Tough on corruption?

The UK used to claim it was at the forefront of efforts to tackle international corruption, but not any more

The UK used to claim it was at the forefront of efforts to tackle international corruption, but not any more

The UK’s reputation for cracking down on bribery and corruption has taken a battering in recent months. The decision to halt a police investigation into allegations that defence company BAE Systems bribed officials in Saudi Arabia to secure a lucrative contract provoked international outrage. Now the government has reneged on a promise to introduce new anti-corruption laws this year.

The Serious Fraud Office (SFO) stopped the Saudi part of its BAE investigation in December after the Attorney General, Lord Goldsmith, advised that, if continued, it would threaten national and international security. The SFO is still investigating other allegations against BAE involving South Africa, Tanzania and the Czech Republic. The company denies any wrongdoing.

Lord Goldsmith didn’t elaborate on the nature of the security threats created by the Saudi probe, but stressed that commercial or national economic interests had nothing to do with the decision.

If such factors had been taken into account, the government would have fallen foul of section five of the OECD Convention on Combating Bribery of Foreign Public Officials. The convention, introduced in 1997, is part of an effort to get countries around the world to enact anti-bribery and corruption legislation similar to the US Foreign Corrupt Practices Act. The United Nations has produced a similar Convention Against Corruption for countries not in the OECD.


Bribes

Laurence Cockroft, UK head of anti-corruption lobby group Transparency International, describes the BAE decision as ‘a huge setback’ in efforts to get governments to tackle bribe-paying companies. Despite what the government says, the block on the enquiry has been seen around the world as an act of political expediency, he says, creating the impression that “the guys with the big bucks, in this case the Saudis, can call the shots.”

In a letter to the head of the OECD, the group said the decision to stop the Saudi investigation “poses the most serious threat to the success of the OECD Convention since it was adopted. The credibility of the UK Government commitment to prohibit foreign bribery must be rebuilt, in order to restore the collective commitment on which the success of OECD Convention depends.”

Transparency International now wants the government to make BAE publish a statement, clarifying the business practices it has in place to prevent bribery and corruption, and what steps it takes to ensure compliance is independently verified. “It is essential to clear the air for future international transactions,” the group said.

Like many other countries around the world, the UK has done little to enforce the OECD convention. According to a Transparency International monitoring report, the UK has not brought a single prosecution for bribery of overseas officials. The group’s latest report – for 2006 – found no prosecutions in Australia or Japan and only one in Canada. But other countries are starting to become more active. France prosecuted eight cases in 2005, with three in Germany and three in Belgium.

Annoyed at the BAE decision, the OECD has decided to launch an inquiry into the UK’s efforts to fight bribery. Its working group on bribery and corruption, which brings together all 36 countries that have signed and ratified its convention, said in a recent statement that the UK had made some progress, but not enough. The government has made efforts to raise awareness of the issue, but has repeatedly failed to enact modern foreign bribery legislation. The Working Group said it was ‘seriously concerned’ that the UK hadn’t implemented legal changes requested by the OECD. In addition, UK law on the liability of legal persons remains deficient and the Working Group reaffirmed that it should be modified. In 2005, the Working Group recommended that the UK monitor decisions not to open or close foreign bribery investigations.


Remaining vigilant

Ironically, before the Al Yamamah decision caused such a furore, the UK had shown signs of raising its game. In December 2005, the Home Office set out proposals to reform the law on bribery, at home and abroad. “Although the crime of bribery remains relatively rare in the UK, it is vital that we, through our actions and principles, remain vigilant and promote high standards of propriety at home and abroad,” Home Office Minister Fiona Mactaggart said at the time.

Ms Mactaggart noted that in 2001 the government gave courts the power to investigate overseas, but said the existing criminal offences stem from the common law and the Prevention of Corruption Acts 1889-1916 which are widely considered to be fragmented, outdated and unclear. They are not used often and a lack of clarity in legal definition can lead to acquittals on technicalities. The government wants to ensure that UK nationals and companies do not contribute to bribery in other countries, and clarifying the law will make investigating corrupt activity easier, she said, adding: “The existing law is complex and outdated, and can be difficult for law enforcers to use. I want to make the law clearer for all concerned.”

There were further positive steps six months later when Prime Minister Tony Blair unveiled new measures to tackle international corruption. He appointed Hilary Benn, the International Development Secretary, to be the ‘ministerial champion for addressing international corruption.’ This new role would see him “working with other Ministers across government to tackle corruption wherever it threatens to undermine the fight against poverty.”

At the same time, Blair said the government would establish a new team to investigate international corruption, including money laundering in the UK by corrupt politicians from developing countries, and bribery by UK businesses overseas. This would include members from the City of London Police and the Metropolitan Police Service, funded by the Department for International Development. “The UK has a responsibility to tackle money laundering and bribery where it stems from our own shores, and to support developing countries in fighting corruption,” said Blair. “We have to recognise that where there are bribe takers, there are also bribe givers. The new taskforce for investigating corruption will help to put the UK at the forefront of efforts to tackle international corruption in all its forms.”

But in March this year, a vital part of these efforts – the legal reforms led by the Home Office – was postponed. After at least three years of consultation, the government said there was broad support for reform of the Prevention of Corruption Acts and that it was committed to a fundamental reform of our bribery laws, but it would not push ahead with the draft Bill it published in 2003.

Home Secretary John Reid told the House of Commons there was ‘significant and influential opposition’ to the Bill and it was unsuitable for presentation to Parliament. The problem, he said, was a lack of agreement about what the new offences should look like. Instead, he asked the Law Commission to undertake a thorough review of the UK’s bribery laws “with a view to fundamental reform.” The Commission has already considered the issue at length, but Reid said that “the context of reform has moved on.” In particular, the Commission will take into account “the issues and views that have emerged” since the Bill was published, including “additional practical experience of UK law enforcers in operating the existing law, and other countries’ experience of implementing international conventions in this area.”

Cockroft says the referral back to the Commission was ‘very bad news’ and ‘absolutely ridiculous.’ There is unlikely to be a new draft bill before the end of 2008. “They are going to be at least two years behind their own deadline, and this creates a lot of uncertainty.” Transparency International has contributed to a Private Member’s Bill on corruption that Lord Chidgey has introduced to Parliament. This defines the necessary offences perfectly well, says Cockroft. And while some countries might be slack to prosecute overseas bribery and corruption, the US has prosecuted over 100 cases over the last two years. Cockroft, and other campaigners, say the UK needs to show that it is still committed to fighting overseas corruption. He wants so see accelerated legal reform but, more importantly, some prosecutions. Otherwise, the UK risks not only damaging its own anti-corruption goals, but also undermining the efforts of countries that are starting to take the issue more seriously.


High-profile

The halting of the Saudi probe is frustrating for anti-bribery campaigners because it comes at a time when other EU countries have started to pursue high-profile investigations. In Germany, engineering giant Siemens is embroiled in claims that staff paid bribes to win contracts. In France, the authorities have become much more active, encouraged by the successful prosecution of two senior employees from oil company Elf Aquitaine, including its CEO, who were sent to prison for paying bribes to win overseas contracts.

Such activity seems long overdue. It’s now been 10 years since the OECD published its Convention, and all of its member nations are committed to implementing its measures. But, to date, most have done very little. Since 2005, Transparency International has published a progress report on enforcement of the Convention. Last year, it had little activity to report. France had prosecuted eight cases, with three in Germany and three in Belgium. But Italy only had one, and the UK had none at all. The situation was worse in the Czech Republic, where the authorities had brought no prosecutions and hadn’t even started any investigations.

Other countries have shown what can be done. A week after it chastised the UK for its inaction, the OECD praised Norway for the progress it has made towards implementing the convention. It published a report commending the country’s ‘impressive effort’ and said Norway had satisfactorily implemented all of the OECDs recommendations.

The country has raised awareness and improved corruption detection measures. It has also brought two successful prosecutions involving the bribery of foreign public officials. In the first case, the defendant company and an executive of the company were fined €2.4m and €24,000 respectively. In the second case, three defendants were convicted of violating bribery laws and sentenced to imprisonment for periods of between ninety days conditional and 14 months (of which four months were conditional).


Corruption team

Norway has also taken significant steps to enhance the institutional framework for investigating and prosecuting cases of corruption. For instance, the Corruption Team at the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime has been permanently assigned a police solicitor, and all local police districts have established multi-disciplinary economic crime sections, which will be closely monitored by the Ministry of Justice, Police Directorate and Prosecution Service.

Other measures include the production of a manual by the corruption team, for publication in 2007, on the detection, investigation and prosecution of corruption cases. There has also been a heightened focus on the confiscation of the proceeds of crime, reflected in a significant increase in the number of confiscation orders. If international efforts to tackle bribery and corruption are to succeed, more countries need to show the same kind of enthusiasm as Norway. The UK’s lame performance is so troubling to the OECD because it gives other laggard countries a further excuse to do nothing.