Select Committee on European Union Forty-Ninth Report


CORRUPTION IN THE PRIVATE SECTOR (9953/02; 11466/02)

Letter from Lord Brabazon of Tara, Chairman of the Committee to Bob Ainsworth MP, Parliamentary Under-Secretary of State

  Sub-Committee E (Law and Institutions) considered these documents at its meeting on 9 October. The Committee noted your point that the adoption of the proposal as it stands would not require any changes in domestic legislation. However, we are concerned by the apparent breadth of the offences set out in Article 2, particularly when read with the definition of "breach of duty" in Article 1. This would appear to include breaches of professional regulations or instructions. An element of dishonesty should, in the Committee's view, be a condition for imposing criminal liability for corruption and thus distinguish it from everyday commercial practices (for example poaching employees). Do you agree that Articles 1 and 2 might be amended to make this clear?

  The Committee also notes your concerns regarding Article 5(2) and we would be grateful if you could keep us informed of developments and of the outcome of your consultation exercise.

  The Committee decided to retain document 11466/02 Droipen 57 under scrutiny. Documents 9953/02 and ADD 1 Droipen 39 have been cleared.

10 October 2002

Letter from the Chairman to Bob Ainsworth MP, Parliamentary Under-Secretary of State, Home Office

  Thank you for your letter of 7 November on document 11466/02 and your Explanatory Memorandum accompanying document 12249/2/02. Sub-Committee E (Law and Institutions) considered the documents at its meeting on 20 November.

  The Committee notes that the revised text is substantially improved regarding the provisions on temporary disqualifications. But we are not entirely convinced that Article 2 as currently drafted would be fully covered by existing domestic legislation. We note the concerns of the Commons Scrutiny Committee that the proposal would potentially render criminal aggressive commercial practices, such as the poaching of staff, and believe that the explicit inclusion of an element of dishonesty in the wording of Article 2 is essential.

  A separate but related issue arises in the context of the implementation of the European Arrest Warrant. Article 2(3) introduces a "minimum standard" approach to the criminalisation of corruption in the private sector, enabling some countries to adopt "narrower" criminal offences. As corruption is one of the offences for which dual criminality no longer applies, there is a danger of a warrant being issued for "corrupt" behaviour which is criminal in one Member State but not in another.

  The Committee decided to retain document 12249/2/02 Droipen 64 Rev 2 under scrutiny, pending your response to the issues raised by the Commons Scrutiny Committee. Document 11466/02 Droipen 57 has been cleared.

21 November 2002

Letter from the Chairman to Bob Ainsworth MP, Parliamentary Under-Secretary of State, Home Office

  In my letter of 21 November I drew attention to the problems raised by Article 2 of the draft Framework Decision and noted the concerns of the Commons Scrutiny Committee that the proposal would potentially render criminal aggressive commercial practices. Your letter of 21 November, in reply to the questions raised by the Commons Committee, was considered by Sub-Committee E (Law and Institutions) yesterday evening.

  The Committee continues to have difficulties with your interpretation of our domestic law on corruption and the proposed scope of the Framework Decision. Our problem is with the statements made in the first and last sentences of the third paragraph of your letter: "if staff are `poached', they cease to have a duty to their existing employer" and "inducements to act in breach of contract are breaches of duty and may in our view rightly be regarded as criminal". The Committee would be grateful if you could provide a fully reasoned legal analysis of the law underlying these statements.

5 December 2002

Letter from Bob Ainsworth MP, Parliamentary Under-Secretary of State, to the Chairman

  Thank you for your letter of 5 December, which sets out your continuing difficulties over the proposed Council Framework Decision on Private Sector Corruption. I hope the following reply will help to meet your concerns.

  Section 1(1) of the Prevention of Corruption Act 1906 provides that "if any agent corruptly accepts or obtains, or agrees to accept or attempts to obtain, from any person, for himself or for any other person, any gift or consideration as an inducement or reward for doing or forbearing to do, or for having . . . done or forborne to do, any act in relation to his principal's affairs or business, or for showing or forbearing to show favour or disfavour to any person in relation to his principal's affairs or business", he is guilty of an offence.

  Section 1(2) of the 1906 Act defines "agent" as including any person employed by or acting for another and defines "principal" as including an employer.

  The term "corruptly" is not defined by the 1906 Act. In its report on corruption in March 1998 the Law Commission noted that there were two competing strands of judicial interpretation as to the meaning of "corruptly" according to one interpretation, corruption meant an act which the law forbade as tending to corrupt; according to the other interpretation, it meant a dishonest intention to weaken the loyalty of an agent to his or her principal (see paragraphs 2.29 and 2.30 of the report). The subsequent Court of Appeal case of R v Harvey [1999] Crim.L.R 70 seems to have gone some way to resolve the confusion. In that case, it was held that dishonesty was not an element of obtaining corruptly within section 1(1) of the 1906 Act. Instead, the word "corruptly" was to be construed as meaning deliberately offering money or other favours, with the intention that it should operate on the mind of the person to whom it was made so as to encourage him to enter into a corrupt bargain.

  You refer in your letter to the situation where staff are poached from their existing employer. It seems to me that the term "poaching" may cover a variety of different circumstances. Where a head hunter approaches an employee and offers him a new job with a higher salary, I do not think that would be covered by our domestic law on corruption. This is because the employee is not being induced to anything in relation to his current employer's business. But where a person approaches an employee and offers him a new job with a higher salary if he undermines his current employer's business in some way, for example, by revealing a secret formula for making the current employer's product, that would fall within the scope of the 1906 Act.

  You also refer in your letter to the situation where a person is given an inducement to act in breach of his contract. This seems to us to fall clearly within the scope of the 1906 Act. The person giving the inducement intends that the employee should do something which is in breach of his contract with his employer and therefore against his employer's interest.

  As I have stated previously, we consider that existing UK law meets the requirements of this Framework Decision and of the existing 1998 Joint Action on which it is based. We do not propose any changes in UK law as a result of it, although the Government is committed to reforming UK law on corruption on the basis of the Law Commission Corruption Bill.

  We agree with the Danish Presidency that the absence of adequate law on private sector corruption in several EU Member States represents an undesirable lacuna and we share their wish to agree this measure at the JHA Council on 18-19 December.

  I hope that in the light of these explanations your Committee can clear this measure from scrutiny.

12 December 2002

Letter from the Chairman to Bob Ainsworth MP, Parliamentary Under-Secretary, Home Office

  Thank you for your letter of 12 December which was considered by Sub-Committee E (Law and Institutions) at its meeting on 18 December. The Committee was grateful for the more detailed explanation of your understanding of the elements of the offence of corruption. We continue to believe that the definitions employed in the proposed Framework Decision are unsatisfactory. While it might be the position that the Decision could be implemented in the UK in such a way as it would not cause problems at least initially, we remain of the view that the Framework Decision should be amended to clarify the definition of the offences concerned.

  In response to our request for clarification of the situation where staff are "poached" you now acknowledge that there are some cases which may amount to corruption and others which may not. It is, we agree, one thing for an employee to be offered a higher salary by a head hunter, quite another where an employee agrees to reveal business secrets. We do not think a jury would have particular difficulty in determining whether the latter amounted to a corrupt bargain.

  But we do not agree with your assumption that an inducement for an employee to act in breach of his contract would necessarily "fall clearly within the scope of the 1906 Act". That approach which also appears to be written into the text of Articles 1 and 2 of the Framework Decision lies at the very heart of the problem. Whether or not a particular inducement to breach of contract will amount to corruption will very much depend on the facts. One who offers an employee a better paid job and golden handshake and induces an employee to quit his current employment without giving or serving the period of notice required under his contract would not ordinarily be said to have acted corruptly. Nor would the employee accepting such offer. The present text of the Framework Decision does not include, we believe, sufficient words to make clear that it is an essential element that the parties must be acting "corruptly" or in a manner that the ordinary person would describe as dishonest (not necessarily dishonest in the subjective Ghosh sense, which as you say was rejected by the Court of Appeal in Harvey).

  We have drawn attention in the past to the need for legal certainty in Union law. That is particularly important in relation to Union criminal law such as the present instrument. We may not be able to require that degree of precision of drafting that would be expected for an English statutory offence but that does not mean we should be content to accept the degree of uncertainty manifest in the present instrument. For the reasons given above we do not share your confidence that the UK could implement the Framework Decision without amendment to our law. The offences appear to be wider than our current law and the possibility cannot be excluded that this might ultimately be confirmed by the Court of Justice, notwithstanding its limited jurisdiction in the area.

  The Committee decided to retain the proposal under scrutiny and we await your response to the arguments made above.

19 December 2002


 
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