The OECD Convention was signed by 34 countries (the 30 Members of the OECD plus Argentina, Brazil, Bulgaria, Chile, Slovak Republic) on 31 December 1997, and came into force on 15 February 1999 (since when Slovenia has also ratified the Convention). The aim of the Convention is to prohibit the bribing of foreign public officials in order to obtain or retain business or other improper advantage in the conduct of international business (Article 1:1). The United Kingdom ratified the OECD Convention, depositing its instrument of ratification on 14 December 1998, on the basis of existing statute and common law. Under the Convention, 35 countries have deposited instruments or acceptance of the Convention, 29 countries have been subjected to close monitoring to determine the adequacy of their implementing legislation. For each of these countries reviewed, the Working Group on Bribery has adopted a report which has been made available to the public.

Work has also been underway on a review of the reform of the existing UK law of corruption. Home Office proposals were published on 22 June 2000 and opened to public consultation. The Government response to the consultation was laid down in the Library of the House on 9 April 2001 and full reform of the law of corruption is expected in the very near future. However, in an effort to meet the UK’s international commitments, two new anti-corruption provisions contained in Part 12 of the Anti-terrorism, Crime and Security Act, came into force on 14 February 2002. This legislation makes it explicit that relevant UK law applies to the bribing of foreign public officials, including foreign MPs, judges, ministers and agents, whether public or private, as well as those in the UK. It also ensures that any UK national or legal person (e.g. a company or other entity incorporated under UK law) can be prosecuted in the UK for bribery even if no part of the offence took place in the UK. A DTI conference: 'Global Business and Change in Anti-Corruption Law’ highlighted these changes was held at the DTI Conference Centre on 29 January 2002 (see speeches below. Hard copies of HE Prof. Kirya’s speech and Prof Mark Peith’s presentation are also available from DTI). Details of all the main provisions of the law of corruption and further guidance for exporters are available on the UK Trade & Investment website: www.uktradeinvest.gov.uk

Contact: Ramil Burden
Tel: 020 7215 4467
Fax: 020 7215 4539
E-mail: ramil.burden@dti.gov.uk

Conference Speeches, 29 January 2002

BARONESS SYMONS’ OPENING SPEECH                                                                      

Thank you for that warm welcome.  I would like start by thanking all of today’s speakers – it really is an excellent line-up and a testament to the importance of today’s conference.  May I also pass on my gratitude to the Department for International Development for financing the event and the Home Office for generously sharing their expertise.

I’m very happy to be able to speak at today’s conference.  As you know the Secretary of State had hoped to open the conference but was unavoidably called away at the last minute.  I know that she - as the whole Government does - attaches the utmost importance to this issue.  She asked me personally to pass on her apologies – she wishes you all a fruitful conference.

Corruption and bribery represent an unacceptable cost to business.  Corruption distorts competition and investment and hinders free and fair trade.  Furthermore it undermines the democratic and moral standards, which underpin the way in which we conduct our lives.

But of course, corruption and bribery can – indeed must – be tackled.

The entire business environment and attitude towards corruption and bribery is changing.  In a relatively short period of time, the issue of corruption has moved from being a subject, which at best was not discussed, to one which is now stringently challenged and opposed by a number of large multilateral organisations.

It is no longer accepted that bribery in business, ANY business, is inevitable, that it is to be expected and that there is nothing that can be done to stop it.

The UK is absolutely determined to work with all partners to create a business climate, which robustly combats and deters bribery and corruption.

The 1997 OECD Bribery Convention, which focused on the bribing of foreign public officials to obtain or retain business, is one of a series of international initiatives that the UK has fully supported.

And negotiations have just started to produce a UN Convention Against Corruption.  Although it is early on in that process, I hope that it will lead to existing international standards such as those contained in the OECD Convention being adopted by a broader range of countries.

The UK has a strong reputation for honesty and integrity, but there is no cause for complacency.  It is common knowledge that most British people and companies behave perfectly properly in carrying out business abroad.  This fact is borne out by the main international index which exists:  Transparency International's “perceptions index” shows that UK companies are perceived to be the second least likely of any of the G7 countries to pay bribes.

But there is no cause for complacency.  Bribery and corruption remain a threat.  They can hinder trade, investment and development.  Trade has become increasingly internationalised and we need to ensure that none of our citizens or companies gives any kind of assistance to bad and corrupt governments.

This is why the Government chose to introduce new anti-corruption measures in the Anti-Terrorism Crime and Security Act 2001. This piece of legislation, which comes into force next month in mid-February, should be welcomed by all UK business.

These measures will outlaw acts of bribery by UK nationals and companies abroad in the same circumstances as they are outlawed here.  They will amend the existing laws:

Firstly to put beyond doubt that the law of bribery applies to acts involving foreign public officials, Ministers, MPs and judges; and

Secondly to take jurisdiction over crimes of bribery committed by UK nationals and UK companies overseas.     

This legislation will ensure that UK companies act abroad as they would act at home.  The UK needs to be seen to be clean, to uphold our good trading reputation.  We were one of the first countries in the world to introduce anti-corruption law, dating back to 1889.  The new legislation brings this up-to-date.  By providing a clear legal framework as part of an international effort to counter both ‘petty’ and ‘grand’ corrupt payments, it will become easier for companies to withhold such payments without damaging competitiveness.

This will encourage the spread of good business practice and ultimately achieve the level playing field that business needs. 

But this is not the whole story.

Effective corporate governance can also play a major contribution towards helping combat corruption.  The likelihood is that within a well-governed company, scope for corrupt practice, and for concealing it, is reduced.   To this end, the Government continues to work actively not just at home but also within international fora, such as the OECD and the Commonwealth, to embed the key principles of good corporate governance at a global level.

One of the challenges for today’s multinationals is to be a force for good in the areas where they invest.  Many businesses now see the implementation of Corporate Social Responsibility (CSR) strategies as increasingly important to their competitiveness.  These companies have found the benefits that CSR can bring, such as through better reputation, improved staff recruitment, retention and motivation, and the ability to attract and retain capital.

The activities of multinationals undoubtedly bring substantial benefits to host countries too.  I am pleased to say that some UK based multinationals  - ASDA, B&Q and BT to name but a few – have well-developed codes of conduct leading to positive engagement with stakeholders and impacts on societies.  I know that John Farrar of British Airways will speak in more detail about the codes of conduct they have set up.

One of the main contributions by governments to internationally responsible business conduct is through the OECD Guidelines for Multinational Enterprises.  This set of principles and standards of corporate behaviour is endorsed by 35 countries, including all OECD governments and some non-OECD members such as Brazil and Argentina.  Concerns about the behaviour of individual UK multinationals operating overseas can be raised with the UK National Contact Point, based in the DTI. 

I would also like to mention briefly the action, which ECGD – the Export Credit Guarantee Department – has taken to tackle corruption.

I know many of the companies with whom ECGD does business and am aware of the high standards of corporate governance that are adopted by the vast majority of them.

Nevertheless, because of the importance that this Government attaches to reducing the level of corruption in international trade, we believe that it is right, for example, that all applicants should be asked to warrant to ECGD that an export contract has not been secured by corrupt means.

ECGD now has the right to void any insurance cover it might be liable for and to recover any loss it might suffer should that warranty be shown that it was falsely given.

Finally we should not forget the importance of international trade to the UK’s economy.   And over the last twenty years, despite challenges from emerging nations and the growth of globalisation, our position as the world’s 5^th largest exporter has been maintained.

And the credit must go to UK business for this record.

But it is important also to mention the role that government can play.

By creating the right environment for trade to flourish and providing advice and support to British businesses overseas – wherever it is needed, we too can help UK business and the UK economy as a whole.

Last year it, the DTI and FCO, through UK Trade & Investment, helped some 25,000 British companies towards export success - providing them with information and advice to win orders and contracts around the world.

I’d like now to draw to a close with a warning.

Despite the growing efforts by business and governments in the fight against corruption, there is no cause for complacency.  Bribery remains a threat.  In a number of countries, corruption is rooted in the social fabric.  For all the good work being carried out, there is little evidence that corruption is actually a diminishing factor in international business.

That is why further action against corruption is needed, and it is vital that business must contribute to this process.  Governments need to know what business perceives as necessary to make international measures more effective.

I sincerely hope that business representatives here will take advantage of this forum to exchange opinions and experiences and to feed into the ongoing work to combat corruption.

I hope you enjoy the rest of the conference and find it both interesting and useful.  Further information on all of the schemes, guidelines etc that I’ve mentioned are in your delegate packs.

hope you enjoy the rest of this conference.

Thank you.

IMPLEMENTING THE OECD CONVENTION - IMPLICATIONS FOR BUSINESS: DR ELAINE DRAGE, DIRECTOR, DTI

Introduction

I should echo my Minister's welcome to you all.  Thank you for coming today for what we hope will be helpful to all your companies in terms of increasing understanding of this issue, which is such an important part of the wider Corporate Social Responsibility agenda.  In particular, as you will know, Part 12 of the Anti-Terrorism, Crime and Security Act 2001 deals with corruption.  It is due to come into force on 14 February 2002.  The Government's new legislation on corruption is the prime reason we are here today. 

My Minister explained something of the wider Corporate Social Responsibility agenda. Preventing corruption is an important part of this agenda and one on which governments and business need to work together – more of that later.  Professor Kirya has given us a valuable perspective from the point of view of a developing country which has a reputation for working hard to root out corruption.  Professor Pieth - the experienced Chairman of the OECD Bribery Working Group - has outlined for us many of the international legal instruments in this important area. 

The UK as a trading nation has a particular interest.  We are a major exporter of both goods and services to almost every country around the world - indeed the 5^th largest exporter in the world.  Although the majority of that trade is with other OECD countries that have got detailed corruption legislation and enforce it- there is still work to do here for governments to see that standards are maintained.  And where appropriate driven up towards the level playing field of OECD Bribery Convention.  As Professor Pieth explain one key task for the OECD’s Bribery Working group and its valuable peer review system. And in other parts of the world, governments can be working hard to put in place clear and effective bribery legislation and enforce it. Sometimes that is in the face of entrenched local cultures, which see little advantage to them of this change. Those governments deserve our support. So getting the issue of preventing corruption right, is a matter of particular importance to the UK - both for government and perhaps particularly for those of you in companies who have to deal with these issues often on a daily basis in some of your export markets. And indeed, as my Minister said, most British companies clearly are getting working hard to get it right and managing, even in difficult markets, to avoid involvement in corruption.  As she noted, Transparency International's index shows the perception that UK companies are the second least likely of any of the G7 countries to pay bribes. 

It is important to British business to maintain and to build on that reputation - however difficult it can sometimes be in certain markets.  It has been said that for evil to flourish it is only necessary for good men to stay silent.  Neither the Government nor British companies should stay silent. 

But what is Government's role?

We see this as four-fold role: 

to legislate and enforce an appropriate framework to criminalize bribery, corruption and other forms of economic crime; to both contribute to, and respond to, discussions and agreements in a range of international fora which are increasingly necessary to deal with problems as the volume of global trade and business has increased dramatically over the last 50 years.

to support other governments who are seeking to improve their governance standards and root out corruption; and to encourage businesses, including SMEs and not just large multi-nationals, to adopt a corporate responsibility agenda appropriate to their own line of business and to the countries in which they operate. 

Firstly, turning to the Government's main roles of legislating and enforcing an appropriate framework to criminalize bribery and corruption.  As many of you know, there has been a considerable focus on the issue of preventing money laundering over the last decade.  As to Bribery of Foreign Public Officials, discussions took place over several years within the OECD.  Certainly the most appropriate body since there representatives of the world's major trading nations meet.  This culminated in 1997, under the leadership of Professor Pieth, in the OECD's Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.  All OECD countries signed up to this Convention and several - Argentina, Brazil and Chile - who are not OECD members have also signed up. The OECD itself and Member States like the UK are keen to encourage further countries to sign up. And, particularly important in doing this that we focus first on those countries who are major exporters - internationally or regionally.  Thus, like tide smoothing out sandcastles on a beach, we will gradually produce the more level playing field we all want to see. 

The UK took an active role in the negotiation of the Convention. Its passage coincided with work already being undertaken by the Law Reform Commission here since the Government recognised that existing UK legislation, scattered through 3 Acts of Parliament from between 1889 and 1916, means that the legislative base is not as clear as is ideal.  The OECD, in peer reviewing the UK, found it difficult to discern whether or not existing UK legislation complied with the Convention.  In 1998 the Law Commission had published a report of their proposals for modernising UK law on bribery, which was followed by a Home Office White Paper "Raising Standards and Upholding Integrity: The Prevention of Corruption" in June 2000.  In line with normal good practice, that was followed by a public consultation, the results of which were laid before Parliament on 10 April last year.  At that time the Home Secretary confirmed in a written answer that it was the Government's intention "to implement the proposals at the earliest opportunity". 

That commitment was fulfilled by an announcement in the Queen's Speech in June last year that corruption would be on the legislative agenda for the 2001/02 Parliamentary session.  At the time it was planned to have this - based on the White Paper and the government’s response to the subsequent consultation - as part of an extensive Home Office Crime Bill.  However, the tragic events of September 11^th necessitated considerable juggling with the Parliamentary timetable.  As a result, it is unlikely to be possible this session to fit in the more extensive updating of the law against bribery of foreign public officials that had been - and remains -the Government's intention. 

However, such was the importance of the subject and the clear link between issues of good international corporate governance and the fight against terrorism, that 2 proposals from the Home Office White Paper were included in the Anti-Terrorism, Crime and Security Bill.  Part 12 of the Act, which comes into effect on 14 February, gives extra-territorial effect to existing UK legislation.  Existing law allow UK authorities to prosecute a company or a UK national which bribes a foreign public official if that offence is committed either in whole, or in part, in the UK.  Indeed the successful prosecution of a Dutch national – Van der Horst an unreported case from about 5years ago- confirmed the reach of the existing 1906 law.  What the clauses in Anti-Terrorism, Crime and Security Act will do is:

clarify, as my Minister said, that the law on bribery does apply to acts involving foreign public officials, Ministers, MPs and judges (explicit rather than implicit); to allow the UK authorities to prosecute either a UK national or a UK company where the offence of bribery takes place entirely outside the UK's borders. At present there is legislative basis for a prosecution only where either a UK or a foreign company or individual commits such an act either wholly- or partly- in the UK.

And here the government by responding to and helping to drive forward the international agenda is also playing the second of the four roles I mentioned earlier.

Extraterritorial legislation is rare in UK law.  But the Government's determination to give extraterritorial effect is a sign of its commitment to the OECD Convention.  The government accepts that Convention does not require a ratifying Government to take extraterritorial jurisdiction, but it does encourage them to do so.  The US, through its Foreign Corrupt Practices Act, of which we will hear more this afternoon, took such jurisdiction over 20 years ago now.  The UK Government after careful thought and consultation believes it is right to do likewise.  Are ahead of game here, but believe that others will follow as agenda moves on.  And if the UK and its companies are serious about dealing with corruption. We should not be aiming to be at the back of the pack as discussion and practice moves forward on these issues, particularly in the current climate where shareholders are looking more actively for higher ethical standards in the corporate sector.

In another area the UK has long been ahead of international practice.  The UK's existing legislation was probably the first internationally to criminalize private-to-private bribery.  The view is gaining ground, as functions which were once exclusively public are carried out in different ways, that there is longer a simple dividing line between "public" and "private" sectors.  They should therefore be treated on a similar footing.  That was the Law Commission's view in their 1998 report.  While the OECD Convention does not - or rather not yet since the issue will shortly be discussed - cover this, other international instruments do.  The Council of Europe's Criminal Law Convention on Corruption and the 1998 EU Joint Action require their members to make private sector corruption illegal.  The UN is also considering inserting such a requirement in the Global Convention.  If standards of probity in the private business arena are allowed to diverge too far from that of the public arena, the problems are only too obvious. 

It is important to note just how far our existing law can already go on this.  The successful prosecution of a Dutch national [the van der Horst case which I mentioned earlier] confirmed its reach.  In this case an employee of a company made a phone call from the UK giving information to other companies about rival bids, in pursuance of a corrupt transaction.  He was successfully prosecuted, receiving 3 years in prison, for an offence under the 1906 Act.  It was a case of 'private to private' bribery.  No public officials were involved.

The Government is still fully committed to the modernisation of the totality of the UK's corruption legislation in line with ideas in the White Paper of 2000 and the results of the consultation.  The Government will do so as soon as the legislative timetable permits.  Attorney General gave a public commitment to this effect in the House during the discussions of Part 12 of the ATCS Act.  The Government recognises that, both for our friends overseas and for companies in the UK, the maximum degree of clarity in this difficult area would be helpful.  And indeed there are aspects of other international conventions - for example the Council of Europe's important Criminal Law Convention - that have still to be embedded in UK law.  I have no doubt that UK industry will wish to urge the UK Government to move rapidly to complete- in as clear way as possible- the process of updating the corruption legislation the work which, this session, they have begun.

Now – the third limb of the government’s actions- that is to assist those governments overseas who wish to tackle the demand side of the corruption equation.  And this is an area where Clare Short- the Secretary of State for International Development has taken an outspoken lead. As the December 2000 Globalisation White Paper underlined, the Government is working both through its bilateral aid programme and through other initiatives - like proposed UN Convention - to support and add to existing multi-lateral efforts to fight corruption.  Professor Kirya has spoken frankly of Uganda's efforts to choke off the demand side of the equation.  We need to continue to work with those, the Ugandan and other governments.  Gradually shift balance of argument.  This programme will continue vigorously.

In dealing both with these countries and indeed with other OECD countries, it is important to have robust Mutual Legal Assistance arrangements as Mark said in place. The government has recently boosted the size of the Home Office Unit dealing with these contacts.  Build too on existing co-operation by law enforcement authorities in money-laundering context.

And finally the co-operative role between government and industry in pushing forward the CSR agenda, of which fighting corruption is an important part It is business that has to contend with corruption at the coalface.  Government and business need to work together in partnership to combat corruption.  It is for government – in a climate of ever closer public scrutiny of business conduct- to assist in developing frameworks on which businesses can build their own corporate codes of conduct dealing with the issues they face whether in the countries in which they operate or in particular market sectors. The OECD’s Guidelines for Multinational Enterprises- endorsed not only by OECD governments – indeed the only one so endorsed - but also by business and the trade unions is the most comprehensive of these and provides a valuable benchmark against which a company can check the breadth of its own corporate code of conduct. But it can only be with business that government can work so together we can try to spread the message about the insidious impact of corruption on the commercial environment, on good governance and on all citizens, but perhaps especially the poorest.  This applies to situations faced by companies whether involved in large-scale projects or in the more everyday business of getting goods or services into or around a particular country.  By engagement in small scale bribery – in part what people mean by that ill defined term “facilitation payments” or by tacitly accepting it amongst parts of the supply chain, businesses contribute to undermining the rule of law- since few, if any, countries have legislation that condones bribery. And bribery also serves to support a climate of poor internal corporate governance.  Despite the practical difficulties in some markets, which the Government does recognise, it is not impossible for companies to make a clear stand against prevailing standards in public life in particular countries. 

A number of large British firms - Shell and British Airways (from whom we will be hearing this afternoon) among them have already made clear stands on this issue.  They have done so by working carefully through the types of situation they face and drawing up clear guidance for their staff and management overseas as to how they should respond in certain situations.  And then – crucially important - carefully monitoring the observance of those standards through regular reporting. And that includes not being prepared to fall in with prevailing standards of petty corruption - so called "facilitation payments". Anecdotally, one Shell manager has said to me, that after the initial phase, contacts in a particular country soon learned that it is no use trying to pressurise Shell for a "customary" bribe.  And indeed, the more multi-national companies who refuse to acquiesce in a climate of corruption - whether grand or petty - the easier it becomes for governments in those countries who wish to reform, to do so.

Conclusion

The Government recognises that there is unfinished business in terms of a comprehensive Bill to modernise the law on corruption.  And that UK business would welcome greater certainty and clarity in a number of areas of business practice.  The Government recognises the need to continue the existing free and frank dialogue on these issues with businesses, with key business partners like CBI and with interested NGOs like Transparency International and Public Concern at Work so that, when the modernisation of the UK's bribery law occurs - and we all share a hope it will not be too far distant - it will be as clear and understandable as possible for business.  Business wants certainty to ensure you can comply with the law.  While the Government wishes to do everything possible to embed the highest standards of probity into both the life of Government and that of companies whether in the UK or overseas.  That can only be to the wider benefit of citizens everywhere.

You may have noticed that my colleagues Paul Stephenson from the Home Office (the guardians of the legislation) and Martin Polaine from the Crown Prosecution Service, who are likely to be involved in prosecuting under both the existing legislation and the new, are part of the panel at the end of the afternoon.  We all look forward to hearing more from those of you in business, both formally and informally, about the problems that you face and any clarifications that you would find helpful.

EMPLOYEE PROTECTION: TONY YOUNG, PRESIDENT, TUC

Introduction

Good afternoon.  First of all, I would like to thank the Department of Trade and Industry for inviting me to contribute to today’s conference on confronting corruption.  The TUC welcomes the government’s efforts to address this important issue and I am pleased to have the opportunity to put the trade union view.   

I’d like to focus on the role that unions can play in addressing corruption, as well as the need to protect employees who expose corrupt practices in their workplace.  These two issues are of course linked.

The link between corruption and abuses of workers’ rights

It should be fairly obvious why trade unions, in the UK and worldwide, are deeply concerned about corruption.  The simple fact is that workers suffer when business and governments behave in a corrupt manner. 

There is a direct link between corruption and abuses of the fundamental human rights of workers.  These are the right to freedom of association, the right to bargain collectively, freedom from forced or compulsory labour, child labour and discrimination.  They are commonly referred to as the core labour right

One of the first things I did when I set about preparing for today was to have a look at the latest Corruption Perceptions Index published by Transparency Internationa

This, as some of you will know, reflects the perceptions of business people, academics and risk analysts on the degree of corruption existing in the countries considered by the study.  In effect, it is a league table of 91 countries running from the least corrupt to the mos

I wasn’t surprised to find that there were significantly more countries in the top half of the list that had ratified the core conventions of the International Labour Organisation than in the bottom half.  The core conventions cover the fundamental rights I have already mentioned. 

A number of the countries in the bottom half of the table have also been repeatedly censured by the Freedom of Association Committee of the ILO.   

This confirms the experience of the trade union movement.  By and large, the least corrupt countries have good records on labour rights.

A similar situation exists at the workplace level.  The experience of trade unions worldwide suggests that unionised workplaces are more conducive to the creation of a culture of transparency and accountability.  They are less likely to be ones in which corruption can take root and become endemic.

The role of fundamental workers’ rights in combating corruption 

Corruption thrives when workers’ fundamental rights are suppressed.  The reason for this is simple.  Take away the core labour rights and you take away key building blocks of democracy and equity.  You deny workers the means to redress the imbalance of power in employment relationships, and the ability to challenge unscrupulous practices. 

This is why initiatives to address corruption must include action to implement the ILO’s 1998 Declaration on Fundamental Rights at Work.  Govern.ments that are serious about combating corruption need to ensure that the core labour rights to which the Declaration relates are actually observed in countries around the worl

The campaign against corruption cannot be carried out in isolation.  It has to be linked to the broader campaign for human rights and democracy.   

Developing and industrialised countries

I do want to emphasise that although many of the countries perceived to be corrupt are in the developing world, corruption also takes place in the industrialised countries. 

In addition, wrongdoing by western businesses operating in developing countries is well documented.  I know that John Cridland will be closing today’s conference with an address entitled ‘The UK as a leader in corporate values’.  But the UK’s record is perhaps not as good as we would like to think.

In early 2000, the World Bank announced the permanent debarment of 29 firms as a result of actions taken in connection with Bank-financed projects in Nigeria.  The Bank’s Sanctions Committee found that the firms had engaged in corrupt practices as defined by the Bank’s Consultants’ Guidelines.  Of the 29 firms, 25 were British.

Of the 59 firms currently listed on the World Bank website as ineligible to be awarded a Bank-financed contract either permanently or for a specific period because they were found to have violated fraud and corruption guidelines, more than half – 31 – are British.

Nevertheless, there is no doubt that there is very good corporate practice in the UK and the fact that you are all here is an indication of the commitment that exists within the business community to tackle corruption. 

The link between poverty and corruption

I think that it is also important to recognise that there is a vicious cycle of poverty and corruption.  The fact is, the poor are most affected by corruption. 

Let me give you an example.  The bribery of public officials is a widespread problem where the level of public sector pay is so low that it becomes impossible to support a family.   

In many countries, fertile breeding grounds for corruption are created when unions are prevented from organising in the public sector, and from negotiating decent working conditions and wages for workers.   

One result is that poor people have to bribe underpaid public officials for access to essential services such as health and education.  Not exactly a good recipe for development. 

Exposing corruption: the role of whistleblowers 

Workers play a key role in exposing corruption.  The employees of an organisation are often in the best position to know when fraud and mismanagement are being perpetrated.   

Workers can act as an early warning system and help uncover corruption in the workplace.  The fraudulent activities of many organisations would go undetected if not for the courage of employees who are prepared to ‘blow the whistle’ on management.   

About two years ago, the Trade Union Advisory Committee to the OECD, to which the TUC is affiliated, held a joint meeting of business and management to consider the issue of whistle-blowing.  It was recognised that corruption is most attractive where the risk of detection is low and / or the penalties for detection are slight. 

Encouraging whistle-blowing should increase the risk of detection, and therefore act as a deterrent to corruption - so long as the penalties applied upon detection are significant.   

Whistle-blowers also assist enforcement agencies with evidence gathering and increase the chances of successful prosecutions. 

Nevertheless,  whistle-blowing is on the whole frowned upon by many organisations.  Employees who raise concerns about wrongdoing are often deemed disloyal and treated as troublemakers. 

Hardly surprising then that official enquiries into major scandals – whether in the private or public sector – repeatedly point to the same finding: Employees were aware of the problem but were either too worried about losing their livelihood or career prospects to raise it, or they had done so but were ignored. 

Examples include the Piper Alpha disaster in the North Sea which left 165 people dead; and the ecological damage caused by the Exxon Valdez spillage.  In each case, warnings from those with an awareness of the hazards and risks went unheeded, and the whistle-blowers suffered severe penalties for being public-spirited.   

In 1994, 300 Kenyans died in the Mombassa ferry disaster amid allegations of corruption and that warnings had gone unheeded. 

The Union Carbide disaster in Bhopal, India in 1984 which killed over 3,000 and injured a huge number of people had been preceded by a local journalist report, accident reports and workers expressing concerns.  But these were ignored by the local authority and the public who had to grapple with the more immediate concern of earning a basic living.  

Similar findings have been made by inquiries into a number of subsequent industrial disasters in Asia and beyond. 

Whistleblowers can also face great personal danger.  In a number of countries around the world, for example, Russia, Guatemala and Colombia, workers have been murdered for exposing, or threatening to expose corruption, particularly in relation to privatisation contracts. 

Protection for whistleblowers 

It is clear that we need to improve protection for whistleblowers to be successful in combating corruption.  If employees are to be encouraged to raise concerns then they need to have the appropriate legal protection.    

This issue was not covered in the OECD anti-bribery convention.  However, in the UK we have the Public Interest Disclosure Act of 1998.  The Act provides workers who speak out against corruption and malpractice at work with statutory protection against victimisation and dismissal.  The TUC worked hard to persuade the government to uncap compensation for unfair dismissal of whistleblowers and briefed unions on how to use the legislation.   

We think that the approach adopted by the PIDA should be encouraged and developed elsewhere.  The British government could play a leading role in promoting work in this area at the OECD. 

Trade unions can make a significant contribution to this field.  We have accumulated a certain amount of experience in protecting whistleblowers as a result of the need to protect health and safety representatives who expose unsafe or hazardous working conditions. 

UNISON has also produced a Guide to whistle-blowing for its branch officers and shop stewards.  The Guide provides advice on how to negotiate agreements and procedures on whistle-blowing.  This enables trade union representatives to raise concerns about wrongdoing and to assist employees in speaking out against corruption in the workplace.  UNISON also runs a whistleblowers’ hotline. 

In addition to providing legal protection for employees, there is a need to create a culture of openness in both the public and private sectors which recognises the ability of workers to make a valuable contribution to the running of their organisations, and to act in the public interest. 

The role of codes of conduct 

These days, no discussion that relates in some way to the behaviour of business is complete without a reference to the role of codes of conduct and voluntary initiatives.  I would therefore like to turn to the role of such instruments in combating corruption.    

There is no shortage of codes of conduct or guidelines covering the operations of business.  If anything, there has been a proliferation of voluntary instruments in recent years. 

Many companies now have their own codes.  Often, these are drawn up unilaterally, without consulting trade unions or involving them in the development process.  They do not have effective monitoring and independent verification procedures, which in our view, are the key factors which determine the value of any voluntary initiative.  Too often, such instruments are largely public relations exercises, which bring little practical benefit to workers. 

NGOs have also been developing codes of conduct, sometimes in association with companies.   

There are some genuine attempts by companies to establish ethical standards for themselves.  Some have also worked towards extending these standards to their subcontractors and suppliers.   

We welcome these efforts and the TUC is actively involved in one such initiative – the Ethical Trading Initiative which promotes a code based on internationally recognised labour standards.   

Another instrument which the TUC is committed to promoting, and which addresses corruption, amongst other issues, is the revised OECD Guidelines for Multinational Enterprises.  TUC staff have collaborated with the UK National Contact Point on work on the Guidelines.    

The Guidelines are not a substitute for government regulation.  However, if they are effectively promoted and implemented, they could play a significant role in the effort to tackle corruption, and in promoting broader corporate responsibility.  This is because the Guidelines could provide an important Government benchmark for corporate codes.   

Greater effort is needed from OECD governments and the Secretariat itself to publicise the Guidelines beyond business organisations to individual companies. I am aware of the efforts by the government to promote the Guidelines among UK companies and foreign investors.  However, they still do not have a high enough profile – many companies are still either unaware of their existence or of their significance. 

This profile raising exercise needs to be accompanied by the establishment of effective National Contact Points in all adhering countries to ensure the implementation of the Guidelines.

Promotion of the Guidelines to countries beyond the OECD area would also be a positive step.  The OECD outreach programme and Britain’s relationship with the Commonwealth countries provide useful opportunities for promoting this instrument.

Privatisation and corruption

Before I conclude, I would like to touch on the question of privatisation and corruption.  It is sometimes suggested that privatisation reduces the opportunity for corruption. 

This is an argument that we strongly challenge.  It may be stating the obvious but corruption affects both the public and private sectors.  The cases I have cited all illustrate that companies are not immune from corruption

Moreover, the privatisation process itself introduces new ethical questions on the role of public officials and private investors.

It is against this background that the international organisation for public sector unions, Public Services International, has drawn up a code of ethics for public officials

Conclusion

Trade unions have a vested interest in tackling corruption and we are taking this issue seriously.  We are ready to play our part alongside government, business and other civil society actors

However, we remain at a significant disadvantage so long as effective legislative frameworks to protect workers at both country and international levels are not put in place. 

There is also a need to move towards a culture of greater transparency in the workplace in which trade unions can raise concerns with management, negotiate fair policies and practices, and support employees who expose wrongdoing within their organisations 

Finally, it is worth bearing in mind that corruption is not a new problem and that people have been grappling with this issue for some time.  A clearly exasperated individual once wrote 

‘The Earth is degenerating today. Bribery and corruption abound. Children no longer obey their parents, every man wants to write a book, and it is evident that the end of the world is fast approaching….’

For something that sounds so contemporary, it may come as some surprise that this was written in Assyria, nearly 5000 years ago.  Let’s hope our own efforts to combat corruption will be rather more successful. 

THE UK AS A LEADER IN CORPORATE VALUES: CLOSING ADDRESS BY JOHN CRIDLAND, DEPUTY DIRECTOR-GENERAL, CBI  

Good afternoon 

I am delighted to be here to give the closing address.

I congratulate the DTI for organising this conference. It is vital that UK companies are updated on the national and international initiatives to counter corruption. It is a very timely conference, especially with Part 12 of the new Anti-Terrorism, Crime and Security Act due to come into force so soon. 

The CBI and responsible business rejects bribery, corruption and extortion. 

We reject it because it’s morally wrong.  We reject it because it’s against the law.  We reject it because it’s against the interests of people living in the countries where it happens. 

Corruption distorts markets and harms overall economic, social and political development, particularly in developing countries. To quote Shell, a company which has particularly well developed anti-bribery guidance for its employees, “Bribery and corruption lead to a society where economic and political decisions become twisted. They slow social progress hamper economic development and drive up prices for products and services. A corrupt society is an unequal and unfair society”. 

Corruption, extortion and bribery weaken economies by reinforcing poverty, lowering the provision of essential services to poor communities and distorting free markets. 

So we all stand against corruption.  But in many countries corruption is still endemic and features as a part of daily life.  So should we choose not to invest in certain developing countries at all?  It is certainly true that the greater the perceived level of corruption the less investment a country gets.  But many of these countries desperately need foreign investment.  So in standing against corruption we need to do better just standing completely aside from situations where it may arise.  Rather we have to get our hands a bit dirty – by working to eliminate corruption on the ground, where it happens. 

Multinational companies are stamping down hard on corruption.  They have codes, protocols and guidance for employees about how they should and should not act.

And this is where it gets difficult because those policies have to be applied in very difficult practical situations.  Major instances of corporate corruption are rare but can at least be clearly defined as such.

But what about the many dilemmas that companies face on a day-by-day basis? Let me give you one example from Shell: 

You are working for a western company in a developing country and must travel to another town. You are confronted by a military roadblock and a “toll” amounting to around twenty dollars is demanded. It is generally known that soldiers do this in order to supplement their small incomes. You have also heard that people have been shot at such roadblocks. What do you do? What if the demand had been for five hundred dollars? What if they had not been government soldiers but rebel militia? Does it matter whether you are on a business trip or a personal trip? 

Let us come closer to commercial life.  What about so called “facilitation payments”? Such payments have often been necessary to get the standard service you would expect in other countries but are now made illegal by the new law. 

Let me give you an example:

In many countries it is difficult to have a telephone installed. The telephone company often has a monopoly and charges five hundred dollars for the installation. There is often a delay of more than twelve months for installation. What do you do? Do you join those who pay a thousand dollars direct to the technicians who work for that company and have your phone installed in the next few days or do you wait for a year? 

Although company employees wouldn’t be encouraged to make such payments, businesses do need telephone lines. 

And of course the debate about facilitation payments often relate to payments made to companies to agents or consultants who are on the ground in a developing country and providing services to that company.

So what exactly are companies expected to do in such situations?  Are such payments corruption or bribery?  My opening statements of principle no longer appear quite so straightforward. 

In tackling these dilemmas, and none of them are new, we need strong and clear law, we need corporate action, and we need co-ordinated action at international level by Governments and intergovernmental bodies.

Which brings me back to the immediate context of this conference.

Like so many things, the terrible events of September 11 has had an affect on UK corruption law. At the CBI, we have been pressing for some time for UK corruption laws to be revised following the criticisms in the OECD peer review report. The Queen’s speech, Law Commission report and Home Office White Paper indicated that the Government was going to take action to address not only the anomalies between the OECD Convention and UK law but also comprehensively review all existing UK corruption laws. The CBI has made substantial input to this process over the last few years. We supported the UK bringing its legislation in line with its international obligations. But events overtook the Government and measures were included in David Blunkett’s Anti-terrorism legislation. A development that kept us all on our toes as the Bill raced through Parliament. We had always supported quick and full implementation of the OECD recommendations but the fact that the Government went beyond these provisions did raise some concerns.

It is now crucial that business knows how to deal with the new law. Business is working hard to ensure that guidance to employees is accurate. No doubt government departments are doing likewise. This conference is an important first step in this process.

But a consequence of the new provisions in the Anti-Terrorism, Crime and Security Act is that the impact of the UK’s corruption legislation is now far more stringent than that of most other countries with the exception of Singapore. The Act goes beyond the provisions of the US Foreign Corrupt Practices Act and the requirements of the OECD. It also raises questions of law, principally around definitions, which the UK courts may have difficulty in interpreting.  For example on facilitation payments where does that leave British business in relation to the kind of situations I was referring to earlier? 

We welcome the fact that the Attorney General’s discretion on corruption prosecutions remains but this leaves companies open to problems of uncertainty. As a result of this uncertainty, guidance from the Attorney General would be useful. 

It is of course important that British law conforms to internationally agreed standards, in this case OECD standards, but by going further than necessary UK business has been put at a competitive disadvantage.  

Well the law is set and business will seek to adhere to it.  So what is important is what companies do next.  What companies do within the regulatory framework depends on their own internal codes. And where regulation does not exist or is unclear it us up to those business principles to guide employees as to permissible practices. A Conference Board survey stated that “successful anti-corruption programmes are rooted in organisational culture rather than being mandated by law”. It adds that effective company anti-corruption programmes can be achieved through the institutionalisation of a compliance culture. Compliance should go beyond preventative systems and be embedded in general management practice. So what we’re really talking about here is best practice in its broadest sense. 

For our part, the CBI will continue to work closely with all the relevant government departments to raise awareness of these developments. UK Trade & Investment has an important role to play in helping companies to operate ethically in countries where corruption is endemic. And the CBI will assist Government in raising awareness about the new UK legislation. It’s not just the “big boys” who need to know about the changes but any company operating internationally, particularly the smaller or less experienced exporters.

But to successfully counter corruption and extortion in international markets there is an overwhelming need for all governments to assist in strengthening international institutions and improving local governance. The UK government is already a world leader in capacity building and since it chose to legislate more strictly than other OECD Governments, it should encourage other governments to do likewise. Business cannot act alone in stamping out corruption, particularly in countries where it is endemic and where local governance is weak.

And this goes beyond Governments.  There is array of international anti-corruption activities in the EU, Council of Europe, World Bank and United Nations as well as further work in the OECD.  This means an ever-changing picture for companies.  These approaches need to be better co-ordinated.

The next step, I would suggest needs to come from our Government.  I ask the Government to find legislative time for the wholesale reform of UK corruption law as soon as possible. We believe that the current law does not give business the certainty is needs to operate in difficult markets.

There is no doubt that fighting corruption plays a critical role in companies attempts to act responsibly and it also recognises the interdependence between business and the wider community. The UK is a leader in corporate values, we have some leading companies in this area but we need to recognise that bribery and extortion cannot be stamped out overnight. Business, government, international institutions and responsible NGOs need to work together.

Last revised on 14 February 2003