Examination of Witnesses (Questions 700-719)|
11 JUNE 2003
Q700 Chairman: You mentioned "overseas"
and "international" once or twice. Is this only an activity
which takes place in regard to overseas building, trade and manufacturer
or is it also a consideration internally in the United Kingdom?
Mr Campkin: You are referring
particularly to the offsets issue, my Lord Chairman?
Q701 Chairman: Do you have offset
agreements in the United Kingdom?
Mr Campkin: Not that I am aware
Chairman: We will have to break again
for a division.
The Committee suspended for a division
Q702 Mr Stinchcombe: I just want
to ask one further aspect about this proportionality test. In
the scenario that I conjectured, we are talking about a very significant
investment, maybe the future entirety of the firm, and yet I am
told that because of the scale of the payment, then the making
of it should, notwithstanding the consequences of not making it,
still be a crime. In that case, if the whole future of the business
is at stake, there is no test of proportionality at all, is there?
It does not rule it out because it is a disproportionate payment
of the consequences, it is ruled out simply because it is too
big a payment in the first place to the wrong person.
Mr Cridland: My answer to that
would be that it is ruled out because it is clearly soliciting
a bribe. The proportionality test was in answer to the Chairman's
question about how you cap facilitation payments. As Andrew explained,
our justification for facilitation payments and our distinction
between facilitation payments and activities which may be illegal
or criminal is that facilitation payments are simply enabling
or procuring a service which you are entitled to anyway, which
is perfectly legal, but to get it when you need it and that is
quite distinct from encouraging somebody to do something which
is clearly, by any definition, illegal.
Q703 Mr Stinchcombe: In a scenario
perhaps in a new economic zone, if you have gone through the legal
procedures, you should be entitled to start manufacturing. You
have employed local people, everything is in place, and then some
administrator says, "Your licence or consent permission will
be withdrawn unless you pay me." Even in those circumstances,
whatever the consequences for the future of the manufacturer,
the payment of that amount should be a crime in this country.
Mr Cridland: These are desperately
difficult situations but it is here that corporate policy has
drawn an absolute line in the sand and responsible business should
walk away from those sorts of business opportunities because,
until we do, those situations are not going to be resolved. Andrew,
do you want to add anything?
Mr Berkeley: I would just add
the point which I think I made before, that the statement that
unless you do X, the whole permission for the project will be
withdrawn implies a degree of authority in the person who made
that threat, which is not meant to be the degree of authority
of people who are, if you like, egged along by facilitation payment.
Q704 Baroness Whitaker: Just returning
to the grey areas, corporate hospitality and that kind of thing,
your colleagues in the business world will be familiar with the
concept of the approved code of practice, heavy guidance which
has an evidential status, so that, if you breached it, it is prima
facie evidence that you had not complied with the statute.
It is used very often for law which has an impact on industry,
so that they can have different ways of complying. In your opinion,
might this be useful if we do not have lots and lots of separate
offences to flesh out areas where there might be doubt like corporate
Mr Cridland: Yes, I think it might.
Frankly, I think it lies outside the CBI's competence to make
specific proposals as to how these matters should be dealt with
in parliamentary terms. I think it is our job to throw up a problem
and ask you to find the solution. We do suggest in our evidence
that this particular Bill, whatever we can do to improve the quality
of its definition and constitution, does need very clear guidance.
I am sure that there will be a need for very clear guidance on
these points and I can see the case that some of the fairly specific
and technical issues we referred to could lend themselves very
well to guidance. All I think I would say is that it is not a
case of "do it in law or do it in guidance", I think,
in our view, business deserves greater clarity from the statute
and business deserves ministers to stand up and give very explicit
reassurances and perhaps actually we need all three: perhaps we
need a better Bill, greater ministerial clarity and better guidance.
Q705 Baroness Whitaker: The other
question that I wanted to ask was again in the overseas area.
The Government have attempted to deal with bribery of a foreign
public official in the Anti-Terrorism Crime and Security Act.
As far as I recall, the CBI was perfectly supportive of that section
on bribing a foreign public official.
Mr Cridland: I think that is right.
Andrew, do you recall any problems about it?
Q706 Baroness Whitaker: There was
no problem about it.
Mr Berkeley: The answer is "no".
The effect of the Anti-Terrorism Bill was to extend the concept
of nationality jurisdiction so that any British citizen or British
company, no matter where they were, were subject directly to British
Law. To that, we had no objection.
Q707 Baroness Whitaker: And it is
Mr Cridland: I think there were
some definitional issues which did not dispute the intent which
we were entirely comfortable with.
Q708 Baroness Whitaker: I just want
to ask you if Clause 13 in our Bill regarding corruption outside
of the UK in your view was as clear and is it easy for a business
to grasp how it applied to them in comparison with Part 12 of
the Anti-Terrorism Crime and Security Act?
Mr Cridland: I do not think we
had a lot of concern expressed about Clause 13, to be honest with
you. I could not, in all good faith, say that it is right but
I can say that members have expressed a lot of concern about certain
other clauses, Clauses 3, 6, 7 and 11 particularly, but less so
on Clause 13 to the best of my knowledge.
Q709 Vera Baird: I just want to try
and put a boundary around facilitation payments, if possible.
You have made clear that a facilitation paymenta smallish
facilitation payment the implication waswas to someone
to do their job or to do it more quickly. Is it still okay if
it is to do the job more quickly for you than for someone else?
Mr Cridland: I think in practice
that is almost inevitably going to be the case. The sort of examples
that would appear in managerial manuals trying to guide staff
as to what are the boundary lines would be examples like, you
are opening a new office in the capital of a developing country,
the office is absolutely up and ready to start business, you need
to start business but the telephone line is not there and you
know that $100 will ensure that you can open on the due day, you
paid your money and it should have been opened. It is that sort
of situation. I think inevitably therefore it is producing the
situation where your needs are dealt with and somebody else's
needs may be dealt with less expeditiously, but the intent is
simply to get a service performed which is the duty of the official
concerned which you should have had done by the due date.
Q710 Vera Baird: You give a very
innocuous example. What about an example where the person over
whom you pay for preference is a rival?
Mr Berkeley: I find it very difficult
to answer that question, to tell you the truth. If one is talking
in the context in which we are trying to put it forward, namely
that you have an official who has a duty to do an action by a
certain time or in a certain way, he is the junior official and
you make a comparatively small payment to him in order to get
him to do that he should have done anyway. Whether the people
across the road did not get their telephone until a week later
because of that action or not seems to me to be one of those questions
more suitable for arguing in, shall we say, a philosophical way.
I do not think it is something the law can take account of adequately.
Q711 Vera Baird: That must be a real
limitation on your attempt to suggest then that there can be a
clear defence of making an illicit facilitation payment. It makes
it unclear at the edges, does it not?
Mr Berkeley: All I can say is
that it has been in force in the United States since 1977. It
is very rarely used in the United States actually and, as you
know, the Department of Justice administered prosecutions under
the Foreign Corrupt Practices Act. It is not a big issue and indeed
facilitation payment as a word, an expression, is simply shorthand
of American jurisprudential analysis of the FCPA.
Q712 Vera Baird: One further thingand
I am going to try to fix its ambitis the example Mr Stinchcombe
gave you which perhaps helps me here. Albeit you may be paying
only a relatively small amount to a relatively minor official,
it may nonetheless be of very great consequence indeed and very
great financial consequence to the payer. Does the amount of consequence
that it has for the payer at all blur whether it is appropriate
or not? It may be the difference between them being able to complete
a contract before your next contract, you need to hurry him up.
Is it more problematic if the consequences for the payer are greater?
Mr Berkeley: You are positing
a contract for $25 million on the payment of $100 to some junior
official which would enable the $25 million contract to be completed.
Q713 Vera Baird: You have a time
limit and he is not hurrying because he knows that he has you.
Mr Berkeley: All I will say is
that it could happen.
Q714 Vera Baird: Does that shake
you at all in thinking that there can be a definition of facilitation
payment which would afford an appropriate defence?
Mr Berkeley: I would like the
Committee to understand that facilitation payment is not the main
trouble of the CBI in this Bill. It is a comparatively small matter
and many CBI members are perfectly happy as a general policy simply
to say, "There shall be no payments of any kind." It
is not an important thing as far as we are concerned.
Mr Cridland: What I would say
in answer to both of your questions is that the thing that for
me acts as the ring-fence is intent. There is no intent; there
cannot be any intent of a legitimate facilitation payment to get
an advantage to the disadvantage of somebody else, nor can there
be an intent to give money to an individual which is disproportionately
meaningful to the individual. It is simply a question of getting
the individual to do what they should be doing anyway. I think
that is somewhat clearly ring-fenced from the sort of definitions
we see in the Bill that relate to activities which are clearly
Chairman: If I could interrupt at this
stage because Dr Turner has something he would like to pursue
about a remark you made earlier. You have been talking about overseas
trading and subsidiaries and he would rather like to purse this
before he has to leave.
Q715 Dr Turner: The Government have
made it quite clear that the crime provisions are not meant to
apply to overseas subsidiaries of British companies and others
have suggested that in fact this is a defect of the Bill and will
undermine its efficacy. How difficult is it for UK-based companies
to control the activities of overseas subsidiaries and agents
and what is your view of the position of subsidiaries or agents
and should they be specifically included in the Bill as, for example,
they are in the United States Foreign Corrupt Practices Act?
Mr Cridland: Our view is that
they should not be included. At a somewhat simplistic essentially
correct level, we believe this would be extra-territoriality.
The point at issue here is that a company or organisation which
is legally constituted in that other country is subject to the
laws of that country. Clearly, it may well have a management responsibility
to the parent organisation which may well be within UK jurisdiction
and it does not cut across that, but the appropriate legal remedies
lie within the judicial system of the country in which it is constituted
and to blur that distinction is, in our view, highly unhelpful.
Andrew, do you have anything to add?
Mr Berkeley: It is not my belief
that the Foreign Corrupt Practices Act of the United States does
cover foreign subsidiaries of American corporations; I do not
think that it does.
Dr Turner: The suggestion has been made
to us; I had not read it personally.
Q716 Lord Campbell-Savours: Is it
naive to ask you whether, if there were a specific exemption or
defence for small facilitation payments, that it would be in conditions
Mr Berkeley: Could you explain
slightly more what you mean by "conditions of transparency".
Q717 Lord Campbell-Savours: That
it be declared. That a declaration for such payments be declared.
Mr Berkeley: In good management
practice in many of our large corporations, the chief executive
of each geographical area will, at the end of the year, sign a
formal statement that no payments have been made and, if anything
is on the borderline, he has to declare it and this is a matter
of management practice. This is another point that we want to
emphasise. True efficacy of action against corruption depends
to a great extent on the skill and power of management to really
deal with it because it is important. So, if that fits your definition
of transparency, the answer is "yes".
Q718 Lord Campbell-Savours: You are
described as a consultant; are you a lawyer?
Mr Berkeley: Yes.
Q719 Lord Campbell-Savours: So the
CBI consults you on legal matters?
Mr Berkeley: Yes.