Grand Committee
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Arrangement of Business
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The Deputy Chairman of Committees (Baroness Henig) (Lab)
My Lords, the hybrid Grand Committee will now begin. Some Members are here in person, respecting social distancing, and others are participating remotely, but all Members will be treated equally. I ask Members in the Room to wear a face covering except when seated at their desk, to speak sitting down and to wipe down their desk, chair and any other touchpoints before and after use. If the capacity of the Committee Room is exceeded or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes. The time limit for the debate is three hours.
Bribery Act 2010: Post-legislative Scrutiny (Select Committee Report)
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Lord Saville of Newdigate
That the Grand Committee takes note of the Report from the Select Committee on the Bribery Act 2010 The Bribery Act 2010: post-legislative scrutiny (HL Paper 303, Session 2017–19).
Lord Saville of Newdigate (CB) [V]
My Lords, the report of the committee charged with post-legislative scrutiny of the Bribery Act 2010 was published almost two years ago. The delay in the report coming before this House was caused by general elections, Brexit and, to some extent at least, the Covid epidemic.
I start with the good news. In the view of the committee, a view shared among all our witnesses, the Act is an excellent piece of legislation, sweeping away many unsatisfactory features of the previous law and instead creating offences that are clear and all-embracing. In particular, the new offence of corporate failure to prevent bribery puts the onus on companies to conduct themselves in an ethical way and, where necessary, to take adequate steps to prevent persons associated with them from indulging in bribery. In light of this provision, the committee was not persuaded by the suggestion that companies should be made criminally vicariously responsible for bribery. The report is therefore mainly devoted to considering how the Act has operated in practice and whether improvements can be made to the way it is being implemented.
Time does not permit me to address all of the matters that we considered, but there are some that I would like to raise today. The first relates to deferred prosecution agreements, a novelty in English law. These are bargains between prosecutors and a company under which the prosecutor agrees not to proceed with a prosecution against the company for a fixed time in return for the company mending its ways and paying a financial penalty. DPAs were a creation not of the Bribery Act but of the Crime and Courts Act 2013. However, the Liaison Committee, when recommending the setting up of the bribery committee, specifically invited us to consider DPAs as they have affected the conduct of companies, both to prevent corrupt conduct and in the investigation of such conduct when it is suspected of having occurred.
DPAs apply to many economic crimes other than bribery, but it appears that their principal use to date has been in relation to corporate bribery. As your Lordships will see from the report, the committee considered that DPAs can perform, and have to date performed, a very useful function in combating corporate bribery. We were not persuaded, as some have suggested, that they provide an easy way out for rich companies, but not poor ones, to avoid prosecution. There are, however, three aspects that I want to stress.
The first is that we consider it vital that, unlike in other countries, DPAs continue to be subject to judicial control—in other words, only initiated after judicial scrutiny if the judge is satisfied that an agreement is likely to be in the interests of justice and that the proposed terms are fair, reasonable and proportionate, and sanctioned publicly by the court only if the judge is satisfied that the final terms do in fact satisfy these requirements. The second point is that DPAs must not be used as a means of avoiding the prosecution of the individuals actually responsible for the bribery in question. The third point relates to the financial penalty. Under the present law, the amount of the penalty should be broadly comparable to the fine that a court would have imposed on conviction following a guilty plea. In general terms, this results in a discount of one-third of the maximum that could be ordered. However, the discounts given in some DPAs in recent years have been as high as 50%.
I stress that the committee in no way considered that the judgments in these cases were wrong, as there was clearly ample justification for the greater discount. However, they were cases where the company had not self-reported the bribery. We took the view that self-reporting by companies should be encouraged and that, accordingly, a company that has not self-reported should normally receive a lesser discount than a company that has done so, whatever co-operation the company later provided. In their response to the report, the Government noted this recommendation but made no commitment towards encouraging self-reporting by companies. I, for one, hope that they will at least keep this matter under review as, at present, we see a risk that companies will consider that there will be little or no benefit to be gained from self-reporting.
On another topic, we were firmly of the view that there should be no exceptions to the offence of bribery in cases of so-called facilitation payments. These are, in general, small payments in cash or kind to bribe officials into properly performing their public duties rather than failing to do so or taking undue time. There is no doubt that there are some countries where officials are low paid in the expectation that they will add to their wages by this means. This state of affairs often puts the person asked for a bribe in a very difficult position. For example, a ship’s captain with a valuable perishable cargo on board risks losing it through delay if he does not sweeten the harbour-master to let him berth in due time, by giving him a bribe of cigarettes or whisky of miniscule value compared with that of the cargo. The committee is heartened by the fact that the Government have stated unequivocally that no exceptions should be made for facilitation or similar small bribes. It is noteworthy that some countries that did enact exceptions have now abolished them.
A good deal of the report is taken up with the question of educating people on the Bribery Act. We had quite a considerable body of evidence to the effect that people were either ignorant of its provisions or misunderstanding them. There is not sufficient time today to go into this question in detail, but for example, many seem to have had difficulty in distinguishing between unobjectionable corporate hospitality and attempts to gain an improper advantage. This is said, among other things, to have had an adverse effect on financial support through corporate hospitality for sporting activities.
On the general matter of guidance on the Bribery Act, we made a number of specific recommendations for improvement. As will be seen from the Government’s response to the report, we failed to persuade them to adopt or carry forward many of the suggestions that we made. However, we do urge the Government to ensure that these matters are best kept under constant review, especially in the case of SMEs seeking to open or enlarge their trade with other countries, a vital part of our economy. Greater knowledge and understanding of the Bribery Act can, in our view, only assist in combating corruption. Corruption is an evil that, if allowed to flourish, is extremely damaging to our society.
At the time of our report, we did not know what the Brexit outcome would be. Concerns were expressed about the possible effects on European co-operation, since there were many EU measures in force to support and enhance security and law enforcement, some of which were of particular importance in the investigation and prosecution of bribery offences, which often cross national borders. I have asked the Minister present today to give us an update on the position.
On a final note, I pay tribute to those who fashioned the Bribery Act. Faced with an extremely unsatisfactory state of affairs and a long history of less-than-successful attempts to remedy matters, they produced what I would describe as a model piece of legislation, bringing simplicity, clarity and certainty to an important part of our criminal law. I beg to move.
Lord Hain (Lab) [V]
My Lords, I thank the noble and learned Lord, Lord Saville of Newdigate, for his instructive introduction and welcome the report of the committee.
The international scope of both the UK Bribery Act —introduced by Labour when I was a Cabinet Minister —and the US Foreign Corrupt Practices Act is important, with anti-corruption campaigners reporting a continuing rise in global bribery and corruption. For instance, Goldman Sachs has agreed to pay $2.9 billion, or £2.2 billion, to settle a US-led investigation and its Malaysia division also agreed to plead guilty to violating foreign bribery laws linked to the alleged looting of the country’s sovereign wealth fund, 1MDB. Airbus had to set aside $3.6 billion last year to cover settlements with authorities in the US, France and Britain after admitting it had paid huge bribes on an endemic basis to secure contracts in 20 countries. Furthermore, the Covid-19 pandemic has opened up opportunities for bribery and contracts for cronies worldwide, including in Britain where an uncommon number of ministerial mates seem to have benefited.
Nevertheless, as the committee reported, the Bribery Act does not seem to have prejudiced UK business. Perhaps, as the noble Lord, Lord Gold, suggested in a recent article, the Act has resulted in companies improving their governance and compliance by not using third-party agents and therefore, as he wrote, has,
“frightened many companies into honesty”.
However, perhaps the strikingly low rate of prosecutions under the Bribery Act, as the committee pointed out, is because of the slow pace of bribery investigations, with a number of witnesses criticising the time it had taken for bribery charges to be brought and cases to reach trial. The committee rightly recommended that the director of the Serious Fraud Office and the Director of Public Prosecutions publish plans outlining how they will speed up investigations into bribery and improve communication with those placed under investigation for bribery offences.
However, is not the real problem that there are simply not enough resources being invested by the Government into enforcing the Bribery Act and money laundering legislation? Enforcement and investigative agencies, such as the Serious Fraud Office, the National Crime Agency and the Financial Conduct Authority, require proper resourcing to utilise the legislation to conduct investigations—some very complex—and bring prosecutions. Yet across the world that has not been the case. In the UK, these agencies have not had anything resembling the resources required to combat financial crime in recent years, leading to a request in 2019 from the head of the National Crime Agency for an additional £2.7 billion in funding for that agency alone. That is just one of the agencies involved in combating bribery requesting an additional £2.7 billion to enable it to do its job properly. No wonder London is regarded by many as the money laundering centre of the world, where the legislation is stringent but the enforcement and policing is certainly not.
As I demonstrated in debates in 2017-18 in your Lordships’ House on the Sanctions and Money Laundering Act, London-based global corporates such as HSBC, Standard Chartered and Baroda Bank facilitated massive looting and money laundering from South African taxpayers under former President Zuma and his cronies the Gupta brothers. London-based corporates McKinsey, KPMG, and Bain & Co admitted to raking off multi-million fees from President Zuma’s regime, its state agencies and state-owned enterprises. So guilty of complicity in corruption were these corporates that, when it was exposed, they sacked their top South African-based executives and made promises to pay back millions of fees they had received.
Why, however, were they not prosecuted in London under the Bribery Act? Is it because, like another London-based corporate guilty of whitewashing corruption and securing a lucrative fee, Hogan Lovells, the international law firm, told the Solicitors Regulation Authority that their South African arm enjoyed the same name only for “branding purposes”, and that London bosses were therefore not culpable in any way? You could have fooled me looking at their website and their activities internationally: they are a global corporate like the others that I have named. Surely corporates operating from London should be bound by the Bribery Act. Otherwise, people will ask: is it worthless? I hope the Minister will reassure me on these questions and I will be interested in any observations by the noble and learned Lord, Lord Saville of Newdigate.
Baroness Bowles of Berkhamsted (LD) [V]
My Lords, I welcome this report and commend the work and conclusions of the committee and the opening speeches by the noble and learned Lord, Lord Saville, and the noble Lord, Lord Hain.
I will speak about “failure to prevent” offences generally, but before that will speak briefly on the lack of clarity about what is meant by procedures being “adequate” for preventing bribery. This was brought about by the subsequently enacted tax facilitation offences using the alternative phrase “reasonable in all circumstances”. This is despite that having been dismissed in the Bribery Act debate as too high a standard by referring to “all circumstances”. In that context “adequate” was thought to be a lower bar. Certainly, if I congratulated a fictitious noble Lord on their “adequate speech”, it may not be taken as altogether complimentary.
Others switched the emphasis around so that, looking after the event, the bar is suddenly higher because procedures had failed and must therefore be inadequate. I am comforted that a senior judge said that he would have accepted them as both meaning the same had it been presented to him, but clarification on what is intended is desirable for both purposes.
I have mentioned the two “failure to prevent” offences and the reason for their existence is to strengthen the prospect of finding responsible parties guilty—which is very difficult because of the need to find a directing mind, and is tantamount to impossible with the board structures of large firms. Therefore, I welcome the point made in paragraph 109 that there are arguments to make corporations vicariously liable more generally, even though there is not a recommendation due to the inquiry’s scope.
It is some time since the Ministry of Justice made a call for evidence on corporate liability—to which I made a submission—and, after a long delay, the response is that there was not a sufficient evidence base on which to base reform. It has been sent off for lengthy procedures in the Law Commission, which already said in its 2010 paper on Criminal Liability in Regulatory Contexts that
“the identification doctrine can make it impossibly difficult for prosecutors to find companies guilty of some … crimes, especially large companies”,
and in its 2019 paper on suspicious activity reports that
“The identification doctrine can provide an incentive for companies to operate with devolved structures in order to protect directors and senior management from liability.”
Regrettably, I do not believe that the department has any heart to follow through on the Prime Minister’s call for action in 2016 and the good start shown by the Bribery Act. The only reason I can imagine for that squeamishness is that somehow it thinks it is a competitive advantage to shield directors in a way that they are not shielded elsewhere, such as in the United States.
A read of the call for evidence background document gives a good exposition of how bad matters are and many of the reasons why evidence of failures in prosecutions is relatively scant—because prosecutors know they cannot succeed against large companies and give up, unless sector-specific legislation has been introduced such as the “failure to prevent” regimes or the now systematically compromised financial services senior managers’ regime.
The current common law “directing mind” principle, first expounded in 1915, is unfairly discriminating to small businesses. The Crown Prosecution Service’s legal guidance, under “Further Evidential Considerations”, states:
“The smaller the corporation, the more likely it will be that guilty knowledge can be attributed to the controlling officer and therefore to the company itself.”
Given the general guidance for prosecution that there must be a “realistic prospect of conviction”, no wonder evidence is scant and statistics show a preponderance of prosecutions against small companies.
How can that unfairness be left to stand? What does it say about the culture of our country and why people feel left out? While acknowledging the fact of wrongdoing, people nevertheless rightly resent there being one law for the big and another for the small. Dancing-on-pins excuses do not cut that.
Civil law developed to take account of the complexity of modern companies, but not criminal law. Civil law is not enough: the ultimate deterrent of deprivation of liberty cannot apply to corporations, and in the end it does not apply to directors in large corporations. Culture will not change until it does, and the UK being “a good place to do business” is a tainted phrase—maybe even a loaded phrase. Surely directors should be required to ensure systems to prevent all bad corporate behaviour. Only then will action make its way to the boardroom, rather than be kept away in the safety of the executive committee or below.
But if the ministry is reluctant—whatever the cause—will it at least not stand in the way of further sectoral facilitation of crime measures?
Lord Gold (Con) [V]
First, I thank the noble and learned Lord, Lord Saville, for securing this debate and for ably chairing the Select Committee, and also thank the noble Lord, Lord Hain, for plugging my recent article.
The Select Committee report we are considering today stated that the Bribery Act
“is an excellent piece of legislation which creates offences which are clear and all-embracing.”
I agree and, in doing so, declare my position as a member of the committee. The new Section 7 offence of corporate failure to prevent bribery was innovative and has been most successful, not because there has been a plethora of prosecutions but rather because it has made CEOs and boards undertake their own review of their businesses to satisfy themselves that they comply with the new legislation.
The immediate reaction from businessmen when the Bribery Bill was enacted was that British companies would find it harder to compete internationally. There was a particular concern that facilitation payments were being outlawed and there was a fear—clearly unfounded—that the new Section 7 offence would be onerous. It was particularly interesting to the Select Committee that no witness giving evidence suggested that there should be any relaxation of the prohibition on facilitation payments.
Recognising the success of the Section 7 “failure to prevent” model, the Select Committee recommended that the Government should consider whether this should be adopted in other areas, notably to prevent economic crime. This issue is now being considered by the Law Commission. I ask the Minister to confirm that the Government will keep under review the possibility of extending the Section 7-style offence to this and, possibly, other areas.
In practice, as the Select Committee found, there is little sign that the Bribery Act has prejudiced UK business. If anything, it has resulted in companies improving their governance and compliance. Indeed, by not using third-party agents, which has been a cause of problems for many international businesses, companies have been better able to compete internationally, as they have developed closer direct relationships with their customers, instead of relying on middlemen to be the link.
Another area where the Bribery Act has been successful is in cutting corporate hospitality. The committee wondered whether the pendulum had swung too far and many companies were shying away from giving any hospitality to their customers, even though, properly administered, corporate hospitality can be a necessary and legitimate part of doing business.
The Ministry of Justice guidelines on what is permissible are clear and, although the committee suggested that the Government should consider adding further examples of what might constitute acceptable corporate hospitality, the Government declined to do so. They explained that the guidelines were drafted
“in a deliberately high-level, non-prescriptive way to encourage organisations to examine their own internal systems and procedures”,
and identified other sources for guidance—notably, Transparency International. I rather agree with this. Frankly, common sense should largely dictate what is permissible. A modestly priced working lunch or dinner is clearly on the right side of the line; an airplane being delivered to a customer, carrying a Rolls-Royce car as a sweetener gift, is not. Over time I am sure that companies will find the right balance.
The Select Committee reviewed deferred prosecution agreements which, as the report states,
“have had a major influence on some of the largest recent cases of corporate corruption, allowing them to be settled without the companies involved being convicted of the offences.”
This is terribly important, because the existence of a conviction may well mean that companies are debarred from undertaking certain business, notably government contracts, in all parts of the world. This would put companies at risk of close-down, with ensuing unemployment of their staff.
The committee recognised the need for careful judicial oversight of DPAs and identified two key conditions for one: first, whether the company self-reported; and, secondly, whether it then co-operated with the criminal prosecution. A further essential requirement is that the company embraces compliance and governance and demonstrates that it is committed to clean business in future and, as required by Section 7, will put in place processes and rules which will reduce the risk of this recurring. This commitment has to come from the very top of the company, fully supported by the board, demonstrating by their actions, not just words, that non-compliant business is unacceptable.
Over the past 10 years, I have worked closely with a number of major international businesses that have agreed a DPA and, in the run-up to securing that, have completely overhauled their compliance regime. I have been heartened by the approach adopted by each of those companies, and in every case I believe that the business has been strengthened by the measures adopted.
Finally, it is of concern that, where DPAs have been agreed, there have been so few successful prosecutions against individuals responsible for the criminal act. While strongly supporting DPAs, the committee reiterated the importance of prosecuting the “culpable individuals”. I ask the Minister to let us know whether the Government have any plans to address this issue and, if so, what they are.
Lord Stunell (LD) [V]
My Lords, it is a pleasure to follow the noble Lord, Lord Gold, one of the many distinguished and high-powered members of the committee, on which I too served, under the very effective chairmanship of the noble and learned Lord, Lord Saville. It was as well-informed and expert committee as your Lordships would expect.
However, I was not one of those experts. I came on to it straight off the Clapham omnibus, via the Committee on Standards in Public Life. For me, the test was: how can we get to the gold standard of effectiveness in the fight against corruption, in the punishment of bribery, and in the deterrence of anyone from using bribery or corruption in other forms as a route to business success?
The UK has one of the better legal frameworks for tackling bribery—certainly up to silver standard but definitely not gold standard. We are high in the international corruption perceptions index, which is good, but we are not top of that list. Our score has fallen from 82 points out of 100 in 2017 to 77 points last year. A five-point decline in four years is not a world-beating performance, and we have now dropped out of the top 10 on that index. Surely we should be moving towards the gold standard, and not dropping down to bronze, in the years ahead. I will pick out two of our recommendations that show where we could reverse that decline and comment on another where I fear that the UK is now anyway committed to going further downhill.
First, regarding our skilfully drafted recommendation 9 on vicarious liability, on which others have already spoken, the issue for me is whether, when the ship sinks, the captain should go down with the ship or whether, so long as he did not realise that someone was steering on to the rocks, he should get away in the lifeboat with no court of inquiry to follow. To the lawyers, it is “mens rea”—not much spoken of on the Clapham omnibus. What normal people expect the law to do is to hand out just deserts to those in authority who show reckless ignorance of wrongdoing on their watch.
Instead, protected by the current law, it is absolutely in the best interests of those who run large businesses and multinational companies to keep themselves carefully ignorant of any evidence of bribery by underlings when they bring home big contracts and boost company profits. When knowledge means taking legal responsibility and ignorance means acquittal, the incentives are perverse. The committee noted evidence that, as a result of that, it is much easier to convict the boss of an SME than the boss of a multinational company. That, too, is a wholly perverse outcome of the current framework of legislation.
The committee’s recommendation does not endorse this perversity, but nor does it recommend any change. But if we ever want to get to gold standard, we will have to find a way to reconcile our legal principles with common sense, as has already been achieved in the United States and other jurisdictions to good effect. My question to the Minister is: does he actually want to be world-beating? Does he aspire to reach gold standard on corruption? If it is not via vicarious liability provisions, what does he propose as the alternative?
That brings me to the committee’s recommendation 20, where we pressed the Government to introduce a “failure to prevent” offence to a wider range of economic crimes and corrupt practices. There is clear evidence that a “failure to prevent” offence is an effective inducement to companies to put in place a culture of compliance and systems and processes to support that culture. Among other important benefits—like actually stopping bribery happening—it means that bosses cannot so easily shelter behind ignorance if a case does come to light. It is, therefore, very disappointing that the Government have given a very tepid response to our recommendation. I could quote the Government’s response at length, but I will summarise it by saying it was pretty much a lemon. It is a clear opportunity to raise our score on that index, so I hope to hear the Minister say that he will now quickly revisit this key issue and get things moving in the right direction.
Lastly, recommendation 14 focused on the European arrest warrant, where we said:
“The fight against international bribery will be significantly impeded if there are not in force … measures with equivalent effect to the European Arrest Warrant.”
In his evidence to us, the Minister, Ben Wallace MP, said that the loss of the EU arrest warrant
“would have a degrading effect on our ability”.
In the event, as your Lordships will know, the UK has ditched the European arrest warrant—a clear step backwards in the fight against corruption. So my final question to the Minister is: what concrete plans do the Government have to reverse this slide down the league and to rebuild our record of ethical business practices, both at home and abroad?
Lord Morris of Aberavon (Lab) [V]
My Lords, the Select Committee of your Lordships’ House is to be congratulated on an impressive and comprehensive report, which is a good example of post-legislative scrutiny. I well remember that, when I was a member of a similar scrutiny committee on the Defamation Act, there was a steep learning curve.
In the short time available, I can touch on only some of the report’s subjects. The first is the role of the CPS and the SFO. In my time as a law officer, I had to initiate reform of the CPS by setting up the Glidewell inquiry. In my supervisory role, I had regular meetings with the Director of Public Prosecution and less frequent meetings with the director of the Serious Fraud Office. My first point is that, as a criminal law practitioner, I was very conscious of the immense burden that prosecutors carried in investigating and prosecuting fraud cases, which were becoming more complex than they had been in the past. It is essential that investigators and prosecutors have sufficient resources to tackle the problems. May I ask the Minister to place on record the financial resources that the CPS and SFO have been getting annually since the beginning of the period when austerity cuts began? I believe that the Ministry of Justice accepted far too readily reductions in finance and, hence, manpower. Specifically, can we have the figures for both?
I regard it as important that the Director of Public Prosecutions and the director of the SFO should publish plans outlining how they will speed up bribery investigations and improve levels of communications with those placed under arrest under the Bribery Act. That is not to denigrate the Government’s response, which I welcome; my query is whether it goes far enough. The committee received evidence of relatively low salaries for lawyers and investigators at the SFO and the CPS in comparison with their private sector counterparts. That is only partially taken on board in the Government’s endorsement of the SFO’s increased budget. I make the same point as regards the rank of police investigators and the resources that the police are able to devote. I regard the Government’s response to paragraph 85 of the report, where the committee makes a valuable recommendation, as inadequate. I submit that the Government should look again at this now and repeatedly in future years.
I welcome the scrutiny that the committee has given to deferred prosecutions and pay tribute to the noble and learned Lord, Lord Garnier, for his advocacy. The emphasis is clear in the report that the judgment of the court should be public, and the public should be aware of what has happened and the conclusion.
On post-Brexit issues, the lower figures for applications for European arrest warrants at Westminster magistrates’ court in recent weeks are alarming. I am concerned by the Government’s claim that they have the available tools to ensure the safety of our realm and that we can get hold of people whom we require to face justice. I suspect that the tools are inadequate and we are less protected than we were. Perhaps we could have the observations of the Minister specifically on the issue of why there has been such a reduction in applications for extradition in recent weeks at Westminster magistrates’ court.
I welcome the committee’s scrutiny. I turn to that part of the report that deals with corporate hospitality, although it has been dealt with so adequately by the noble Lord, Lord Gold. The bottom line is that it is a matter of common sense, as he said—and I repeat that. Many years ago, my friend the late Sir Melvyn Rosser, one of the senior partners at Deloitte and a member of the Royal Commission on Standards of Conduct in Public Life, said that a possible yardstick of the measure of hospitality was that a bottle of whisky at Christmas might be permissible but certainly not a case of whisky at any time. The Bribery Act was never intended to prohibit reasonable and proportionate hospitality or other similar business expenditure. I do not go along with the committee’s attempt to get the Government to give clearer examples in the Ministry of Justice guidance. It is common sense at the beginning and the end, and no more advice is really needed.
With those brief words, I am conscious that I do not do justice to the committee’s hard work, which I commend, and I appreciate the forbearance of the House.
Lord German (LD) [V]
This is a very welcome report, and it is pleasing to note that the Act in itself is robust, and that most of the concerns expressed are related to the operation of the Act. Of course, this debate has been a long time coming, as noble Lords have said. Between its publication in March 2019 and the Government’s response in May 2019 and now, nearly two years later, a great deal of time has elapsed, and progress in our courts has been held up significantly by the pandemic. Looking at this in a positive way, this delayed debate provides an opportunity to review the report and the response by looking at what has changed over the intervening period since their publication.
I have the impression that at, about, or close to the period of publication, a major change of internal emphasis took place in the Serious Fraud Office. I got a sense of a clearing out, a refreshment, and a new approach to its work. This was very encouraging. However, I would be grateful if the Minister in reply could indicate whether my impression is born out of reality.
I note the report’s comments on how the SFO handled large amounts of documentation, which was a contributory factor to the long delays in producing outcomes to its investigations. For example, it talks of millions of documents being scrutinised in the course of the Rolls-Royce investigation. The reality is that data, by which I mean documents and digital information, will increase, not decrease. The report mentions the introduction of artificial intelligence as a means of aiding this scrutiny. That approach is essential, because the demand for better correlation of information and timeline creation, sometimes spanning multiple sources of information, will increase as the number of data sources increase. I would be grateful for an update from the Minister on how this challenge is being met. Does the Minister agree that this approach will be an important tool in the armoury of the SFO in dealing with the complexity of modern business activity? Much evidence will be in electronic form on a multitude of different platforms. Identifying and comparing strands of an investigation will be much enhanced by the use of AI.
The SFO evidence provided to the inquiry and the report itself raise the question of vicarious liability. That case has just been outlined by my noble friend Lord Stunell; the report does not rule it out but says that it is beyond its scope. The SFO, in supporting the case for this approach in its evidence, states:
“From a prosecutor’s point of view this lack of clarity”—
—that is, the identification principle approach—
“is a significant disadvantage in attributing corporate liability”,
and says that
“the clear principle of vicarious liability for criminal acts by employees acting for a company creates a much stronger enforcement regime.”
In response, the committee’s report states that this issue goes beyond offences under the Bribery Act. In view of that response, can the noble and learned Lord, Lord Saville, the chair of the committee, say whether he considers that a further investigation into that measure alone by the House of Lords would be appropriate, and whether he might consider recommending it to the House? It would also be important to understand the view of the Government in their response to this debate.
I turn to another matter that has arisen in the period between the publication and response to this report, which is the OECD Working Group on Bribery conclusions on the UK Government’s report on the follow-up to the phase 4 evaluation. The Government’s follow-up report was presented in March 2019, and the OECD gave its evaluation later that year. Many of the OECD recommendations have been fully or partially implemented, but there are several where no progress has been made, and where there is a read-across to the committee’s report.
There are two issues in the OECD report which are of particular concern. The working group welcomed the committee report’s recommendation that the Government should review the guidance to commercial organisations, but noted that
“no steps have yet been taken to address the Working Group’s Phase 4 recommendations in this respect”.
Those OECD recommendations in 2017 preceded the committee report that we are now considering. I would be grateful for the Government’s response to this matter, given the time that has elapsed.
The second issue relates to the independence of investigation and prosecution of foreign bribery and in particular the implementation and use of Shawcross exercises in foreign bribery cases. Taken alongside what noble Lords have previously talked about in terms of the European arrest warrant, could the Government say whether this matter has now been corrected or needs to be put right, and what deficiencies there are now in the system?
Finally, I turn to SMEs. The report outlines a number of recommendations on the approach to gifts and hospitality and on better guidance. The Government’s response to better guidance is that SMEs could find information on bribery on the Government’s web pages or by phoning a helpline. So they say that the information is there, if you want to look for it. But above all SMEs need to be aware of the issue, because you cannot look for things that you do not know exist. There is certainly room for a more systematic approach to awareness raising, and the Government as yet seem to have not taken the opportunity to take this forward. This is crucial if we are to encourage more and more companies to look for export opportunities across the globe.
Awareness-raising can follow a wide range of routes, but the Government need to address this matter urgently. The committee witness who said that you cannot take someone out to dinner without committing a crime exemplifies the need for a balanced and understood approach to these matters. As the report states, corporate hospitality is a necessary and legitimate part of doing business. The Government must do more to raise awareness of that balance—
The Deputy Chairman of Committees (Baroness Henig) (Lab)
My Lords, I reinforce the point that the time limit for speeches is six minutes.
Lord Empey (UUP) [V]
My Lords, I begin by thanking the noble and learned Lord, Lord Saville of Newdigate, for his chairmanship, which it was a pleasure to serve under throughout this report. I also extend my thanks to the clerk and the staff of the committee, who served us extremely well, dealing with voluminous amounts of evidence that came in throughout the inquiry.
If I had one impression from the committee, it was that perhaps we were looking at the issue a little earlier than might have been appropriate given that it takes a long time for a piece of legislation like this to drill down to the actual business on the ground. However, I would have to say that we are not unique in having a report debated here 18 months to two years after we published it. Earlier this week I attended Grand Committee when the noble Lord, Lord Howell of Guildford, was making a report on the Pacific Alliance, and that was 18 months old as well, so we are not in any way unique.
It was encouraging to hear that by and large the legislation was working, and it was also good to hear that the United Kingdom has a relatively good reputation internationally on its approach to bribery. However, as the noble Lord, Lord Stunell, pointed out, that was the position nearly two years ago, and obviously it has changed. I hope that that is not permanent. I also note that I watched an interview last night with Senator Menendez of the US Senate, during which Russia and what was happening in the Navalny case came up. A throwaway remark was made that London was awash with Russian money, we were very soft on dealing with money laundering, and so on. One has to be aware that our reputation is under scrutiny by the world, and questions need to be answered about how we approach large sums of money which seem to come without any clear evidence of how they were earned.
The other issue that has perplexed me somewhat has been the balance between small and medium-sized enterprises and the large corporates. While our recommendations are as they are, one still has a feeling, as the noble Lord, Lord German, pointed out a few moments ago, that the person running a small business, up a lane in a garage somewhere, would not necessarily have the grasp of the issues that a large corporate has, which can afford to employ expert legal advice and have people to deputise. That needs to be watched very carefully. We need to push the SME sector to export, and the biggest fear it has is not so much getting sucked into bribery but not getting paid for its products in a foreign market. That needs to be taken into account.
The other issue that we touched on was how this matter will be continuously kept under the eyes of government and Parliament. There is, or was at the time, a parliamentary advocate, who I think was John Penrose MP, and we were a bit concerned that a Back-Bencher might not necessarily be the right person to promote the whole concept of keeping bribery under control.
I would also like to raise one another matter, which perhaps the Minister could address in summing up—no one would be better qualified. We took evidence from Scotland; of course we know that Scotland has a different law and has had for centuries. One issue that came up was whether there was a risk that the law in Scotland could become sufficiently different from the law in the rest of the United Kingdom that we could allow a loophole to develop whereby location of a business in one part of the United Kingdom would leave it less vulnerable to charges under the Bribery Act than if it was located in another. I would appreciate it if the Minister could address that in his summing up. While we were satisfied that it was adequate and equivalent in current circumstances, that may not necessarily be the case in future. Could that particular matter be kept under review?
Lord Hodgson of Astley Abbotts (Con) [V]
My Lords, I too was a member of this committee and I enjoyed serving under the chairmanship of the noble and learned Lord, Lord Saville of Newdigate. Like my noble friend Lord Empey, I also pay tribute to our excellent staff, marshalled expertly by Michael Collon. I chaired a different committee which Michael was clerk to, and so I spoke to him just before Christmas and found that he was retiring from the House on 31 December last. I am sure that I speak for the committee and indeed the whole House when I wish him on behalf of all of us a very happy retirement. I expect that he may well have tuned in to watch this debate this afternoon.
In my remarks I will focus on just three points: the position of SMEs in relation to the Bribery Act; the role of the Government’s anti-corruption champion; and finally, like several other noble Lords, including my noble friend Lord Gold, I shall urge the Government to reach a decision on the widening of the “failure to prevent” offence. These three points need to be considered in the context of the overall conclusion of our report, which is, as our chairman said in his opening remarks, that the Act is an excellent piece of legislation.
First, on the SMEs, it is important that the Government always remember how narrow the management bandwidth inevitably is. Unlike big companies, they cannot double-bank roles. Management time is a precious and scarce commodity. It is therefore critical that decisions on whether to prosecute are taken promptly. To have a sword of Damocles hanging over an SME will, if not paralyse it, certainly render it much less effective. Therefore we were not impressed by the slow pace of progress by investigations of these cases. Most disturbing was the stop-start nature of many of them. Interviews would take place followed by long periods of silence: 12, 15 or 18 months, we were told in the evidence we received.
The Government’s reply to this at paragraph 17 in their response document was that progress was being made, and they prayed in aid that now all preceding cases over two years old will be given special treatment to speed the decision. Two years of uncertainty is a quite unacceptable burden on any company, but particularly on a smaller one, where ownership and management may well be combined. SMEs whose business is focused particularly on exports have, of course, to face the grey area of corporate hospitality, and it would be good to know what progress has been made in fulfilling the pledges made in paragraphs 73 to 75 of that document. Overall, one was left, as other noble Lords have said remarked, with an underlying suspicion that SMEs could be seen as a happier hunting ground for prosecutors. The directing mind principle, referred to by the noble Baroness, Lady Bowles, the inevitably less well-resourced defence and the pressure on small management claims to clear up and move on will all be factors that may lead prosecutors to see an opportunity to make an example. In the Skansen Interiors case, which we examined in some detail, it was interesting that it was not even offered the opportunity of a deferred prosecution agreement.
The next point I want to make concerns an update from my noble and learned friend on the Front Bench on the role of the Government’s anti-corruption champion. I make it clear at the outset that I am not in any way attacking John Penrose MP, who currently holds that position. He is in an unenviable and probably impossible position. In that old country phrase, he is set to get most of the kicks and none of the ha’p’orth. His role seems to be a token nod towards the importance that the Government place on anti-corruption activities, and he appears to have neither the clout nor the resources to be able to carry out the detailed investigations or effect real change. Indeed, until July last year, Mr Penrose was combining the role with that of a Minister of State in the Northern Ireland office.
When my noble and learned friend comes to wind up, can he lift the curtain on the Government’s policy objectives for this post? What is its budget, what staff does it have and to whom does the anti-corruption champion report? What practical results can the Government point to? It is interesting that, if you do a Google search, one of the only entries on the website is Mr Penrose’s appearance before our committee on 10 July 2018.
I return to the issue of Section 7 on failure to prevent, which is seen, as many noble Lords have said, as one of the key parts that drives against corruption and which has proved pretty successful. The Government have taken an inordinately long time to reach a decision as to whether the scope of this offence should be widened to cover economic crime generally. The original consultation paper was issued by the MoJ in January 2017 and the consultation closed at the end of March that year. Now, four years later, we are still awaiting a decision. Can my noble and learned friend please give us a heads-up on the latest position on this when he replies?
Lord Woolf (CB) [V]
My Lords, it is a pleasure to speak on this matter. I do so from a different perspective to the earlier speakers from whom we have heard so far. I say first that, in my view, the Act was undoubtedly the most constructive and sorely needed legislation of which I am aware. It has played an important role in promoting higher standards of ethical conduct in global companies internationally and has helped to make the concept of the “responsible capitalist” a reality.
Having said that, I should disclose that I make those remarks as a result of experience I had before the Act that we are considering came into force. In 2008, I became the chairman of a committee that delivered a report on business ethics in global companies and, in particular, the defence industry, based on the conduct of one company, BAE Systems, one of the world’s largest global defence contractors. In addition, I was for 10 years chairman of the judges of FIRST magazine’s competition to identify the responsible capitalist of the year—a task now performed by my noble and learned friend Lord Judge.
I mention my impressions on the basis of ancient experience because it is important that we should realise that great progress has been made. In our comments today, we must recognise that the criminal justice system in this country is facing probably the biggest challenge that it has faced since the last war. The number of cases outstanding is horrific. Any changes that we would like to promote before the Minister must take place against the reality of that background. A terrible danger exists now of injustice being caused by delay. The remarks from the noble Lord, Lord Hodgson, about SMEs having a sword of Damocles hanging over them should certainly be taken into account.
The reality is that the capacity of the system to expedite more cases that could take a long time to investigate is limited at the present time. Certainly, what has been suggested about further reports in the future should be paid attention. With great diffidence, I suggest that the help that has been given now could be of double value if it were to be given once the present situation of arrears in dealing with criminal cases is not as pressing as I have suggested it is.
In 2008, it was thought that legislation of the sort that was concluded in the 2010 Act would tie the hands of British companies internationally. I am very pleased to know that, in fact, that has not been the consequence. We thought that being a responsible company was becoming more and more important and, therefore, it was vital to make clear that there was some sanction.
I note that there has been no comment so far this afternoon about consent being required. I thought that that might be a matter that would cause concern—though I was not sure why it would cause concern, because the consent that is required now is from the very people who would be responsible for prosecutions if they take place. They presumably will be the best watchdogs over this situation. Of course, they must have—as had been pointed out already—the resources to go into matters of this sort in so far as can be practical, which is very limited at present.
There has been talk also of deferred prosecutions. DPAs are making very slow entry into our criminal justice system. Our Act overtook the law in the United States, but, in the United States, much greater use is made of facilities of that nature. It is obviously the sensible way to deal with acts of corruption. Nothing will influence the directors of companies—no matter what their size—more than if the punishment is on the company’s finances. For that reason, it is important that it takes place.
Lord McNally (LD) [V]
My Lords, it is always an honour and pleasure to follow the noble and learned Lord, Lord Woolf, with all his wisdom and experience.
On 13 May 2010, I became Minster of State for Justice in the coalition Government, as deputy to the noble and learned Lord, Lord Clarke of Nottingham, who was then Secretary of State for Justice and Lord Chancellor. In my in-tray when I arrived at the department was a gift from the departing Labour Government in the shape of the Bribery Act. The noble Lord, Lord Bach, had done much of the heavy lifting in this House in delivering the Bill to the statute book and had been supported from these Benches by the late and sadly missed Lord Goodhart and my noble friend Lord Thomas of Gresford who, happily, is with us today and from whom we will hear later.
It is perhaps not surprising that those who opposed the Act saw the change of Government as an opportunity to push back on bringing the Act into force. This meant a delay in implementation, for which we were criticised at the time. The Secretary of State and I carried out a consultation with a variety of interested parties. We heard all the familiar objections: how burdensome it would be on business, particularly SMEs; how it would inhibit the use of legitimate corporate hospitality; how many grey areas there were between a tip and a bribe; and, of course, the plea that we would lose out to the dastardly French, who would steal all our business by ignoring such Anglo-Saxon sensitivities to the greasing of palms.
That second round of consultation by the incoming Government emphasised the cross-party support for the legislation and its greater acceptance. We took the flak about the delay, and the Act reached commencement on 1 July 2011. I took some satisfaction from reading in the Select Committee’s report that it had received no “major” criticisms of the legislation and that, overall,
“the structure of the Act, the offences it created, its deterrent effect, and its interaction with deferred prosecution agreements, are only some of the aspects which have been almost universally praised”.
We are entitled to ask whether the Conservative Government elected in 2019 would have been as willing as the coalition to pick up the Bribery Act and guide it to commencement. The noble Lord, Lord Hodgson, asked some pertinent questions about the role of the anti-corruption champion and rightly questioned whether the Government have the stomach for the fight against bribery. This is, after all, the Government who champion the global buccaneers who will swashbuckle their way around the world with scant regard for the niceties and who are only too willing to act as money launderers to the world, as the noble Lords, Lord Hain and Lord Empey, pointed out.
So we will listen carefully to the Minister’s response. The Committee has rightly pointed to the slow progress of bribery investigations and prosecutions and rightly asks how the Government intend to bring a sense of urgency to implementation and enforcement. It is encouraging that in Transparency International’s 2020 report, Exporting Corruption, the UK is one of only four countries, along with the USA, Switzerland and Israel, cited as active enforcers of anti-bribery measures, but the report also finds that active enforcement has fallen off since 2018 and there is real danger of us falling out of the top group—as my noble friend Lord Stunell indicated. Key to avoiding that slide will be ensuring the availability of funding for the Serious Fraud Office to pursue serious cases and ending the delay in bringing forward prosecutions.
There is also the general responsibility to prevent economic crime. The review that we are considering today states that
“the new offence of corporate failure to prevent bribery is regarded as particularly effective”,
and Transparency International UK has called for the Government to extend the “failure to prevent” approach used in Section 7 of the Bribery Act to corporate criminal offending in economic crimes such as fraud and money laundering—I was pleased to see the noble Lords, Lord Hodgson and Lord Gold, lend their weight to that, as well as my noble friend Lord Stunell.
Bribery is often seen as a victimless crime where one man’s bribe is simply another’s facilitation of the wheels of commerce. It is not. It is corrupting to both ends of the transaction. It distorts the benefits of the free market by preventing the best product or service being provided for the best price. It diverts resources from the needy to the criminal and inflates the cost of development. The Select Committee is in our debt for pointing the Government in the right direction in updating the Bribery Act for the new circumstances we face in the decades ahead. We are grateful to the noble and learned Lord, Lord Saville, and his colleagues for their work.
Lord Rogan (UUP) [V]
My Lords, I welcome the Select Committee’s report and commend its members for their sterling work in producing it, especially and including my noble friend Lord Empey.
One of the great privileges of serving in your Lordships’ House is the sheer volume of knowledge and expertise that we possess as a collective body. We are also not known for giving compliments lightly, particularly when it comes to our primary role of scrutinising legislation from the Government of the day. It is therefore noteworthy that the Select Committee report describes the Bribery Act 2010 as
“an excellent piece of legislation which creates offences which are clear and all-embracing”.
To be fair, Ministers did have quite a bit of time to give proper consideration to its provisions, since the Bribery Act received Royal Assent 121 years after the first attempt to put the common law offence of bribery on to a statutory footing. However, coming eight years after the Act became law, the Select Committee report makes it clear that the wait was worth it and that the legislation can now rightly claim to stand as an example to the rest of the world on how to combat bribery.
Of course, there is always room for improvement in an ever-changing world. The report offers some helpful suggestions on how the Act’s measures might be made even more effective. I echo the comments and suggestions made by the noble Lords, Lord German and Lord Empey, regarding SMEs.
Over some 40 years as an owner and director of several Ulster SMEs, I have been fortunate to experience many different countries and diverse cultures in my commercial working life. I welcome in particular the Select Committee’s recommendation that Her Majesty’s Government provide UK companies with support on corruption issues in countries to which they either currently or expect to export, and on the business norms and culture in countries where they currently operate. The report adds that such support should be provided by properly trained officials and that smaller embassies should have at least one official who is an expert in local customs or cultures who can contact officials of foreign government departments on behalf of companies facing problems in this field. In its formal response to the Select Committee’s report in May 2019, the Ministry of Justice, to its credit, endorsed these helpful suggestions.
The ministry’s response also stated:
“The DFID-funded Business Integrity Initiative … is currently undertaking pilot work in Kenya, Mexico and Pakistan”—
countries in which I have done business—
“… to identify appropriate ways to support UK companies operating in these markets and … provide new guidance and tools for staff in post.”
It further stated that
“as evidence from the … pilot emerges, DIT will consider how to include business integrity work in its future activity”.
I would be grateful if the Minister could update the Committee on the progress of this pilot. What lessons have been learned and what measures have since been introduced as a result of the knowledge gained?
Those of us who supported Brexit were promised that it would allow the UK business community to access new markets in all parts of the world that were previously either fully out of reach or difficult to get into. I hope that those commitments still ring true. If Brexit is to be the success that we all hope it will be, no matter which stance noble Lords took in relation to the referendum, it is critical that UK businesses are given proper, professional advice and guidance about those markets with which they may not be sufficiently familiar. The Select Committee in its excellent report has clearly identified this need. Once again, I commend it for its work.
Baroness Fookes (Con) [V]
My Lords, when I joined the committee, I had had no previous experience of post-legislative scrutiny. I came away from it greatly impressed by the value of this form of consideration. As we have had ample evidence of this afternoon, the House of Lords seems brilliantly equipped to undertake such inquiries. Having listened to many other speakers, it seems to me that there would be definite value in resurrecting this process in another five years or so to see how matters have developed. It is clear that the Act itself is remarkably good legislation, but how it is implemented and develops seems worthy of consideration further down the line.
One point that concerned me during our taking of evidence was the reluctance of small and medium-sized companies to give evidence in public. I can understand that, but it left a slight gap in the knowledge that we wanted to obtain, but I suppose that is water under bridge.
I turn now to the question of facilitation payments, referred to earlier in the debate. This does not have the spurious glamour, of course, of enormous companies doing bribery and corruption on a grand scale; nevertheless, they can have a very damaging effect on small companies seeking to open enterprises abroad. I had direct experience of this some years ago, when two friends of mine wanted to set up a very small enterprise in an Asian country. They kept meeting enormous obstacles, from their point of view. They never knew whether the rules they thought had obeyed would suddenly be changed and a little payment would be required. In the end, because they were so keen, they won through, but I am certain that many small enterprises would not continue to the end, and that is a great pity.
I had experience of this myself. To my astonishment, they needed the signature of a local official on some final piece of paper before they could set up in business. I was taken up six flights in great heat, where we were received by the said official, and when a large bottle of whiskey was handed over, the document was signed. Slightly later in the afternoon, when he said that he was going to take us out for lunch, we found that my friends were actually paying for lunch for this chap and his cronies. He actually had the gall to say, very proudly, that there was no corruption in his neck of the woods, so I suspect that this kind of thing is pretty pervasive and very difficult to deal with.
That is why I so applaud the point made by the noble Lord, Lord Rogan, I think—or one of our number—who spoke about the role of embassies in helping small and medium-sized companies with this kind of problem. It is not simply that the staff should have expertise, it is also important that they actually go out and talk to local officialdom to try to get them onside. It is clearly very difficult for one small company to get anything done, but if it can rely upon embassy staff to have much greater clout, this would be considerably helpful. I commend this and I want to know from the Minister how many people have this expertise in the various embassies, and how much work they are doing. That is extremely important.
Turning closer to home, I am also concerned that there are not sufficient people with real expertise and understanding of the very complicated nature of crime and corruption, which is so widespread even now. So, I was very disappointed when one of our recommendations, that the City of London Police’s Economic Crime Academy should be given additional resources, was rejected. We also recommended that every police force should have at least one senior officer with specialist training in dealing with bribery and corruption. I should be very interested to know whether this has come about and, if not, why not. It has unfortunately been, as has been said, some time since the report was published. I hope the Minister will be able to tell us what other actions the Government have taken since to deal with the particular problems that we raised, so that we can be assured that the Bribery Act, so excellent in itself, is fully implemented.
Baroness Wheatcroft (CB) [V]
My Lords, it is a pleasure to follow the noble Baroness, Lady Fookes, who, after more than 50 years of continuous service in Parliament, is deserving of everyone’s attention when she speaks. I also thank the committee for its work in producing this report and the noble and learned Lord, Lord Saville of Newdigate, for his introduction to this afternoon’s proceedings. Given the believed scale of bribery on the international stage, either the Act is proving incredibly successful and, as the noble Lord, Lord Gold, said, frightening many companies into honesty, or bribery is going undetected.
As the report points out, bribery is a crime that is generally detected only when it goes wrong. I was therefore concerned by the comment in the report that suspicious activity reports have very little follow-up. Companies know when competitors seem to be enjoying disproportionate success: if they report suspicious activity, that report should be followed up. Will the Minister comment on how the follow-up of suspicious activity reports could be improved? If that were done, perhaps we would see more cases of bribery come to court.
The committee’s report was largely positive about the way the Bribery Act is working. It welcomed the refusal to allow facilitation payments, and I concede that while this can disadvantage British business in many markets, it is impossible to be, as the noble and learned Lord, Lord Mackay, once said, “a little bit pregnant”. Facilitation payments are bribery, however common they may be in some countries, so this country is right to rule out bribery of any kind—unlike the United States, for instance. I also agree with the committee’s endorsement of deferred prosecution agreements. It seems that these are proving effective in persuading companies to own up to partial failings and improve standards for the future, while not preventing prosecution of individuals.
The aspect of this report on which I shall concentrate my remaining remarks is that of vicarious liability for companies. The noble Baroness, Lady Bowles, was eloquent in her criticism of the way prosecutions for bribery have hit the small business sector rather than the large. The issue is that of the identification principle: that the controlling minds of the company do not have mens rea. I listened with interest to the noble Lord, Lord Stunell, as he drew his analogy with a captain escaping all liability as his ship went down. I share his discomfort with this situation.
The committee made no recommendation on the issue of vicarious liability, but neither did it rule it out. It was looking towards the report of the committee the Government had already established to examine corporate liability for economic crime. Indeed, when the Government published their response to this Select Committee report, in May 2019, they said that the issue of vicarious responsibility was under review, and their response would be issued “shortly”. That was in May 2019. “Shortly”, turned out to be 18 months later and, after such lengthy deliberation, the Government concluded that the call for evidence on corporate criminal liability was inconclusive. They therefore proposed to ask the Law Commission to examine the issue and report on the options by late 2021. By any standards, this looks like kicking a difficult issue into the long grass.
However, the evidence was not in everyone’s view inconclusive. Three-quarters of respondents to the call for evidence agreed that the identification doctrine inhibited holding companies to account for all economic crimes. The noble Lord, Lord German, called, earlier this afternoon, for a new Select Committee report into vicarious liability—I would be very interested to hear the Minister’s response to that. I would also like to hear his view on why there has been such reluctance to address the issue of vicarious liability, when it is quite clear that larger companies are not being held to account in the way that smaller companies are, because the people at the top are able to dodge the issue.
Finally, I raise again, as have others, the issue of the Government’s anti-corruption champion. This is not, by any standards, a high-profile position. Will the Minister tell the Committee whether the current incumbent, John Penrose MP, needs greater powers if he is to be an effective champion of anti-corruption, both in government and in business, as his job description says?
Lord Bhatia (Non-Afl) [V]
My Lords, in November 2009, the then Bribery Bill was introduced in the House of Lords. Its purpose was to reform and update bribery and corruption legislation. This included creating offences for offering, promising or giving an advantage—bribing another person—and requesting, accepting or agreeing to receive an advantage: being bribed. Both offences carry the same maximum penalty of 10 years’ imprisonment and/or a limited fine for individuals, with offences relating to commercial organisations carrying a maximum penalty of a limited fine. In addition to the UK, the jurisdiction scope of these offences covers those which took place either partly or entirely outside the UK, providing that the alleged perpetrator of the offence is a British citizen or is considered to have close connections to the UK.
On 17 May 2018, the House of Lords Select Committee on the Bribery Act 2010 was established to conduct a post-legislative review of the legislation. The House of Lords recommended that the committee focus on several areas around bribery, including whether the Act has led to stricter prosecution of corruption conduct or a higher conviction rate in the reduction of such conduct. Can the Minister state whether the directors of commercial organisations can be imprisoned instead of the company paying the higher fine?
Lord Bradshaw (LD) [V]
My Lords, I was not a member of the committee, so I have had to rely on reading the documentation provided. On reflection, the revision down the line that the noble Baroness, Lady Fookes, called for is probably necessary, because a lot of issues have been placed before the Grand Committee today. The reputation of the country for honesty and straight dealing is not improving; anybody who thinks so is probably deluding themselves. It is important, however, that our reputation is restored; we should not be complacent when we are told in debate that we are slipping down the world’s league tables.
The issue of what is to succeed the European arrest warrant is very important. There are criminals waiting to come here in the knowledge that they will probably be beyond the reach of the law. The problems in the court system to which the noble and learned Lord, Lord Woolf, referred are a scourge on the country. The fact that a criminal trial cannot now be arranged in less than about two years is a real indictment, because justice delayed is justice denied.
However, I want to speak particularly about the police service, of which I have experience. To train police officers to deal with issues such as fraud—you can choose anything you like; child abuse is another one—is a long-term commitment. Such officers are very attractive to other people who would seek to employ them. It is important that we take seriously the recommendation that the police service—particularly the City of London Police service but all other police services as well—have people trained to look out for all sorts of corruption.
There are large problems about money laundering, and the issue of vicarious liability needs attention. I understand the mens rea issues, and I certainly agree with my noble friend Lord Stunell that if the ship goes down, it is really quite regrettable if nobody above the rank of, as it were, able seaman gets prosecuted. People look to people being prosecuted where they have done wrong.
I would also like to encourage the use of DPAs to encourage people to own up if they find that wrong has been done, not necessarily by the directors of a company but by somebody within it. Finally, when the Minister sums up, will he tell us how much time John Penrose is devoting to his role as anti-corruption champion? It seems to be an almost invisible role.
The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)
The noble Lord is very quiet; could he lean closer to the microphone?
Lord Naseby (Con) [V]
Is that better? It will have to be.
I looked at this report, not because I was on the committee—I was not—but from the aspect of exporting. I have been involved in exporting all my life since leaving Cambridge with a decent degree in economics and having had the privilege to listen to the lectures of Professor Walt Rostow on his stages of growth. I lived in India and Sri Lanka in the mid-1960s, working for the Reckitt and Colman group as a marketing manager. In the 1960s, I wrote a pamphlet called Helping the Exporter with one of our colleagues, my noble friend Lord Vinson. On entering Parliament, I joined the All-Party India Group and the All-Party Pakistan Group, and started the All-Party Sri Lanka Group. Later on, I started the All-Party Maldives Group. In the following years, I travelled and had negotiations and discussions with the rest of south-east Asia, particularly Singapore, Malaysia and Indonesia, which I continue to do.
I congratulate the committee on the depth of its analysis. The Government’s responses are clear in what the response is but lacking, as I will indicate in a few seconds. It is a great pity that a work of this nature gets so little reporting in the major national press, particularly the Financial Times and other business publications. I urge the House authorities to get a grip on this issue; it is not a new issue but it needs to be attended to.
I will focus my comments on small and medium-sized companies. They are vital to our future as a country and are experienced in the sense that many of them take part in trade visits, usually underwritten or promoted or organised by the relevant chambers of commerce. The ones that I think about are, obviously—I was an MP for the East Midlands—the Leicester and Northampton chambers, which are very active, and many others.
For those chambers of commerce—and I have discussed this with the current people—as small and medium companies, the comment that they make is on focus. First, they do not think that our embassies or high commissions, when they go out and visit whatever company they choose to go to, are well enough briefed. I concur with that, as I travel to that part of the world and, in my judgment, Her Majesty’s Government now need to get a grip on it. Every embassy and high commission should have somebody very senior who is totally responsible for trade and development—and, within that, for how people should operate in the context of the country where they serve. Our people representing us on the ground need to be fully briefed on the Bribery Act and the implications for companies that come to seek their advice. Frankly, that is not happening, and it is time that we got a grip on it.
Secondly, the UK has good trade associations, which brief us politicians well when we talk about particular subject matters, and Her Majesty’s Government should provide specialist courses for them, covering all aspects of exporting—like the ECGD, which I have worked with—particularly, in the context of this debate, on the implications of the Bribery Act. It would be no bad thing if the chief executives of trade associations were brought into the government departments and given proper briefs and some structure to it all. Ideally, they could use a business school to help in this project.
Thirdly, small and medium companies are very important, but their management structures for exporting are likely largely to consist of an export team with an export director or manager with the involvement of the chief executive. These are busy people and, again, the department needs to make simple, short and efficient courses for export directors and managers—not just online and not just saying that something has been posted in some note somewhere, which they have to find. They need something good and easy and a helpline managed by an experienced official, not somebody who just reroutes them somewhere else. I realise that, with Covid and so many staff working from home, it is not easy, but it has to be addressed—and, in my judgment, all those involved in exporting need to come into the office at least once a week.
The department has been seeking collaborative approval on export advice since May 2019. What came out of the pilot scheme? That is so important.
I conclude with two comments. First, the City of London Police get 2% of the police budget but at least 25% of fraud crimes, so they need a bit more money to see that through. Finally, I wholeheartedly support the comments made by the noble Lord, Lord German.
Lord Hope of Craighead (CB) [V]
My Lords, I very much welcome this report, and congratulate warmly all those who have contributed to it. As it happens, I was a member of the Liaison Committee when it considered on two occasions whether to recommend this Act for post-legislative scrutiny. On each occasion there were a number of other statutes on our list, and we could recommend only one of them. I was glad that on the second occasion my suggestion that this Act should be put forward for scrutiny was agreed to, and I am very pleased with the result.
One concern that we had on the Liaison Committee was whether UK businesses were being put at a competitive disadvantage by the standards set by this legislation in obtaining foreign contracts, a point made by the noble Lord, Lord Gold. I recall similar concerns being expressed at a conference that I attended in Hong Kong shortly after the Act was brought into force. Corporate hospitality and facilitation payments were mentioned as areas of particular difficulty. I was particularly pleased to read that, of the 100 witnesses from whom the committee received evidence, not one had any major criticisms of the Act, and its structure and the offences that it created were almost universally praised. Comments that were quoted were remarkably positive in their support. I take from all of this that, by and large, the warnings given at the outset—I suspect to try to undermine what this Act stands for—have not been borne out by experience. That is very good news.
I shall comment briefly on what the report has to say about Scotland. Questions of policy are, of course, for the Scottish Ministers. Nevertheless, I welcome that fact that the committee took the trouble to examine the position in Scotland as part of its scrutiny review. I am glad that the committee saw no reason for any change in the law and practice regulating the commencement of proceedings in Scotland. With the exception of private prosecutions, which are very rare, the golden rule in Scotland is that no prosecutions whatever can take place unless in the name or under the authority of the Lord Advocate. I recall having to point this out on several occasions during my time in the Crown Office as an advocate depute, to the great irritation of bodies such as the then Customs and Excise, which were used to handling these matters themselves in England. That is how the law works in Scotland, and it has long been recognised that there is no need to say anything about it in a UK statute.
I see great merit in the recommendation that the Secretary of State for Justice should amend the guidance published under Section 9 of the Act so that it deals adequately with the law and practice in Scotland, and that the websites in use on both sides of the border should be updated so that they each refer to both sets of guidance. As the guidance is for use in all parts of the United Kingdom, it is important that it should take account of the differences in law and practice there. I note, however, that no mention is made of Northern Ireland in this paragraph, nor indeed is Northern Ireland mentioned at all in the Ministry of Justice’s quick start guide. I hope that the Minister will feel able to suggest to the Secretary of State for Justice that he should look at the position in Northern Ireland too when he considers that recommendation.
As for what the committee says about civil settlements in Scotland—the alternative to the deferred prosecution system in England and Wales—I do not wish to take anything away at all from what my noble and learned friend Lord Saville said about this matter in his introduction. However, the differences between those two systems are perhaps less troublesome than the committee seems to have thought in commenting on the Scottish position. Take, for example, the suggestion that judicial supervision should be regarded as a vital element for the conduct of civil settlements in Scotland, which does not happen just now. This takes me back to the golden rule that I mentioned earlier. Another way of putting it is that the Lord Advocate is the “master of the instance” in Scotland; he is not subject to the direction of the courts as to whether a prosecution should be brought, and it is entirely up to him to decide whether or not to settle a case without resorting to prosecution and, if so, on what terms. Scotland does not have sentence bargaining, but agreements about pleas and settlements are within the discretion of the prosecutor. I doubt whether anyone in Scotland would want that system to brought under the supervision of the judges.
As to consistency, the lack of a statutory basis for the scheme does not trouble me, given the way in which these matters are handled by the Crown Office in Scotland, although a statutory basis would be needed for a financial penalty if this was thought appropriate. However, I see merit in the points made by the committee about the ways in which the scheme lacks transparency and the need to improve the quality of the information on the Crown Office website. I am sure that the Lord Advocate will pay close attention to what is said about this in the report.
Finally, I noted the remarks of the noble Lord, Lord Empey, and his concern about the differences that might emerge between the law and practice in Scotland and that in England, Wales and Northern Ireland in how the Act is administered. I doubt very much that that is a matter for real concern. The terms of the statute are perfectly clear and the prosecutors themselves are well aware of the need to maintain consistency throughout the United Kingdom in dealing with these important matters.
Baroness Ritchie of Downpatrick (Non-Afl) [V]
My Lords, it is always a pleasure to follow the noble and learned Lord, Lord Hope of Craighead. I congratulate the chair of the committee, the noble and learned Lord, Lord Saville of Newdigate, on securing this debate, and congratulate him and his committee on a comprehensive report on the post-legislative scrutiny of the Bribery Act, for which the committee has had to wait nearly two years for the Government’s response. It is important that the Government use the powers within the Bribery Act effectively to tackle economic crime and the corrosive effect that corruption has on companies, individuals and society in general. This Act encourages companies to adopt honesty in all their dealings.
The committee wisely focused on several areas around bribery, including whether the Act had led to
“a stricter prosecution of corrupt conduct, a higher conviction rate and a reduction in such offending.”
It is remarkable and excellent that not one witness had major criticisms of the legislation. However, the report expressed concern at the slow pace of bribery investigations, with a number of witnesses criticising the time it had taken for bribery charges to be brought and for cases to reach trial.
What is also interesting is that companies were concerned about the potential for the legislation to be prejudicial to businesses in the operation of their work, but the committee found that this was not the case. The noble Lord, Lord Gold, referred to that today and in the article he published on his blog some time ago.
Recommendations dealt mainly with the implementation and enforcement of the Act, urging the director of the Serious Fraud Office and the DPP to speed up investigations into bribery and improve communications with those placed under investigation for bribery offences. The Government response centred on the committee’s concern surrounding the “slow pace” of bribery investigations, and they noted that several measures had been introduced within the specialist fraud division of the Crown Prosecution Service to
“ensure that cases progress effectively”.
That included bribery cases now having two allocated prosecutors, and legal managers being provided with weekly data on pre-charge cases, such as bribery, to ensure cases are regularly reviewed and progressed. How many cases have progressed to prosecution and conviction or release since these appointments, and how many are still awaiting trial and conviction? Has all this led to zero tolerance within companies and within the judicial system of bribery offences and economic crime? I also ask the Minister where the new Financial Services Act and the National Security and Investment Bill fit into the existing Bribery Act.
In response to the recommendation from the Committee regarding training and awareness of the act, the Government said there was not enough evidence to commit to providing additional resources to the City of London Police’s Economic Crime Academy to expand its training programme. The noble Lord, Lord Hain, asked about resources. What has happened since the publication of the Government’s response? Has there been a change of heart, and do they now intend to give resources to the Economic Crime Academy for training purposes?
On supporting companies on corruption issues in the countries to which they export, the Government said that DfID’s business integrative initiative was undertaking pilot work in Kenya, Mexico and Pakistan. According to the Government, the Bill aims to
“identify appropriate ways to support UK companies operating in these markets”
and will provide new guidance and tools to staff in these companies. Has this role been taken on by the FCDO with the dissolution of DfID? Has that new guidance been provided?
Many questions have been posed to the Minister, but we are undoubtedly better served by the operation of the Bribery Act and by the committee’s report and the Government’s response to it, all of which have enormous potential. The bottom line is that companies have no real choice but to enforce a stringent anti-corruption regime to minimise their risk of conviction and uphold proper standards of integrity and ethics in their business operations.
Lord Thomas of Gresford (LD) [V]
My Lords, as a member of the committee, I, too, pay tribute to the careful chairmanship of the noble and learned Lord, Lord Saville, and I thank Michael Collon and his staff and the expert advisers for all the hard work they put in.
Bribery is an offence which occurs in the shadows. It is a transaction which brings advantages to both parties, neither of whom can complain, whether satisfied or dissatisfied with the corrupt bargain. Its detection may well depend on a chance: an auditor stumbling on it in the course of an audit, a report from a whistleblower, or a complaint from a competitor. Nevertheless, like all corruption, it can be highly corrosive and potentially damaging. Even when the active agents are identified, the individual in the higher echelons of a corporate body who authorised or turned a blind eye to what was going on may still be too hard to pursue. Hence, it is justifiable to introduce the concept of corporate criminal responsibility, although the company itself is a legal person which can neither speak nor hear, much less form an intention.
I was involved in the pre-legislative committee prior to the passing of the Bribery Act in 2010. The policy which emerged was to create a climate in corporate business which would lead to the elimination of bribery altogether. One way of doing that would be, as my noble friend Lord Stunell argued, to make a corporate body vicariously liable for crimes committed by its employees or agents. But it could not be right to criminalise a company with absolute liability, and therefore there would have to be a right to a statutory defence—for example, that the company had taken all reasonable steps to prevent bribery and, once its existence were known, had not covered it up.
Of course, if there is sufficient evidence that the director or manager of a company—the captain on the bridge of the sinking ship—was complicit in bribery, “wilfully blind”, as my noble friend Lord Stunell said, or if he covered it up, he will be charged accordingly under Sections 1, 2 or 6 of the Act or with conspiracy.
For corporate criminal responsibility, however, it was thought preferable not to introduce vicarious criminal responsibility but to encourage a company to put in place systems of training and supervision and to frame the criminal offence as “failure to prevent bribery”. Thus, the company is not prosecuted and convicted vicariously for the bribery which its agent has committed. As an inanimate legal person, the company can have no knowledge of the offence, nor can the company be convicted positively of failing to have adequate procedures in place, whether or not bribery has been proved. An offence delineated in those terms would put the onus on the prosecution to prove that the company did not have adequate procedures.
Under Section 7 of the Act, the burden of proof is where it ought to be. If bribery has taken place on behalf of a company, the onus under Section 7 is on the company to show, as a defence to the charge that it failed to prevent it, that it had adequate procedures to prevent bribery in place. My noble friend Lady Bowles was concerned that the phrase “adequate procedures” is too low a bar for a defendant company to surmount. However, I am happy that the decision as to what is adequate is one for the jury, which imports the standards of the ordinary citizen, not the standards of the City.
The investigation carried out by the committee demonstrated that the architecture of the Bribery Act has been well conceived—a tribute to the noble Lord, Lord Bach, in fathering it, and to my noble friend Lord McNally in acting as its midwife. Its definition of what constitutes bribery and its use of the defence of adequate procedures are well received and applauded internationally. It is regarded as the gold standard. No significant legislative changes have been recommended.
Where concerns are expressed in the report, they refer to advice, delay in investigation, and resources. Guidance could be improved in important areas, such as facilitation payments. But the idea that the Government should set up an advice bureau to authorise the conduct of an individual or a company before a transaction takes place was rightly rejected by the committee. Nevertheless, consular services to advise on overseas trade customs and norms should be strengthened, as the noble Baroness, Lady Fookes, emphasised.
An unintended consequence of the Act was that corporate sponsoring of events took a hit: sporting and musical events in particular. It is a matter of balance and common sense, as both the noble Lord, Lord Gold, and the noble and learned Lord, Lord Morris, noted, which defies statutory definition. However, the committee concluded that guidance could be improved by the inclusion of examples to illustrate what is or is not acceptable. I am sure that that would be helpful.
On investigations, the report points to the fact that only 12 out of 45 police forces had taken advantage of specialist training in the Bribery Act, and it recommended that a senior specialist investigator trained in the provisions of the Act should be employed in each of the 45 forces. As my noble friend Lord Bradshaw said, training is a long-term commitment. Can the Minister tell us whether this recommendation has as yet been taken up?
When guilt in a case against a corporate body depends on whether it has employed adequate procedures, the field to be covered will be much larger than establishing the mere fact of an incident of bribery. The report calls for investment in artificial intelligence, document sifting and similar modern technologies which can handle what have been in some of the cases millions of documents. Like my noble friend Lord German, I would welcome the Minister’s report on the Government’s up-to-date position on greater investment in these areas.
DPAs have been a success under strict judicial control. However, I underline the one concern of the noble and learned Lord, Lord Saville. In all criminal proceedings, lesser sentences encourage pleas of guilty; defence counsel always brings this to the attention of a defendant at the earliest moment. Self-reporting should similarly lead to similar discounts otherwise there is no benefit in self-reporting. I do not propose to debate whether the concerns expressed about co-operation in criminal investigations with the EU after Brexit have been met by the trade and security agreement, save to say that they manifestly have not. But that is surely for another day.
I hope that the work of the committee and the report it has produced has given direction to the investigators and prosecutors of bribery. I hope it also gives confidence to the business community that there is in place an effective weapon against bribery, and that it has encouraged the climate of honest and successful business that was intended without being too onerous a burden of time and cost, despite the many naysayers, to whom the noble and learned Lord, Lord Hope, and my noble friend Lord McNally referred. My noble friend Lord Bradshaw referred to the UK slipping down the league table, and money laundering is a real issue. However, in the field of bribery, this Act has served to uphold our reputation for fair dealing across the world and, as the noble and learned Lord, Lord Hope, said, without commercial disadvantage.
Lord Davidson of Glen Clova (Lab) [V]
My Lords, I declare an interest as a Queen’s Counsel in practice in Scotland, whose work from time to time involves cases where the Bribery Act is required to be considered, and as a former Advocate-General in post at the time of the Act’s introduction. I also take this opportunity to congratulate the Minister on his appointment as Advocate-General, to which he brings not only his considerable professional ability but a calm and measured approach.
The noble and learned Lord, Lord Saville of Newdigate, and the committee, are to be complimented on this excellent review of the Bribery Act, as other noble Lords have observed. It is gratifying that the Act, introduced by the then Labour Government, is now so well regarded by so many. It is fair to say that it received a considerable amount of criticism as being a shackle on British international business at its introduction—a point that was observed by the noble Lords, Lord Gold and Lord McNally, and which was picked up by the noble and learned Lord, Lord Hope of Craighead.
The committee notes that there have been a number of positive assessments of the Act which chime with the general view of the it as broadly perceived. The noble and learned Lord, Lord Woolf, added his weighty and positive commendation, followed by the noble Baroness, Lady Ritchie, with her eloquent commendation.
The range of topics covered by the committee’s report is extensive, so I will confine myself to only a few matters. The first of these arises not from the Act but is scrutinised by the committee: the success of deferred prosecution agreements. I share the commendation of the noble and learned Lord, Lord Morris, of the noble and learned Lord, Lord Garnier, for having pushed this innovation forward. Similarly, Sir David Green, as former director of the Serious Fraud Office, can be congratulated on putting the DPA into practice very effectively. While it is not unknown for the SFO to be criticised, it should be given considerable credit, as the noble Lord, Lord German, observed, for its innovatory use of artificial intelligence in the Rolls-Royce case, identified by the committee at paragraph 72. What might have taken many months if not years of document analysis was reduced to weeks and greatly accelerated the resolution of a highly complex case. It is encouraging to see that the SFO is now deploying AI-powered analysis across its new casework and embracing new technology ahead of many in the private sector.
One specialist in bribery law, Eoin O’Shea, now at CMS, who gave evidence to the committee and who is a supporter of the Act, has commented that DPAs may reduce the opportunity for senior courts to grapple with the key concepts from the legislation: for example, the defence of adequate procedures. Is the Minister able to say whether the statutory guidance will be amended to equiparate “adequate” to the familiar “reasonable in the circumstances” approach, as the committee and the noble Baroness, Lady Bowles, emphasised?
What may be less encouraging are the observations made by the committee on the corresponding Scottish regime to DPAs. Most Scots lawyers would be opposed to a proposition that Scots law should always copy the laws and procedures of the southern jurisdiction. However, the committee raises some clear and forceful criticisms of the civil settlement regime in Scotland.
I note that the government response identifies that some but not all of these criticisms have been addressed. Having been a Scottish Solicitor-General some two decades ago, I was conscious of a then somewhat overdeveloped resistance to transparency in the Crown Office. I had assumed that that resistance might have reduced substantially by now.
The noble and learned Lord, Lord Hope, sees little problem in the absence of judicial oversight of civil settlement, but is the Minister aware what reasoning lay behind the unwillingness of the Scottish Government to adopt judicial oversight of civil settlement? One might expect, given the international dimension of most bribery offences, that jurisdictional differences might be thought somewhat undesirable in this area, given that it applies a UK statute. I echo the concern of the noble Lord, Lord Empey.
One further criticism that is levelled regarding the Act in practice is the paucity of prosecutions. One immediately understands the difficulty in gathering reliable evidence and carrying forward the question of resources, a matter that my noble friend Lord Hain stressed as an important requirement. My noble and learned friend Lord Morris also identified this, as did the noble Baroness, Lady Fookes, and the noble Lord, Lord Bradshaw. Bribery is, by its very nature, covert—in the shadows, as the noble Lord, Lord Thomas, put it, with perpetrators often taking steps to disguise the crime as innocent activity. What can be less easy to understand is the absence of prosecution when, in civil proceedings, bribery has been uncovered and held by the court to have occurred to the civil standard with a high level of confidence. It is unclear how often this situation arises, but anecdotes suggest it has arisen from time to time. Perhaps the Minister may even have encountered this problem in his own practice. This is a variation on the point made by the noble Lord, Lord Gold, about DPAs and the lack of individual prosecution. Is the Minister aware whether any research has been carried out to identify such occurrences? If so, is there any explanation for this apparent dissonance?
The area of corporate hospitality, which perhaps received the most criticism at the time of the introduction of the Act, remains, as the report indicated, an area where greater clarity is desired, where context is critical to assessing the appropriateness of a level of hospitality. The committee correctly recommends clearer guidance by way of examples being given. Is the Minister committed to leaving the guidance as it is, or is he really content, as the Government’s report suggests, that clarity may be outsourced, in a way, to Transparency International? If outsourcing to Transparency International is favoured, there are certainly a number of areas where TI offers guidance to the Government.
Hospitality, in its various forms, is of course one area that comes close to the conduct of government. The very first words of the report state:
“Societies are built upon trust.”
Nowhere is trust more important but less prevalent today than in government. Transparency International UK, in its recent report, Corruption and the UK, opined:
“The corrosive influence of big money continues to undermine the integrity of the UK’s political system.”
The noble Lord, Lord McNally, referred to TI’s perception of a sliding of UK enforcement. The noble Lord, Lord Empey, gave a caution to the position of London’s reputation in the world and the noble Lord, Lord Bradshaw, added his concerns.
There is an insidious form of bribery that provides hospitality and financial support in many forms, but which never expresses a direct quid pro quo; rather access, favours and influence are the implicit anticipated reward, which may come all too easily. Does the Minister agree that such conduct should be criminalised to restore integrity to the political system? Should not the definition of bribery be extended to cover such activity wherever it may arise? Does he agree with the chief executive of Transparency International UK, who in a press release of 21 September 2020 said:
“To win back public trust, Parliament should legislate to remove the corrupting influence of big money from our democracy.”?
The Advocate-General for Scotland (Lord Stewart of Dirleton) (Con)
My Lords, I thank the noble and learned Lord, Lord Saville of Newdigate, for calling the debate today in his capacity as former chairman of the committee for post-legislative scrutiny of the Bribery Act 2010. I also wish to thank him and all other former members of the Bribery Act Committee for the important and comprehensive post-legislative review process, which they carried out between May 2018 and March 2019, before the publication of the official report. The breadth of issues covered in the committee’s report has led to the very interesting and lively debate we have heard today. Finally, I thank all noble Lords who took part in this discussion.
We will all agree that bribery is a very serious crime, and the importance of having a law for bribery which is clear, effective and robustly enforced is not in doubt either. This Government remain committed to tackling economic crime and see the Bribery Act as an important and effective tool in that endeavour. As the committee makes clear in the report, however, the task of the legislature is not just to make the law but to see whether major legislation enacted is having the effect it was designed to achieve; that is why scrutiny is so important.
As we have discussed this afternoon, the main focus of the committee’s scrutiny centred on three areas. The first is whether the Act has indeed led to stricter prosecution of corrupt conduct, a higher conviction rate and a reduction in that behaviour. The second is whether UK businesses have been put at a competitive disadvantage in obtaining foreign contracts under the stricter provisions of the Bribery Act and whether small and medium enterprises were sufficiently aware of the provisions of the Act. A further area is how far deferred prosecution agreements have affected the conduct of companies, both in preventing corrupt conduct and investigating it once it has been discovered.
It is worth reminding ourselves why we needed the Bribery Act in the first place—a number of speakers today touched on this. Bribery was not reported as a high-volume crime in the days before the Bribery Act came into being, so it could be said that it was not born of a need to address an urgent domestic problem of the day. However, in the face of growing criticism by both domestic and international stakeholders, it was apparent that reform of the previous law on bribery was increasingly necessary to deal effectively with ever more sophisticated, cross-border use of bribery in the modern world. The main objective in the development of the Act was therefore to provide modern legislation which reformed the existing common law and statutory offences of bribery by introducing a new consolidated scheme of bribery offences designed to give the police, prosecutors and the courts an effective way of tackling bribery, whether committed at home or abroad. I will return to the extraterritorial aspect of the 2010 Act in due course.
At the same time, the Government also sought to provide the private sector and affected companies with greater certainty and consistency around bribery and the obligations on companies and businesses. It was hoped that this would ensure justice for those involved in or affected by bribery, and a reinforcing of proper ethical conduct in commercial business and society in general—a matter of culture to which many speakers today adverted.
A further main policy objective of the Act was to address issues raised in relation to our international anti-corruption obligations by putting in place an effective mechanism for prosecuting bribery involving foreign public officials, and to establish effective corporate liability for bribery where it takes place. Perhaps most importantly of all, however, it was envisaged that the Act would support the Government’s wider strategy for tackling international corruption by not only deterring and penalising bribery offences but encouraging and supporting business to apply appropriate standards of ethical business conduct.
In this regard, the Government had a specific objective of combating the use of bribery in high-value transactions in international markets and, in particular, in large-scale public procurement or tendering exercises where the largest businesses operate and predominate. Although the legislation would ultimately apply to all companies falling within scope of the definition of the offence, it was recognised that small and medium enterprises would not usually engage in the business environment described above, so it was never envisaged that they would be the main focus of any enforcement activity.
As the committee itself observed, however eagerly anticipated or well received a Bill may be, it is by no means guaranteed that the resulting Act will live up to those expectations. Fortunately—again, I endorse noble Lords’ observations on the topic—the Bribery Act is now recognised internationally as being the leading model, alongside the United States Foreign Corrupt Practices Act, for effective criminal anti-bribery legislation. Moreover, the United Kingdom is recognised as one of the top four enforcers of the Organisation for Economic Co-operation and Development’s convention against bribery. Following the OECD’s review in 2017, the UK received a very positive assessment of its legislative framework. I hope that I will not be thought complacent in that I cite these figures without specific reference, at this stage, to the observations about dropping down the international league table, moving from the gold standard to the bronze.
Alongside the praise received for being a successful anti-corruption tool internationally, the Government’s own initial assessment was that the Act was performing as Parliament had intended. Much of the evidence submitted to the committee supported this, and the Government are very grateful that no major criticisms were made, reflecting the quality of the Act in its drafting. While there is always a case for listening to suggestions about where there might be further improvement, the Government were again grateful for the committee’s positive assessment that the overall structure of the Act, the offences it created, its deterrent effect, and interaction with deferred prosecution agreements are some of the main aspects which have received almost universal praise.
The committee’s final report—which we have covered in detail this afternoon—made 35 conclusions and recommendations around the implementation and enforcement of the Act. Although the Government’s position on each recommendation was made clear in the response document, we will continue to consider and, where possible, explore opportunities for increasing awareness of the associated guidance. However, I think it is clear that the Act is indeed working well and doing what it was intended to do. To illustrate this, I highlight a few of the successes of the Act as an effective enforcement tool since its coming into force in 2011.
Since that time, the Serious Fraud Office has secured its first conviction after trial for corporate offences involving bribery of foreign officials and its first guilty plea by a corporate body for an offence under Section 7—the provision that we have discussed. Nine deferred prosecution agreements have been put in place with United Kingdom companies since their introduction in 2014, six of which are for overseas corruption offences. This is in addition to the imponderable, impossible to quantify, deterrent effect that the Act continues to have on those who would seek to commit bribery offences. The Act has had a positive impact in helping businesses and corporations to reshape their culture.
The Government are not complacent over issues relating to economic crime, which remains a key priority for the Government. We are committed to exploring ways to continue to improve our response to this type of offending. We should not forget that we have achieved some other important milestones following the introduction of the Bribery Act itself. The Government’s anti-corruption strategy, launched in 2017, provides the framework for their domestic and international priorities on corruption and details each of the policies and actions being taken forward to combat that evil up to 2022. Despite the challenges that last year brought to every aspect of life, the year 2 update on that strategy was published, as expected, in July.
Speakers this afternoon have made reference to the provisions for training. The multi-agency National Economic Crime Centre, based in the National Crime Agency, has been established to co-ordinate and task the United Kingdom’s response to economic crime, including high-level fraud and money laundering. For the first time, the centre encourages and facilitates closer ties between its partner organisations in law enforcement and the regulated sector, including the Financial Conduct Authority, Her Majesty’s Revenue and Customs, the City of London Police, the Home Office, the Serious Fraud Office and the Crown Prosecution Service, all of which played an important part in the committee’s review. The Crown Office and Procurator Fiscal Service in Scotland also contributed.
Another issue that was highlighted by the committee was the lack of progress on next steps following the corporate criminal liability call for evidence in 2017. I am conscious of the criticism made by a number of noble Lords about the delay that has occurred since that date. This is an extremely complex area of law, and the Government received a number of diverse and often conflicting views to the call for evidence. This resulted in a considerable delay to an announcement on the way ahead. Although the results of the original process proved inconclusive, it is extremely positive that we have had progress on the issue since the committee’s report—and indeed the Government’s response—was published. As I am sure many noble Lords are aware, the Law Commission has agreed to carry out an in-depth review of the current law on economic crime. Work has already started on this, and I know that there is a good deal of support for the work of the commission in this House. The delay arises not out of any attempt to kick the matter into the long grass, as one speaker said earlier—or at least referred to the possibility of it being interpreted as such. It is a reflection rather of the polarisation of views with which we were presented.
The terms of reference for the project have been published on the Law Commission’s website but, in summary, it is envisaged that the first part of the process will be to draft an options paper, in which the commission will analyse how effective the law is and where it could be improved. The commission will then present various options for reform of the law, so that we can continue to ensure that corporate entities can be held appropriately to account. Initial findings are expected later this year, and it is hoped that this will lead eventually to the end of the long-running and often contentious debate on whether further changes to economic crime law are necessary. This will include consideration of a potential extension of the “failure to prevent” offence set out in the Bribery Act, so I am sure that it will be of great interest to all former committee members and to those who have contributed to our debate today.
The chairman of the committee sought specifically to learn about developments since the conclusion of our departure from the European Union. The safety and security of our citizens is the Government’s top priority. We have reached an agreement with the European Union, which delivers a comprehensive package of capabilities that will ensure that we can work with counterparts across Europe to tackle serious crime, terrorism and other offences, protecting the public and bringing criminals to justice. This includes fast-track extradition arrangements similar to those in place between the EU and Norway and Iceland. These arrangements are intended to be as fast and effective as those under the European arrest warrant, while providing greater safeguards for those who are arrested.
The agreement also puts in place arrangements that will simplify and speed up co-operation with EU member states on mutual legal assistance and asset freezing and confiscation, building and improving on the relevant Council of Europe conventions. This is the first time that the EU has agreed such a comprehensive agreement with a third country in this area. I recognise that, in the case of economic crimes, effective extradition arrangements will be important to ensure that we prosecute individuals effectively. We have these streamlined arrangements based on the EU’s surrender agreement with Norway and Iceland.
We are no longer part of the EAW. These new arrangements provide stronger protections for individuals, including provisions that make it clear that a person cannot be surrendered if their fundamental rights are at risk, or extradition would be disproportionate, or they are likely to face long periods of pre-trial detention— all evils identified under the EAW scheme. They also allow the UK courts to refuse a warrant if they believe that it has been issued to prosecute someone because of their political views, and to guarantee rights of access to translation, legal advice and consular assistance for British citizens arrested abroad.
The deal that the Government have reached in relation to our departure from the European Union enables arrangements with Europol and Eurojust that reflect the scale of our contribution to these agencies and facilitate effective operational co-operation. It enables the fast and effective exchange of national DNA, fingerprint and vehicle registration data via the Prüm system to aid law enforcement agencies in investigating crime and terrorism. We have agreed fast and effective arrangements for exchanging criminal records data through shared infrastructure and have ensured that information can be exchanged for crime prevention and safeguarding purposes. We have secured the continued transfer of passenger name records from the EU to protect the public from terrorists and criminals. As I said, we have also put in place arrangements that will simplify and speed up co-operation with EU member states on mutual legal assistance and asset freezing and confiscation, building and improving on the relevant Council of Europe conventions.
Perhaps I may turn to some of the thoughtful submissions made by speakers in the debate. The noble Lord, Lord Hain, referred to specific examples and endorsed the essay of the noble Lord, Lord Gold, on corporate culture. The noble Lord spoke about the importance of adequate resourcing and questioned the Government’s commitment to the operation of the Act abroad and the enforcement of anti-bribery measures abroad. I draw to his attention Section 12 and emphasise that the Bribery Act is an extraterritorial matter. Persons can be prosecuted where they have a close connection with the United Kingdom, and it does not matter if acts are committed abroad.
The noble Lord’s observations about London as a centre for money laundering are matters of urgent concern, but I sense that they also reflect something of London’s particular pre-eminence and status as a financial centre.
I agree with the observations of the noble Baroness, Lady Bowles, as to the importance of deferred prosecution agreements. I advise her that guidance and indeed practice emphasise that the existence of a deferred prosecution agreement does not bar prosecution of individual persons who were themselves responsible for acts of bribery. We encourage the prosecution of individuals. That has taken place already and is taking place in the context of DPAs.
As well as contributing an article which attracted positive views from members of the committee, my noble friend Lord Gold also spoke. I am happy to endorse his question and say that we will keep under review the possibility of extension of Section 7 of the 2010 Act into other areas.
I hope that I have already reassured noble Lords who mentioned the risk of complacency. It was the noble Lord, Lord Stunell, who spoke of our decline from the gold medal position to the bronze medal position on the podium. I suspect that this will be a matter which is somewhat fluid and dynamic in terms of measures coming into force. As we will discuss later, the types of offence with which the Act is concerned and the investigations put forth under it have a very long lead time.
The noble and learned Lord, Lord Morris of Aberavon, called for figures on the operation of the bodies charged with investigation of crimes of this sort. I can advise him and others that the gross budget for the Serious Fraud Office went up from £44.6 million in the financial year 2009-10 to £60.6 million in 2018-19, that being the last year for which figures are available. I regret that I do not have figures for the Crown Prosecution Service or other agencies. I shall endeavour to discover those and to write to the noble and learned Lord. I can tell him that the Government are committed both to the Serious Fraud Office and to the maintenance of the Crown Prosecution Service. We will always ensure that those bodies are fully supported to deliver their objectives, and they make their financial details available year on year.
My attention is drawn to the clock. I agree with the submission by the noble Lord, Lord German, that artificial intelligence will be an important and developing tool.
On advice given to small and medium-sized enterprises, the Government have sought to group matters together on a specific landing-site website. That means that inquiries on this matter will come to a central site and there will be easy links to places where information and advice can be discovered.
The role of the anti-corruption champion was raised by a number of noble Lords. Mr Penrose MP holds that office; he is a prime ministerial appointment and reports to the Prime Minister. The anti-corruption champion is committed to his role, which can be seen by the fact that he has weekly meetings with the joint anti-corruption unit and regular meetings with Ministers and businesses. That matter was raised by the noble Lord, Lord Bradshaw, as well as by my noble friend Lord Hodgson of Astley Abbotts.
My noble friend Lord Hodgson also made reference to the committee’s scrutiny of the Skansen case. I share his concern about aspects of the prosecution in that matter, and I am sure that the practice will have developed and will continue to develop so that what might be seen as errors in the prosecution’s approach will not be made in future.
The noble Lord, Lord McNally, referred to his gift from the outgoing Labour Government of the 2010 Act. I am happy to say that the noble and learned Lord, Lord Davidson of Glen Clova, my predecessor in this role, was responsible for that, and I thank him for his kind words. I am happy that the gift to the noble Lord, Lord McNally, on coming into post was merely the 2010 Act and not a case of whisky—a reference to the sensible observations from the noble and learned Lord, Lord Morris of Aberavon, about the nature of facilitation payments and the obviousness of bribery.
I have made reference to funding concerns and cited figures for the Serious Fraud Office and its increase in budget.
I am grateful to the noble Lords, Lord Rogan and Lord Empey, and my noble friend Lord Naseby, who spoke from experience of business abroad. The noble Lord, Lord Rogan, referred to the existence of a pilot project operating in Kenya, Mexico and Pakistan. It is important that consular, high commission and other embassy advice is available to businesses practising in foreign countries. The Government are aware of that. Time may not permit me to refer noble Lords to the range of training in place but, again, I can write to noble Lords who raised the question. I can say in relation to the specific point raised by the noble Baroness, Lady Fookes, that we will respond in writing to the question of how many people are involved in training in the embassies—and that also goes to consular and high commission facilities.
In answer to questions raised by the noble and learned Lord, Lord Davidson of Glen Clova, my predecessor in office, the self-report system that operates in Scotland is, as he and the noble and learned Lord, Lord Hope of Craighead, observed, distinct from the system of deferred prosecution agreements that operates in England, Wales and Northern Ireland. The initiative must be reviewed and approved each year by the Lord Advocate, and was most recently extended until June 2021. The fact that business is required to put in place measures to prevent unlawful conduct is viewed as an effective means of preventing corruption in future.
In 2018, the committee asked the Lord Advocate about a perceived lack of transparency with the self-report scheme, because the matter does not go before a judge in open court. The Lord Advocate does not accept that there is a lack of transparency in the Scottish system. Following the conclusion of any settlement under the self-reporting scheme, as part of a proactive strategy, the Crown Office invites publicity and provides information for media releases which are published on a dedicated bribery page on the Crown Office and Procurator Fiscal Service website.
In response to a further point raised by the noble and learned Lord, there are no current plans to amend the Act, but we will await with interest the findings of the Law Commission review of corporate criminal liability. In relation to the concern raised by a number of noble Lords about the guidance on offer in relation to corporate hospitality, we believe strongly that professional organisations and trade associations are better placed to provide both sector-specific and bespoke guidance on corporate hospitality. In relation to the broader point raised by the noble and learned Lord, we can readily see that there may be a difficulty if, further down the line to the provision of specific tailored advice in specific circumstances, one side might plead that it was being prosecuted having followed advice, and the other might declare that material facts that would have influenced any advice given had not been disclosed. It is that sort of matter that the Government’s approach seeks to avoid.
I thank the noble Lord, Lord Thomas of Gresford, for his characteristically thoughtful analysis of the matter and his endorsement of the operation of Section 7. My observations in relation to the last point follow his remarks that the Government are not a trade body in relation to the provision of advice to members.
I suspect that I have gone over time and I apologise for trespassing on your Lordships’ patience and that of the clerk and others here. I thank noble Lords for their thoughtful contributions and am particularly grateful to the committee for its work in scrutinising this piece of legislation. I am happy that the legislation and its operation, broadly speaking, enjoy such support across the Benches in your Lordships’ House. I apologise to noble Lords if I have not responded, owing to the times constraints, to specific points that they have raised, but I will go over my notes and those taken for me in relation to points raised by noble Lords, and will correspond in due course.
Lord Saville of Newdigate (CB) [V]
My Lords, during the course of the debate, a number of speakers raised the question of applying vicarious criminal liability to companies in cases of bribery. There are very strong views held on both sides of this question, but I simply draw attention, once again, to Section 7 of the Act, on the failure to prevent bribery. This avoids all questions of mens rea and other difficulties and provides, in my view, a ready means of catching out the company if it has failed properly to take adequate measures. If we apply that section to the ship captain who has lost his ship, then he would not get away with it if he had failed to take adequate measures to keep his ship seaworthy.
I take this opportunity to publicly thank the staff who worked for this committee. The advice and guidance of our clerk, Michael Collon, proved quite invaluable. We could not have been better served. I wish him a long and happy retirement. The same could be said—except that he is not retired—of Ben Taylor, our policy analyst. His historical and other research was of the highest quality. Alasdair Love and Rebecca Pickavance also formed part of the team, and we were all very impressed by the hard and good work that they did for us. I also thank Anne-Marie Ottaway, a solicitor with extensive knowledge of the working of the Bribery Act, whose assistance as our specialist adviser made an important contribution to our work. Finally, I thank the other members of the committee, all of whom played a vital part in our deliberations. It was a very great pleasure to work with such people.
The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)
That completes the business before the Grand Committee this afternoon. I remind all Members to sanitise their desks and chairs before leaving the Room.