Examination of Witnesses (Questions 680-699)|
11 JUNE 2003
Q680 Chairman: Gentlemen, we are
very grateful to you for coming and also for the very helpful
papers you have put in. You have covered a great deal of ground
in the papers and we have found it all extremely useful. There
are a number of things which we can perhaps tidy up on. If there
are other things you would like to add either by way of addition
to your paper or clarification of your paper, we should be very,
very pleased again. We have been looking at corruption now for
some time and, as far as I am aware, nobody has tried to drive
any of us with this report in mind. We cannot claim direct experience
in the last few weeks, but what we would like to really know is,
how far is corruption an issue in domestic business and I would
like to ask you afterwards whether you think this is really a
problem relating to those who trade abroad rather than those in
this country. Is it a problem here? We do not see a great number
of prosecutions but that does not mean it does not exist.
Mr Cridland: Thank you for that.
We are not aware that it is a major issue within the UK and, in
the quite extensive consultations that we have had with breadth
and depth of the CBI membership on this particular proposed Bill,
the focus of our members' interest and attention has all been
in the international context, which is where they see the issues
being challenging and company practices as evolving over time.
We have not had the same degree of comment about the domestic
Q681 Chairman: Are people anxious
about this in industry and CBI? Is this something you feel we
have to deal with more effectively than it has been dealt with
under the present law?
Mr Cridland: The domestic situation
or corruption per se?
Q682 Chairman: Domestic firstly.
Mr Cridland: I think from the
domestic situation, we are not aware of problems which the law
does not currently adequately deal with. We do not believe there
is a need for the Committee specifically to spend a great deal
of time and energy on that matter. We set out in our evidence
belief in the broad concepts of the Bill but that, in the matters
of statute and in its international ramifications, there is a
lot more that needs resolving than domestic application.
Q683 Chairman: We will come onto
the detail of the overseas situation in a few minutes. Insofar
as there is commercial activity, trading and building activity
abroad, what would you think are the main sectors where the problem
of corruption arises?
Mr Cridland: I think clearly companies
are more likely to be exposed to the challenges of ensuring that
management processes and practices work in more difficult trading
environments. So, it is our members working in developing countries,
working in countries with very different legal systems and very
different political traditions and cultures and those are likely
to be the companies particularly in the manufacturing, oil, petroleum,
chemical, engineering sectors and mining ...
Q684 Chairman: Construction?
Mr Cridland: Construction would
indeed be on that list ... they are often operating and creating
wealth for Britain under very difficult circumstances.
Q685 Chairman: Not only difficult
economic circumstances but difficult competition from people who
may not take the same view of corruption.
Mr Cridland: Indeed.
Q686 Chairman: How do we deal with
Mr Cridland: I think it is why
the CBI has always had a strong commitment to providing an appropriate
panoply of international rules under which business operates in
appropriate areas. We are strong supporters, for example, of the
UN agencies, we are strong supporters of the OECD and that, as
a starting point, has governed our approach to this draft Bill
and we believe as far as possible that the Government should be
seeking to set in place legislation which is consistent with key
international principles for dealing with corruption and obviously
the OECD in particular is a prime constituent, if I can use that
word, and we are very interested in the extent to which this Bill
would satisfy the OECD.
Q687 Chairman: Can the law really
deal with the practical problem faced by manufacturers, builders,
engineers and so on that, if they do not do what every other country
is doing in a particular distant countryI want to leave
Europe alonethey will not get the contract?
Mr Cridland: That is a very real
Q688 Chairman: How would we deal
with it in legislation?
Mr Cridland: I think that there
has to be a degree of flexibility in legislation as there has
to be a degree of flexibility in company practice and that is
why, in our evidence for example, we raised this challenging issueto
just illustrate by one specific but concentrating on the themeof
facilitation payments because, at the end of the day, a company,
as statute should, can have a clear statement of its position
in abhorring all forms of corruption and bribery and take very
serious action against any employee who is found to be undertaking
such actions, but the best company policies are the ones that
do not stop at that statement of high moral principle but actually
train people working on the ground in the sorts of countries you
are describing as to how they deal with the varying practical
dilemmas that arise from trying to do business in an operating
environment which may not adhere to those rules. That is not a
cop-out; it is not saying you can have a policy and then just
let people not apply it; it is saying that it is not as easy as
just having a simple statement of what is morally or legally allowable.
You have to train people in dealing with the most difficult situations
and it may be, standing in front of a roadblock being asked for
money to proceed by a member of the armed forces, you have to
face what you advise your own employee to do in those situations.
Q689 Chairman: Dealing with it by
way of definition of corruption in the Bill may be quite difficult
but the suggestion has been made that perhaps you can deal with
it by way of fairly clearly drafted exceptions, but even that
presents difficulty. The simple example is the one of facilitation
payments. Do you think there should be an exception in the Bill
dealing with facilitation payments and, if so, what are good ones
and what are bad ones? How do you begin to draw the line?
Mr Cridland: If you will allow
me to comment on the concept and then illustrate it with facilitation
payments. I was taken with the comments that the minister made
giving evidence to you that he had looked at the two extremes
of not giving any definition or going down the route of trying
to be certain on everything and gave an example of the South African
model, and he felt he had settled halfway between the two. I think
that, in principle, that is where our company members have come
down, that we do need certain key principles defined and established
in the Bill to give an element of certainty but that we cannot
have absolute certainty and, in the absence of absolute certainty,
we then need certain exemptions and defences. Our concern with
the Bill is that we do not believe that the degree of definition
that is in the Bill is sufficient and we do not believe that the
list of exemptions and defences is sufficient. However, in principle,
the concept is right. When we come to facilitation payments, this
is clearly very difficult.
Q690 Chairman: Let us stick with
facilitation payments and then look at the others which you recommend
should be exemptions. How do you define a facilitation payment
if you are doing it by legislation?
Mr Cridland: We take note of how
the US administration deals with this and we also take note of
what is said in the commentary to the OECD Convention but, to
answer your question more specifically, Andrew Berkeley, a barrister
and international arbitrator, may like to add to that.
Mr Berkeley: If I may suggest
to the Committee, the key distinction is that facilitating payments
are made to a person who is already under a duty to do something
and a facilitation payment is one which is designed to make him
either do that duty or do it more quickly or more efficiently
and this distinction, by the way, is taken in the Foreign Corrupt
Practices Act of the United States. If the person is already under
a duty and it is a small payment designed to make him get on with
it, that is what is meant by a facilitation payment. It is not
a payment, as it were, in abstracto just to have something
Q691 Chairman: That does not introduce
a concept of a value limit, a financial limit. Some people have
suggested to us that small facilitation payments may be all right
but that big ones are getting a bit dodgy.
Mr Berkeley: I do not think it
would be wise at all in any system of legislation to attempt to
put a monetary value on it. The furthest you could go is probably
what is done in the FCPA and use some concept such as disproportionate
Q692 Chairman: The sort of examples
that people have given is that a free lunch may be okay and is
a perfectly normal part of trading. If somebody comes for a free
lunch and then says, "I cannot stay, I have to go" and
so he is given the value of the lunch in a brown envelope, is
that all right?
Mr Berkeley: This was produced
in the example by the Home Office. They used the same concept
in that, if you have someone along to your box at Arsenal or whatever
and you get to know each other and perhaps talk about business
and perhaps talk about other things but that is getting to know
you. The suggestion of the Home Office was that that is acceptable.
If you simply send the tickets to the man in a brown envelope
or otherwise, that is not. That, to us, goes more to the meaning
of the word "primarily" in the definition of the main
offences rather than our point which is that we need a specific
exception for and definition of, small facilitation payments.
Q693 Chairman: Just to stick to the
quantitative aspect of this, is there not a limit to be drawn
somewhere between when you move out, on any view, of a reasonable
payment to someone to encourage them to do what they were already
bound to do. If you give someone £50 or a Wimbledon ticket
or something, that may be one thing, but someone who is bound
as part of his job and his duty to his employer to do a particular
thing, if you give him £100,000, that is still to encourage
him to get on and do his job but surely, on any view, that would
not be acceptable.
Mr Cridland: We would suggest
some test of whether it was proportionate or disproportionate
rather than some arbitrary financial figure within statute.
Q694 Chairman: The other matters
which you have specified in your statement are that things like
corporate entertainment which is really part of the facilitation
payment I suppose and promotional expenditure and things of that
kind should be excluded from the definition of corruption, but
would it be sufficiently precise and also sufficient to exclude
things that should be excluded if we adopted the word "improper"
before "advantage" and said any "improper advantage"
in Clause 5?
Mr Cridland: We are certainly
strongly of the view that it is insufficient to rely upon "primarily"
and that it would be a much better approach to adopt either "improper"
or "undue" or some other word that has international
currency from the OECD or other appropriate international bodies,
but I think that we still have the concept of strengthening the
definitions but also, either within the Bill or clear ministerial
statements read into the debate, that certain things are not likely
to result in criminal prosecutions, and our principal concern
is that even sophisticated companies with suitable resources are
struggling with what this Bill means, but the lay business community
will not have confidence that they can train and brief their staff
that certain actions will not cause them to fall foul of offence.
Chairman: If you add in "improper"
or "undue", which may be even more difficult because
it is a legal concept or a moral concept, an awful lot is going
to be left to judges and juries in working it out.
Q695 Mr Stinchcombe: If I could test
with you this concept of the proportionate facilitation payment.
Imagine a manufacturer in England who decides to switch his factory
manufacturing processes to some new economic zone in the Far East,
considerable investment, and, the day before he goes into production,
he is asked to make a £100,000 facilitation payment to a
local administrator otherwise the plug gets pulled. Should that
be a crime in England?
Mr Berkeley: I think that posits
a degree of executive authority in the person from the development
area you are talking about which is not appropriate to facilitation
payments because you said "otherwise the plug gets pulled."
We do not mean that in the context of facilitation payments. It
is simply a junior/very junior official who is paid a small sum
of money to get on with what he is bound to do in any event.
Q696 Mr Stinchcombe: So that should
be a crime?
Mr Berkeley: What you have just
described should be a crime.
Chairman: One of the hazards of this
Committee is that we get divisions all the time and we now have
a division, so we will have to break off for a few minutes.
The Committee suspended for a division
Q697 Chairman: Just before we go
on to the other general questions, you explained to us that the
difference between a facilitation payment and a non-facilitation
payment is not simply the difference between a small greasing
of the palm and a big greasing of the palm. Just to move on to
something that you mentioned in your paper should be a specific
exemption and that is offset payments under agreement of government
or procurement agencies. Could you just explain to us, what is
the extent of these and what is the width of these and does it
really matter to exclude them? Why should they be excluded?
Mr Campkin: Offset agreements
are fairly commonplace in certain types of contracts, normally
big-ticket items and quite often in circumstances which come with
it an agreement between government and the company that wins the
contract to do work which is mainly developmental. And these are
commitments to build things like hospitals and these sorts of
projects. We believe and business believes that these are quite
clearly accepted as part of international business practice and
they are also one way of ensuring that, in countries where there
are particular development needs, there can be some additional
benefit brought through doing business. One of the ways of ensuring
that offsets can be excluded from the draft Bill is to include
a definition of the type we have been talking about already, related
to language on improper advantage, because there is a danger that,
as currently drafted, the Bill could catch legitimate offset arrangements
which could lead to real difficulties for British companies getting
involved in the sorts of projects which not only bring back advantage
to Britain but also provide to increasing capacity in the developing
world which is of vital importance.
Q698 Chairman: Are you saying that
these are always perfectly all right or that these are borderline
when you are looking at what corruption is really like?
Mr Campkin: Offset agreements
are perfectly accepted as a natural part of doing business in
Q699 Chairman: Supposing in the Bill
the exemptions in respect of offset payments and facilitation
payments were not included and there were no exemptions. What
practical effect, in your assessment, would this have on British
Mr Campkin: We believe that there
could be some real problems in terms of giving British business
the type of certainty that it requires to go and do its business
overseas. Many companies, as I am sure the Committee is well aware,
have some well-developed codes of conduct for the way that they
do business. They take great care in the way that they do business
overseas, but any legislation, we would suggest, requires clarity
and certainty, and certainly if you look at some of the definitional
issues which we have touched upon already, there is a big question
mark hanging over what a business should do and our great concern
is that having got some international standards and having got
an international test, if you like, as, for example, in the OECD
Convention language, legislation in the UK should reflect that
which has been agreed internationally. We believe that is the
way forward in terms of giving British business the certainty
it requires to continue to do what it does best which is to generate
wealth and promote development.