in the hon. Gentleman’s black and white
academic world, there should not be. I can tell him that significant
parts of the business community are concerned about issues in these
debates that relate to having a definite way forward. On the use of
blackmail rather than extortion, I am open to his
suggestions.
With regard
to the Under-Secretary’s points, the new clauses tabled on a
probing basis. They were designed to elicit a response to concerns that
the Bill will be applied in a way that is realistic to the demands of
business operating in a complicated global economy. She went some way
towards outlining the parameters of corporate hospitality, but the
outcome of what she has said does not represent absolute clarity and
will have to be tested in the courts. That is where we are. Of course,
it is for prosecutors to decide prosecution policy, but with three
different prosecutors, the possibility of confusion is not reduced. We
will have to look at that very carefully in future. I am happy to have
debated the new clauses and, on that basis, I beg to ask leave to
withdraw the
clause.
Clause
,
by leave,
withdrawn.
New
Clause
7
Exclusion
from prosecution under other
statutes
‘An individual or
other person prosecuted for an offence under this Act shall not be
subject to proceedings under the provisions of the Proceeds of Crime
Act 2002 or other statute by virtue of the acts or omissions which gave
rise to the proceedings under this
Act.’.—
(Mr.
Djanogly.)
Brought
up, and read the First
time.
Mr.
Djanogly:
I beg to move, That the clause be read a Second
time.
The
new clause follows on from our earlier debates on the Proceeds of Crime
Act 2002 and its interplay with the penalties under the Bill. As well
as being subject to an unlimited fine if successfully convicted,
corporations are concerned about how the confiscation regime under POCA
might relate to the offence. I touched on this issue on Second Reading
when I asked the Secretary of State whether the Government appreciated
that the sentencing guidelines conflict in some ways with other
sentencing powers, particularly POCA. Businesses say that people might
not come forward, because once they have been convicted under the Bill,
they might be liable to prosecution and penalties under other
legislation. The Secretary of State said that he would look at the
issue, so I ask the Under-Secretary whether the Government have indeed
looked at it. I look forward to hearing her
response.
Although
we accept that there is a morally defensible position that those
convicted of a criminal offence and who have received proceeds in a
criminal way should pay those proceeds back, we are not entirely
convinced that the interplay between the statutes is stated clearly
enough. POCA was designed to deprive individual defendants,
particularly drug dealers and organised criminals, of the benefits of
their criminal conduct. However, there has been no acknowledgement or
recognition that there could be serious implications for
companies caught by the legislation, which in some cases could see them
being put out of business if the full weight of the law were applied.
The fact that businesses wish to draw POCA to the attention of
Parliament during our debates on the Bill highlights how unsettled they
are by the introduction of a strict liability offence to which the
defence is vaguely
worded.
In
the other place, Lord Tunnicliffe responded to Lord Henley’s
queries on the matter by
stating:
“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”.—[Official Report, House of Lords, 7
January 2010; Vol. 716, c.
GC52.]
The
fear, however, is that that misses the main thrust of
businesses’ concerns. The International Chamber of Commerce drew
parallels with the situation in the USA. The original purpose of POCA
was to prevent criminals from enjoying the proceeds of their
activities, and in the United States, the Racketeer Influenced and
Corrupt Organizations Act, which was passed as an anti-mafia measure,
has the same underlying purpose. Now, however, RICO is often used in
aggressive commercial litigation and by administrative authorities to
further their policies. The ICC fears that POCA may have the same
potential in the
UK.
Neil
Gerrard, head of the litigation and regulatory group for DLA Piper,
published an article at the end of last year addressing the issue and
the potential deterrent effect on companies considering self-reporting
to the Serious Fraud Office. The SFO is trying to encourage companies
to engage with it to report wrongdoing, in return for which it will use
civil penalties wherever possible instead of criminal sanctions, but
will not give guarantees or further
guidance.
11.15
am
The
Committee may wish to consider as a model the recent corruption case
involving Mabey and Johnson, in which the company engaged
constructively with the SFO in return for a plea agreement in both
quantum and terms. The penalties on the company totalled
£6.6 million, £1.1 million of which was
confiscated. However, because the date of the earliest offence charged
against Mabey and Johnson was 1993, the confiscation was determined
under the Criminal Justice Act 1988. For offences committed after
November 1995, the confiscation regime is more draconian, as determined
under POCA. Those rules include a mandatory obligation on the court to
conduct a confiscation inquiry if the prosecutor asks for a
confiscation order. However, even if the prosecutor decides not to ask
for one, the court has discretion to conduct an inquiry in any event.
However, it has no discretion in determining the amount to be
confiscated, with the calculation of benefit from criminal conduct
determined by
statute.
Given
those restrictions, according to Mr. Gerrard’s
article, I understand that a judge cannot simply ratify the plea
agreement and the agreed sums as was done in the Mabey and Johnson
case. Therefore, while under the CJA regime, Mabey and Johnson paid
£1.1 million in confiscation, the sum at risk of confiscation
under POCA would have been as high as £60 million. That
sum represents the strict statutory application of the benefit or value
of the contracts, rather than any profit obtained from the offences
committed.
Will
the effect of the overlap between POCA and the Bill be to drive
companies out of business altogether? If that is not the intention,
will the Under-Secretary explain how such a drastic scenario can be
avoided? Clearly, if such a powerful disincentive were to prevent
self-reporting by companies—as it no doubt would—the
efficacy of the SFO’s hoped-for new regime of corporate
responsibility could be brought into doubt, which is not in
anyone’s
interests.
David
Howarth:
Again, the new clause concerns a matter that we
have discussed before, so I will only add one point to what I have
said. I oppose the idea of separating the POCA powers and making them
inapplicable in such cases, for the simple reason that what lies behind
the Proceeds of Crime Act and its predecessors is the notion that
stripping a criminal of all the benefits of crime is a deterrent. It is
a way of ensuring that people think twice before going into such
activity in the first place, as they would obtain no gain from
it.
The hon.
Gentleman is right about rigidity of calculations under POCA compared
with previous regimes, and he described the procedure in which that
would happen. Normally, a prosecutor would threaten to use POCA to
secure a settlement. That puts the prosecutor in a better position than
would be the case under the new clause, and I do not want to undermine
the powers of the prosecutor in any way at
all.
The
hon. Gentleman’s only point is that a judge has the discretion
to start the whole process on their own motion. That is the only risk
here—a judge might upset the whole arrangement agreed between
the defendant and the prosecution authorities. I honestly think that
the risk is very low. The hon. Gentleman shows no faith in the
judiciary, which is not, if thinks about it, something he would wish to
repeat. There is a technical point in his favour, but it is not strong
enough to support his new
clause.
Claire
Ward:
As the hon. Member for Huntingdon has explained, the
new clause would confer protection on individuals or other persons
prosecuted for an offence under the Bill from any other proceedings,
whether under POCA or any other statute, in respect of the facts that
gave rise to the proceedings under the
Bill.
The
hon. Gentleman is particularly concerned about the application of the
confiscation provisions under POCA. He mentioned on Second Reading that
many businesses to which he had spoken have expressed concern that
further action may be taken against companies convicted under the
proceeds of crime legislation, and that the financial penalties that
would be imposed could threaten their
businesses.
First,
I wish to clarify the fact that the matter is not about companies
convicted of an offence under the Bill being exposed to double
jeopardy. The confiscation regime under POCA is designed to deprive the
offender of their benefit from crime, which is an entirely correct
approach. The confiscation powers under POCA are not solely directed at
drug dealers and armed robbers—useful though they are in those
respects. The powers exist in respect of any offence if offenders
secure a
financial advantage from their crimes. The Act does not just apply to
individuals; it also applies to companies and other legal persons
convicted of any such
offence.
To
provide immunity of the sort proposed by the new clause would be
unprecedented. I do not see why individuals or commercial organisations
convicted of offences under the Bill should be singled out for immunity
from legislation that Parliament has determined should apply following
conviction. Bribery is a serious offence and should be treated as such.
I am sure that the hon. Member for Huntingdon is not really saying that
people convicted of a bribery offence should be able to retain the
benefits from their crime—I hope that is not what he thinks
should
happen.
So
far as the Proceeds of Crime Act is concerned, it is for the court to
determine the benefit derived from an offence in any individual case.
The court’s decision will be informed by a statement of
information, prepared by the prosecutor, identifying the
defendant’s benefit from their criminal conduct. The defendant
has an opportunity to respond to and contest any assertions in the
statement of information. Section 13 of POCA requires the court to have
regard to the confiscation order before imposing a fine or other order
involving payment on the defendant, except for a compensation order.
Otherwise the confiscation order is left out of account in sentencing
the defendant. I have every confidence that the courts will exercise
their powers of confiscation on the basis of accurate information and
in a just and appropriate
manner.
The
hon. Gentleman was concerned on Second Reading that the existence of
confiscation powers would make it less likely that companies would
self-report allegations of bribery. I do not accept that that would be
the case, although the prospect of the proceeds of a crime being
confiscated should act as a deterrent against committing the offence in
the first place. If that is not seen to be the purpose of the Bill, we
have not got the policy objectives across in all the time we have spent
in Committee and in the previous
work.
Furthermore,
the Serious Fraud Office has indicated in guidance on self-reporting
bribery that, in appropriate cases in which the commercial organisation
demonstrates that it is prepared to act responsibly, there is the
prospect of a negotiated settlement with a civil outcome rather than a
criminal prosecution. Such examples ensure it is the right way to deal
with the facts of the
case.
The
proposition of total immunity, however, goes wider than POCA, to cover
proceedings under any other statute arising from the same facts. That
would potentially encompass many other types of proceedings, such as
those relating to compensation orders, serious crime prevention orders
under the Serious Crime Act 2007 or the disqualification of
directors under the Company Directors Disqualification Act 1986. Again,
I am not sure whether the hon. Gentleman intended his new clause to
have such consequences, but we see no justification for creating an
immunity to such proceedings for someone convicted of a serious
offence—bribery. That is contrary to what Parliament
intended.
Bribery
is a serious crime that needs to be addressed accordingly. The
inclusion of the new clause would seriously impair the effectiveness of
the Bill, as I have said of previous new clauses. The Joint Committee
on the draft Bribery Bill, on which the hon. Gentleman served, stated
in its report
that
“the
Bill must have teeth”.
The new clause would
have the opposite effect. In light of my response to the points made by
the hon. Gentleman, I encourage him to withdraw the new
clause.
Mr.
Djanogly:
Let me first say in reply to the hon. Member for
Cambridge that I have every confidence in our
judiciary.
I
was pleased to move the new clause, which gave us an opportunity to
probe the interaction of different legislation. Of course financial
advantage should be repaid—I totally agree with the
Under-Secretary about that. The question is whether the new interaction
of laws will reduce the chance of companies coming forward and
self-cleaning—as I think my hon. Friend the Member for
North-East Hertfordshire described it. The Under-Secretary’s
view is that that will not be the case, and I am certainly happy to
hear
that.
Mr.
Oliver Heald (North-East Hertfordshire) (Con):
I am in
favour of self-cleaning as well, but self-cleansing was what I
said.
Mr.
Djanogly:
The approach to the matter taken by
prosecutors—and indeed judges—in the initial cases will
be vital, as businesses will be looking on as decisions are
made.
On that
basis, I beg to ask leave to withdraw the
motion.
Clause,
by leave,
withdrawn.
Ordered,
That
certain written evidence already reported to the House be appended to
the proceedings of the Committee.—(Claire
Ward.)
The
Chair:
Before I put the last Question to the Committee,
may I say that this is the last Bill I shall chair during my
parliamentary career in the House of Commons? I have served on the
Chairmen’s Panel for just under 25 years. It has been a
tremendous pleasure—often a challenge, but very enjoyable. I say
to Back Benchers—there are also Ministers to come, and shadow
Ministers, on the Back Benches—that there is an alternative
career in the House of Commons, which is serving the House on the
Chairmen’s Panel or in other ways. I hope that that career
structure will be used increasingly, because it is good for the House
to have Members who are committed to the service of this magnificent
Parliament.
I
congratulate the hon. Member for Watford on the job she has done as the
Government Minister on the Bill, and the hon. Member for Huntingdon on
the way in which he has represented Her Majesty’s Opposition. It
is always a pleasure to listen to the hon. Member for Cambridge; I know
that Parliament will miss him when he steps down and returns to law at
the university. We wish him well. All those who have contributed to our
proceedings have added to the Bill. I thank the congregation of Clerks
whom we have had during these short proceedings. It is always very
helpful to any Chairman to have someone sitting by their side who can,
if we forget what we are supposed to be doing, quickly bring us back to
reality and give us the advice we
need.
Hansard
is always impeccable. The police and the doorkeepers who ensure that we
run an effective and efficient Committee are to be thanked for their
service. The agreeable Whips on this Bill should also be congratulated.
Looking round the Committee, I see three hon. Members who will not be
standing for Parliament again. I thank them personally for the service
they have
given not only to the House, but to their constituents and to the
country, in the role they have fulfilled. It has been a pleasure to get
to know many such Members
well.
Question
proposed, That the Chairman do report the Bill, as amended, to the
House.
Claire
Ward:
I thank you, Sir Nicholas, for your chairmanship of
the Committee, and your co-Chair, Ms Walley. I know that you are off to
new pastures—wherever that may be—and to a new life
outside Parliament. We wish you well in what you choose to do. It is
incredibly important that we have people throughout the parties who
believe wholeheartedly in the role of Parliament and the work we all
have to do as Members. Whatever happens after the general election,
there will be, by the very nature of so many people deciding not to
seek re-election, a very different Parliament in the summer. We have
much to learn from those who have gone before, particularly regarding
chairing a Committee such as this, which you have done very agreeably.
You have ensured that, even in moments of difficulty and disagreement,
we have got through this important legislation.
I join you,
Sir Nicholas, in thanking those who have enabled us to get through the
Bill. I thank the hon. Members for Huntingdon and for Rugby and
Kenilworth for their, at times, constructive and interesting debate;
the Clerks; Hansard; the doorkeepers; the police officers; all members
of the Committee, of course; and the Bill team and my officials,
without whom life would be not just difficult, but frankly impossible.
I thank them for all their hard work. I spent many years sitting where
my hon. Friend the Member for Warrington, North is sitting
now—in the Whip’s chair. This is the first full Public
Bill that I have taken through, and everybody here has ensured that it
has been both an enjoyable and relatively easy task. I thank you, Sir
Nicholas, and take this opportunity to wish you well in the
future.
11.30
am
Mr.
Djanogly:
May I join the Under-Secretary in congratulating
to you, Sir Nicholas, on the way in which, with your normal fairness
and good humour, you have guided us through the Bill, and in wishing
you well in your retirement? I am certainly very sorry that this is the
last of the many Bill Committees that you have chaired on which I have
had the privilege to serve. I also congratulate Ms Walley on what was
her first Bill Committee; may she chair many more. I thank those who
have contributed to making the Committee happen: the Clerks, the
doormen and the police. I wish the hon. Member for Cambridge well in
his return to academia, and I thank all members of the Committee for
giving up their time to consider this important
legislation.
David
Howarth:
May I add my thanks to you, Sir
Nicholas, and my appreciation for the way in which you have chaired
Bill Committees in the few years that I have been here? In every case,
you have enabled the debate to flow and ensured that important points
were made, but that in the end, the work was done. Your principle, that
that should be possible without recourse to procedural interruptions
such as knives, is a model of
how such things should be done. I, too, wish you well in your future
outside the House. I also thank the Clerks and the Bill team, who
seemed very much engaged with the Bill—it is a tribute to them
that it has got through this stage with such dispatch—and all
the other members of staff who helped the Committee to get its work
done in
time.
As
hon. Members have mentioned, this is not just your final Bill
Committee, Sir Nicholas: it is also mine, unless something very odd
happens that we do not expect in the next few days and weeks. The way
you chair Committees means that we get the work done and we examine the
Bill clause by clause. The way government is set up means that rarely
can Governments say, “That was a good idea and we will accept
it”, so Committees can be frustrating exercises. I am sure there
is a better way of doing it. I shall go away and think about what that
might be in my academic career, but given that this is the way we do
things now, Sir Nicholas, you do it better than anybody else. Thank you
very
much.
Tom
Levitt (High Peak) (Lab):
Unusually, I rise from the
Parliamentary Private Secretary Bench, but then I am not a PPS—I
just happen to be sitting here. I want to add my thanks to all those
who have already been mentioned: to members of the Committee; and to
all who have helped make this Committee effective, especially you, Sir
Nicholas. We share a boundary and a love of the Peak district; the
second will continue, if not the first.
If I may, I
want to sound one note of reminiscence and nostalgia. In 2002, I
represented the House at a conference in Canada—I was then a
member of the Standards and Privileges Committee—at the
inaugural meeting of the Global Organisation of Parliamentarians
Against Corruption, which in some parts of the world has become a very
effective organisation, helping particularly in emerging democracies.
At that conference, the OECD documentation was applauded and
commitments were made, and I am touched, having had four years in the
Department for International Development as a PPS, that my final Bill
should be bringing that commitment to the OECD principles into effect.
It is therefore a slightly nostalgic moment—a nice
nuance.
The
Chair:
Indeed it is—a nostalgic moment for a number
of us. I thank members of the Committee for their generous remarks. I
have allowed Members’ comments to range widely; we had time, and
I felt it appropriate to allow that at the end of a
Parliament.
I have left
it to the very end to say thank you to my co-chair, Joan Walley. It was
her first Bill and she did a magnificent job; I wish her well and I
shall personally thank her when I see her later. It has been a very
pleasant Bill Committee to chair, and I thank again all members of it
for their very generous remarks.
Thirty-nine
years, almost, in this place is quite a lifetime, but I do not regret a
single minute of it, and if I had the opportunity to live my life
again, I would do things in no different way. Perhaps that, in a way,
is what somebody should say at the end of their House of Commons
career.
Question
put and agreed to.
Bill
accordingly to be reported, as
amended.
11.37
am
Committee
rose.
