Lord Hodgson of Astley Abbotts
Main Page: Lord Hodgson of Astley Abbotts (Conservative - Life peer)Department Debates - View all Lord Hodgson of Astley Abbotts's debates with the HM Treasury
(13 years, 5 months ago)
Lords ChamberMy Lords, it gives me great pleasure to be the first to congratulate my noble friend on her extremely and expectedly impressive speech. She has given us the grand sweep, as I would have expected. I am afraid that I will take a slightly different tack. I will give a worm’s-eye view. Before I adopt the position of the worm, I need to declare some interests, because I am a director of, and am involved with, companies that export goods and services around the world. I am anxious about some of the practical implications of the Bribery Act and the money-laundering regulations. However, I shall focus on the bribery ambiguities to which my noble friend referred a few minutes ago.
To cut to the chase, I urge my noble friend the Minister, who was for a number of years our distinguished representative on the Financial Action Task Force, to hold his nerve, continue with the period of consultation and extend it if necessary, because it is absolutely vital that we get the guidance right, particularly in respect of small and medium-sized businesses, which are not surrounded by armies of lawyers and advisers to provide them with comfort.
I do not want my noble friend to think that I am soft on bribery. It corrupts the recipient and also the giver. In my experience, firms that are slack about oversees payments are often slack about internal procedures such as management expenses, and sometimes confuse what is the company's—the shareholders’—money and what is the management’s. But—and this is a very big but—the Bribery Act poses considerable challenges for UK-based small and medium-sized companies. The crux of the problem is Section 7, which creates the new offence of failure to prevent bribery and is linked to Section 8, which defines “associated person” very widely.
I will give the House an example. I am afraid that it is detailed, but it is the only way to explain the practicalities we face on the ground, where they do not seem as easy as they do in the calm and rarefied atmosphere of your Lordships' House. The company I have in mind is a mid-sized one. It has a good product and it sells well abroad. It is growing and is increasing its employment in the United Kingdom. In short, it is just the sort of company that politicians of all political parties wish to encourage. One of our export markets, which is not yet large but is growing, requires us to pay a transport tax. We pay that through our agent. I am afraid that it is not a tax in the conventional sense. It is a payment to customs officials and to transport union officials to ensure prompt and timely delivery of our goods. We know that our continental European competitors also pay it.
We are advised that when the Act comes into force, the transport tax will constitute a bribe. We do not know whether any comparable legislation will affect our continental competitors; we think probably not. My noble friend referred to the Foreign Corrupt Practices Act in the United States. We know that they will get round this because that Act has a specific carve-out for “facilitation payments”, of which this transport tax would be one. Noble Lords may cite proportionality and ask what UK Government would pursue a minor payment of this nature. Quite so—but one Government might one day do it, and the prospect of 10 years in jail and an unlimited fine concentrates the mind.
However, our major concern lies in a quite different direction. In this market, our major competitor is local and does not pay the transport tax. He ships direct from his factory to the customer. We are advised that there is a considerable risk that this competitor, who will be aware of the transport tax, will make an official complaint to his Government that a UK company has been bribing individuals under the terms of the Bribery Act, and the UK Government will be asked to undertake a prosecution. Who knows what will happen then? My noble friend Lady Williams talked about ambiguities. There are many more like this. They are the sort of practical issues on which our legal advisers will need guidance before they in turn can advise us.
I will make one thing clear. If the guidance does not give us sufficient comfort, we shall withdraw from the market, and from others where we face similar challenges. We will leave them to our competitors. Exporting is hard enough work without risking the very grave penalties that this Act carries with it. Therefore, although we all, understandably and rightly, work ourselves into an indignant frame of mind on what I appreciate is a very important topic, please may we not forget my little company, and thousands like it, which are concerned with how to meet the requirements of the Bribery Act while dealing with the complex and varied demands of customers and social systems in highly competitive markets across the world.
My Lords, in no year since the turn of the century have there been more than 25 successful prosecutions for bribery in England and Wales. Indeed, in 2005 there was only one. Those numbers are ludicrously small. Anyone who believes that the numbers reflect a standard of probity in British business that leaves little to be desired is suffering from an excess of complacency or an excess of naivety that leaves them blind to the reality. Those prosecutions were brought under the old legislation, which was principally passed in 1906 and 1889. Those statutes were plainly not fit for purpose. It is a mark of the lack of seriousness with which we have treated bribery, particularly bribery in a commercial context, that it has taken so long to replace legislation which is more than a century old and which produced such a limited response to serious criminal activity.
The OECD anti-bribery convention, to which we are now signatories, marked a milestone in international co-operation in stamping out bribery in international business. However, the UK’s response to its obligations under the convention has to date been mediocre at best. That should all have been set to change with the passage of the Bribery Act last year, yet this admirable legislation has not come into force and we are now entitled to be impatient. It was supposed to come into force last October. In September, a brief consultation on the proposed guidance was announced, which would last until November, with a view to commencement in April this year. The consultation paper had draft guidance annexed to it. In January, further delay was announced and further work on the guidance was said to be needed.
My right honourable friend the Secretary of State for Justice says that we are back on track. He rightly says that corruption is bad for business and that we must be at the forefront of stamping it out, not only in the developing world but in international trade generally. That must mean that he completely rejects the argument that British businesses cannot compete with others that may be corrupt unless they, too, offer bribes. It is that argument that represents precisely the evil that the anti-bribery convention was designed to stamp out.
It is a pity that on occasions in recent months the CBI and the Multinational Chairman’s Group, to which my noble friend referred, have sounded close to rehearsing that argument in seeming to press for further delay and in their complaints about the implications of the Bill. That is the answer to the point powerfully and elegantly but, I suggest, wrongly advanced by my noble friends Lord Hodgson of Astley Abbotts and Lady Wheatcroft. It is no good saying that it is acceptable for small companies to pay small bribes, perhaps disguised as something else such as the transport tax that was referred to, and that it is only large bribes that the Act should outlaw. We have to rely on our markets wanting to buy British goods and services because they are competitive on price and quality.
I know that my noble friend has just six minutes, but it is a travesty of what my noble friend Lady Wheatcroft and I were saying to suggest that we were advocating small bribes. From the beginning, both of us have said that we are absolutely against bribery. It is the reality of the situation that we are asking the House to address.
My Lords, that is what was said, but the description of the transport tax being moneys paid to officials in small amounts to enable goods to be imported into those markets amounts to small bribes. I do not accept that they are acceptable. It is to be conceded by those who take our position that there may be a cost to that strict position, as my noble friends Lord Hodgson and Lady Wheatcroft point out. However, if it is a cost, it is a short-term cost, with the prize of a long-term business environment that is clean. The enforcement of the anti-bribery convention internationally and the Bribery Act in this country is a prize worth gaining.
The delay has been damaging to the reputation of this country and its business. As my noble friend Lady Williams explained, there is great anger with the United Kingdom in the United States and in the OECD. In the United States, the very strong legislation in the Foreign Corrupt Practices Act, which is rigorously enforced by the SEC and other federal enforcement agencies, has brought about a complete change of approach. The United Kingdom’s performance has been seen as hopeless and the delay in passing the Act has been seen as worse than that.
Meanwhile, we have regular reminders of the extent of the problem. Noble Lords have referred to the British Aerospace scandal and, in particular, to the previous Government’s extraordinary decision to stop investigating the Al Yamamah contract for the sale of aircraft to Saudi Arabia. The emergence even now of further evidence, which was highlighted in the past few days by my right honourable friend Sir Menzies Campbell, of a $70 million payment in connection with the contract makes the point
We have recently had the MW Kellogg engineering case, with a £7 million settlement over a contract for a gas liquefaction plant in Nigeria after payment of more than £100 million in bribes by the parent company. We had the disgraceful Innospec case last year, where a British company had paid bribes of $17 million to secure sales in Indonesia of a highly toxic lead fuel additive that is banned in the UK and elsewhere, the bribes having been paid to prevent the chemical from also being banned in Indonesia.
The list goes on. The evil of corruption is a cancer in our international trading system. It must be removed. The anti-bribery convention and the Bribery Act are powerful instruments. In Richard Alderman we have an energetic and effective director of the SFO, but we need the Bribery Act to become law. The guidance is needed fast. It needs to show a commitment to thorough enforcement. It must not be said that it waters down the effect or the effectiveness of the Act. Only in that way can Britain’s damaged reputation for probity in international business be restored.