Joint Committee on The Draft Corruption Bill Written Evidence


APPENDIX 8

Memorandum from The Export Credits Guarantee Department (ECGD) (DCB 10)

  1.  The Committee have asked for information on what procedures ECGD has in place to combat corrupt practices and what impact the draft corruption bill may have on ECGD's operations.

ABOUT ECGD

  2.  ECGD is the UK's official Export Credit Agency (ECA) and is a separate Department, which reports to the Secretary of State for Trade and Industry and the Minister for International Trade and Investment.

  3.  ECGD's Mission is to benefit the UK economy by helping exporters of UK goods and services win business and UK firms to invest overseas, by providing guarantees, insurance and reinsurance against loss, taking into account the Government's international policies. In providing these facilities, ECGD's Mission also requires it to seek to break-even on its trading activities and to complement, not compete with, the private sector.

  4.  ECGD usually issues around £3 billion of guarantees in support of new capital goods contracts per annum. This comprises around 2-3% of the UK's non-oil exports, but nearer 20% of capital goods exports. ECGD's cover, however, is principally needed for non-OECD countries, where our support covers around 50-60% of UK exports of capital goods; these are the main overseas markets for key industrial sectors such as power generation, water treatment, defence, aerospace and telecommunications.

  5.  Since January 2001, ECGD has operated in accordance with a Statement of Business Principles. These principles cover policy areas such as the environment, international development, business integrity and transparency. The main aim is to ensure that the Department acts in a responsible way, consistent with the full range of the Government's international policies.

  6.  One of ECGD's objectives in its Business Principles is to "combat corrupt practices."

CURRENT ECGD PROCEDURES TO COMBAT CORRUPTION

  7.  The measures that ECGD takes to combat corruption can broadly be divided into procedures that are designed to prevent cover being given to companies who have been illegally awarded contracts, and procedures to ensure that appropriate action is taken where corruption is alleged or proven in cases where ECGD has provided support.

Preventative Measures

  8.  ECGD operates extensive due diligence procedures prior to underwriting, examining a variety of factors including: relationships between the parties to the contract; the track record of the exporter; factors in the pricing or make-up of the contract that may indicate higher risk of corruption; and high levels of agent's commission. If any of these factors suggested a high risk that corruption was involved in the contract award process this would trigger further research or prompt us to seek appropriate clarifications or assurances from the parties involved.

  9.  We also require applicants for ECGD support to warrant that neither they nor anyone acting on their behalf has engaged or will engage in any corrupt activity in connection with the supply contract or any related agreement, undertaking, consent, authorisation or arrangement of any kind. They must also declare whether they have been debarred from tendering for or participating in any project funded by the World Bank or any other multilateral or bilateral aid agency or whether they have been convicted previously of corrupt activity.

  10.  The sanctions for giving a false warranty can potentially be very serious and could involve voiding the insurance policy or requiring the repayment of any claims that might have been paid.

  11.  A prior conviction for corruption would be a prima facie case for refusal of new cover. However, we do not absolutely disbar companies from cover to allow them the possibility of demonstrating that they had reformed their practices.

Post-Issue Measures

  12.  ECGD also seeks to ensure that it is aware of any allegations or indeed convictions for corruption in respect of cases that it has already provided support for. These could clearly have implications for the validity of the ECGD support or the likelihood of future ECGD support being offered.

  13.  As ECGD does not have any legal investigatory powers, its' policy is to report appropriate allegations of corrupt activity received to the National Criminal Intelligence Service (NCIS) who act as the focal point for receiving any allegations about offences of bribery by UK nationals or UK incorporated bodies which take place overseas. NCIS are responsible for reporting allegations worthy of investigation to the authorities in the jurisdiction concerned eg the Police or Serious Fraud Office.

IMPLICATIONS OF THE DRAFT CORRUPTION BILL FOR ECGD PROCEDURES

  14.  We do not anticipate that the draft bill will have any significant effect on ECGD's current procedures for combating corruption. We had previously strengthened our anti-corruption measures to reflect both the OECD Convention and the enhancements to the Prevention of Corruption Acts made by the Anti-Terrorism Crime and Security Act. We will however be reviewing our procedures to ensure their legal effectiveness, particularly where documentation is concerned, prior to the new Act coming into force.

May 2003





 
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