Corruption Bill [HL]

My Lords, I congratulate my noble friend Lord Chidgey on introducing the Bill. It is extraordinary that it has become necessary to do so, but it is clear that it is because the Government have been using delaying tactics. I note that the Written Statement last week includes a new tactic—kicking this into touch in the Law Commission for another couple of years. The need is urgent, more so now in the light of the considerable damage done to this country’s reputation as a result of the suspension of the Serious Fraud Office inquiry into corruption allegations involving the Al Yamamah project. The statement on 14 March by the OECD working group on bribery, to which noble Lords have referred, is a strong condemnation of the United Kingdom’s record. One expert said to me this week: "““In nearly 40 years of work involving international organisations, I cannot recall one being so critical of a major member. The Government will have to do a great deal better than sending this to the Law Commission for the next two years””." The statement reminded the world in detail about how the United Kingdom has been dragging its feet. There was already growing concern among those who follow these matters that the UK appears to be more reluctant to prosecute than other OECD members. I shall focus on the security-related aspects of corruption, although I realise that the Bill rightly covers a potentially much wider field of economic activity. I remind your Lordships that I am a member of the strategy group that advises Transparency International UK on the prevention of corruption in the official arms trade. The two major areas that have long been recognised as particularly prone to corrupt practices in international contracts are the construction industry—the noble Lord, Lord Berkeley, spoke of his experience of that—and arms sales. The arms trade is a highly competitive field in which large sums of money are at stake. Decisions are taken by government officials and politicians in the country that is buying a particular military capability. The contractual costs are often very opaque, partially as part of negotiating strategies, but also to protect commercial opportunities elsewhere. Payments may be made by means other than cash, and the whole can be further complicated by the use of offset deals, which may be in unrelated fields. Each of these aspects provides opportunities for corruption. Corrupt benefits may take the form of post-deal arrangements to give advantage through the subsequent offset arrangement. When I discuss these matters with those who have worked with and in the defence industries, many of them argue that these arrangements are just a fact of business life. If one wishes to export military equipment or services to some parts of the world, the local custom means that orders will need to be facilitated by additional payments and the price charged takes account of that. That has a number of security implications. The receiving country is not necessarily obtaining the most appropriate capability or the best value product. The sale may go to the international company that offers the best bribes. If a defence company depends on such techniques, itis likely that they will produce less effective products because they are not exposed to full market competition. That means that our own troops, who will be enjoined to help exports by buying British products, may be among those who ultimatelysuffer as a consequence of corrupt practices in export sales. There is also the question of what effect such corrupt practices have on the nation to which sales are made. On 11 January 2007, we debated the DfID White Paper Making Governance Work for the Poor. In Chapter 3, a compelling case is made for why corruption is bad for the developing world. I shall not repeat its arguments, but undermining good governance is not a recipe for future stability, so we sow the seeds of future security threats when we permit bribes to happen. The OECD working group report this week was right when it stated: "““The Working Group underlines in this respect that bribery of foreign public officials is contrary to international public policy and distorts international competitive conditions””." However, another aspect worries me. We rightly take pride in the integrity of our public servants in the UK, yet arms sales are conducted on a Government-to-Government basis. Indeed, within the Ministry of Defence, there is a body, the Defence Export Services Organisation (DESO) whose only role is to promote British arms exports. It is staffed by a mix of civil servants, military personnel and seconded industrialists. It is a strange organisation to find in a ministry of defence, and I believe it should not be there, but it is, and we must accept that. If bribery takes place in arms deals, it is difficult to see how DESO can operate without being at least aware of it. Exposure to corrupt practices that are not followed up may tempt some down the road to corruption. We should protect the integrity of government abroad and in the United Kingdom. How do we ensure that corruption in the official arms trade ceases? We need two things: transparency of accounts, so that everybody can see what the costs are and who is getting the cash, and a clear set of rules that are enforced. This Corruption Bill can clarify the rules. We need to encourage companies to make sure that they are not undermining Governments through corrupt payments. We need to do so much more urgently in the light of recent events and the very strong criticism that we have received from allies through the OECD. We have an opportunity with the Bill to respond positively to the OECD criticisms and, if we get it through, we could achieve something tangible for the supplementary phase 2 bis review that the OECD is to undertake. I welcome and strongly support the Bill. We cannot afford any more delay in getting an Act.