Commissions and British Government-to-Government arms deals

The documents below are all sourced from The National Archives (TNA) in London.    They contain public sector information licensed under the Open Government Licence v2.0.

 

Letter D.N.Brinson, British Embassy, Caracas, to L.C.W.Figg, F.O., 18 January 1967, FCO 46/190, TNA.

SECRET

British Embassy,

CARACAS

(1193)

18 January, 1967

L.C.W.Figg[1], Esq.,

Defence Supply Section,

FOREIGN OFFICE.

 

Dear Figg,

Thank you for your letter of 22 December enclosing Hubert’s[2] of 15 November.  The particular hare which gave rise to this correspondence has gone to ground.  The Naval and Military Attaché will be writing to Hubert about this, but Hubert’s letter raises certain questions about sales methods which we feel need clarifying.  Since they also affect the other Services (and to some extent cover the same ground as earlier correspondence about Defence Supply Attachés) I am copying this letter to Dodds[3] in the Ministry of Defence, in his capacity as deputy to Mr. Raymond Brown[4], as well as to Hubert.

2. As far as concerns hardware produced by private firms there is little difference between us.  We feel, with respect, that the resident attachés with their day-to-day contacts are better placed than visiting officials to do the job of promoting and spotting interest in what Britain has to offer, though it is useful to know that they can call on help from London or from the nearest Defence Supply Attaché if they get out of their depth technically.  But we entirely agree that once there is interest the firm itself must take over, and if it has not already got an agent, appoint one.  Nor, as implied in paragraph 10 of Hubert’s letter, did we intend to suggest that one agent should represent all British industry for arms sales; merely that for the particular package referred to in my letter one man might be suitable.  Even when a possible sale is brought to our notice by a contact man or intermediary who claims that only through him can the business be got, we realise that it is entirely up to the firm or firms, in agreement with their regular agents if they have one, whether or not to use the contact man for the particular job.

3. Where I am not so sure that we see eye to eye is over hardware produced by H.M.G. – i.e. R.O.F.[5] products, warship disposals and possibly new construction in Admiralty dockyards – where the result would be a Government-to-Government contract.  (The idea of a sale to a Venezuelan agent can be discounted.)   Hubert says (para. 4) that as far as the R.O.F.s are concerned there is no reason why an agent should not be appointed, though he would have to be a man of repute (para. 8).  But neither you nor he have given a clear answer to the particular question: given the margin of profit involved, are H.M.G.[6] prepared, through an agent, to enter into a Government-to-Government contract in the negotiation of which there will have been an element of bribery and which will itself reflect this bribery (though in a concealed form) in that the price will include hidden commissions of one sort or another?  My Ambassador[7] feels we must have a clear answer to this, otherwise it is probably a waste of time for the attachés to try to promote interest in articles of Government production.  Sooner or later the question of bribery would almost certainly arise.  (I seem to remember that a warship disposal to another Latin American country, negotiated on a direct Government-to-Government basis, fell through at the last moment because the Admiralty, obviously, could not increase the price and hand over the extra.)  No member of the staff of this Embassy could get involved in this sort of thing and sooner or later, therefore, negotiations would have, in our view, to be handed over to an agent.  But it is only worth starting the process if we know that at the later stages H.M.G. would be prepared to let an agent do what the attachés cannot.

4. This is not just an academic question.  It does not affect sales to the Venezuelan Air Force, which by their nature are all firm-to-Government; but the new Naval and Military Attaché’s first soundings in his fields show that there is possible demand for Government-produced hardware, especially R.O.F. production in the naval and military fields.  Moreover, in Latin America demand does not always originate from the officers or officials, procurement or otherwise, with whom the attachés are in contact.  These contacts will reveal genuine demand, but demand can also originate from others, from Presidents down to junior officers, entirely for reasons of personal financial gain; and this type of demand can be stimulated by an agent who can dangle the carrot of such financial gain.  If Hubert were to appoint an agent, not necessarily Pedraza, for the R.O.F.s, it might be possible to stimulate also this artificial sort of demand.  But it is no use considering this further or suggesting names until we have a categorical answer to the question in paragraph 3.

Yours ever,

Derek Brinson

(D.N. Brinson)[8]

 

Letter L.C.W.Figg, F.O., to D.N.Brinson, British Embassy, Caracas, 22 February 1967, FCO 46/190, TNA.

 

S E C R E T

FOREIGN OFFICE, S.W.1

ZDS 3/6

22 February, 1967.

D.N. Brinson, Esq., M.C.,

British Embassy,

Caracas.

 

Thank you for your letter 1193 of 18 January about the appointment of agents in connection with arms sales to Venezuela.

2. We naturally understand your wish to have a straight answer to the question about bribery mentioned in para. 3 of your letter.  I am sorry we did not make it clear before that we accept the proposition that an agent acting in a Government-to-Government deal (or of course firm-to-Government) should get his commission and that the price H.M.G. charge must reflect this cost.  Of course the rate of commission which an agent will receive is a matter for negotiation, and will, I suppose, take into account what outlay the agent thinks he may incur in the process of winning an order.  But once the commission has been negotiated that is the end of the matter so far as the producer is concerned.

3. Hubert has explained this and other points very fully in a letter, a copy of which I enclose.  I think it covers all the questions raised in your letter, but please let us know if there is anything further you want.

3. I might as well take this opportunity to reply to Caracas telegram No. 11 from the Military Attaché about armoured fighting vehicles.  According to the M.O.D. it was not possible to arrange for Sir Raymond Smith[9] to meet Alvis and Daimler when he was in London on 6 and 7 February; nor could anyone in the Arms Sales Department meet him (I don’t know why not).  However, Alvis got in touch with him by telephone and we understand that arrangements are being made for a full scale meeting to be held with him when he is back in London sometime after 25 February.

(L.C.W.Figg)

 

Letter H.R.Hubert, Ministry of Defence, to D.N.Brinson, British Embassy, Caracas, 2 February 1967, FCO 46/190, TNA.

FROM: H. R. HUBERT, O.B.E., DIRECTOR OF ARMY SALES

COPY 2 OF 5

MINISTRY OF DEFENCE

ROOM 1151

ST. CHRISTOPHER HOUSE

SOUTHWARK STREET

LONDON. S.E.1

Waterloo 7999

Extn: 4311

 

Your Ref. 1193

Our Ref. 10/Overseas/413

2nd February, 1967.

S E C R E T

Thank you for sending me a copy of your letter of the 18th January to Leonard Figg about agents.

2. May I start by saying I am completely mystified by just what your problem is.  On the one hand you made it quite clear that where there are no agents there is no hope of business, and on the other hand your repeated references to bribery suggest that the idea that the a British Government Department should engage in activities which have some connection with it is quite horrifying to you.  I should very much like to know whether you are pressing us to appoint agents in order to get export business, or whether you are insisting that we should have no truck with you in anything so wicked which might besmirch the good name of the British Government.

3. As I told Bennett in my signal of 31st January, people who deal with the arms trade, even if they are sitting in a Government office, live day by day with this sort of activity, and equally day by day they carry out transactions knowing that at some point bribery is involved.  Obviously I and my colleagues in this office do not ourselves engage in it but we believe that various people who are somewhere along the chain of our transactions do.  They do not tell us what they are doing and we do not enquire.  We are interested in the end result.

4. I am sorry that my letter of 15th November was not specific enough.  I certainly was not trying to burke the issue, and it may be of some help to you if I set out two possible transactions.  If first of all we take a sale of armoured vehicles, these will probably be sold as Government-to-Government transactions, and if the main manufacturers have not already got an agent in Venezuela we shall do what we can to get them to appoint one.  They will pay the commission.  I doubt if they will interest themselves in detail in what is done with it and I certainly shall not.  From the point of view of the customer, the transaction is likely to be Government-to-Government and somebody will receive encouragement for seeing it through.  You have made it clear that you are quite happy about such an arrangement.

5. If we take now a possible deal on guns and ammunition it will also be a Government-to-Government deal.  It is quite probable that I will appoint the same agent; it is equally probable that he will pursue his sales promotion activities in the same way.  Armoured vehicles and guns and ammunition could well be sold to the Venezuelan Army in a single contract.  Could you let me know whether you would have any objection to this sort of arrangement, and if so, on what grounds.

6. I think I ought to say a little more about the activities of agents.  You have placed some emphasis on one point and one point alone, but if they are good they do a great deal more.  They lobby officers and officials; they find out about the availability of funds and perhaps suggest to people that availabilities might be created; they sniff out the activities of our competitors and they sing the virtues of our equipment and our services.  They are active inside the Government organisation, whereas a Defence or Service Attache can only work from the outside.  As far as the local work is concerned, their activities are complementary to those of the Attache, and the Head of Defence Sales is interested in the Attaches keeping in touch with reputable local agents as part of the work of progressing our sales efforts.

7. I paragraph 3 of your letter under reply, you ask whether H.M.G. is prepared through an agent to enter into Government-to-Government contracts.  In reckon to do Government-to-Government negotiations direct, the agent being present or absent according to the custom of the country.  Generally they do their work behind the scenes and do not appear at the negotiating table, but if it is customary in Venezuela for them to form part of the negotiating team I am perfectly happy to have them there, and in one or two countries in which I have conducted negotiations the agents have been present.  Should we get to the negotiating table I should be grateful for your advice as to the way to handle this aspect.

8. Finally I should like to refer to paragraph 2 where you say that the Attache can do the work better than we.  His work and mine, or indeed that of M.A/O.E., are complementary and not alternative.  He may be an expert on a particular type of equipment and on that equipment should be able to take things further than in others, but he cannot be an expert on everything and experts are necessary.  In particular, he is not an expert on commercial aspects.  M.A/OE. has considerable experience of putting over to foreign countries our concepts, the particular qualities of the equipment we use and the particular ways in which we use them.  Unless any Venezuelan equipment is chosen exclusively on commercial considerations there is a need to put over our philosophy and the particular characteristics of the hardware we have to offer.  M.A/O.E. is the expert on this, and should there be a need for a specialised knowledge he can arrange for Armoured Corps or Artillery specialists to come with him or to follow up his activities.  If we are fortunate enough to get to the negotiating table I think I must be there, because it is rare that a country will look at a price and delivery offer and say yes or no.

9. I hope that all the above makes clear my attitude to the question of agents and commissions and the necessity of visits from London if we are to have any hope of business.  Caracas Signal MA/14 of 10th January about the demonstration of French armour and helicopters is surely the most telling indication that equipment is not sold just by the efforts of Attaches, though we ourselves ask for a great deal of effort from them as part of our sales campaigns.

I am copying this letter to Leonard Figg of the Foreign Office.

H.R.Hubert

 

Draft minute from H.J.L.Suffield[10], Ministry of Defence, to F.Cooper[11], Ministry of Defence, undated, DEFE 68/319, TNA

SECRET

DRAFT MINUTE FROM HDS TO PUS

 

PUS

Copies: CE(PE)

AUS(Sales)

AUS(Sales Admin)

SAUDI ARABIAN AIR DEFENCE ASSISTANCE PROJECT & SAUDI ARABIAN NATIONAL GUARD COMMUNICATIONS NETWORK – AGENCY FEES

In the context of your recent directive to me on the subject of agency fees there are two major Government-to-Government projects in fairly advanced stages of negotiation upon which I must seek your guidance.  The matters discussed in the following paragraphs also have a bearing on the question of Accounting Officer responsibilities which have recently been under discussion.  CE(PE)[12] has agreed that I should approach you.

THE SADAP PROJECT

2. The Air Defence Assistance Programme is the subject of a government-to-government Memorandum of Understanding concluded in 1973, worth at that time some £250m, under which BAC Ltd[13]. as prime contractors to HMG undertake aircraft maintenance, training and building work for the RSAF[14].  It was accepted when the back-to-back contract with BAC was concluded that agency fees of 8% could be admitted as a specific charge to the contract but, in assessing the profit margin, it was recognised that BAC have, in fact, a comitment to meet agency fees of at least 10%.

3. The present MOU is due to expire in 1978 but the life of the Lightning and Strikemaster aircraft to which the project principally relates can be extended well into the 1980s and we have therefore been pressing the Saudis to extend the agreement  to at least 1981.  This would be worth a further £400m.  In addition BAC have been promoting a number of further projects, principally:

(a)    Strengthening the North West Defences (Tabuk Air Base)

(b)   The provision of an engineering and maintenance depot to support all aircraft in service with the RSAF.

(c)    The extension and modernisation of the King Feisal Air Academy (KFAA)

(d)   The provision of a relief landing ground for the KFAA.

These projects could be worth as much as £1,000 million in total.  Even if we are successful in getting in only two or three of them for Britain they will represent several hundreds of millions of pounds worth of exports, visible and invisible.

4. We have been informed by BAC that they will be expected to pay  % in respect both of the extension of the existing programme and of the new projects.  Although this appears to represent a significant increase over the earlier fees payable it is believed that these were in fact augmented by payments made to agents by BAC’s sub-contractors (eg building and catering sub-contractors).  There will be considerably less work for these sub-contractors in the new programme and therefore less opportunity to conceal agency fees in their prices.

THE SANGCOM PROJECT

5. In early 1975 we were asked by the Saudis to carry out a survey and make proposals for the provision of a nationwide communication network and training facility with associated after sales operating and maintenance services.  Cable and Wireless Ltd. were selected as our prime contractors and detailed proposals, prepared by them and approved by MOD(PE)[15] were submitted to the National Guard in October 1975.  The estimated cost was *150m.

6. We were informed that our offer would be held in suspense until the United States had had an opportunity to submit a tender.  We have now been asked to send a small team to discuss our proposals in more detail and we understand this to mean that the evaluation committee which was appointed to consider the offer has found ours superior to the American offer.  A joint MOD/Cable & Wireless team is now in Saudi Arabia for talks with the Deputy Commander of the National Guard.

7. Cable and Wireless have informed us that their prices include provision for the following agency fees.

[handwritten: To be verified in detail but believed to total about 15%]

Level of Fees requested

8. In neither the SADAP nor the SANGCOM case do I consider that the fees being demanded are exceptionally large in terms of the percentage commonly charged in Saudi Arabia for the sort of service being offered, which, although described as ‘technical consultancy’, amounts is practice to the exertion of influence to sway decisions in favour of the client.  However, in absolute terms the sums involved are very large and in future, as defence projects become even more ambitious, the agency fees demanded will, unless some restraint is applied, become enormous.

POSSIBLE COURSES

9. I have discarded as unthinkable the possible option of informing the Saudis that we have decided not to proceed further with any of these projects on a government-to-government basis since the firms concerned would certainly not be prepared to go it alone on projects of this size and the result would therefore be a breakdown in defence business between the UK and Saudi Arabia with repercussions spreading far wider than that, both in the fields of commercial and political relations.

10. I gave also assumed that we would not wish to follow the recently introduced American practice in government-to-government agreements of informing the foreign government in the preamble to the letter of offer of the amount, and beneficiary if known, of any fees included in the price.  The Americans appear to be powerful enough to get away with this “take-it-or-leave-it” approach but I do not believe we could afford to adopt this attitude.  The French are certainly unlikely to adopt it.  I have, moreover, concluded that it would be unhelpful to consult the Saudi government on the subject in any way, since they would certainly not officially approve the payment of fees, although they undoubtedly expect appropriately discreet arrangements to be made.  Statements to this effect are made by senior Saudis to visiting senior businessmen in somewhat elliptical language whenever a suitable opportunity occurs, for example by HRH Crown Prince Fahd ibn Abdul Aziz during a recent audience granted to Mr. Greenwood[16], Chairman of BAC, in the resence of D.Sales 1 and our Defence Attache.

11. I believe, therefore, that we are left with the alternatives of either:

(a)    accepting the proposed levels of fees as legitimate charges to the projects, or

(b)   of seeking to limit them to a level which would indicate to the beneficiaries that unreasonable sums, in absolute terms, are not available from this country, while not reducing them to a level which would permit the French, or others, easily to outbid us.

RECOMMENDATION

12. I would therefore recommend the acceptance of fees of 10% as a charge to the projects.  However, to permit industry a degree of flexibility to meet other minor charges in respect of consultants or agents with whom they might have legitimate and long-standing arrangements, I would also recommend that the profit margins allowed on projects of this nature be significantly more generous than on contracts for the supply of equipment or services to HMG.  I would suggest that a profit margin be accepted of, say, 15% or even 17% on costs, the reckonable costs to exclude the approved agency fees.  This would acknowledge the greater risks and difficulties associated with operating in an overseas market and would leave it open to the contractor to make the most sensible commercial arrangements within the limits of his profit margin.  It would also provide an incentive to the contractor to resist excessive demands.  I do not believe that there is anything in the argument that an increase in the profit margin on overseas projects would lead contractors to expect similar treatment on a British contracts.  Were they to do so, their claims could be very easily withstood.

12. As I mentioned in para.7 we are now in the final stages of negotiating the SANGCOM project and an early resolution of these matters is, therefore, imperative.

 

Minute from H.J.L.Suffield, Ministry of Defence, to F.Cooper, Ministry of Defence, 23 June 1976, DEFE 23/149, TNA

S E C R E T

LOOSE MINUTE

PUS

Copy to:

CE(PE)

AUS(Sales)

AUS(Sales Admin)

SAUDI ARABIAN AIR DEFENCE ASSISTANCE PROJECT & SAUDI ARABIAN NATIONAL GUARD COMMUNICATIONS NETWORK – AGENCY FEES

In the context of your recent directive to me on the subject of agency fees there are two major Government-to-Government projects in fairly advanced stages of negotiation upon which I must seek your guidance.  The matters discussed in the following paragraphs also have a bearing on the question of Accounting Officer responsibilities which have recently been under discussion.  CE(PE) has agreed that I should approach you.

THE SADAP PROJECT

2. The Air Defence Assistance Programme is the subject of a Government-to-Government Memorandum of Understanding concluded in 1973, worth at that time some £250M, under which BAC Ltd as prime contractors to HMG undertake aircraft maintenance, training and building work for the RSAF.  It was accepted when the back-to-back contract with BAC was concluded that agency fees of 8% could be admitted as a specific charge to the contract but, in assessing the profit margin, it was recognised that BAC have, in fact, a commitment to meet agency fees of at least 10%.

3. The present MOU is due to expire in 1978 but the life of the Lightning and Strikemaster aircraft to which the project principally relates can be extended well into the 1980s and we have therefore been pressing the Saudis to extend the agreement  to at least 1981.  This would be worth a further £400M.  In addition BAC have been promoting a number of further projects, principally:

(c)    Strengthening the North West Defences (Tabuk Air Base)

(d)   The provision of an engineering and maintenance depot to support all aircraft in service with the RSAF.

(e)   The extension and modernisation of the King Feisal Air Academy (KFAA)

(f)     The provision of a relief landing ground for the KFAA.

These projects could be worth as much as £1,000M in total.  Even if we are successful in getting in only two or three of them for Britain they will represent several hundreds of millions of pounds worth of exports, visible and invisible.

4. We have been informed by BAC that their agreed fees will be 15% in respect of both the extension of the existing programme and of the new projects.  Although this appears to represent a significant increase over the earlier fees payable it is believed that these were in fact augmented by payments made to agents by BAC’s sub-contractors (eg building and catering sub-contractors).

THE SANGCOM PROJECT

5. In early 1975 we were asked by the Saudis to carry out a survey and make proposals for the provision of a nationwide communication network and training facility with associated after sales operating and maintenance services.  Cable and Wireless Ltd were selected as our prime contractors and detailed proposals, prepared by them and approved by MOD(PE) were submitted to the National Guard in October 1975.  The estimated cost was £150M.

6. We were informed that our offer would be held in suspense until the United States had had an opportunity to submit a tender.  We have now been asked to send a small team to discuss our proposals in more detail and we understand this to mean that the evaluation committee which was appointed to consider the offer has found ours superior to the American offer.  A joint MOD/Cable and Wireless team is now in Saudi Arabia for talks with the Deputy Commander of the National Guard.

7. Cable and Wireless have informed us that their prices include provision for the following agency fees:

Engineering and Trading Operations

Company Beirut                                                                           10%

Cable and Wireless Middle East                                               2%

SIMEC International                                                                     3%

 

Level of Fees requested

8. In neither the SADAP nor the SANGCOM case do I consider that the fees being demanded are exceptionally large in terms of the percentage commonly charged in Saudi Arabia for the sort of service being offered but in absolute terms the sums involved are very large and in future, as defence projects become even more ambitious, the agency fees demanded will, unless some restraint is applied, become enormous.

POSSIBLE COURSES

9. I have discarded as unthinkable the possible option of informing the Saudis that we have decided not to proceed further with any of these projects on a Government-to-Government basis since the firms concerned would certainly not be prepared to go it alone on projects of this size and the result would therefore be a breakdown in defence business between the UK and Saudi Arabia with repercussions spreading far wider than that, both in the fields of commercial and political relations.

10. I believe, therefore, that we are left with the alternatives of either:

(g)    accepting the proposed levels of fees as legitimate charges to the projects, or

(h)   of seeking to limit them to a level which would indicate to the agents that unreasonable sums, in absolute terms, are not available from this country, while not reducing them to a level which would permit the French, or others, easily to outbid us.

RECOMMENDATION

11. I would therefore recommend the acceptance of fees of 10% as a charge to the projects.  However, to permit industry a degree of flexibility to meet other minor charges in respect of consultants or agents with whom they might have legitimate and long-standing arrangements, I would also recommend that the profit margins allowed on projects of this nature be significantly more generous than on contracts for the supply of equipment or services to HMG.  I would suggest that a profit margin be accepted of, say, 15% or even 17% on costs, the reckonable costs to exclude the approved agency fees.  This would acknowledge the greater risks and difficulties associated with operating in an overseas market and would leave it open to the contractor to make the most sensible commercial arrangements within the limits of his profit margin.  It would also provide an incentive to the contractor to resist excessive demands.  I do not believe that there is anything in the argument that an increase in the profit margin on overseas projects would lead contractors to expect similar treatment on a British contract.  Were they to do so, their claims could be very easily withstood.

12. As I mentioned in paragraph 6 we are now in the final stages of negotiating the SANGCOM project and I need an early resolution of these matters.

(signed)

HEAD OF DEFENCE SALES

23 June 1976

 

Minute from F.Cooper, Ministry of Defence, to H.J.L.Suffield, Ministry of Defence, 23 June 1976, DEFE 23/149, TNA

SECRET

PUS/76/355

9/23

Copy 6 of 6 copies

HEAD OF DEFENCE SALES              cc            CE(PE)

AUS(Sales)

AUS(Sales Admin)

Thank you for your minute of 23 June.  I agree with your recommendation in paragraph 11.

2. As regards agency fees, I think our responsibility in both these are first to satisfy ourselves that they are no more than the going rate for the area and second to ensure that, except in the most special circumstances, they are a matter for the firms concerned and not for HMG.

3. Given the putative size of some of the contracts it seems to me in everyone’s interests that agency fees are kept down as much as possible and that British firms have their own interest in seeing that this occurs.

4. As regards profit margins, the general rule is that we should earn as much as we can on sales to non-Exchequer customers and I see no difficulty about what you propose provided that we do not at any time get into a situation where we have undertaken to any purchaser to try and place any contract on the kind of terms that would be obtained by HMG.

F.C.

FRANK COOPER

23 June 1976

 

Cooper guidelines, 23 August 1977, DEFE 68/110, TNA.

CONFIDENTIAL

DIRECTIVE FROM PUS TO HDS[17]

The general principles of conduct for all public servants, whether uniformed or civilian, are laid down in relevant manuals (eg Queen’s Regulations, Non-Industrial Civilian Staff Regulations) and apply to all MOD servants in whatever capacity they may be employed.

2. In view of the current interest in the general subject of special commissions and similar arrangements in relation to commercial and business deals and the importance of maintaining strict standards in the Defence Sales field for which we are publicly accountable, there is a need for some special guidance which should be followed by Defence Sales Staff in this difficult and sensitive area.  It will be for you to decide the details of arrangements to be made within this guidance, consulting me in difficult or abnormal cases.

3. Although there may well be political and strategic returns from Defence Sales the object is primarily to produce economic benefits by improving the UK balance of payments, providing employment and, where equipment is used by the UK forces as well as being exported, by reducing the unit costs of such equipment with benefit to the Defence Budget.  Against this background, staff of the Defence Sales Organisation are to take particular care to observe the following principles:

a. Public money is not to be used for illegal or improper purposes.

b. Officials must not engage in, or encourage, illegal or improper actions; this requirement covers relations with representatives of United Kingdom firms as well as nationals of other countries.

c. Defence Sales are to avoid so far as possible the direct employment of agents.  If agents must be employed then:

(1)    The agent should be reputable in the area in which he is operating.

(2)    The fee or commission paid to an agent should not in any case exceed the normal level for the area; and where the fee or commission is 10 per cent or more, or where, though it is less than 10 per cent, the total payment would appear excessive in relation to the lawful and proper work which the agent undertakes in the area in which he operates, the agent should not be engaged without reference to me.

4. The same principles are to be observed in respect of arrangements made by Millbank Technical Services when acting on behalf of MOD.  Arrangements may also be necessary in the context of Government-to-Government deals where MOD is in a back-to-back relationship with a United Kingdom firm.  In such cases staff of the DSO should be generally guided, as appropriate, by the principles set out in paragraph 3.  Additionally, in those cases when the UK firm seeks MOD authority for a fee or commission to be included in the price, the DSO should obtain assurances in writing from the UK firm concerned that:

a. The agents to whom the payments are made are reputable companies or individuals.

b. The firm regard the agents’ services as providing an adequate return for the payments which are made to them; and

c. To the best of the firm’s knowledge the appropriate authorities in the customer Government accept the position of the agents in relation to the contract.

5. In all the above what is “illegal” or “improper” will depend in the last resort on the law or practice of the country or countries concerned, and it is for the foreign government to determine what are acceptable standards within its jurisdiction.  But where these standards are less restrictive than those applied within the UK, any relaxation of UK standards should be applied by us with great caution.

F.C.

Frank Cooper

PUS

23 August 1977


[1] Leonard Figg , Counsellor, Defence Supply Section, Foreign Office.

[2] Harold Hubert, Director of Army Sales, Defence Sales Organisation, Ministry of Defence.

[3] G.C.B. “Kit” Dodds, Assistant Under Secretary, Ministry of Defence.

[4] Raymond Brown, Head of Defence Sales, Ministry of Defence.

[5] Royal Ordnance Factories.

[6] Her Majesty’s Government.

[7] Sir Anthony Lincoln, British Ambassador to Venezuela.

[8] Derek Brinson, First Secretary, British Embassy, Caracas.

[9] British businessman resident in Venezuela.

[10] Lester Suffield, Head of Defence Sales, Ministry of Defence.

[11] Frank Cooper, Permanent Secretary, Ministry of Defence.

[12] Chief Executive, Procurement Executive, Ministry of Defence.

[13] The British Aircraft Corporation.

[14] The Royal Saudi Air Force.

[15] Procurement Executive, Ministry of Defence.

[16] Allen Greenwood.

[17] Ronald Ellis, Head of Defence Sales, Ministry of Defence.