DTI plan fails to close loophole on payment of overseas bribes

The government is planning to keep open a loophole which allows British companies to pay bribes, despite having lost a court case brought by anti-corruption campaigners.

Under proposals published by the Department of Trade and Industry following its legal defeat, British firms that receive taxpayer support will continue to be allowed to conceal from the government the identities of agents overseas to whom they pay commissions, often amounting to millions of pounds. Evidence has emerged in the past that such offshore payments can be used to funnel bribes to politicians in the developing world.

The DTI compromise suggests that firms such as arms company BAE Systems, currently under investigation by the Serious Fraud Office, can continue to conceal the identity of agents. But if the taxpayer suffers financial loss subsequently as a result of proved corruption, the DTI could seek to claim the money back.

The proposal was dismissed yesterday by campaigners. Susan Hawley, of The Cornerhouse, the group that successfully challenged the government in a judicial review last year, said that the Export Credits Guarantee Department, which guarantees loans, must be able to ask for the name and address of an agent to be used by an exporter. "It would be extremely difficult for them to conduct proper due diligence with regard to the possibility that an agent may be used to pay bribes unless it has access to this information."

She said the proposed wording of the regulations would mean companies would only face liability if corruption was subsequently discovered and proven, "which of course in many instances it is not", and only if there was default on a loan.

But the trade minister Ian Pearson said last month in a speech to exporters that he wanted to give effect to anti-bribery principles "in the most practical way". This meant "the department should never be kept in the dark when there is a chance that its being so could leave it picking up the tab for corrupt activity".

The government originally tried to water down anti-bribery rules by allowing firms to conceal agents' names on grounds of "commercial confidentiality", but the DTI was forced to reconsider after The Cornerhouse took ministers to court because they had failed to consult.