Corruption

Corner House double victory

(Jan. 25, 2005) On UK government department’s anti-bribery rules and public interest litigation.

In December 2004, The Corner House instituted legal proceedings against the UK’s Secretary of State for Trade and Industry, Ms Patricia Hewitt.

The Corner House claimed that the Export Credits Guarantee Department (ECGD) 1 had, in November 2004, significantly weakened its rules aimed at reducing corruption without consulting The Corner House or other interested NGOs.

The ECGD had, however, “carried out extensive and detailed consultation with its corporate customers and their representatives,” who had lobbied the ECGD intensively on these rules.

“The one-sided nature of the consultation that did occur”, argued The Corner House’s lawyers, led “to a result biased in favour of the ECGD’s commercial customers.”

The Corner House’s claim was that the ECGD’s failure to consult with other interested organisations “was a serious breach of basic public law standards of fairness and the ECGD’s own published consultation policy”.

On 13 January 2005, just as a two-day hearing in the High Court was to begin, the government settled out of court. It agreed to instigate a full public consultation on its changes to its anti-corruption rules, and to pay The Corner House’s legal costs.

It also agreed to make public some 380 pages of documents relating to the court case (http://www.ecgd.gov.uk/20050121_webdocs_lowres.pdf). These are predominantly correspondence between three British companies (Airbus, BAe Systems and Rolls Royce) and an industry grouping, the Confederation of British Industry (CBI) with the ECGD. They include the initial complaints these exporters made to the ECGD about the department’s rules aimed at reducing corruption and the subsequent detailed exchanges and negotiations on the revisions that the exporters were seeking.

The court case also made UK legal history in public law litigation. The Corner House was awarded an unprecedented full “protective costs order” for a judicial review.2 This meant that it would not have to pay the government’s legal costs if it lost because it was bringing the case in the public interest. The solicitors acting for The Corner House, Leigh Day & Co, state that the case:

 

“is a dramatic breakthrough for non-governmental organisations representing the public interest in litigation . . . Without this protective costs order, The Corner House would have been unable to bring the case and the Government would not have been called to account” (see http://www.leighday.co.uk/doc.asp?cat=844&doc=560).

Once the full judgement on the protective costs order has been made available by the UK courts, soliticors Leigh Day & Co. and The Corner House will give further details of its practical effect.

Anti-corruption expert and policy analyst Susan Hawley of The Corner House took the lead in bringing this court case. Solicitors Leigh Day and Co, particularly judicial review expert Richard Stein and Jamie Beagant, represented The Corner House, while human rights barristers Lord Lester of Herne Hill QC and Ben Jaffey from Blackstone Chambers acted as barristers.

For more information on The Corner House’s work on corruption and bribery, and the Export Credits Guarantee Department, see http://www.thecornerhouse.org.uk/subject/aid/

1 The ECGD is the UK’s official export credit agency and reports to the Secretary of State for Trade and Industry. It uses taxpayers’ money to provide financial guarantees to UK exporters of capital equipment and project-related goods and services to help them win business and invest overseas ( http://www.ecgd.gov.uk).

2 In a judicial review, a court of law asseses a specific action taken by a government official or entity or by another legally-appointed person. It reviews whether a decision, action or failure to act in relation to the exercise of a public function was lawful or not.

Reporting
The following articles from UK newspapers give more information.

“Exports victory for anti-corruption group”, The Guardian
“DTI backs down on plan to dilute bribery rules”, Financial Times
“Industry keen to distance itself from taint of corruption”, Financial Times
“Hewitt U-turn on anti-bribery rules”, The Times
“Anti-Bribes Watchdog Claims ‘Great Victory'”, PA News
“Review poses question on bribery curbs”, Financial Times
“UK ministers back down on bribery controls”, Financial Times
“Firms can keep secret agents: Minister persuaded to ease anti-bribery rules”, The Guardian
“Big business pressure led Hewitt to emasculate anti-bribery laws”, The Guardian

1) “Exports victory for anti-corruption group”
Mark Tran, The Guardian, 13 January 2005

A pressure group claimed “a great victory in the public interest” today after winning the right to be consulted over changes in bribery rules for British exporters.

Corner House Research, a group that campaigns for enforcement of the law in overseas corruption offences, had accused the Export Credit Guarantees Department of failing to consult it on changes that had “watered-down and weakened” key procedures on Britain’s anti-bribery policy.

The ECGD underwrites bank loans to enable overseas buyers to purchase goods – most controversially military hardware – from the UK. Export credit guarantees have, for instance, been issued for major arms sales to countries such as Saudi Arabia and Indonesia.

Nearly half the work of the civil servants in the ECGD is related to arms exports; the cost of the civil servants and the credit guarantees issued by the department to subsidise UK-based arms companies come to around £180m annually.

As Britain’s official export credit agency, the ECGD has pledged to eliminate bribery and corruption in overseas contracts involving UK exporters. In November, the department published a revised anti-bribery policy.

Originally, British exporters had to give anti-bribery undertakings on behalf of any affiliate involved in the deal. The later guidance limited that to companies controlled by the exporter.

A full judicial review application was due to be heard by Mr Justice Moses in the high court today, but the judge was told the dispute had now been settled.

Sue Hawley, a Corner House spokesperson, said: “The ECGD has at the last minute conceded to our main demand, which was that there should be full public consultation . . . Last November, the ECGD weakened their anti-bribery procedures following one-sided meetings with industry which were held entirely in secret.”

Before today’s settlement, Lord Lester of Herne Hill QC had been due to argue in court on behalf of Corner House that the “one-sided” nature of the consultations amounted to “a serious breach of basic public law standards of fairness” and the ECGD’s own published consultation policy.

Corner House said this led to a result biased in favour of the ECGD’s commercial customers, which include BAE Systems, Airbus – partly owned by BAE – and Rolls Royce.

Mr Justice Moses was told the ECGD had now agreed to undertake fresh public consultations under cabinet office guidelines. But the changes to the department’s anti-bribery and corruption procedures made last November will remain in place pending the outcome.

Andy Scott, the CBI director of international competitiveness said: “This is a sensible compromise which will continue to give exporters and the banks the certainty they need in their on-going dealings with ECGD while public consultation takes place.”

The ECGD also agreed to pay Corner House legal costs estimated at £250,000.

2) “DTI backs down on plan to dilute bribery rules”
Jean Eaglesham and Nikki Tait, Financial Times, 13 January 2005

Business is facing months of uncertainty over anti-bribery rules, after a legal challenge forced the government to retreat on its earlier plans to water down the regulations.

Ministers on Thursday promised to open the issue of bribery in overseas contracts up to a full public consultation after an anti-corruption lobby group threatened a legal challenge that could have disrupted the export financing system.

The enforced U-turn is an embarrassment for the government, which has publicly championed support for anti-corruption measures while secretly backing business opposition to controls imposed last May by the Export Credits Guarantee Department.

The UK export agency supports almost £3bn of deals a year through loans and insurance and the CBI had warned government that the ECGD’s anti-bribery rules would “endanger a number of valuable contracts”.

Industry thought it had succeeded in persuading the government to dilute the regulations last month after an intensive lobbying campaign led by Airbus, BAE Systems and Rolls-Royce.

Corner House, an anti-corruption group, had been poised to mount a judicial review today. But Patricia Hewitt, secretary of state for trade and industry, agreed a deal after eleventh-hour negotiations at the High Court.

Corner House had argued that Ms Hewitt had acted unlawfully by overriding her civil servants and instigating a one-sided consultation on the rules which excluded anti-bribery groups.

The judicial review sought reinstatement of the original rules, which were condemned as “unworkable” by the CBI on Thursday. Industry has particularly objected to requirements to give anti-bribery undertakings for joint venture partners and detail commissions paid to agents – requirements dropped from last month’s revised rules.

The settlement which was agreed on Thursday means that Corner House has withdrawn its demand to revert to the original rules in return for government agreement to hold a public consultation – albeit without admitting any breach of a duty to consult more broadly. The government will also pay Corner House’s “reasonable” legal costs.

The CBI called the deal a “reasonable compromise in the circumstances”. But the consultation raises the risk of tougher anti-bribery measures and could shine an unwelcome light on government willingness to bow to big business lobbying.

Corner House was given liberty to apply to the court to use documents disclosed to it during the case in the public consultation, unless the government first agrees to release the documents.

Advisers to Corner House later said these “devastating” documents – which deal with communications between the Department of Trade and Industry, the ECGD and business – demonstrated clearly that November’s watering-down of the controls had been “a political decision”.

Documents already in the public domain as a result of the case show the ECGD initially rejected business lobbying against its original anti-bribery rules.

But the agency on Thursday insisted it was pleased the watered-down rules were not being quashed as this would have “damaged exporters’ interests and our ability to support them”.

3) “Industry keen to distance itself from taint of corruption”
Jean Eaglesham, Financial Times, 14 January 2005

Lobbying ministers for the right to turn a blind eye to corrupt activities that boost overseas profits is not an activity any business would wish to advertise.

So it is not surprising industry moved swiftly to try to distance itself from yesterday’s court battle over the dilution of curbs on overseas bribery.

The government has agreed to a full public consultation on the anti-bribery rules to avert a court challenge to its one-sided consultation with business.

The CBI employers’ body protested that the legal challenge was simply a “dispute about the process of government” between Patricia Hewitt, the trade and industry secretary, and anti-corruption campaigners.

Business had been “inadvertently caught up” in the wrangle, the CBI said. But this protestation that industry was an innocent bystander to the government’s actions sits uneasily with documents connected to the case. These show how BAE Systems, Airbus and Rolls-Royce spearheaded an intensive – and highly successful – industry lobbying campaign, persuading Ms Hewitt to override her civil servants.

The campaign was triggered by tough anti-bribery rules introduced in May – without prior consultation – by the Export Credits Guarantee Department, the official export agency.

The new rules were hailed by ministers as part of a concerted government drive to eradicate British business’ involvement with corruption overseas. But they were immediately rejected by some of the ECGD’s biggest customers – including BAE – for presenting, as the CBI put it yesterday, “practical and legal difficulties which made them unworkable”.

While the ECGD dismissed such complaints, a subsequent appeal to Ms Hewitt warning several contracts could be jeopardised by the new system yielded her assurance that the rules should not “place an undue burden on business,” according to one court document.

The government’s stance is understandable. Part of Ms Hewitt’s role is to promote British industry overseas and the ECGD is a vital source of financial support for exporters, backing deals worth close to £3bn a year with insurance and loan guarantees.

The agency is also a potentially valuable tool for preventing bribes and corruption through its vetting of applications for funding. But industry argued this audit role should not take precedence over its prime purpose of supporting deals.

A tart retort from Rolls-Royce to an ECGD explanation of the rationale for the new rules said the company did “not see how ECGD’s statutory role could be interpreted to include an objective ‘to root out wrong- doing in international business transactions’ as suggested in your letter”.

A series of meetings between industry and the ECGD agreed some important changes to the May rules, which came into effect under revised procedures last month:

Companies no longer have to include joint venture or other business partners in the anti-bribery warranties given to the ECGD. The requirement to notify the agency of previous convictions for bribery by such partners was also dropped.

The amount of commission paid to an agent no longer has to be disclosed to the ECGD, provided it is less than 5 per cent of the contract value and not being funded by the agency.

The name of the agent can also be withheld from the agency, so long as the exporter can justify this. Industry argues such information is often commercially valuable and needs to remain confidential.

Powers for the ECGD to undertake random audits of transactions have been dropped.

These concessions are, potentially, up for renegotiation in the public consultation.

Business is adamant that the dilution of the May rules has not undermined the government’s overall aim of combatting corruption and bribery.

4) “Hewitt U-turn on anti-bribery rules”
Tom Bawden,The Times, 14 January 2005

Patricia Hewitt, Trade and Industry Secretary, was forced into an embarrassing climbdown yesterday as an agency she controls agreed, in an out-of-court settlement, to review her controversial decision to water down new anti-bribery rules.

In a decision that has landed the taxpayer with up to £275,000 in legal costs, the agency that underwrites British exports to the developing world bowed to the demands of an anti-corruption campaigner and agreed to consult human rights and other non-corporate groups before finalising Ms Hewitt’s changes.

The Export Credits Guarantee Department (ECGD) agreed the settlement with The Corner House, the anti-corruption group, at midday as the two parties were due to begin a two-day hearing in the High Court.

Under the terms of the agreement, the Department of Trade and Industry (DTI) will pay The Corner House’s legal costs, which could be as high as £250,000. The Government’s own costs are expected to be £25,000.

The agency agreed to public consultation on the changes by Ms Hewitt, who canvassed companies but did not talk to other interested parties, such as anti-bribery campaigners.

However, the revised rules will continue to apply during the consultation process, which is expected to begin by the end of this month.

Susan Hawley, research analyst for The Corner House, who brought the case, said: “This case is about ensuring that the coterie of ECGD’s customers do not get to dictate the anti-bribery law.”

Ms Hawley said that she had proof that linked sustained lobbying from Rolls-Royce, BAE and Airbus to Ms Hewitt’s decision to water down the new anti-bribery rules.

Ms Hawley sent a letter to the DTI last night demanding the right to publish this evidence ahead of the public consultation. Ms Hawley plans to pursue the matter in the High Court if the Government refuses.

Although court documents reveal that BAE, Airbus and Rolls- Royce lobbied extensively to change the rules, the “paper trail” that the ECGD plans to publish would demonstrate for the first time just how the lobbyists caused Ms Hewitt to overrule her ministers, Ms Hawley claimed.

The ECGD supported £1 billion worth of contracts for BAE, £509 million for Airbus and £67 million for Rolls-Royce and its International Aero Engines subsidiary, and £509 million for Airbus, in the year to last April.

Ms Hewitt’s revised policy, introduced on November 8, required British exporters to give anti-bribery undertakings in deals only on behalf of those companies it controlled. Under the previous policy, introduced on May 1, exporters to developing countries had to vouch for all affiliates in the deal, increasing the scope for corruption, according to opponents. Andy Scott, director of international competitiveness for the CBI, said: “Although we are disappointed that the issue has not been completely resolved, we welcome the fact that (The Corner House) was not able to quash the November 2004 procedures.”

Mr Scott added that the original anti-bribery rules were “unworkable” because it was impossible for companies to access information relating to corruption in businesses they did not control. The ECGD said yesterday that the settlement was “sensible”.

5) “Anti-Bribes Watchdog Claims ‘Great Victory'”
John Aston, PA News, 13 January 2005

An anti-corruption watchdog today claimed “a great victory in the public interest” after settling a High Court action and winning fresh consultations with the Government’s Export Credits Guarantee Department.

One of the main functions of the ECGD, which is responsible to the Secretary of State for Trade and Industry, is to underwrite bank loans to enable overseas buyers to purchase goods from the UK.

As Britain’s official export credit agency, it has also pledged to eliminate bribery and corruption in overseas contracts involving UK exporters.

Particular concern comes over goods being supplied to military or security forces, or armaments manufacturers.

Corner House Research, which campaigns for enforcement of the law in overseas corruption offences, had challenged the ECGD’s failure to consult it on changes which had “watered-down and weakened” key procedures.

A full judicial review application was due to be heard by Mr Justice Moses today, but the judge was told the dispute had now been settled.

Later, Corner House spokesperson Sue Hawley said: “This is a great victory not just for us but for the public interest.”

“The ECGD has at the last minute conceded to our main demand, which was that there should be full public consultation.”

“We have always made clear this case was essentially about whether a small coterie of ECGD’s most powerful customers should get to dictate the terms of anti-bribery policy.”

“Last November, the ECGD weakened their anti-bribery procedures following one-sided meetings with industry which were held entirely in secret.”

Lawyers for Corner House had complained that, although the ECGD had carried out extensive and detailed consultation with its corporate customers and their representatives, it had failed properly to consult the watchdog and other organisations active in the area.

Before today’s settlement, Lord Lester of Herne Hill QC had been due to argue in court on behalf of Corner House that the “one-sided” nature of the consultations amounted to “a serious breach of basic public law standards of fairness” and the ECGD’s own published consultation policy.

This had led to a result biased in favour of the ECGD’s commercial customers, which included BAE Systems, the Airbus Consortium, of which BAE Systems was part, and Rolls Royce.

Mr Justice Moses was told the ECGD had now agreed to undertake fresh public consultations under Cabinet Office guidelines.

The changes to the department’s anti-bribery and corruption procedures made last November and challenged today will remain in place pending the outcome.

The ECGD also agreed to pay Corner House legal costs estimated at £250,000.

6) “Review poses question on bribery curbs”
Jean Eaglesham, Financial Times, 13 January 2005

[Article published the day the court case was to have been heard before out of court settlement]

Claims that Patricia Hewitt, the trade and industry secretary, acted unfairly in ceding to business pressure and watering down curbs on overseas bribery are to be heard today .

The outcome of the case in the High Court could affect industry’s ability to lobby government in private, as well as reigniting a row over corruption controls on exporters. The two-day judicial review stems from the dilution of tough anti-bribery rules imposed last May by the Export Credits Guarantee Department, the official export agency.

Industry lobbying resulted in revisions being introduced last month. Companies no longer have to give anti-corruption warranties for partners and may be able to avoid disclosing the identity of the agents used.

Anti-corruption campaigners are asking the court to quash these changes, arguing that the government acted unlawfully in consulting only industry groups and not campaigners on the proposed amendments.

Documents connected to the case reveal the extent of the business lobbying. The companies involved included BAE Systems – which is denying allegations of corruption in relation to Saudi defence deals – Airbus and Rolls-Royce. A letter from BAE to the ECGD in May, complaining about the “unduly onerous” rules, argued it was not the export agency’s role “to attempt to regulate compliance” with anti-bribery laws.

The ECGD initially rejected such objections, the court documents show. John Weiss, the agency’s deputy director, told the CBI in May there was “no valid reason” for changing rules designed to “support UK government policy to deter and combat bribery and corruption.”

But the employers’ body appealed to Ms Hewitt, arguing in a letter in June that the rules were “endangering a number of valuable contracts”.

The industry secretary then ordered the agency to work with the industry groups to “get this right”, saying the anti-bribery principles should stand but the wording of the rules “may be able to be clarified”, according to the CBI. This intervention produced a significant shift in the ECGD’s stance. The agency held extensive discussions with trade bodies and companies to hammer out revised wording. BAE Systems and Rolls-Royce were present at six such meetings and Airbus at five.

The revised rules were welcomed by industry but prompted a legal challenge led by Corner House, an anti-corruption lobby group.

Susan Hawley, one of its consultants, said today’s case was “about whether a small section of the business community should be allowed to dictate the government’s policy on bribery”.

But Andy Scott, the CBI’s director of international competitiveness, said the lobbying was a legitimate attempt by the ECGD’s customers to change procedures that presented “real difficulties for companies, if not practical impossibilities”.

7) “UK ministers back down on bribery controls”
Jean Eaglesham, Financial Times, 17 October 2004

[Background to the court case]

Ministers have bowed to intense pressure from business and agreed to water down new rules designed to curb corruption and bribery by British exporters.

The government has also secretly allowed some of the new anti-bribery rules – which came into force on May 1 – to be flouted while it negotiates with industry.

The climbdown relates to the anti-corruption procedures used to vet deals by the Export Credits Guarantee Department, the government agency providing guarantees and insurance to exporters. Ministers in April announced these procedures were being tightened to “ensure that the government continues to play its part in rooting out wrong-doing in international business”.

The ECGD – which backed £2.9bn of business in the last financial year – has not refused any company cover on the grounds of corruption for at least five years in spite of allegations of bribes on a number of deals.

The new rules have run into sustained opposition from British exporters who say the new anti-bribery requirements would place them at a competitive disadvantage. An action group formed by several business bodies – including the CBI, British Exporters’ Association and defence groups – has been locked in talks with the ECGD since May.

The government is understood to have agreed to virtually all the industry’s demands. Revised rules – due to be signed off by Patricia Hewitt, the trade and industry secretary – are expected to be published shortly.

The industry concerns involve the undertakings companies are being asked to give, particularly in respect of joint venture partners, as well as the information that must be disclosed.

Anti-corruption campaigners expressed alarm on Sunday night. Susan Hawley, a consultant for The Corner House, said: “The ECGD must stick to its guns on its anti-corruption procedures. To weaken them now would send a very bad message to the business community.”

8) “Firms can keep secret agents: Minister persuaded to ease anti-bribery rules”
Rob Evans and David Leigh, The Guardian, 25 January 2005

Newly released documents have revealed how companies used their lobbying power to loosen official rules designed to stop corruption.

In behind-the-scenes manoeuvres, Rolls-Royce, BAE Systems and the aircraft giant Airbus, persuaded trade secretary Patricia Hewitt to allow them to keep secret details of the middlemen used to secure international contracts.

She brushed aside the advice of Whitehall officials who argued that these middlemen are often used to channel bribes to foreign politicians and officials to win contracts.

The government’s Export Credits Guarantee Department (ECGD) had proposed that exporters had to disclose the identities of middlemen when they applied for financial support from the taxpayer.

The government required the details as part of tougher measures to stop the payment of bribes overseas by British companies.

The documents were released by the ECGD following a freedom of information request from the Guardian and a recent court case.

Minutes of a meeting on August 9 last year show that the three companies told the ECGD that information about these middlemen was “very commercially sensitive”.

The minutes continued: “The network of agents/intermediaries was a valuable asset built up over a number of years and offered important commercial advantages such as being able to open doors.”

“The intermediaries themselves may have valid and justifiable reasons for wanting to remain anonymous.”

The companies claimed that the names of the agents would leak from the ECGD, enabling competitors to poach them.

Ms Hewitt agreed that the companies did not have to give the names or addresses of these middlemen, provided the firms gave an explanation.

At a meeting on October 7, the companies wanted “confirmation that commercial confidentiality would be accepted as a valid reason for not identifying its agents”.

Ms Hewitt has been forced to rethink the anti-bribery rules because of a legal victory by anti-corruption campaigners, the Corner House group.

Susan Hawley, for the group, said: “Knowing who is the middleman is crucial to stopping corruption, otherwise the taxpayer will end up directly supporting bribery.”

BAE is alleged to have made corrupt payments through middlemen in Saudi Arabia, Qatar and India. Rolls-Royce is accused of paying pounds 15m to win a contract in India.

9) “Minister, how far you’ve come: Big business pressure led Hewitt to emasculate anti-bribery laws” (editorial)
David Leigh and Rob Evans, The Guardian, 25 January 2005

Patricia Hewitt is an honest woman and a nice person. Those who first met her more than 20 years ago encountered an idealist. She was working for the then National Council for Civil Liberties out of a miserable back room in grim King’s Cross, and targeted by the boneheads of MI5 as some kind of subversive.

Now she is a cabinet minister, secretary of state for trade and industry no less. And how she has changed.

Freedom of information is now beginning to reveal the raw mechanics of government. And one of the latest batch of released papers tells a story of brazen political corruption by big business, with which Patricia Hewitt seems to have felt forced to collude. One can only feel for her.

It is one of the biggest scandals of modern Britain that large corporations make sales to the third world by bribery. Time and again, examples have surfaced of huge contracts, generally for arms, but often for civil aircraft, bridges and dams, where suitcases of cash have gone into a Swiss bank for the benefit of local politicians.

Poor countries are further impoverished under a mountain of debt, often for shoddy goods they don’t need. The British taxpayer routinely guarantees these sales. When the dictator topples or the currency crashes, we pick up the bill while the company cheerfully pockets its payment.

Three years ago this Labour government at long last made bribery of foreign officials a criminal offence. One of Hewitt’s agencies, the Export Credits Guarantee Department, has been trying to enforce this law.

Last year it wrote new rules saying that to get taxpayer guarantees, companies had to reveal the identity of their secret commission agents. These are often the people who would end up being arrested under new legislation.

In the past it has been discovered, for example, that the arms firm Alvis paid pounds 16.5m to offshore companies belonging to the daughter of Indonesia’s President Suharto. The arms firm BAE Systems paid pounds 7m into a Jersey account of a relative of the ruler of Qatar.

The Serious Fraud Office is investigating a string of secret agency payments made by BAE, who keep the contracts locked in a safe in Geneva. They are alleged to have provided more than pounds 17m of benefits to a Saudi prince.

So disclosure of the true identity of agents and “consultants” will, as often as not, have a practical value in deterring corruption.

But when the big corporations discovered what the ECGD had done, they went ballistic. The Whitehall papers revealing their behaviour were slipped out at 8pm last Friday in the traditional damage-limiting way, but the story they tell is a particularly naked one.

Three huge companies, Rolls-Royce, BAE and Airbus, used the CBI to mount a behind-the-scenes lobbying campaign aimed at Hewitt. Rolls exports its aircraft engines around the world. BAE sells warplanes, particularly its Hawk light-attack aircraft. Airbus, the Euro-venture in which BAE has a 20% share and which the UK government has supported heavily with launch aid, is seeking to sell its new civil airliners on a global scale in rivalry to Boeing in the US.

Last June the CBI claimed to Hewitt that the new rules had to be suspended as a matter of urgency. They were “endangering a number of valuable contracts due to close this week . . . In the light of the scale of the contracts currently at risk, it would be prudent temporarily to revert to the status quo ante”.

Minutes of a meeting on August 9 last year show that the three companies then told the ECGD that information about middlemen was “very commercially sensitive. The network of agents/intermediaries was a valuable asset built up over a number of years and offered important commercial advantages such as being able to open doors.”

“The intermediaries themselves may have valid and justifiable reasons for wanting to remain anonymous.”

The companies claimed that the ECGD could not be trusted to prevent the names of these middlemen leaking to their competitors, who would try to poach them.

It is unlikely that the secretary of state believed this questionable explanation. Another reason, of course, why an agent would want their identity and the location of their offshore bank account kept secret is because it would reveal that a criminal offence under British law was being committed.

But none the less, she rolled over. Hewitt agreed that the companies did not have to name these middlemen, provided the firms gave a satisfactory explanation. On October 7 the companies demanded “confirmation that commercial confidentiality would be accepted as a valid reason for not identifying its agents”. This was accepted.

It was some anti-corruption campaigners, the Corner House group, who forced the release of these files. They are the kind of small, idealistic body to which Hewitt once belonged. It is a shame that they should end up on opposite sides nowadays.

Corner House, January 25, 2005

Categories: Corruption, Odious Debts

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