Joint Committee on The Draft Corruption Bill Report

Annex 4: Note by Peter Alldridge, specialist adviser, on locating the harm in bribery and corruption - an alternative approach

What is wrong with bribery?

Differing definitions of the crime bribery flow from differing accounts of what is wrong with the phenomenon. There are at least four possible accounts of the harm(s) in bribery. Bribery might be said to be harmful because:

(i) it involves an inducement to breach of a civil law duty. This is the basis of the position taken in the Draft Corruption Bill with its insistence upon a principal-agent relationship and inducement towards its breach.

(ii) the creation of a market in goods or services whose being sold degrades them, or otherwise prevents the proper operation of government. This was the rationale for the earliest corruption statutes - against bribery of judges and magistrates and the sale of offices and commissions, but it would only cover a small area of public sector corruption.

(iii) it is an impediment to fair competition in liberalised global markets and consequently a detriment to consumers, producers and economic growth. Much of the evidence about corruption, particularly international corruption, dealt with these cases, often in public sector procurement.[172]

(iv) it involves abuse of public position for private gain. This kind of definition, adopted, for example, by the World Bank, does not distinguish public sector bribery from other misconduct and excludes some private sector bribery.

A coherent law of bribery will identify the harm and generate definitions directed against its prevention.

A second major issue requiring resolution at the outset is the place of bribery law relative to other areas of criminal law. In particular, the point at which bribery of an official ends and extortion[173] by that official begins is notoriously unclear, as is the apparent area of overlap between bribery and conspiracy to defraud, and the criminal offences[174] dealing with various market abuses. If the offence of misconduct in public office is to be given a more significant role in the fight against public sector corruption (for example, by extending the definition of public office) then again this needs to be taken into account in the reform of bribery. If any acceptance by a public sector worker of a bribe is misconduct then there is less need for specific bribery offences. Coherence of criminal law requires that it generate appropriate labels and consistent sentences, and that like cases should be treated alike. Proliferation of offences each dealing with the same wrong cannot be avoided entirely, but areas of overlap should be carefully considered.

The Law Commission's view of the harm in bribery

The Law Commission took as its starting point, both in the Consultation Paper[175] and its Report,[176] that the betrayal of a principal-agent relationship should form the basis of the crime of corruption.[177] The Commission relied on the Oxford English Dictionary for this account.[178] A number of things follow from the choice of disloyalty as the foundation stone for the definition of the offence:

1.  A law of corruption based around disloyalty must identify the relationship within which the disloyalty takes place. This is done in the principal-agent relationship, which has been widely criticised.

2.  The element of moral turpitude must be directed against that relationship: hence the definition of "corruptly" in clause 5.

3.  There must be a defence of consent by the principal (clause 7). In general, except for the most exceptional cases the consent of the victim is a complete defence to a criminal charge. If the principal is the "victim" it is his/her consent which is relevant. However, if the "victims" are others (competitors or end-users) then the consent of the principal should be irrelevant.

4.  If the offence has its root in disloyalty there is no reason in principle[179] why extra-territorial jurisdiction should be imposed in the case of disloyalty induced overseas, when it is not imposed, for example, for paying the agent overseas to hit the principal.

Much of the evidence before the Committee has emphasised the damage to others than the principal (competitors and end-users) which is consequential upon the bribe.[180] Sentencing has not hitherto emphasised the degree of disloyalty. The growth in global interest in corruption from the time of the enactment of the US Foreign Corrupt Practices Act 1978 till the present, including Lord Falconer's emphasis upon markets and democratic value[181] has not been driven by concern about loyalty of agents.[182] It has been driven by concern about the operation of (increasingly globalised) markets.

This suggests the possibility of a different model of the harm in corruption, one which better responds to the complaints which have placed bribery high on the agenda of the internationalisation of criminal law. It relates the crime (and its gravity) not to loyalty and the principal-agent relationship, but to the relationship between the actor and the market of which s/he forms part. On this account, bribery is not the corruption of a relationship but of a market. Bribery occurs in two overlapping but distinct sets of cases:

attempts to operate a market where it is not an appropriate allocative mechanism - attempts to pay for goods and services which ought not to be for sale at all. These cases are attempts to buy or sell the proper functioning of government (widely considered, to include policing, votes, administration of justice, local government and other public services). The precise limits beyond which there can be no market are set, usually by statute in individual jurisdictions;

there is a market whose existence is desirable or at least legitimate, having rules as to how allocation is to take place (how competition is to work), and proper functioning of that market is undermined by the bribe. The benefits of competition to the end-user are denied by bribes, and competitors may also be damaged.

Instead of there being one broad offence based upon an indistinct wrong related to loyalty there are two wrongs upon which offences could be built. This enables more effective labelling and sentencing. An offer of a small bribe to, for example a traffic warden, strikes directly at the rule of law, is a different type of wrong and should command a heavier sentence than a small bribe to secure a small contract. A definition of corruption on these bifurcated lines would make it an offence (a) to confer or receive a benefit: with the intention of corrupting the proper functioning of government and public services: or (b) with the intention of corrupting the proper functioning of a regulated market.[183]

The reason that the criminal law of corruption is so difficult is that it is not free-standing, but operates by reference to a series of existing legal duties. The approach taken in the Bill is to incorporate the duties owed by agents to principal, in its extended definition. These duties arise under public law and the civil law of employment, agency, fiduciaries, trusts, contracts and even marriage.[184] The alternative approach finds the duties upon which the criminal law of corruption is to be built in the law relating to the relationship between an individual and the market in which s/he operates. A system for allocating goods services, jobs, contracts and other benefits - by competition - posits a set of rules for its proper functioning. These rules - the rules of markets - are limitations upon freedom of contract. They do not compel participants in a market to make the best bargain possible, but they do lay down minimum standards. They may or may not be incorporated in individual contracts between principal and agent. The rules may be laid down by European law,[185] in statutes,[186] in statutory instruments,[187] by prerogative powers,[188] under powers conferred by one of the former,[189] by self-regulation (which generally gives rise to contractual obligations),[190] or by rules from a combination of these sources. The "market" model of bribery holds that corruption is to be identified by reference to those rules. The object of corruption is to gain the benefits of acting according to those rules, whilst not actually doing so. This, and not disloyalty to the principal, is the "fundamental mischief" in corruption. The criminal law of corruption does not itself place limitations upon freedom of contract,[191] but rather punishes attempts to avoid existing restrictions upon freedom of contract.[192]

As against the "loyalty" model the advantages of the "market" model are:

(i)  the principal/agent requirement becomes unnecessary;

(ii)  "corruptly" is no longer an element in the offence and consequently the problems around defining it, and "primarily" are avoided. The mental state of "intention to corrupt" is easily comprehensible and sits well with the codification project;

(iii)  it is no longer necessary that the consent of the principal be a defence (clause 7);

(iv)  the vice in bribery would be is clear from the offences. The reader knows that the statute is intended to prevent corruption: (i) of government (ii) of markets. Clearer identification of the vice will enable judges to sentence more rationally and consistently. Other things being equal, corruption of government, striking directly at the rule of law, should be regarded more seriously than corruption of markets;

(v)  the adoption of extra-territorial liability is in principle[193] far easier to justify. The criminal law of England and Wales has far greater cause to be concerned with proper operation of the organs of government and markets the than with the loyalty of individual public servants;

(vi)  The lacuna in the case of a principal-principal bribe not covered by the Bill, is now covered.[194]

Peter Alldridge

14 July 2003

172   E.g. Supplementary document from the Corner House: Susan Hawley, Turning a Blind Eye: Corruption and the UK Export Credits Guarantee Department (Sturminster Newton, Dorset: The Corner House 2003). Back

173   Which since 1968 could be charged as blackmail (Theft Act 1968 s.21) or under clauses 2or 3 of the Draft Bill.  Back

174   Particularly that under Section 188 of the Enterprise Act 2002. Back

175  .Law Commission, Consultation Paper No 145, Legislating the Criminal Code: Corruption (1997) CP Ch 7, following Phil Fennell and P.A. Thomas, 'Corruption in England and Wales: An Historical Analysis', (1981) 11 International Journal of Sociology of Law 167, themselves citing Lord Ellenborough C.J.'s judgment in Thompson v Havelock (1808) 1 Camp 527; 170 ER 1045. The case, however, turned upon its particular facts and is not authority, for any wide proposition, nor for any proposition in criminal law. Back

176   Law Commission Report No 248, Legislating the Criminal Code: Corruption (1998) 5.4 et seq. Back

177   The "fundamental mischief" Law Commission, Consultation Paper No 145, Legislating the Criminal Code: Corruption (1997) Para 1.15. Back

178   Sir Stephen Silber, memorandum of 23rd June 2003.  Back

179   Other than the fulfilment of international obligations, the significance of which is not underestimated. Back

180   E.g. Transparency International written evidence paras 2.2-2.3: Corner House Susan Hawley, Turning a Blind Eye: Corruption and the UK Export Credits Guarantee Department (Sturminster Newton, Dorset: The Corner House 2003) quantifies the damage done by corruption it describes to the taxpayers of the countries concerned, who are not always the principals.  Back

181   Corruption Draft legislation Cm 5777 (2003) Foreword, page 5. Back

182   Susan Rose-Ackerman 'Corruption and the Global Corporation: Ethical Obligations and Workable Strategies' in Michael Likosky ed. Transnational Law and Legal Process: Globalisation and Power Disparities (London: Butterworths, 2002) 148-171 Back

183   An offence along these lines was suggested by Dr Desmond Turner to Sir Stephen Silber. (Q.657) Appropriate definitions would, of course, be required.. Back

184   Which would be a principal-agent relationship under clause 11(1)(a). Back

185   As, for example, in much competition law. Back

186   As in the Financial Services and Markets Act 2000, the Enterprise Act 2002 or the legislation on discrimination on the basis of race. sex or disability. Back

187   For example, some of the Statutory Instruments made under Financial Services and Markets Act 2000. Back

188   For example, the rules relating to the making of appointments or contracts by Universities. Back

189   The rules for the allocation of contracts or jobs in local government. Back

190   For example, the Stock Exchange Rules. Back

191   Pace Lord Falconer Oral Evidence Q 483, Q.583. Back

192   It would be possible if desired to except discrimination law. Somebody pays a bribe to the personnel manager of a large enterprise acting with the approval of his/her principal, to induce them not to employ persons of a particular race or sex, or persons with disabilities. This is not covered by the Draft Bill: on the market model it would be an attempt to pervert the operation of a market in jobs (because the rules about discrimination in employment form part of the rules of the market in jobs). It is, of course actionable discrimination but is not otherwise criminal (except, perhaps, as a conspiracy to defraud). Whether it should be criminal bribery is an open question.  Back

193   i.e. again leaving aside again the question of the relevant international obligations. Back

194   Q487 & 488 (Lord Falconer) Note: the conduct may also amount to a conspiracy to defraud, and an offence under Enterprise Act 2002. Back

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Prepared 31 July 2003