We have been following your inquiry into corruption with interest and wish you every success in your analysis of the causes, natures and extent of corruption, its impact on development and measures to combat corruption.

  We are writing to clarify the role that Chartered Accountants play in the fight against corruption. The great majority of Chartered Accountants do much work to promote compliance with the law and appropriate ethical standards by their clients, largely in the areas of the avoidance of false accounting and compliance with the tax legislation but also more generally. This means that whether working in practice or in commerce they will be acting as a force for the control and elimination of corruption. Please let us know if you would like to see a copy of our professional ethical guidance on this matter.

  The Committee will be aware that the law on corruption in the United Kingdom is unclear. In these circumstances, it is difficult for accountants or other professionals to advise unambiguously on the legal and ethical implications. We attach a copy of the memorandum of comment that we sent to the Law Commission, in response to their 1997 consultation "Legislating the Criminal Code: Corruption", which encapsulates our views on the reform of the law of corruption. We have also noted the Law Commission's final report and the Government's proposals "Raising Standards and Upholding Integrity: the Prevention of Corruption" published in July of this year and attach a copy of our short response to the latter. We were disappointed that no reform of this law was announced in the recent Queen's speech and believe that it should be reintroduced into the Parliamentary timetable without delay.

Geoffrey Mitchell

Chairman, Business Law Committee, The Institute of Chartered Accountants in England and Wales

December 2000

INTRODUCTION

  1.  This memorandum has been prepared to draw attention to some of the practical issues that might result from the proposals made by the Commission. It should not be considered comprehensive, nor to address the technical issues raised by the paper.

  2.  The Government Statement—The Prevention of Corruption, issued by the Home Office in June 1997, covers similar ground to much of the Commission's consultation paper. We have taken the content of that Statement into account in drafting this response.

CORRUPTION, DISHONESTY AND FRAUD (SUMMARY—PARAGRAPH 1)

  3.  There is an obvious link between corruption and fraud. The paper takes the view that it is possible to have corruption without fraud and fraud without corruption (paras 1.23-1.25 and 8.43). The latter proposition is no problem. The former depends on the definition of fraud as "dishonest conduct intended to result in loss (or the risk of loss) to another" (para 1.23). and the fact that "to exploit a position of trust for one's own benefit is not fraud unless someone else's interests are damaged or endangered" (para 1.24). However, the offer of a bribe is intended to result in a gain of some sort to the briber with the implication of loss to another and could come within the definition in para 1.23. The position of the person bribed is more difficult to bring within the definition of fraud. In summary, we concur with the Commission's provisional conclusion that corruption should not be treated as dishonesty or fraud.

THE DISTINCTION BETWEEN PUBLIC BODIES AND OTHERS (SUMMARY—PARAGRAPH 7)

  4.  We recognise the persuasiveness of the arguments in favour of abandoning the distinction between public bodies and others, and on balance support it. However, it should be noted that while the duties of public officials are often clearly defined, with a clear code of ethics, this is not always so in the private sector. Conflicting duties are often a feature of business life. In parallel with any changes in the law, consideration should be given to the need to clarify the standards of behaviour that are acceptable in a business environment.

THE PUBLIC INTEREST OF OTHER COUNTRIES (SUMMARY—PARAGRAPH 15)

  5.  We note the proposal that quasi-fiduciaries acting on behalf of the public of another country should not be regarded as an agent, for the purposes of defining bribery. Many officials acting on behalf of the overseas public will also, presumably, be fiduciaries since they will be employees of a public body, to which they owe a duty. The exclusion of some foreign individuals but not others runs the danger of introducing a lack of clarity into the resulting law.

  6.  The exclusion of foreign quasi-fiduciaries might have the effect of excluding from the definition of bribery a number of payments made in overseas jurisdictions where these are normal practice in that jurisdiction. If this forms part of the intention behind the proposal, this should be stated clearly and the implications fully explored.

DISTINGUISHING BETWEEN CORRUPT AND NON-CORRUPT CONDUCT (SUMMARY—PARAGRAPH 19)

  7.  In some jurisdictions, it is difficult or impossible to secure the carrying out of normal duties by public officials without the payment of a "fee" or facilitation payment. In such circumstances, the payment is made to promote the discharge of a public duty, not its avoidance or the carrying out of some improper act. Clarification on whether such payments would be considered corruptive would be useful.

SPECIFIC DEFENCES—BENEFITS OF SMALL VALUE (SUMMARY—PARAGRAPH 24)

  8.  Benefits of small value are a regular feature of commerce in most jurisdictions. We recognise that in most cases these will be precluded from definition as an offence because they will not be considered corruptive. However we do wonder whether the law will be easier to interpret and implement, and court cases shorter, if a specific defence of small value is retained. Will the existing case law on the definition of undue reward still apply if the law is amended as suggested, or will an equivalent body of case law need to be developed? Similar arguments might also be applied in relation to a possible defence of "normal practice".

SPECIFIC DEFENCES—NORMAL PRACTICE (SUMMARY—PARAGRAPH 24)

  9.  It is proposed that "normal practice in the environment in question" should not be a specific defence. There is a real dilemma for many international businesses in that in some important markets it is "normal practice" to have to pay what may euphemistically be termed commissions in order to gain significant contracts. Such payments may or may not be against the law in the country where they are carried out, but where they are a regular feature of business practice, non-payment would represent a very significant competitive bar.

  10.  The chaotic state of regulation and enforcement in some countries may require business to be carried on through unusual structures, often involving middlemen who may well resort to bribery, with or without the knowledge or authorisation of the UK company. The criminal liability, or lack of it, of the UK company and its directors and managers must be clear in these circumstances.

  11.  It is a policy issue as to whether the Government considers it preferable to outlaw the paying of bribes to foreign agents, even where it is "normal practice", or whether it is preferable to allow British companies free competition with local and other international companies in such jurisdictions. Whatever the policy, the key requirement is to ensure that there is clarity and certainty under the law.

INTERMEDIARIES (SUMMARY—PARAGRAPH 32)

  12.  In recent years, the activities of so-called "information brokers" has come to the public attention as a result of investigations and prosecutions into corrupt practices over large scale procurement, particularly for North Sea oil operations. Such information brokers bribe company employees to provide information which can be used by their principals (suppliers looking to gain major contracts) in order to improve their chances of winning tenders or to negotiate an improved deal. The information brokers are in a sense instigators of the process of corruption; they will offer their services to companies they know are involved in bidding for major contracts and are likely already to have in place contacts in the companies making the purchases. For this reason, it would seem perverse if the broker were not dealt with as a principal offender.

TERRITORIAL JURISDICTION—PAYMENT OVERSEAS (SUMMARY—PARAGRAPH 41)

  13.  The proposals that a modern bribery offence should be a Group A offence for the purpose of the Criminal Justice Act 1993 implies that to come within the jurisdiction of the English courts, a bribe must be offered, accepted or paid in England or Wales. In these days of frequent foreign travel, it must be increasingly likely that agents of a British principal, who carry out their duties wholly in England or Wales, may be approached and paid bribes abroad. This appears to present a major potential loophole that should be avoided in the definition of a modern offence of bribery. This weakness has been identified in paragraph 9.8 of the paper, but it is not clear that it will be ameliorated by inclusion as a Group A offence.

TERRITORIAL JURISDICTION—PREPARATORY ACTS IN THE UK

  14.  The Government Statement on the Prevention of Corruption raises the possibility that preparatory acts in this country, to an act of corruption abroad, should be made an offence (paragraph 3.19 of that statement). The Law Commission's view on this suggestion would be welcome, and whether any exceptional provisions would be necessary to effect this extension. The fragmentation of the law, so that different jurisdictional and other provisions apply to different offences, is undesirable of itself as it reduces certainty in the applications of that law.

  15.  The proposals made by the Commission for jurisdiction as a Group A offence would be fairly easy for UK corporations to avoid, by the delegation of the offer and payment of bribes to an overseas subsidiary. It would also be possible to delegate the overall arrangement and planning of such payments, to similarly avoid an offence of carrying out a "preparatory act" in the UK. This would be highly undesirable, in that it would reduce the ability of UK boards of directors to control, reduce and assess the effect of the payment of informal payments, without necessarily reducing the overall payment of bribes by UK transnationals. We strongly support the general policy objective of reducing or eliminating the incidence of corruption globally, but this should not be done in a way that promotes the payment of bribes in an uncontrolled and underhand way in overseas subsidiaries without the knowledge or restraining influence of a UK parent company.

THE INVESTIGATION OF CORRUPTION (SUMMARY—PARAGRAPH 50)

  16.  We suggest that the remit of the Serious Fraud Office be amended so that it can deal with serious corruption in addition to its present powers in relation to serious fraud. This would help to resolve the question of investigative powers without giving the police powers comparable to those of the SFO. There would then be a distinction between powers available in cases of serious corruption and in other corruption cases no different from the distinction between cases of serious fraud and other fraud cases.

24 July 1997

  Thank you for sending us a copy of the White Paper. We do not have any serious reservations about the proposals, which have been drafted in a way which answers the points we made in response to the Government Statement made in the summer of 1997.

  We note that it is proposed to repeal the Public Bodies Corrupt Practices Act 1889, but only certain sections of the Prevention of Corruption Act 1906 and the Prevention of Corruption Act 1916. Our preference would be for all three of these Acts to be repealed in their entirety and replaced with a single consolidated Act, for ease of reference.

  We welcome the Government's proposal to introduce an additional offence of "trading in influence". We do not see the need for this offence to be limited to those purporting to be able to corruptly influence a public official. As for the other offences, we see no reason why it should not apply in relation to all agents.

  We are pleased that it is proposed to bring forward legislation as soon as Parliamentary time allows. We would welcome an opportunity to see the draft legislation, before it is introduced to Parliament, if this is possible.

Felicity Banks

Secretary, Business Law Committee

31 July 2000