Bribery Act 2010: Post-legislative Scrutiny (Select Committee Report)

Motion to Take Note

Moved by

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).

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.

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.

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

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.

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.

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.

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.

My Lords, I reinforce the point that the time limit for speeches is six minutes.

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.