Carry on bribing
Martin Vander Weyer on how the government has been forced to water down its anti-bribery rules Amid all the razzmatazz in Toulouse a couple of weeks ago for the unveiling of the Airbus A380 — all those superlatives about the double-decker superjumbo, all the Chiracian hyperbole about the triumph of European co-operation, all that gloating over the eclipse of Boeing — it would have been tasteless to suggest that the success of the EU’s most celebrated joint venture has ever had anything to do with corporate corruption. But a headline in the Financial Times this week reminded us of the reality of the international aircraft trade: ‘Ministers waived bribery rules for Airbus’.
It turns out that more than $200 million worth of finance was provided for Airbus last year by the British taxpayer through the Export Credits Guarantee Department (ECGD) on the basis of ‘interim arrangements’ setting aside tough new rules on bribery. These rules had been brought into force last May, but were watered down again in December after intensive lobbying by Airbus, BAE Systems (which owns 20 per cent of Airbus) and Rolls-Royce.
The government was then taken to court by campaigners claiming that the weakening of the rules represented ‘a serious breach of basic public law standards of fairness’. At this point Patricia Hewitt, the Secretary of State for Trade and Industry, seems to have concluded that she did not have a leg to stand on: she agreed to pay the anti-corruption campaigners’ legal costs, announced a ‘full public consultation’ on the revised rules, and made public all the correspondence on the subject between the ECGD, the three companies and the CBI. The only reason this story has not yet developed into a career-threatening embarrassment for Mrs Hewitt is that it is so damned complicated to follow. But let me attempt to unravel it, and to analyse the issues behind it. ‘In what circumstances is it acceptable to offer a bribe?’ is, after all, a more complex moral question than it first appears.
In many parts of the world, bribery and corruption are a colourful feature of daily life. In Spain or Italy you slip cash to local officials to get a phone line or a water connection for your holiday home. In many Third World countries you buy your way through a succession of police roadblocks to reach the airport. The World Bank estimates that a third of all foreign companies operating in the former Soviet Union are involved in kickbacks, and seasoned operators on the wilder frontiers of that territory will tell you that if you don’t pay, not only do you not win the business but your chances of surviving the visit are significantly diminished. In China, where everyone wants to do business these days, corruption is said to account for up to 5 per cent of gross domestic product. In Turkey the annual bribery bill is worth five times more than the country’s entire exports. The African Union says corruption costs its continent $148 billion a year.
Almost anywhere outside the Western industrial world (and sometimes inside it: Belgium has form too) contracts involving defence equipment, civil aircraft or power stations are highly likely also to involve lavish gifts for ministers, fat commissions for dubious middlemen, and rotten deals for the citizens of the buying country. Such contracts are also very likely to be supported by the export credit agencies of the contractors’ home governments, creating a risk of public scandal. But that has never been much of a deterrent.
In Suharto’s Indonesia, power contract prices were found to have been inflated by 37 per cent to allow for the multiple rake-offs, while the president’s daughter collected £16.5 million from an arms deal with Alvis. Elsewhere, connoisseurs speak wistfully of Malaysia’s wildly uneconomic Pergau dam project led by Balfour Beatty, strongly backed by the British Foreign Office, and somehow linked to a £1 billion arms deal; of the shenanigans which surrounded the huge Al Yamamah contract for Hawk and Tornado jets for Saudi Arabia; and of an earlier Airbus management’s track record of questionable dealings with, among others, Kuwait, Syria and Rajiv Gandhi’s regime in India.
Governments tacitly accepted that tainted transactions were justified by the jobs they secured at home and the influence they secured abroad, so long as there was a sufficient degree of arm’s length in the dodgy aspects of the deal. In France, until 2000, it was even possible for companies to claim tax relief for foreign bribes, suitably disguised. But in a belated effort to turn the tide, 35 countries signed an OECD convention against bribery which came into force in 1999. According to US government monitoring, companies from many of the signatory countries carried on bribing as usual, but Britain eventually took the convention more seriously and the 2002 Anti-terrorism, Crime and Security Act made bribing a foreign official a criminal offence for the first time. ‘It is no longer accepted that bribery in business is inevitable and that nothing can be done to stop it,’ declared the Foreign Office minister Baroness Symons. ‘The UK is absolutely determined to create a business climate which robustly combats and deters bribery and corruption.’ That was the spirit of the new anti-bribery rules introduced by ECGD last May. But the response from the agency’s customers was furious. The CBI said the rules were ‘unworkable’ and would ‘endanger a number of valuable contracts’. Rolls-Royce, the aero-engine and defence manufacturer, said it did not see how the export agency’s role could be interpreted to include an objective ‘to root out wrong-doing in international business’. While continuing to maintain her Blairite moral tone in public, Mrs Hewitt — a former head of the National Council for Civil Liberties — privately caved in to corporate pressure, first by not enforcing the rules, then by diluting them.
In her second version of the rules, companies applying for ECGD support for export deals no longer have to give anti-bribery warranties on behalf of their joint venture partners, or reveal whether those partners have previous convictions for bribery. The amount of commission paid to middlemen no longer has to be revealed, so long as it is less than 5 per cent and not funded by the agency; the names of middlemen can be kept secret; and the ECGD cannot undertake random, unannounced audits of deals.
The CBI called the new formula ‘a sensible compromise’, which is what it probably is: no one, even in The Spectator, wants to make the case for letting bribery rip, but we can surely trust the heads of hugely experienced businesses such as Rolls-Royce and BAE to know where to draw the line. The anti-corruption lobby, on the other hand, was outraged, not least because it had not been consulted about the change. Mrs Hewitt’s leading opponent on the issue is a group called the Corner House — the former editorial team of the Ecologist magazine, operating from Sturminster Newton, Dorset — whose success in extracting a promise of ‘full public consultation’ must inevitably mean that a further compromise is in view.
So Mrs Hewitt will have to come up with a third set of rules, and the only firm conclusion to be reached from all this is that she does not know what she is doing. As so often with New Labour, the collision of self-righteousness with cosying up to money and power has left her looking shallow, incompetent and morally confused, and done nothing to change the world for the better.
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