Britain’s long backhander game

Ministers have tabled a bill allowing prosecution of firms that use bribes to win export orders. Why has it taken years?

The British government has ended a long-running dispute with the American government over bribery in lucrative international business deals. Inserted into the controversial anti-terrorism bill which is being rushed through parliament is a measure that will win praise for the government.

The bill will outlaw the payment of backhanders by British executives to officials and politicians of foreign countries to win contracts in those countries.

Not before time, say American officials who have been putting pressure on Britain for more than three years to stop dragging its feet over this issue.

The bad feeling is evident from official documents, obtained by the Guardian, which also undermine British claims to be at the forefront of the fight to stamp out these covert kickbacks.

The row revolved around a global convention in which 34 leading exporting countries agreed to adopt common rules to punish companies engaging in the “widespread phenomenon” of bribery overseas.

‘Fulfil its commitment’

The convention has been promoted, and policed, by the Organisation for Economic Cooperation and Development. The agreement requires each of the countries to pass a law making this kind of bribery abroad a specific criminal offence.

Yet, despite fine promises, Britain failed to introduce this legislation into parliament after signing the convention in December 1997.

That failure irked the Americans, who continually lobbied the British government. In June this year, the US commerce secretary, Don Evans, wrote to Patricia Hewitt, the trade and industry secretary, urging Britain “to fulfil its commitment to strengthen its anti-bribery legislation”.

In July, the Americans stepped up the pressure at a meeting with her in Washington. The aim of the meeting was to send Britain “the message to get their laws in order”, according to a US commerce department briefing document. It said that Britain argued that three existing anti-corruption laws – dating from 1889, 1906, and 1916 – were sufficient to prosecute British firms involved in bribery abroad.

“This opinion was not shared by the OECD bribery working group, which reviewed the legislation nearly two years ago, nor the US government,” complained American officials in the document, released under the US freedom of information act.

“These laws do not explicitly address bribery of foreign public officials. They have been judged as inadequate even in the views of British legal commentators.

“Over the past year, the UK continued to dawdle in the face of strong domestic criticism of its ineffective laws and an ageing commitment by the government last summer to make the required changes.”

The officials claimed that current British legislation “does not meet the standards of the convention in every respect”.

According to the document, the Americans insisted that the OECD convention is “the most important instrument to date” to combat bribery, and “Britain’s full participation is required to make it a successful agreement”.

The weakness of the British case was the fact that no Briton has been prosecuted under the three existing laws which are alleged to cover the payment of bribes in business deals overseas. Britain’s behaviour had irritated the Americans even before the convention was signed.

In May 1997, diplomats from Britain, the US and other countries had promised to wrap up their negotiations and complete the convention by the end of that year. But the Americans grew unhappy, saying that British officials were doing little to hit this deadline.

The rancour surfaced at a meeting between Margaret Beckett, one of Ms Hewitt’s predecessors, and William Daley, the then US commerce secretary, in Washington in September of that year.

Aides briefed Mr Daley before the meeting that the UK “had not been active in the talks. We do not know the reason for this reticence.”

In the meeting, Mr Daley told the then trade and industry secretary that “there had been no sign of strong, active UK support for the convention”. He urged Britain to “take a forceful, more enthusiastic stance” in order to bring negotiations to a swift conclusion.

According to the minutes of the meeting, Ms Beckett replied lamely that she was “somewhat surprised” and would “ensure that the message” got back to British negotiators.

Battles for big contracts

The private contretemps contrasted with Britain’s public line – the then trade minister, Richard Caborn, told parliament last year that Britain had “played a leading role in the negotiations”.

The reason for British delay is difficult to define. The foot-dragging over so many years inevitably provoked cynical accusations that Whitehall wanted to do nothing to restrict British companies in their battles with other countries’ firms for big contracts.

But it may also have been because no Whitehall department was solely in charge of pushing through the implementation of the convention, amid all the different bills competing for space in the parliamentary calendar. The Department of Trade and Industry, the Home Office, and the Department for International Development had a stake.

The development minister, Clare Short, has for some time been particularly vocal in pushing for an end to the complacency.

Eventually, the British government was stirred into action – ironically, by the terrorist attacks on America on September 11.

The measure to implement the convention was included in the wide-ranging anti-terrorism bill, as the home secretary, David Blunkett, acknowledged that corruption “contributes to the conditions which breed terrorism”. This particular measure has the support of all the political parties.

While the governments of Britain and other countries may have been accused of discreetly ignoring bribery overseas, the same could not be said of the United States.

As long ago as 1977, America passed the Foreign Corrupt Practices Act, exposing US companies to the threat of prosecution if they greased the palms of officials overseas.

Taking a very public posture in favour of the convention undoubtedly made the US appear virtuous, but there was also a more hard-headed reason for adopting that stance.

The US feared that if its companies had to refrain from paying bribes, they would lose out to firms from other countries which were less scrupulous about the conduct of their entrepreneurs who were boosting export revenue.

The US commerce department reckons that last year 61 international contracts, worth a total of $37bn, went to the biggest briber.

The extent of this kind of graft is by its very nature hard to calculate, but it is clear that British companies are involved. The World Bank has barred 72 companies from its projects because they had resorted to corruption or fraud of some kind; 36 of these banned firms are British.

In one prominent case, four British firms, including the construction company Balfour Beatty, were alleged to have been implicated in bribing an official in Lesotho, southern Africa, to win a huge contract to build a dam. The prosecution has become bogged down in legal wrangling, but is due to go ahead in Lesotho at some stage.

When the anti-bribery measure contained in the government’s latest legislation becomes law – possibly in the next few weeks, company executives in such cases will find themselves liable to prosecution in this country as well, facing up to seven years in jail.

Rob Evans and David Hencke, Guardian, November 27, 2001

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