Ethics and governance in the European Financial centers

Transparency International (TI) has submitted a follow-up letter to the Secretary General of the Organisation for Economic Cooperation and Development (OECD) calling for specific action to be taken on the UK government’s decision to terminate the investigation of allegations of bribery by BAE Systems Plc (BAeS) in the UK-Saudi Arabia Al Yamamah defence contract. BAeS, Britain’s largest defence contractor, has throughout denied any wrongdoing.

The letter is the latest contribution by the TI secretariat and TI’s national chapter in the UK to efforts by a large coalition of civil society organisations to press the OECD to persuade the UK government to undo the damage caused by the termination of the investigation.

TI asks that the OECD urge the UK government to promptly undertake the following:

- Reinstate the investigation and move ahead with prosecutions in foreign bribery cases where justified by evidence, without further delays.
- Encourage BAeS to make a public statement making clear that it is following a strict anti-bribery policy, backed up by a rigorous compliance programme, consistent with the best practices of leading MNCs. Provision should be made for independent verification of BAeS compliance programme.
The letter goes on to say that TI believes that the UK government’s assertion that national security interests justify the termination of the Al Yamamah investigation violates Article 5 of the Convention. A recent brief from Yale University Law School indicates that a party to the OECD Convention cannot claim a national security exception simply by asserting that national security interests would be damaged by proceeding with a foreign bribery investigation or prosecution. The brief, which was sent to the OECD on 7 March 2007, can be read in full in the attachment below.

The timing of the letter precedes the OECD’s Working Group on Bribery, which meets tomorrow to review the UK government’s response to the March 2005 OECD Phase 2 Report and the Japanese government’s response to the June 2006 Phase 2 bis Report. The Al Yamamah issue also is on the agenda of the meeting.

Both the UK and Japanese governments have performed poorly on enforcement of the OECD Convention and are under scrutiny by the OECD Working Group on Bribery. Their poor performance also was noted in the 2006 TI Progress Report on the OECD Convention’s Enforcement.

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On 14 December 2006, the UK Attorney General (AG), Lord Goldsmith, informed the House of Lords that the Director of the Serious Fraud Office (SFO), Robert Wardle, had decided to discontinue its investigation into the affairs of British Aerospace Systems plc (BAeS) as far as they relate to the Al Yamamah defence contract. The decision had been taken following representations made both to the Attorney General and the SFO Director concerning "the need to safeguard national and international security". The announcement unleashed widespread criticism, both in the UK and externally.

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Press release TI UK

Under the new system insurance firms and intermediaries are being called on to inform the FSA when they suspect criminal behaviour, so that the FSA can decide whether to investigate further. This may arise when an insurer terminates an agency agreement with an intermediary where they see doubtful practice or suspect misconduct. It may also arise where an insurance intermediary has concerns about another intermediary they do business with.

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