Joint Committee on The Draft Corruption Bill

Joint Committee on The Draft Corruption Bill Report

3 The Bill - the options

64. In the light of all the many criticisms and suggestions that have been made, we have to consider whether the best way forward is to retain the present structure of the Bill based on the Law Commission Report with some amendments or look for a different approach which avoids the criticisms which have been made of the present draft.

65. The central problems with the present Bill appear to be:

· the agent/principal relationship

· the meaning and scope of corruption for the purposes of the criminal law

· whether there should be specific or broad offences

· whether producing offences which cover both the public and private sectors has created artificial definitions which meet neither situation

66. The first question is to analyse what the law is trying to do. What is the conduct which the offence of corruption is seeking to deter or to punish? Is it the betrayal of the duty of loyalty which is owed by the agent to his principal or by the employee to his employer? Is corruption to cover only that or does it go wider? Is it the undermining of the efficiency of and trust in public administration and, in the private sector, an attack on fair dealing and proper behaviour? These two approaches are not necessarily mutually exclusive. The proponents of the Bill have proceeded on the basis that it is disloyalty which is the essence of the offence and that that alone should be covered.

67. The draft Bill contains this definition of corruption:

Conferring an advantage: meaning of corruptly

1) A person (C) who confers an advantage, or offers or agrees to confer an advantage, does so corruptly if -

a) He intends a person (A) to do an act or make an omission in performing functions as an agent of another person (B) or as an agent or the public;

b) He believes that if A did the act or made the omission it would be primarily in return for the conferring of the advantage (or the advantage when conferred), whoever obtains it;

c) The exception provided by section 6 does not apply;

d) The exception provided by section 7 does not apply.

2) A person (C) who confers an advantage, or offers or agrees to confer an advantage, does so corruptly if -

a) He knows or believes that a person (A) has done an act or made an omission in performing functions as an agent of another person (B) or as an agent for the public;

b) He knows or believes that A has done the act or made the omission primarily in order to secure that a person confers an advantage (whoever obtains it);

c) He intends A to regard the advantage (or the advantage when conferred) as conferred primarily in return for the act or omission;

d) The exception provided by section 6 does not apply;

e) The exception provided by section 7 does not apply.

3) For the purposes of subsection (1) the nature of the intended act or omission, and the time it is intended to be done or made, need not be known when the advantage is conferred or the offer or agreement is made.

68. The Committee proceeded to consider whether the problems with the Bill and the definition of corruption could be solved by minor modification; whether a different analysis was needed; or whether a whole new structure for the Bill was necessary. These three options are examined below.

Option 1: Modifying the Bill

69. The Committee considered whether the Bill would be improved by the addition of 'dishonesty' or 'dishonestly' in the offence. If, however, the offence is based on a breach of loyalty there are arguments against using these words. 'Dishonesty' may not be the same as corruption. The courts have avoided giving a precise definition of 'dishonesty' saying that ordinary men and women know what it means. Yet the Committee believe that the offence does need to express some element of immoral or improper behaviour. Nothing can convey this as well as 'dishonest' but we accept the difficulties of relying on the word. We note that the Law Commission has undertaken a review of the law of fraud.[100] Introduction of a bribery offence of which dishonesty is an element will involve a very considerable overlap with the common law offence of conspiracy to defraud and should perhaps best be considered alongside other offences of dishonesty.

70. Another suggestion made is that the word 'undue' should be added. This word appears to have a technical meaning in civil law, but to introduce the phrase 'undue advantage' may raise more questions than it answers. We believe that juries would better understand the concept if the word 'improper' appears before 'advantage'. On the other hand we consider that an 'advantage to which a person is not entitled' would be an alternative formulation to 'improper advantage'.

71. We do not believe that the use of the word 'primarily' adequately meets the concerns about the unqualified use of the word 'advantage'. It does not clearly express the concept of improper or immoral even if it puts emphasis on the necessary intention. While we accept that many other countries have included the OECD wording of 'bribery of a foreign public official' we think there is some force in the Home Office view that the draft Bill adequately covers this point.[101]

72. While accepting the advantages for prosecutors of having broadly-based offences, we do not believe this excludes having in addition some specific offences. It would be up to the prosecutors to choose which offence would be most appropriate for the circumstances. People involved in corruption may currently be pursued for a variety of offences. Although this might add to the complexity of the law, specific offences will also be more readily understood.

73. At first glance the blurring of the distinction between the public and private sectors in economic life would support the combining of the old statutory offence into new ones which apply across all sectors. This is the approach the Law Commission took in 1998. This leads however to the awkwardness of using the agent/principal relationship in the public sector and the defence of consent of the principal applying only in the private sector. Another approach would have been to produce offences some of which might apply in both the public and private sectors and others which were specific to only one sector.

74. The Crown Prosecution Service drew our attention to doubts about the meaning of 'functions' in the Bill.[102] The Home Office has told us that this word is widely used across the statute book and recently in the Human Rights Act 1998. Mr Justice Silber set out the case for replacing the word 'functions' with 'duties'.[103] This would be a return to the wording originally proposed by the Law Commission in 1997 but changed in their 1998 draft Bill. We also note the willingness of the Attorney General to express the offence in terms of breach of duty.[104]

75. We considered whether the Bill could be made clearer by re-casting its various Clauses and provisions and Mr Justice Silber in his latest submission sets out a way in which this could be done by including the relevant words of Clause 5 in the earlier Clauses.[105] But the Home Office states that such a change would have to be reflected throughout the early part of the Bill and would substantially lengthen it. And in our view we would after all these changes still be left with a Bill lacking in clarity. This kind of redraft is not therefore the way forward.

76. Is it however right or sufficient to look only at the loyalty of the agent to the principal? We are persuaded that this approach is too narrow. There could well be cases where the giving of a secret or underhand advantage to the prejudice of competitors or members of the public is corrupt in the eyes of the ordinary public. The head of a company who bribes another not to bid for a contract would be guilty of an offence even though no agent were involved. Lord Falconer and the representatives of the CBI[106] took the view that these cases were already covered by appropriate parts of anti-competition law, and that this was sufficient regulation. The Enterprise Act 2002, which came into force on 20 June 2003, introduces criminal penalties for individuals who dishonestly engage in the worst types of cartels such as horizontal price fixing, limiting supply or production, market sharing or bid-rigging. We are not satisfied that this is sufficient and we consider that there should be legislation dealing with this type of corruption.

77. We have also considered adding separate specific offences to the Bill such as:

· making explicit the liability of UK companies for the actions of foreign subsidiaries and agents

· creating a separate offence of trading in influence

· making misconduct in public office a statutory offence (with a wider definition of public office).

78. We are not persuaded that UK companies should be made explicitly liable for the actions of non-resident foreign subsidiaries and agents because the individuals - in many cases nationals of the countries concerned - will be subject to national law in that jurisdiction.

79. The case for a separate offence of trading in influence is not, in our view, convincing.

80. The draft Bill does not seem to us the appropriate vehicle for giving a statutory definition of misconduct in public office.

81. Our overall conclusion, however, is that by adopting only the agent/principal approach the Bill does not proceed on the right basis and that corrupt acts outside that relationship ought to be included in the Bill.

Option 2: An alternative analysis of the harm in corruption

82. As we have said, the essence of the offence in the draft Bill is the breach of loyalty owed by an agent to his principal. Another approach is to look at the harm corruption does to public administration or the efficient operation of the economy. Taking such a different approach could solve many of the problems which have been identified in the evidence we have received. A full explanation of this alternative is set out in the opinion given by our specialist adviser, Peter Alldridge.[107] In the introduction to the draft Bill, Lord Falconer wrote:

"Corruption is potentially devastating. If it is not kept in check, it has the potential to cause serious damage to government and business - indeed to every aspect of economic and social life. We need to be constantly on our guard against corruption - it is a complex crime, by its nature very insidious and its effects stretch across international borders. Corruption world-wide weakens democracy, harms economies, impedes sustainable development and can undermine respect for human rights by supporting corrupt governments, with widespread destabilising consequences".

83. The alternative approach identifies serious consequential harm in bribery as having greater significance than disloyalty. A Bill based on the harm done to the system would make it an offence to confer or receive a benefit with the intention of corrupting or frustrating the proper functioning of government and public services or with the intention of corrupting or frustrating the proper functioning of a regulated market. An offence along these lines was contemplated by Mr Justice Silber.[108] As against the draft Bill the advantages of this model are:

· it is no longer necessary that the consent of the principal be a defence (Clause 7);

· the vice is clear, because now "corrupting" is used as a transitive verb. The reader knows that the statute is intended to prevent corruption: (i) of government (ii) of markets. Clearer identification of the vice will enable judges to sentence more rationally and consistently;

· the adoption of extra-territorial liability is in principle easier to justify. The criminal law of England and Wales has far greater cause to be concerned with proper operation of the organs of government and markets than with the loyalty of individual public servants.

84. This is an interesting way of looking at corruption in terms of its legal and economic impact. It makes a stimulating contrast to the more conventional approaches to the criminal law. Yet we have received no evidence from those who would be affected by the new law which would support such a radical departure at this stage. We therefore have used this analysis as a means of comparison with the approach in the Bill and as an indication that a wider approach should be adopted.

Option 3: An alternative structure to the Bill

85. As has been seen, much of the concern of our witnesses has centred around the decision to draft the Bill on the agent/principal model. Experienced lawyers and professionals in the anti-corruption field expressed doubt as to whether the new legislation would be intelligible to juries - or indeed to companies and individuals who wanted to be clear that they were acting within the law. The definition of 'corruptly' given in Clause 5 caused particular concern, and we too found it to be opaque.

86. The defences in Clauses 6 and 7 are not clear. Their inclusion is a consequence of the reliance on the agent/principal relationship. If the Bill is based on a breach of loyalty, then the consent of the principal must be a defence. But we still believe that these two Clauses are very complex and hard to understand. It seems to the Committee that in a private sector case, even if the employer consents to his purchasing agent accepting bribes from contractors, this is dishonest, immoral and done to get an unfair advantage at the expense of competitors and /or the public, and there is a strong argument for saying it should be categorised as criminal. We note that there is a case for specifying that the belief in the principal's consent should be genuine or reasonable but this was not accepted by the Home Office (see paragraph 31).

87. Finally, as we have indicated, the agent/principal model fails to cover corruption which takes place between two principals. It is as corrupt for one owner of a firm to give money to an owner of another firm to persuade him not to tender for a particular contract, as it is to give money to the buyer to recommend a particular seller to his principal. The former example would fall outside the offences created by the draft Bill since the two firm owners are not necessarily agents. Moreover, as Lord Falconer pointed out, where the enterprise is incorporated, the owner of the company may be its agent.[109]

88. These problems with the agent/principal model go to the heart of the Bill. The culpable mental state in Clause 5 is directed against the breach of the agent/principal relationship. But the agent/principal relationship is defined so widely in Clause 11 that almost any legal relationship giving rise to duties and functions will be an agent/principal relationship. Where there is a civil law duty, there will be a principal-agent relationship. It is better to rely on the element of duty rather than the principal-agent relationship.

89. The Committee has therefore concluded that the only way to address the problems which are inherent in the Bill (which arise from agent/principal model) is to move away from the definition of 'corruptly' in Clause 5.

International experience

90. For this purpose it is valuable to see how corruption is defined in different legal systems across the world. Some of the legal provisions relate specifically to the bribery of a foreign public official but it may be that a similar definition would apply equally to domestic public sector corruption.

OECD

"It is a criminal offence …. for any person intentionally to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to [a foreign] public official …. in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business".[110]

South Africa

"Corruptly" means in contravention of or against the spirit of any law, provision, rule, procedure, process, system, policy, practice, directive, order or any other term or condition pertaining to:

a) any employment relationship;

b) any sporting event;

c) any agreement; or

d) the performance of any function in whatever capacity.[111]

Australia

A person is guilty of an offence if the person:

a) provides a benefit to another person; or

b) causes a benefit to be provided to another person; or

c) offers to provide or promises to provide a benefit to another person; or

d) causes the offer of a provision of a benefit, or the promise of the provision of a benefit, to be made to another person; and

e) The benefit is not legitimately due to the other person; and

f) The first-mentioned person does so with the intention of influencing [a foreign] public official (who may be the other person) in the exercise of the official's duties as [a foreign] public official in order to:

i. obtain or retain business; or

ii. obtain or retain a business advantage that is not legitimately due to the recipient, or intended recipient, of the business advantage (who may be the first-mentioned person).[112]

Canada

"Every person commits an offence who, in order to obtain or retain an advantage in the course of business, directly or indirectly gives, offers or agrees to give or offer a loan, reward, advantage or benefit of any kind to [a foreign] public official or to any person for the benefit of [a foreign] public official as a consideration for an act or omission by the official in connection with the performance of the official's duties or functions; or to induce the official to use his or her position to influence any acts or decisions of the foreign state or public international organisation for which the official performs duties or functions." [113]

Switzerland

"Anyone who offers, promises or grants an undue advantage to a person acting for [a foreign] state or an international organisation, as a member of a judicial or other authority, a civil servant, expert, translator, or interpreter employed by an authority, or an arbitrator or military person, for that person or for another, for him to act or not to act in his official capacity, contrary to his duties, or using his discretionary powers, will be punished by five years of imprisonment."

Council of Europe

"For the purpose of this Convention, 'corruption' means requesting, offering, giving or accepting, directly or indirectly, a bribe or any other undue advantage or prospect thereof, which distorts the proper performance of any duty or behaviour required of the recipient of the bribe, the undue advantage or the prospect thereof".[114]

"When committed intentionally, the promising, offering or giving by any person, directly or indirectly, of any undue advantage to any of its public officials, for himself or herself or for anyone else, for him or her to act or refrain from acting in the exercise of his or her functions".[115]

"When committed intentionally, the request or receipt by any of its public officials, directly or indirectly, of any undue advantage, for himself or herself or for anyone else, or the acceptance of an offer or a promise of such an advantage, to act or refrain from acting in the exercise of his or her functions".[116]

"The promising, offering or giving, directly or indirectly, of any undue advantage to any persons who direct or work for, in any capacity, private sector entities, for themselves or for anyone else, for them to act, or refrain from acting, in breach of their duties".[117]

Kenya

" 'Corruption' means -

an offence under any of the provisions of sections 39 to 44, 46 and 47;

39.(1) This section applies with respect to a benefit that is an inducement or reward for, or otherwise on account of, an agent -

a) doing or not doing something in relation to the affairs or business of the agent's principal; or

b) showing or not showing favour or disfavour to anything, including to any person or proposal, in relation to the affairs or business of the agent's principal

40.(2) A person is guilty of an offence if the person -

a) receives or solicits, or agrees to receive or solicit, a benefit to which this section applies if the person intends the benefit to be a secret from the person being advised; or

b) gives or offers, or agrees to give or offer, a benefit to which this section applies if the person intends the benefit to be a secret from the person being advised

c) bribery;

d) fraud;

e) embezzlement or misappropriation of public funds;

f) abuse of office;

g) breach of trust;

h) an offence involving dishonesty - in connection with any tax, rate or impost levied under any Act; or under any written law relating to the elections of persons to public office".[118]

91. The World Bank refers to the classic definition of corruption as " the exercise of public power for private gain".[119] The Asian Development Bank uses the phrase "the abuse of public or private office for personal gain".[120]

92. The diversity of these definitions illustrates how difficult it is to arrive at an agreed definition of corruption. Some definitions rely on a single, general, overarching offence: others rely on a number of specific offences. Having examined all these different models, we consider that (leaving aside related offences) the essence of corruption could be expressed in the following terms:

A person acts corruptly if he gives, offers or agrees to give an improper advantage with the intention of influencing the recipient in the performance of his duties or functions;

A person acts corruptly if he receives, asks for or agrees to receive an improper advantage with the intention that it will influence him in the performance of his duties or functions.

93. As we have already indicated, it could be possible to substitute for 'improper advantage' the words 'advantage to which a person is not legally entitled'.

94. It might be helpful to give some examples of how our definition might work in practice. To take a simple example from the private sector, it is corrupt to give a bribe to a buyer to persuade him to buy his supplies from one company rather than from another: and in the public sector it is corrupt to give a bribe to someone involved in a local planning authority so as to obtain planning permission which the giver would otherwise be unlikely to obtain. From the receiver's point of view it is corrupt to receive the bribe knowing of the giver's intention and acting accordingly.

95. The advantages of having a clear and simple definition of corruption such as this are as follows:

· There is no need for the agent/principal relationship and the obscurity and complexity it brings;

· The definition applies equally to the public and private sectors;

· Corruption between principals is covered;

· It leaves open the question of whether further, specific offences could be created, or whether a single, general offence of corruption would suffice.

How would the Bill be restructured if the new definition were adopted?

96. If a definition such as the one proposed above were used instead of the definition given at Clause 5 of the current Bill, it follows that all references in the draft Bill to agents and principals would fall from the Bill. Thus the first two Clauses would remain broadly as they are and Clause 3 would no longer be necessary as a separate offence. Clause 5 would be replaced with a new Clause containing the new definition. These three Clauses would form the heart of the new Bill and Clauses 6, 7 and 10 would be omitted.

97. In addition, it would be possible to implement some of the suggestions given in paragraphs 69 to 81 above (under "Modifying the Bill"). In particular, it would be right to consider whether to add the text of Article 1 of the OECD convention, appropriately modified, for 'bribery of foreign public official', and whether to replace 'functions' with 'functions and duties' throughout.

Conclusion

98. In the light of the criticisms which have been made of it, we do not consider that the draft Bill should be left as it stands on the essential issue. The choice is between modifying the Bill by trying to improve it marginally (by, for instance, making clear that the offences created include an element of moral turpitude) and restructuring the Bill on a new definition of corruption. We conclude that the Bill would still be obscure and unsatisfactory if the offences remain based on the concept of agency. On the other hand we can adopt a completely different approach which concentrates not on breach of the duty of loyalty which an agent owes to his principal but on the giving or receipt of an improper advantage in secret and underhand dealing to the prejudice of the interests of competitors or the public. This alternative course is, we believe, the right one.

99. We believe that a Bill centred on a simple definition such as ours would be clearer and would work better. We also believe it would be more likely to receive general approval.

100. We consider that this approach would equally apply to the bribery of a foreign public official. The Home Office may wish to consider whether one broad offence is in itself sufficient or, as in many other jurisdictions, it should be supported by certain specific offences such as bribing a foreign public official.

100 Law Commission Report no 276 Back

101 Ev 75 para 14 Back

102 Ev 17 DCB 15 para 1.1 Back

103 Ev 170 DCB 33 Back

104 Q578 Back

105 Ev 170 Back

106 Q487 (Lord Falconer) and Q752 (Mr Berkeley) Back

107 Annex 4 Back

108 Q657 Ev 171 Back

109 Q524 Back

110 Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1997) Article 1 Back

111 Prevention of Corruption Bill 2002 Clause 1 (iv) Back