Joint Committee on The Draft Corruption Bill Written Evidence


APPENDIX 1

Memorandum from the Corner House (DCB 1)

SUMMARY

  The Corner House—an advocacy and research NGO with has worked on corruption from a development and human rights perspective for several years—welcomes the draft Corruption bill. It believes however that the draft Corruption bill could be much improved if the following aspects were taken into account:

    (1)  the Attorney or Solicitor General's consent for prosecution should be removed from the bill to allow for private prosecutions;

    (2)  a set of clearly defined criteria for prosecution of corruption offences should be drawn up and included in the Code for Crown Prosecutors of the Crown Prosecution Service in order to bring greater public accountability in an area of considerable prosecutorial discretion, and ensure that the UK abides by Article 5 of the OECD Convention on Combating Bribery;

    (3)  the offence of "trading in influence" should be included in the bill;

    (4)  there should be a specific provision for intermediaries in the bill and the UK government should revise its advice to UK companies with regard to their responsibilities towards corruption offences carried out by subsidiaries;

    (5)  the UK government should revise its position with regard to the prosecution for corruption of "facilitation payments", and issue guidelines for law enforcement agencies about the threshold below which payments will be considered to be "facilitation" payments;

    (6)  the UK government should revise its advice to UK companies with regard to the locus of prosecution for corruption offences, which can and should be tried in the company's home country;

    (7)  the Serious Fraud Office should be given a new mandate to cover corruption offences;

    (8)  the Home Office should review the expenditure and public sector manpower impacts of the bill, with a view to allocating more resources for the investigation and prosecution of such offences; and

    (9)  the Home Office should give reasons as to why it has not produced a Regulatory Impact Assessment for the bill.

INTRODUCTION

  1.  The Corner House is a UK NGO that works with community-based organisations for environmental and social justice by carrying out analysis, research and advocacy.

  2.  The Corner House has worked on corruption from a development and human rights perspective for a number of years now. It submitted evidence to the International Development Committee's 2001 Inquiry on Corruption which was quoted extensively in the Committee's findings. The Corner House works specifically on the role of UK companies in corruption abroad and on the responsibility of the UK government in tackling corruption.

COMMENTS

  3.  The Corner House welcomes the new draft corruption bill. The Corner House has various concerns, however, about the new draft legislation based on its experience of working on corruption and bribery issues from a development and human rights perspective.

4.   Attorney or Solicitor General's consent for prosecution (Clause 17)

  4.1  The Corner House is disturbed that the Attorney General's consent to prosecution for corruption offences is still required under clause 17 of the draft bill. Its concerns are as follows:

  4.2  The Attorney General and Solicitor General are members of Her Majesty's Government, appointed by the prime minister. The Attorney and Solicitor Generals apply criteria for prosecution laid out in the Code for Crown Prosecutors. The Code allows prosecutors to take public interest factors into account including the possibility that prosecution might result in disclosure of information that could harm sources of information, international relations or national security.

  4.3  The Corner House is concerned that public interest arguments, such as national security, potential damage to international relations, and even the potential loss of jobs if a UK company in a strategic industry were to be prosecuted, may be used to avoid prosecutions under the corruption law. This would be in breach of Article 5 of the OECD Convention on Combating Bribery in International Business Transactions ratified by the UK and which came into force in February 1999. Article 5 of the Convention states that "investigation and prosecution of the bribery of a foreign public official shall . . . not 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." [1]

  4.4  The Law Society in its recommendations for new legislation on corruption specifically argued that consent from the Attorney General or any other Law Officer should not be required for the new corruption offences. It noted that the requirement for consent "fetter[s] the right of private prosecutions . . . , impose[s] an administrative burden on senior officials and cause[s] additional delay within the criminal justice system." [2]The Law Commission's recommendations about removal of consent with respect to corruption offences were based "on the basis of the provisional views put forward" in its Consultation Paper on Consents to Prosecution. [3]

  4.5  Senior law enforcement officers have confirmed to the Corner House that the requirement for consent from the Attorney or Solicitor Generals raises the cost of prosecutions under corruption legislation and represents a significant bureaucratic hurdle. [4]One officer noted that the hurdles involved in gaining the consent meant that his unit preferred to prosecute an offence under any law other than the corruption law.

  4.6  The UK has been warned twice by the OECD Working Group on Bribery in International Business about respecting Article 5 of the Convention. The two reviews of UK legislation implementing the Convention by the Working Group, both in relation to the Prevention of Corruption Act 1906 and the Anti-Terrorism, Crime and Security Act 2001, specifically recommended, "that the UK reconsider the requirement that the prosecution of the bribery of foreign public officials not be instituted without the permission of the Attorney-General or Solicitor-General." [5]

  4.7  The Council of Europe's Group of States Against Corruption (GRECO) report published in September 2001 reviewing the UK's law in relation to the Council of Europe's Criminal Law Convention on Corruption (which the UK has signed but not ratified) also questioned the requirement for consent from the Attorney and Solicitor Generals in relation to corruption offences. The Evaluation Team of GRECO noted that such a requirement "might be interpreted as a form of political control" and that it "carries the risk of undermining public confidence in the functioning of the system".[6]

  4.8  Senior law enforcement officers have told the Corner House that political considerations and considerations of international relations currently come into play when an investigation into bribery of foreign public officials offence is considered. In the words of one officer, "you have to look at what's going on politically. This will colour the effective line of action . . . Political considerations do play a role". The Corner House is also aware of two cases in which the UK government or law enforcement agencies have, since 1997, when the UK signed the OECD Convention, been aware of evidence relating to allegations of bribery of a foreign public official and yet have undertaken no further investigation or prosecution. The Corner House thus believes that Article 5 of the Convention is currently being breached by the UK.

  4.9  The Corner House believes the right of individuals affected by corruption to bring private prosecutions should on balance be put above the risk that such prosecutions may be abused, especially since there are other safeguards, outlined in the Law Commission report on corruption, to protect against such abuse. [7]The Corner House believes that the right to bring private prosecutions is especially important where there is both a poor record of prosecution (as there has been under the corruption laws) by public authorities[8] and a risk of public interest arguments being used to avoid prosecutions, with little public scrutiny.

5.   Considerable "prosecutorial discretion" allowed by Crown Prosecutors under the Code for Crown Prosecutors

  5.1  On a related issue to the issue of requirement for consent, both the OECD Working Group on Bribery in International Business and the Council of Europe's Group of States Against Corruption (GRECO) Evaluation Team have criticised the "recognised discretionary power to initiate a prosecution" allowed by the Crown Prosecution Service with regard to corruption offences. [9]

  5.2  The Corner House believes that the UK government should implement the GRECO Evaluation Team's proposal that there should be "a set of clearly defined criteria" with regard to decisions to prosecute corruption offences, either in the Code of Crown Prosecutors of the Crown Prosecution Service or in counterpart provisions. These criteria should be drawn up to coincide with the passage of the bill through Parliament. The Corner House believes that the UK Government should ensure that these criteria make clear the obligations of the UK under Article 5 of the OECD Convention on Combating Bribery.

6.   No provision for "trading in influence"

  6.1  The Corner House is surprised that this offence was not included, since the UK government itself noted in its consultation that it was "broadly welcomed".[10] The UK Government also stated that including this provision would enable the UK to ratify the Council of Europe's Criminal Law Convention on Corruption, which the UK has signed. The Corner House believes that this offence should be included.

7.   Coverage of intermediaries, including agents and subsidiaries of UK companies

  7.1  The Corner House is deeply concerned that intermediaries including agents and subsidiaries of UK companies are not covered by the new corruption offences. The Commentary on the draft corruption bill states that there is "no specific provision for intermediaries" (Explanatory Notes, para 19). The Government, meanwhile, has specifically stated on several occasions that neither the existing corruption provisions nor the new corruption offences are intended to cover subsidiaries of UK companies. [11]The lack of coverage of subsidiaries and intermediaries is a serious loophole which will be damaging to the efficacy of the bill, and to the UK's enforcement of legislation that implements the OECD Convention on Combating Bribery.

  7.2  Evidence shows that it is through agents and subsidiaries that the vast majority of bribes are paid. A survey by the business risk consultancy group, Control Risks Group, in 1997, found that 56% of European companies and 70% of US companies said they "occasionally" used middlemen such as agents, joint venture partners or subsidiaries to make corrupt payments; while 44% of European firms and 22% of US ones admitted to doing so regularly. [12]While the OECD Convention does not address bribery through foreign subsidiaries specifically, the OECD Working Group on Bribery recognised this loophole by issuing a questionnaire on the role of foreign subsidiaries in September 2001, and is currently considering how to address the issue.

  7.3  The OECD Working Group on Bribery in International Business, in its review of the Anti-Terrorism, Crime and Security Act 2001 specifically noted that UK legislation should make it an offence to commit an offence for the benefit of a third party, as is laid out in Article 1 of the OECD Convention on Combating Bribery. [13]

  7.4  The Corner House accepts that Clause 13 (b) and (c), which state that "an attempt, conspiracy or incitement to commit an offence" and "aiding, abetting, counselling or procuring the commission of an offence" are also offences, go some way to ensuring that these situations are covered. Experience shows however that companies usually use the defence that they had no knowledge that an intermediary would pass on the bribe and that use of intermediaries is normal business practice. While this may be the case in some instances, guidelines produced by the International Chamber of Commerce lay out the "red flags" on which companies should be able to document due diligence, in order to show that they have not been complicit in an act of bribery. [14]

  7.5  The Corner House therefore believes that the phrase "whether directly or through intermediaries" should be included at appropriate points in Clause 5 of the new bill. The Corner House also believes that Clause 13 (3) (c) of the new bill should be changed to read "complicity in, including aiding, abetting, implicitly authorising, counselling or procuring the commission of an offence."

  7.6  The Corner House notes that UK jurisprudence in cases such as Connolly v RTZ and Cape show that the courts do hold UK companies responsible for actions of their subsidiaries. The Corner House believes that the UK government must revise its advice that UK companies will not be held responsible for acts of corruption committed by subsidiaries.

8.   Coverage of facilitation payments

  8.1  The Corner House believes that it is right that the law "covers any act" (Explanatory Notes, Clause 4, para 12), and therefore includes facilitation payments.

  8.2  The Corner House notes with concern however that the Government has publicly stated that it does "not envisage any circumstances in which the making of a small "facilitation" payment, extorted by a foreign official in countries where this is normal practice, would of itself give rise to a prosecution in the UK"[15]. This goes against the recommendations made by the International Development Committee that "our legislation should make clear that facilitation payments are not acceptable and that anyone making them would be breaking the law".[16]

  8.3  The Corner House believes that the UK government and law enforcement agencies should operate a zero tolerance for facilitation payments, except in exceptional circumstances in which the life of an employee may be at risk if a payment is not made. The Corner House believes that if it does not do so, facilitation payments could become a serious loophole, which could be used by companies as a defence in court. We recognise, however, that there would be legitimate cost and manpower implications of pursuing cases involving small payments, and we therefore recommend that these should be dealt with instead by "on the spot" fines or under summary convictions. The current situation lacks clarity for both UK companies operating abroad and law enforcers and therefore the Corner House also strongly recommends that the government issue guidelines concerning the threshold below which a one-off payment would be considered a "facilitation" payment.

9.   Locus of prosecution

  9.1  While the new corruption bill establishes clear jurisdiction over corruption committed abroad, there is a lack of clarity about the locus of prosecutions for such offences. The Government, in its response to consultations on the new draft legislation, agreed with the Confederation of British Industry that the "preferred option" was for corruption offences to be prosecuted where possible in the "place of payment".[17]

  9.2  Given that the UK is a signatory of the Brussels Convention which states that companies shall be sued in their home base, and that UK common law also reflects this principle, the Corner House believes that it is entirely wrong for the UK government to suggest that the locus of prosecution should be in the countries where payments have been made. The Corner House is concerned that such an assumption may lead to reluctance to investigate such cases in the UK in the first instance. This would undermine the commitment that the UK government has made through the 1997 OECD Revised Recommendations on Combating Bribery that "complaints of bribery of foreign public officials should be seriously investigated".

10.   The SFO should be given a new mandate under the new corruption bill to cover investigation and prosecution of corruption offences

  10.1  The Corner House notes with concern that the mandate of the Serious Fraud Office has not been broadened to include corruption offences specifically. Article 20 of the 1999 Council of Europe Criminal Law Convention on Corruption requires member states to "adopt such measures as may be necessary to ensure that persons or entities are specialised in the fight against corruption". The UK's International Development Committee report on Corruption meanwhile called for the Government to "give serious consideration to extending the role of the SFO to tackle corruption and money laundering as well as fraud".[18]

  10.2  The Corner House is concerned that the failure of the Government to broaden the mandate of the SFO means that the SFO may not be able to bring prosecutions under the new corruption bill unless they also involve fraud.

11.   The Home Office should review the expenditure and public sector manpower impacts of the bill before it is discussed in Parliament

  11.1  The Corner House notes with concern that the Home Office believes that "The Bill's provisions have negligible expenditure provision for Government Departments" and that "the Bill has a negligible impact on public sector manpower".

  11.2  Senior law enforcement officers have questioned whether there are adequate resources to deal with the offences of both fraud and corruption. [19]The Group of States against Corruption Evaluation Team meanwhile reported in September 2001 that the UK Central Authority in the Home Office had been understaffed for a long period, leading to a large backlog of requests for international legal assistance. The Evaluation Team recommended that permanent resources be allocated to this authority in the Home Office. [20]Given that requests of this nature are crucial to the discovery of bribery of foreign public officials, it is of concern that sufficient resources have not be directed to this authority.

12.   The Home Office should make clear why it has not produced a Regulatory Impact Assessment for this bill

  12.1  The Corner House is surprised that no Regulatory Impact Assessment (RIA) has been produced for the bill on the grounds that "the regulatory impact is likely to be negligible" (para 64, Explanatory Notes). RIAs are, according to Cabinet Office guidelines, meant to be produced as a matter of best practice on any legislation that has an impact on business, charities or the voluntary sector. Given that companies will have to ensure that they are in compliance with this legislation, the Corner House believes that there is therefore a potential cost to business, and believes that the Home Office should make clear why it has not produced an RIA for the bill.

CONCLUSION

  In summary, the Corner House believes that the draft Corruption bill could be much improved if the following aspects were taken into account:

    (1)  the Attorney or Solicitor General's consent for prosecution should be removed from the bill to allow for private prosecutions;

    (2)  a set of clearly defined criteria for prosecution of corruption offences should be drawn up and included in the Code for Crown Prosecutors of the Crown Prosecution Service in order to bring greater public accountability in an area of considerable prosecutorial discretion, and ensure that the UK abides by Article 5 of the OECD Convention on Combating Bribery;

    (3)  the offence of "trading in influence" should be included in the bill;

    (4)  there should be a specific provision for intermediaries in the bill and the UK government should revise its advice to UK companies with regard to their responsibilities towards corruption offences carried out by subsidiaries;

    (5)  the UK government should revise its position with regard to the prosecution for corruption of "facilitation payments", and issue guidelines for law enforcement agencies about the threshold below which payments will be considered to be "facilitation" payments;

    (6)  the UK government should revise its advice to UK companies with regard to the locus of prosecution for corruption offences, which can and should be tried in the company's home country;

    (7)  the Serious Fraud Office should be given a new mandate to cover corruption offences;

    (8)  the Home Office should review the expenditure and public sector manpower impacts of the bill, with a view to allocating more resources for the investigation and prosecution of such offences; and

    (9)  the Home Office should give reasons as to why it has not produced a Regulatory Impact Assessment for the bill.

April 2003





1   OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Back

2   Law Society, "Legislation the Criminal Code: Corruption", 3 March 1998, para 7.19. Back

3   Law Society, "Legislation the Criminal Code: Corruption", 3 March 1998, para 7.21. The Government has argued that it is retaining the consent requirement on the basis of the Law Society's subsequent "Consents to Prosecution" report (Home Office, "Raising Standards and Upholding Integrity: the Prevention of Corruption Cm 4759, June 2000. Government Response to the comments made in consultations", April 2001, para 9). It has argued that the relevant exception allowed by the Law Commission's report, obtains in cases in which "the right of private prosecutions will be abused and the institution of proceedings will cause the defendant irreparable harm". In its report, the Law Commission also suggest that offences involving some "international element", such as offences that relate to the international obligations of the State, or have a bearing on international relations, should include a consent provision specifically from the Attorney General. Given that the new corruption law does have an international dimension, in so far as bribery prosecutions involving foreign public officials may affect international relations, the Corner House recognises that the Government could argue that the Law Commission's report on Consents to Prosecution provides a basis for retaining the requirement for the Attorney General's consent. However, the Corner House believes that doing so would place the government in direct conflict with Article 5 of the OECD Convention on Combating Bribery, as explained in the main text (para 4.2). (The Law Commission, "Consents to Prosecution", Report 255, 20 October 1998). Back

4   Detective Chief Inspector Woodman, Public Sector Fraud and Corruption Unit, interview with Corner House, 25 October 2002. Back

5   OECD Working Group on Bribery in International Business, Country Report, "United Kingdom. Review of Implementation of the Convention and 1997 Recommendation", March 2000, (www.oecd.org/pdf/M00013000/M00013351.pdf); OECD Working Group on Bribery in International Business, Country Report, "United Kingdom. Review of the Convention and 1997 Recommendation, Phase 1 BIS Report", March 2003, p 15 (www.oecd.org/pdf/M00039000/M00039418.pdf). Back

6   GRECO, "First Evaluation Round: Evaluation Report on the United Kingdom", September 2001, para 90, p 21. Back

7   See para 7.25 of the Law Commission's "Legislating the Criminal Code: Corruption", Report No 248, 3 March 1998, p 108. Back

8   There have been no prosecutions for bribery of a foreign public official under the old corruption laws, and none under the Anti-Terrorism, Crime and Security Act 2001, despite the fact that the Home Office predicted at least one prosecution a year. According to the Public Sector Fraud and Corruption Fine, during 2002 there was one case of bribery of a foreign public official which was dealt with as a regulatory issue and resulted in a fine (Interview with the Corner House, 25 October 2002). Back

9   OECD Working Group on Bribery in International Business, Country Report, "United Kingdom. Review of the Convention and 1997 Recommendation, Phase 1 BIS Report", March 2003, p 5 (www.oecd.org/pdf/M00039000/M00039418.pdf); GRECO, "First Evaluation Round: Evaluation Report on the United Kingdom", September 2001, para 89, p 20. Back

10   Home Office, "Raising Standards and Upholding Integrity: the Prevention of Corruption (Cm 4759, June 2000. Government Response to the comments made in consultations", April 2001, para 9. Back

11   Foreign and Commonwealth Office and Trade Partners UK, "UK Bribery and Corruption Law", Leaflet, January 2003, para 2; Home Office, "Raising Standards and Upholding Integrity: the Prevention of Corruption (Cm 4759, June 2000. Government Response to the comments made in consultations", April 2001, para 6. Back

12   John Bray, "Beyond Compliance: Corruption as a Business Risk", paper presented to conference on Fighting Corruption in Developing Countries and Emerging Countries: the role of the private sector, Washington, February 1999. Back

13   OECD Working Group on Bribery in International Business, Country Report, "United Kingdom. Review of the Convention and 1997 Recommendation, Phase 1 BIS Report", March 2003, p 18 (www.oecd.org/pdf/M00039000/M00039418.pdf). Back

14   Michael N. Davies, "The Role of Agents and Sales Representatives", Chapter Four, International Chamber of Commerce, Fighting Bribery: A Corporate Practices Manual, (no date). Back

15   Foreign and Commonwealth Office and Trade Partners UK, "UK Bribery and Corruption Law", Leaflet, January 2003. Back

16   International Development Committee, Fourth Report, "Corruption", Volume I, para 186, p lix. Back

17   Home Office, "Raising Standards and Upholding Integrity: the Prevention of Corruption (Cm 4759, June 2000. Government Response to the comments made in consultations", April 2001, para 15. Back

18   Para 68, Summary of Conclusions and Recommendations, International Development Committee, Fourth Report, "Corruption", Volume 1, Report and Proceedings of the Committee, 22 March 2001. Back

19   The Guardian, 2 October 2002, "Detective attacks lack of fraud officers". Interviews conducted by the Corner House with various law enforcement officers in October 2002. Back

20   GRECO, "First Evaluation Round: Evaluation Report on the United Kingdom", September 2001, para 102, p 23.

APPENDIX 2 Back


 
previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2003
Prepared 31 July 2003