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On Transparency International, I took over from the late lamented Lord Nolan to become the second chairman of the Committee on Standards in Public Life, almost exactly when the OECD convention appeared. We took an interest in it on that committee; I see that the noble Lord, Lord Goodhart, who was a member of the committee, is a later speaker in the debate. We hoped that it would be introduced in full in the UK within a short period. That has not come about.
I deplore two facts already mentioned. First, the UK has been publicly and internationally criticised for its failure completely to incorporate all the provisions of the OECD convention. We were earlier reprimanded with Japan; Japan put its house in order, and I understand that we have continued not to do so. That is the first matter for regret and embarrassment. The second is the international criticism repeated again this week by the OECD working party in Paris following up on the UK’s performance. It expressly criticised the abandonment of the bribery investigation concerning a defence contract linked with Saudi Arabia. I understand that that is the subject of legal proceedings, and it would not be appropriate to say more. On the record, however, we have public criticism of this country, which is how it is perceived internationally. Those two points are very worrying.
I shall briefly make one or two points on the text of the Bill; it may be said that these are things to raise in Committee, but they are major points. The gist of the offence under Clause 1(1) is the payment of money or conferring of advantages to cause the exercise of a function to be made improperly. It raises the question of the payment of money to procure the proper exercise of a function. I first came across this in a country which I shall not name. I was there with my instructing solicitor on an urgent matter, and we had to get a letter to a Minister in a government department. We turned up at the door of the ministry with our letter, and the doorman said, “I am sorry, but I am not going to deliver this letter to the Minister without the usual payment”. Perhaps I should go to prison for this, but we had to bribe the doorman to present the letter to the Minister. That country was so infiltrated by corruption that it would hardly have
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I am afraid that I have had a slight obsession with the OECD convention on “facilitation payments”. I have always felt that it was deeply worrying. Paragraph 9 of the OECD official explanatory commentary on the convention will be familiar to all who have followed the issue:
that rather reminds one of the conversation of the small baby and the lady of the house—
- “do not constitute payments made ‘to obtain or retain business or other improper advantage’ within the meaning of paragraph 1 and, accordingly, are also not an offence. Such payments, which, in some countries, are made to induce public officials to perform their functions, such as issuing licenses or permits, are generally illegal in the foreign country concerned. Other countries can and should address this corrosive phenomenon by such means as support for programmes of good governance. However, criminalisation by other countries does not seem a practical or effective complementary action”.
I have always rather deplored that paragraph, because it says that small facilitation payments—bribes—are okay. I have always thought it a pity that that accompanies the convention. I will not go on any more about that, but those bringing the Bill forward need to think about the use of “improperly”, which appears also in Clause 1(2).
Moving rapidly on with points that may deserve a little consideration, the noble Lord, Lord Berkeley, has spoken about Clause 4, “Foreign bid-rigging”. The definition of bid rigging is a little naive, in that it leaves out quite a common form of corrupt agreement which has certainly happened to my knowledge in the past. A group of, say, six construction companies, important players, agree that they will put in bids of ridiculously high figures, leaving the way clear for the seventh who will get the job. Now, there may be somebody else, but there is a corrupt agreement between those seven. I do not think that that falls within the definitions of bid rigging in paragraphs (a), (b) or (c).
I welcome Clause 5, dealing with corruption in sport. It is high time we had an absolutely clear criminal clause dealing with this worrying phenomenon. There have been many reported instances of events being deliberately thrown by goal keepers and other performers, rigging the results by not performing properly. Perhaps this is more of a tease than a point, but it must be sport; the definition of “sporting event” includes the word “sport”. Would that include an international bridge contest, or the World Chess Championship? It is, of course, inconceivable that corruption could enter those events, but careful thought should be given to the inclusion of “sport” in the definition.
Clause 8 is a very good duty clause, imposing a duty to report attempts at corruption. Clause 9 makes a failure to report a criminal offence. My problem is that, as I read Clause 8, one of those who should report is the person who has actually received an advantage. However, by doing that, he would have committed a criminal offence under Clause 1(2)(b) or Clause 2(2), and it is a cause for concern that that looks like a duty to self-incriminate. It needs a little
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A small point is that Clause 11 is all about corporate entities. It would be helpful if it were expanded to include individual employees of companies.
Finally, I hope the noble Baroness, Lady Scotland of Asthal, will deal with a point about Scotland. Clause 24 states that the Bill does not apply to Scotland. I would be interested to know the current position there and whether Scotland has provisions that we could use as a model.
I wish the Bill every success.
11.40 am
Lord Garden: My Lords, I congratulate my noble friend Lord Chidgey on introducing the Bill. It is extraordinary that it has become necessary to do so, but it is clear that it is because the Government have been using delaying tactics. I note that the Written Statement last week includes a new tactic—kicking this into touch in the Law Commission for another couple of years. The need is urgent, more so now in the light of the considerable damage done to this country’s reputation as a result of the suspension of the Serious Fraud Office inquiry into corruption allegations involving the Al Yamamah project.
The statement on 14 March by the OECD working group on bribery, to which noble Lords have referred, is a strong condemnation of the United Kingdom’s record. One expert said to me this week:
“In nearly 40 years of work involving international organisations, I cannot recall one being so critical of a major member. The Government will have to do a great deal better than sending this to the Law Commission for the next two years”.
The statement reminded the world in detail about how the United Kingdom has been dragging its feet. There was already growing concern among those who follow these matters that the UK appears to be more reluctant to prosecute than other OECD members.
I shall focus on the security-related aspects of corruption, although I realise that the Bill rightly covers a potentially much wider field of economic activity. I remind your Lordships that I am a member of the strategy group that advises Transparency International (UK) on the prevention of corruption in the official arms trade. The two major areas that have long been recognised as particularly prone to corrupt practices in international contracts are the construction industry—the noble Lord, Lord Berkeley, spoke of his experience of that—and arms sales.
The arms trade is a highly competitive field in which large sums of money are at stake. Decisions are taken by government officials and politicians in the country that is buying a particular military capability. The contractual costs are often very opaque, partially as part of negotiating strategies, but also to protect commercial opportunities elsewhere. Payments may be made by means other than cash, and the whole can be further complicated by the use of offset deals, which may be in unrelated fields. Each of these aspects provides opportunities for corruption. Corrupt benefits may take the form of post-deal arrangements to give advantage through the subsequent offset arrangement.
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When I discuss these matters with those who have worked with and in the defence industries, many of them argue that these arrangements are just a fact of business life. If one wishes to export military equipment or services to some parts of the world, the local custom means that orders will need to be facilitated by additional payments and the price charged takes account of that. That has a number of security implications. The receiving country is not necessarily obtaining the most appropriate capability or the best value product. The sale may go to the international company that offers the best bribes. If a defence company depends on such techniques, it is likely that they will produce less effective products because they are not exposed to full market competition. That means that our own troops, who will be enjoined to help exports by buying British products, may be among those who ultimately suffer as a consequence of corrupt practices in export sales.
There is also the question of what effect such corrupt practices have on the nation to which sales are made. On 11 January 2007, we debated the DfID White Paper Making Governance Work for the Poor. In Chapter 3, a compelling case is made for why corruption is bad for the developing world. I shall not repeat its arguments, but undermining good governance is not a recipe for future stability, so we sow the seeds of future security threats when we permit bribes to happen. The OECD working group report this week was right when it stated:
“The Working Group underlines in this respect that bribery of foreign public officials is contrary to international public policy and distorts international competitive conditions”.
However, another aspect worries me. We rightly take pride in the integrity of our public servants in the UK, yet arms sales are conducted on a Government-to-Government basis. Indeed, within the Ministry of Defence, there is a body, the Defence Export Services Organisation (DESO) whose only role is to promote British arms exports. It is staffed by a mix of civil servants, military personnel and seconded industrialists. It is a strange organisation to find in a ministry of defence, and I believe it should not be there, but it is, and we must accept that. If bribery takes place in arms deals, it is difficult to see how DESO can operate without being at least aware of it. Exposure to corrupt practices that are not followed up may tempt some down the road to corruption. We should protect the integrity of government abroad and in the United Kingdom.
How do we ensure that corruption in the official arms trade ceases? We need two things: transparency of accounts, so that everybody can see what the costs are and who is getting the cash, and a clear set of rules that are enforced. This Corruption Bill can clarify the rules. We need to encourage companies to make sure that they are not undermining Governments through corrupt payments. We need to do so much more urgently in the light of recent events and the very strong criticism that we have received from allies through the OECD. We have an opportunity with the Bill to respond positively to the OECD criticisms and, if we get it through, we could achieve something tangible
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11.48 am
Baroness Whitaker: My Lords, I declare an interest as a member of Transparency International UK’s advisory council, which I thank for its high-calibre work on the Bill. I support the Bill very warmly. A coherent law of corruption has been a long time coming and, as your Lordships have heard, the Government’s eventual attempt in 2003 was not found to be up to the task by the scrutiny committee of which I was a member. As the noble Lord, Lord Chidgey, said, we found that the 2003 draft Bill was neither adequate in scope, nor, most importantly, intelligible to the business community that would have to operate it. It also shared the narrow perception of corruption in the Law Commission paper, which was that the principal issue was the domestic UK dimension. It was as if globalisation did not exist, as if post-colonial western interests had never shored up greedy dictators and enabled them to loot their countries’ Exchequers, as if powerful, rich companies had never colluded with developing countries’ public officials to produce white elephants of public expenditure or to reinforce a clientele culture where petty bribery is necessary to obtain any service, as the noble Lord, Lord Chidgey, so powerfully described.
These are the real and far-reaching issues of present-day corruption worldwide. I add another figure to those cited. The World Bank estimates that, globally, bribery for public procurement bids is at least $200 billion a year and that total bribery of the public sector from private sector companies and individuals might be as much as $1,000 billion. That would pay for a lot of roads, health centres and schools. It would save many lives. Another casualty of such pervasive corruption is democracy itself: public goods and services are not transparently and equitably delivered and redress through the systems of justice is barely available.
That much larger consideration of the harm done by corruption is why the international organisations such as the OECD and the UN brought forward instruments, universally supported and adopted. We modernised our law to criminalise bribery overseas, which is welcome, but the OECD review committee still finds that UK implementation of the convention is impaired, as we have heard, and whatever our re-arrangement of enforcement machinery, there has not been one prosecution under such legislation as we have. This is why the All-Party Parliamentary Group on Africa, in our report The Other Side of the Coin recommended a new Bill by the end of last year. The Tanzanian Government have had sufficient political will to enact legislation and prosecuted 50 of their 677 investigations in 2005.
Well, that did not happen here, as noble Lords have explained. Why do the Government not realise the importance of this? If it is because the Home Office, the lead department, quite understandably, has little experience of the devastating consequences of corruption
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Optimists hoped that the Government’s very positive response to this report would result in a new corruption Bill, of the sort that the noble Lord, Lord Chidgey, has so eloquently described, not another postponement and a referral to the same organisation. I see that consultation with business is not included in the new terms of reference and I hope that the Minster can assure us that this will be remedied. We owe speedy, intelligible legislation to our many transnational companies that observe the provisions of the OECD convention, to those that want to preserve the good reputation of the City of London, and to those that want to increase investment potential everywhere. I quote Ms Karina Litvack, a senior executive of F&C, on whose committee of reference I sit:
- “for long-term investors, bribery and corruption distort and destabilise markets, expose companies to legal liabilities and reputational damage, disadvantage non-corrupt companies and reduce transparency for investors seeking investment opportunities”.
The director of the Serious Fraud Office himself, who had to decide to scrap the investigation into the activities of BAE Systems in Saudi Arabia, is reported in the Financial Times less than a month ago as saying that our anti-corruption laws urgently need to be reformed to cope with modem international business practice. Does not that make the case of the noble Lord, Lord Chidgey, compelling?
11.54 am
Lord Dykes: My Lords, it is a great pleasure to follow the sensible words of the noble Baroness, Lady Whitaker, in also calling for an urgent reaction by the Government to these matters. In this debate there are noble Lords representing different parts of the House but only one Conservative. The noble Lord, Lord Kingsland, who is not in his place but was here briefly at the beginning, positively welcomed the Attorney-General’s announcement to abandon the SFO investigation into the arms deal with Saudi Arabia. That makes me proud of the remarks of my noble friend Lord Thomas of Gresford on the Front Bench, which were in total contrast to the reaction of the Conservatives in this House.
I am sorry to have to say this, but the stench of that abandonment of the investigation still lingers over the MoD, the Government, No. 10 and the Attorney-General’s Office. People will not easily and lightly forget what happened on that dark day for this country. The reasons given for it are totally unconvincing. The Government need to return to the matter and give us further answers.
That is not the direct subject of the Bill, although it is an important background component. I, too, add my warmest thanks to my colleague and noble friend Lord Chidgey for being the inspiration behind the Bill. I heartily endorse the idea of the Bill enthusiastically receiving a Second Reading. My noble friend has done a great deal of work on this. His background in industry and engineering, combined with many years spent in other countries representing legitimate British
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I do not intend to go into very great detail on the Bill’s contents, except to say that I strongly agree with what the noble Lord, Lord Neill, said about facilitation payments. That needs to be clarified and worked properly in the subsequent stages of the Bill. I hope that the Bill will go into Committee as soon as possible so that these matters can be dealt with.
I turn to the sad events of 14 December and the subsequent comments of the OECD in March this year. We need to return to the contradiction expressed by the noble and learned Lord the Attorney-General that definitely no aspect of economic interest—or national interest in that sense—was involved and that those factors were definitely not taken into account in the judgment. The Government’s answers on these points are very unconvincing. I was reflecting on that when my noble friend Lord Thomas of Gresford said:
“I protest that the public interest in the prosecution of international corruption is of the highest order and, if we permit international corruption to continue in any way, or seem in any way to be giving a go-ahead to a large British industry, however much that may be in the economic interests of this country, we are damaging international relations in the broadest sense”.—[Official Report, 14/12/06; col. 1713.]
That matter must be returned to.
We now have the impending visit of the OECD investigation team. I am not sure whether a date has been set; perhaps the Government can give us an answer. In its statement on 14 March it was extremely critical of the Government’s position: the failure to keep up with other countries in the international convention and the agreement, which has been signed and ratified by so many countries. We have fallen behind in our obligations.
On 1 February I said—forgive me for repeating it:
“Corruption of any kind—even the thorny problem of finding a definition of it that will stand up to searching analysis—is a hard item for parliamentarians to deal with”.—[Official Report, 1/2/07; col. 364.]
I made my maiden speech in this House on 16 July 2004 and reflected on the enormous Joint Committee report, which we all remember, and the Government’s poor and disappointing response to it—although they are entitled to make a number of technical points, which some would regard as very valid. So much time has now elapsed that it is really high time that the Government made rapid progress.
In summer 2003 the Government rejected most of the Joint Committee’s recommendations but insisted on keeping the agent/principal formula. That very important matter also needs to be gone into profoundly in Committee.
The government response stated that,
- “as regards the central issue of the definition of corruption, we do have reservations on the proposal of the Joint Committee ... we have not abandoned the agent/principal approach proposed by the Law Commission for reasons which we detail below”.
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But the Government can now make progress without once again referring the whole business back to the Law Commission. That would cause a delay of several years. That is unacceptable bearing in mind the extremely expert work done by Transparency International and other bodies, including our overseas friends, with their technical and legal suggestions on how to deal with definitions, the relationship between agents and principals, the definitions of the measurements of money passing hands unlawfully and so on.
Transparency International underlined that when it presented the draft text. It stated that,
“The Attorney General’s announcement of the decision of the Serious Fraud Office to discontinue the criminal investigation of BAe Systems’ role”
was a major part of the immediate background. It is not just a side issue that we can now forget; it is central, although not a direct part of the Bill’s text. In the last part of its introductory letter of 14 March, Transparency International stated that the Bill,
- “aims to reform the law of bribery in a way that will be understood by police, prosecutors, jurors, the private sector and the general public. It defines bribery by reference to the improper conduct that results from a bribe and includes a number of modern features of anti-corruption law, including explicit offences of bribing foreign public officials; of foreign bid-rigging”—
I am glad that that was referred to earlier, because it is a huge area needing complex supervision—
I am delighted that my noble friend Lord Chidgey has also included that matter in the Bill. Transparency International continued:
“It includes a requirement for UK companies to take steps to ensure that their foreign and associated companies do not commit corruption offences; and a duty to report suspicions of corrupt behaviour in the public sector”.
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