The Guardian (UK)
December 13, 2000
You bribe a foreign official to give your company a contract. It works and you get the business. You escape prosecution in Britain because corruption performed abroad is not illegal here. Better still, the British government gives you a tax break because “commissions” paid abroad are accepted as a deductible expense.
Not bad going, and in the fourth year of New Labour’s tenure there is still no action to change things. The tireless Clare Short made a big issue of corruption in the Department of International Development’s white paper on globalisation this week, but much of her fire was directed at kickbacks taken by foreign officials from their compatriots rather than from foreigners.
It is certainly true that poor people suffer most from corruption. In developing countries and most of the so-called transition economies in the former Soviet Union and eastern Europe, people often have to bribe teachers and doctors to get services which are supposed to be free. Local police and judges frequently want their palms greased. Foreign-donated medicines and other items of aid disappear into private hands.
Most non-governmental organisations working in the third world have not made enough of these scandals for fear of discrediting aid in general or making reform look too difficult. So the Department for International Development’s focus on this prevalent but “petty” corruption is welcome.
The government is also promising to help countries tackle the “grand” corruption involving politicians, senior officials, and businessmen. In last week’s Queen’s speech, the government pledged to bring in a bill to strengthen the law on money laundering and make it easier for countries to recover funds which their leaders or officials acquired corruptly and deposited in British banks. Yet for every Marcos, Milosevic, or Mobutu there is a British salesman or senior executive who has offered cash illegally abroad. When is action going to be taken in this country against them?
Britain’s record is poor. Last summer the Organisation for Economic Cooperation and Development reviewed the action rich countries had taken to implement its 1997 anti-bribery convention. It found Britain was falling behind almost everyone else. Although it had ratified the convention, it had no law which explicitly criminalised bribery of foreign officials. When New Labour came to power, it initially followed in its predecessor’s footsteps in arguing that a 1906 statute on bribery at home implicitly covered bribery abroad. Yet in more than 90 years there had not been a single prosecution under this law.
British companies are among the worst offenders. Some 37 of the 55 companies which the World Bank publicly blacklists and has disbarred from participating in its contracts because of evidence of corruption are domiciled in Britain. Transparency International, which publishes a “bribe-payers’ survey”, based on perceptions by business executives and professionals in the third world of how foreign companies behave, confirms that bribes are most common in the arms trade, public works and big infrastructure projects. British companies are among the strongest players in all these sectors.
This summer the government accepted that a new law is needed to bring bribery by Britons abroad under the jurisdiction of British courts and remove the problem of “extra-territoriality”. Ministers made all the right noises in a discussion paper.
“Corruption is like a deadly virus. It has no boundaries. We need to fight it wherever it is found,” thundered Jack Straw, the home secretary. “For too long dishonest individuals have profited at the expense of undermining the integrity of professional and public life in this country. The international business community increasingly realises that a culture of corruption is a disincentive to investment and trade.”
Richard Caborn, the trade minister, added his own controlled wrath: “The government believes that bribery has no place in a modern economy. These proposals demonstrate our determination to be at the forefront of international efforts to stamp out bribery.”
Yet the government continues to delay. It says the money-laundering bill which it will publish this session will not be given time until the next parliament. The same holds for its promised bill to tighten controls on the arms trade. The anti-bribery bill is in even worse shape. There is no commitment even to publish it this session, nor is drafting firmly on track within Whitehall to have it ready for the next one.
The OECD’s inter-governmental working group, which provides peer-group review on compliance, came close to censuring Britain this autumn for this failure to honour its convention obligations. “British companies could be considered unsafe until new legislation is in force,” said Professor Mark Pieth, the Swiss lawyer who chairs it. At the time the OECD was fobbed off with the promise that legislation was on the way. Now it has been delayed again, to the anger of the US, France, and other countries which feel Britain is trying to steal business through laxer standards.
The Department of Trade and Industry made one important advance this month when it joined other OECD member states in agreeing on an action programme to deter bribery in government-supported export credit transactions. From now on the export credit and insurance agencies of OECD countries will demand signed statements from companies applying for coverage, stating they will not engage in bribery. If bribery is established, the agency will reject claims for indemnification and refer the case to the judicial authorities. This could act as a powerful deterrent, provided it is enforced.
Bribery is notoriously difficult to establish. The OECD guidelines recognise that small “facilitation” payments to obtain licences in a foreign country cannot realistically be pursued, although it declines to set a size limit. When a sales commission amounts to a quarter or half of a contract’s value, the bells of suspicion must ring. Payments of this size cannot easily be explained, if auditing procedures require them to be clarified.
When she introduced her white paper this week, Clare Short renewed the government’s pledge “to put our own house in order” by passing anti-bribery legislation. Yet it remains blocked. If the problem is only that parliamentary time is limited, there is no reason why clauses outlawing foreign bribery could not be added to the bill the government is proposing on money laundering.
The home secretary, the trade minister, and Clare Short all favour action. So where are the forces of conservatism stopping progress? Is the problem the prime minister and his wish to appear business-friendly at all costs?