Financial Crime: Legislation

Lord Thomas of Gresford Excerpts

Thursday 17th March 2011 Lords Chamber

[Lord Thomas of Gresford]

My Lords, the issue that caused the most grief and anguish during the passage of the Bribery Act 2010, as it still does, was the scope of the statutory defence of adequate procedures contained in Section 7(2). Section 7(1) provides that a commercial organisation is guilty of an offence if a person associated with it bribes another person to gain an advantage in a commercial transaction. It was a deliberately wide net, bounded only by the need to demonstrate that the organisation is carrying on a business, whether it is an incorporated body or a partnership formed in this country, wherever in the world it carries on its business, or a foreign company or partnership carrying on business in the United Kingdom.

Attempts were made during the passage of the Bill to insert a requirement that the prosecution must prove that the organisation has, through its responsible managers, acted negligently. However, bribery, or the absence of any objection to bribery, is more often due to the slackness of the company, as the noble Lord, Lord Hodgson, pointed out, than to significant negligence that can be tied to specific directors or managers. Negligence by any individual director or manager is a heavy burden to prove beyond reasonable doubt, so there would be no convictions. Another amendment was proposed for the prosecution to prove that the organisation did not have in place adequate procedures to prevent bribery, but that was an impossible burden to place on the prosecution, as it would require it to delve into the files of the company in question.

The Government rightly rejected those suggestions and produced a strict liability offence subject only to the statutory defence contained in Section 7(2), the defence of adequate procedures. The burden is on the organisation to prove, on the balance of probabilities, that adequate procedures are in place. What are adequate procedures? I and others, both in the Joint Committee and in the Chamber, attempted to tie the previous Government down to a working definition of the concept of adequate procedures, but that proved impossible. The noble Lord, Lord Tunnicliffe, said in Hansard on 2 February last year that it was for the courts alone to determine in a specific case whether the procedures had been adequate, leaving the matter completely up in the air.

I suggested that a commercial organisation ought to be able to obtain specific advice from the Department for Business about the adequacy of its procedures to prevent bribery, or, if it proposed to trade in a new area or foreign jurisdiction, that it could get advice on facilitation, grease payments or entertainment. What is improper performance? Should the meaning be governed by the standards of the country with which the organisation is dealing or by the stringent standards of a British jury?

The Foreign Corrupt Practices Act in the United States provides that a rebuttable assumption will arise that a person acting in accordance with advice will not commit an offence. An advisory service in the Justice Department of the United States gives that advice. In Hong Kong, the Independent Commission Against Corruption, which has brought Hong Kong to number three in the Transparency International scale, stamped out corruption. As part of its organisation, it has the Hong Kong Ethics Development Centre, which offers a full range of consultancy services on corporate ethics. To date, it has advised more than 3,000 private companies and businesses. The ICAC, with which I have some connection, cannot believe how few charges of corruption have been brought in the United Kingdom as compared with its case load. It is satisfied that its advisory service works well.

Unfortunately, it was thought to be un-British to do that in this country when the Bill was going through Parliament. Clearly, the advice of a government department could not pre-empt the decision of prosecuting authorities to prosecute, nor could it be a complete defence, but it could provide an important piece of evidence in support of a defence of adequate procedures under Section 7(2).

The previous Government rejected that approach and preferred to rely on the guidance. We have already heard about the issuing of guidance. An industry then sprang into being. It reminds me of an evangelical Welsh preacher who spends two-thirds of his sermon convincing completely blameless people that they are sinners and will go to hell and then offers redemption in the last third. What has happened is that commercial lawyers are warning companies of dire consequences, saying that directors will go to prison. I am sure that that is why my noble friends Lord Hodgson and Lady Wheatcroft take the position that they do. Directors are being warned that they will go to hell if they are not prepared to pay for advice from commercial lawyers on current procedures. These lawyers are busy tailoring anti-bribery and corruption programmes appropriate for the size and risk profile of their clients. Therefore, instead of the state—the Government—giving advice to a firm, you have to go to very expensive lawyers and others to get that advice.

I have in front of me an anti-corruption and bribery conference brochure, which says:

“Attending this conference will allow you to answer the following questions … How far will the SFO go in prosecuting offences?”.

Who can know that?

“What is the meaning of ‘adequate procedures’?”

I have already given what the Government say and we are waiting for the guidelines.

“Will the Act be reviewed by the Government”?

Who knows? You will have to pay £600 individually to get this useless advice. That is the industry that has grown up and which, I am quite sure, has caused all the problems, the difficulties and the fears for my noble friend Lord Hodgson, just as that Welsh preacher induced fear in his congregation. I do not believe that you need these programmes. The Act is perfectly straightforward. The concepts are perfectly clear and common sense is required. The intensive lobbying that has been going on to delay the issue of these guidance notes and the implementation of the Act is wholly to be deplored.