Examination of Witnesses (Questions 460-479)|
QC, MR PAUL
4 JUNE 2003
Q460 Chairman: Just thinking again
about the definition, one problem which has been raised a number
of times is the retention of the agent/principal concept. Sir
David Calvert-Smith told us: "I am sure it would be easier
for prosecutors were we to focus on the passing of the bribe rather
than on the agent/principal relationship. It is easier, I would
say, for ordinary folk to understand that when the money changes
hands, that is when the offence is committed, rather than in the
breach of trust between the agent and his or her principal."
Do you think that it would be possible to place the offence on
the passing of a bribe rather than on this concept of principal
and agent and breach of trust?
Lord Falconer of Thoroton: We
thought about that and we thought about it again after Sir David
had said that. I do not know if you have seen the example of "I
want my house surveyed". There are two surveyors and one
surveyor says, "If you have me as your surveyor rather than
the other surveyor I will give you free tickets to Arsenal football
ground for the next year". There is nothing wrong with that
because I am the only person involved. You might say in common
parlance there is a bribe, but there is nothing corrupt about
it. Whereas there would be corruption if, instead of having the
house surveyed for myself, I was having the house surveyed, for
example, for a company for whom I worked. I would then be putting
my own personal interest above my duty to the company. We think
if you apply that to the public sector, where you say to a public
official, "Will you give me this particular licence because
I will give you free tickets", again the public is not getting
the attention it is entitled to. It is difficult to think of occasions
when the essence of corruption is not cheating on the person who
you should be looking after.
Q461 Chairman: The person you work
for, your principal?
Lord Falconer of Thoroton: Exactly.
Q462 Chairman: It does mean sometimes
that a deal between two principals where there is not an agency
relationship might slip through the net.
Lord Falconer of Thoroton: I am
sorry, say it again.
Q463 Chairman: Unless you can find
a relationship between the principal and agent then I am suggesting
that many cases might slip through the net if you had negotiations
between two principals. We will come on to a detailed example
later. That would not necessarily be covered by your reliance
on the agent/principal concept.
Lord Falconer of Thoroton: Let
us hear some examples. There is obviously an issue about the public.
If I am the chief executive of some public sector organisation,
even thought I might be said to be acting as principal, if I have
got an obligation to the public, and we make that clear in the
Bill, that should be corruption as well.
Q464 Chairman: A number of difficulties
have been expressed to us about this definition and we will come
on to specifics but I want to do a general review to begin with.
Lord Falconer of Thoroton: My
answer in principlemeaning it in a different wayis
we think the essence of corruption is cheating on the person who
trusts you or cheating on the public. That is why we have focused,
as you rightly say, on the principal/agent or agent/public relationship.
Q465 Chairman: Could you not do that
by a definition which picks up the trust concept rather than the
Lord Falconer of Thoroton: We
think at the moment that the principal/agent or public/public
servant relationship is the best way to do it. If there is a better
way of doing it we will obviously consider it.
Q466 Baroness Whitaker: Nice to take
your views twice in one month, Minister. I rather missed in the
Bill the idea of the person bribed having a private advantage
at the expense of a public or organisational benefit and that
is not captured in 5. I am not asking for an immediate answer
now but I just wondered if you could consider how that could be
captured because there is nowhere in the whole Bill the idea that
somebody makes into their private pocket something so that the
public gain, or the intention of the whole organisation, is thwarted
Lord Falconer of Thoroton: We
were very keen to capture that and when we talk about "agent
for the public", that is what we are talking about. Take
the obvious case: if a local authority planning officer gives
planning permission for money rather than the merit of the planning
application, that would be a plain example of somebody putting
his private advantage above his obligations to the public, he
is an agent for the public in those circumstances, that is plainly
Q467 Baroness Whitaker: I think it
is because we know what corruption is that we understand clause
5 but if you were in a different country I wonder because it could
cover planning gain, perhaps.
Lord Falconer of Thoroton: Taking
the planning officer example again, and I may have got the basic
structure of planning wrong, if he said "I will not charge
you any planning gain in giving you this planning permission because
you have given me free tickets to Arsenal for the next year",
that plainly would be corrupt and would be caught.
Q468 Baroness Whitaker: If a local
authority says "We will give you the contract if you not
only put up these buildings within our price range but you also
contribute to our sports ground or you do not build on the adjoining
land", none of which goes into any private pocket, nevertheless
it enables somebody to get the contract.
Lord Falconer of Thoroton: That
is perfectly legitimate.
Q469 Baroness Whitaker: That is not
corrupt at all.
Lord Falconer of Thoroton: Not
Q470 Baroness Whitaker: But is it
not thwarting 5?
Lord Falconer of Thoroton: No,
most certainly not, because there, plainly, the agent in seeking
to extract the planning gain is acting on behalf of the public.
Q471 Chairman: Can you say that any
deal done where the aim is to confer a benefit in the third person,
here talking about a sports field or something, is irrelevant
for the purposes of corruption?
Lord Falconer of Thoroton: No,
you cannot, but I am not saying that.
Q472 Chairman: No, you are not. I
am moving from the particular example to a general statement of
Lord Falconer of Thoroton: In
some cases if a benefit would be conferred in the third person
then it would be a bribe in effect.
Q473 Chairman: Can I just ask you
two or three questions which arise, again, out of evidence which
has been given. In the Explanatory Notes to the Bill it is suggested,
I think, that the impact of the Bill, the changes in law, on businesses
and the voluntary sector and charities, is negligible. We have
been told two things. Firstly, we were told by one organisation
that it was very surprised that there had not been a Regulatory
Impact Assessment. The second thing we were told by two organisations
was that they really needed clarification of the scope of the
Bill and in particular its effect on the payment of commission
in the financial service and insurance industries. The Association
of British Insurers in their statement said: "the abstract
way in which the new offences in the Bill are framed may lead
to certain activities being caught inadvertently". The Investment
Management Association said: "as it stands, many such commission
payments could be deemed `corrupt' unless the defence could establish
that the agent's principal knew all the material facts and had
consented to the specific payment." In the first place, was
there wide consultation of industry and commerce about the definition
in the Bill?
Lord Falconer of Thoroton: There
was. You know the history: the Law Commission's consultation paper,
the Law Commission's final paper, the Government's White Paper
in 2000, response to the White Paper in 2000 and now pre-legislative
scrutiny. The process of the matter being looked at has been going
on for in excess of five years.
Q474 Chairman: I was thinking more
of the actual terms of the draft Bill. The Law Commission's report
is quite a long time ago now.
Lord Falconer of Thoroton: But
the Law Commission's report does have a draft Bill annexed to
it, which is quite similar to the Bill we have gone with today,
and the White Paper produced in 2000 also has a Bill attached,
or indicates it is going to go with the Law Commission Bill. The
Law Commission consulted the Institute of Chartered Accountants,
the Institute of Directors, a number of corporations, such as
Kingfisher and Lloyds plc. You referred in your second point to
the insurance industry and the Association of British Insurers
first responded with that point after the publication of this
particular Bill, but I venture to suggest that the issue was already
apparent on looking at the Law Commission Bill. That is not an
answer because, however we have got here, we need to talk to everybody.
We have spoken to these people and inevitably as you go through
pre-legislative scrutiny new points arise.
Q475 Chairman: Perhaps the draft
Bill at the end of the day, because it is a lot shorter, draws
people's attention to things more precisely than the Law Commission's
Lord Falconer of Thoroton: This
is a lawyer's point which you will find deeply unattractive, but
it is not that much shorter than the draft Bill in the Law Commission's
paper; indeed it is slightly longer. The point was there in the
Law Commission's paper.
Q476 Chairman: They asked whether
a Regulatory Impact Assessment should have been carried out: should
Lord Falconer of Thoroton: The
view we have taken is no, because the purpose of the Bill is to
codify and clarify and we believe that the effect will be not
to capture any significantly greater series of cases than are
already captured. Do you want me to go on to the second point,
which is the financial services?
Q477 Chairman: Yes.
Lord Falconer of Thoroton: I assume
that what people have in mind in relation to the financial services
issue is where an independent financial adviser advises his customer
"Go with this pension" or "Go with that mortgage",
and, in fact, instead of advising the customer to do it on the
basis of what is in the customer's interests, he does it on the
basis he gets a higher commission from mortgage company X than
he does from mortgage company Y. If that is the reason why my
own independent financial adviser has given that advice then that
potentially is corrupt under the Bill. Does it lead to a greater
risk of prosecutions than previously, I am not sure that it does
and I am not sure that the Association of British Insurers are
saying they would necessarily want to countenance independent
financial advisers giving, as it were, their own clients advice
based on the levels of commission.
Q478 Chairman: One has obviously
got to be careful that legitimate commission payments in the financial
sector are not caught by this. Have you considered whether this
Bill is more or less likely to pick up legitimate commission payments?
Lord Falconer of Thoroton: How
does one put this? If my motivation, as the independent financial
adviser, in giving you the advice is solely because I get a higher
commission, I am not sure you would describe the commission as
illegitimate but, nevertheless, I am not acting pursuant to the
trust you place in me in those circumstances. That should not
be lawful anyway at the moment.
Q479 Chairman: Very much in this
area too, one question which we have been asking, and people have
raised with us, is the question as to what sort of activities
which now would be lawful, apart from the position of MPs, would
become unlawful under your Bill? Perhaps even more important,
what offences cannot in practice now be followed through and prosecuted
which will be caught by the Bill and will enable prosecutions
effectively to take place?
Lord Falconer of Thoroton: There
are certain things on the margins. For example, the 1906 Act does
not extend to bribery of a third party, whereas the 1889 Act does.
In the public sector, bribing a third party does constitute a
crime where it does not in relation to the private sector, but
that, I accept, is pretty on the margins. Again, I have asked
the question that you have asked, what does this cover which it
did not cover before, and it is very hard to identify specific
cases. I have not got any specific cases, apart from the very
marginal legal issues that I have just referred to. We do think
it is of benefit to do this because of the codification and the
clarification. It is because we do not think that there is a substantial
increase in coverage that we did not have a Regulatory Impact