New efforts to kill off the UK Bribery Act

This post was originally published in TI-UK‘s blog.

Is there an assault being mounted to undermine the Bribery Act – before it has had a chance to take effect?

Anecdotal evidence suggests this is the case – one visible sign is a recent letter to the FT (FT Letters, March 18th).

I have some sympathy for the concerns expressed by the correspondent on behalf of small and medium enterprises about the bureaucracy surrounding the Bribery Act, to which over-engineered procedures are not the answer. Nobody wants to see entrepreneurialism throttled by unnecessary red tape.

The problem is that such arguments are often used by those who, in fact, really want to pay bribes, in the belief that it’s the way foreigners do business.

They would prefer this annoying law not to exist and so are happy to use any available argument to undermine it. I should make it very clear that I do not ascribe such motives to the writer of the letter to the Financial Times.

My point is that legitimate arguments about bureaucracy can easily be hijacked. We should be careful that any debate is about how to make the Act work, not whether it is necessary.

A tide of public opinion is sweeping the world, from China to the Arab Spring, in which ordinary citizens show how they feel about such corruption. Public opinion in Britain would be scandalised by an oil company bribing a UK politician, or even a junior government official. Those who believe it is acceptable to do so elsewhere should wake up to the changing world.

The most obvious remedy for any company concerned about the Bribery Act is this: don’t pay bribes.

It is a discredited argument, both morally and economically, to claim that if British companies do not pay bribes their competitors will do so and win the business. A decade of research from the World Bank and others has shown the damage that bribe-paying does in emerging economies. This damage is not just to economic growth, by embedding the power of corrupt elites who prioritise personal enrichment over economic development, but to ordinary citizens.

Anti-bribery laws are designed to stop this abuse of power. There have been an increasing number of such laws in recent years, as countries comply with the OECD Anti-Bribery Convention. It is common in the UK to believe that we are adopting harsher laws than elsewhere, or gold-plating them. This is simply not the case with the Bribery Act, which brings the UK in line with its international obligations.

Bribes distort the free market, which cannot be in the long-term interests of a well-run company. Moreover, if a company can only win a contract by breaking national and international law, the board should question whether its executives are operating a sustainable business model.

The Bribery Act has not suddenly made bribery illegal. It has long been illegal for UK companies under UK law, certainly illegal under the local laws in their export markets, and illegal under the US Foreign Corrupt Practices Act, whose reach encompasses many UK companies.

The lack of prosecutions to date is no surprise and certainly not evidence that the Bribery Act is not working. Such cases often take several years to come to light. We might reasonably expect the first prosecutions over the next twelve months.

But it is fair to ask, as did a recent Lords Select Committee report, whether SMEs are disproportionately affected. This is not to say that they should be allowed to pay bribes; but that they may have been advised to put into place over-engineered procedures that are unsuitable for a small company. There is certainly scope for some SME-specific guidance in this area.

The Select Committee also suggested that the Bribery Act should be reviewed. In my view, it may be sensible to review the law in due course. After all, the Bribery Act replaced laws from 1889, 1906 and 1916 which had long passed their sell-by date. Such laws must be fit-for-purpose in a changing world.

But it is too early to review the law before there have been a reasonable number of cases. It would simply open the door for those who wish to pay bribes to try and water down a law they have never liked.

Like laws on child labour and health and safety, anti-bribery laws act as a deterrent for bad behaviour, a protection for the innocent and a means of recourse for victims. Exactly what the badly-needed Bribery Act was designed to achieve.