In November 2013 Parliament’s Foreign Affairs Committee published its report into the UK’s relations with Saudi Arabia and Bahrain. Select Committees are supposed to scrutinise Government policy on behalf of the electorate. Let’s see what they had to say about the issue of corruption in the UK’s arms deals with Saudi Arabia:
- Corruption: In 2006 a major Serious Fraud Office (SFO) investigation into alleged bribes paid as part of the Al Yamamah deal was controversially halted after it was advised that Saudi Arabia might withdraw intelligence cooperation. In 2012 the Serious Fraud Office launched an investigation into GPT, the subsidiary of EADS, the pan-European defence contractor that supplied the Saudi Arabian National Guard Communication project (SANGCOM) equipment, in the light of further bribery allegations. The Government has thus far declined to give further information about the case.[131]
- The closure of the SFO’s Al Yamamah inquiry led to increased international and domestic pressure to update the UK’s bribery laws, contributing to the Bribery Act 2010, which clarified what could and could not be done by British companies when conducting business both at home and abroad. This legislation put the UK on a par with the strongest anti-corruption measures in the world, including those of the US. Howard Wheeldon and Dr Eyal both considered that the UK’s regulations were as tough, if not more tough, than our competitors’, though Howard Wheeldon noted that “It is a pity, of course, that the rest of the world does not necessarily play with us on a level playing field.”[132] As the UK has imposed new limitations, Saudi Arabia is also beginning to improve: Jane Kinninmont, Senior Research Fellow at Chatham House, told us that the Saudis had begun to address corruption from their side, stating that: “King Abdullah has taken steps to make the procurement more transparent from his end, because he has clearly been very aware that corruption eats away at legitimacy.”[133] This trend toward greater transparency has seen institutional changes, as financial accounting responsibility for the defence contracts have moved from Saudi Arabia’s Ministry of Defence to its Ministry of Finance, and the ‘oil for arms’ arrangements no longer exist. According to Transparency International’s Corruption Perceptions Index for 2012, Saudi Arabia is a middle-ranking country in terms of public sector corruption.[134] Scoring 4.4 on a scale of 1 to 10, where 10 is the least corrupt, Saudi Arabia is seen as less corrupt than Italy and than many of its neighbours in North Africa and the Middle East (although its neighbouring Gulf States are all rated higher, with the UAE and Qatar doing significantly better). The UK scores 7.4.[135]
Later the Committee concluded:
- Saudi Arabia is an important buyer for the UK defence industry, and defence sales are important to the overall UK-Saudi relationship. The UK provides valued training alongside its defence sales that is beneficial to both UK and Saudi forces. With other competitors in the market, there is little to suggest that ending the UK’s defence sales would have any effect on overall defence sales to Saudi Arabia, or that it would give the UK additional leverage to effect positive improvements. The government must adhere strictly to its existing policy to ensure that defence equipment sold by UK firms are not used for human rights abuses or internal repression. In its response to this report the Government should provide further evidence that it is doing so in practice, including any evidence gathered by end-use monitoring.
Paragraph 71 is a correct statement of the facts, and intended as nothing else. Paragraph 72 is clearly intended to suggest to the reader that, after all the fuss about the Serious Fraud Office’s termination of its investigation into BAE’s Al Yamamah arms deal, Britain’s arms deals with Saudi Arabia are getting much cleaner, while paragraph 78 rounds off by saying Britain’s arms deals with Saudi Arabia are a good thing. Let’s look at the evidence the Foreign Affairs Committee cites in support of its views, before considering whether their line of thinking makes sense.
The evidence relied upon by the Committee
The Committee says, and I agree, that the Bribery Act 2010 (to which it refers) probably is about as tough as the Foreign Corrupt Practices Act in the US. However, the Committee seems unable to take this point further and appreciate that having tough new laws is all very well, but only if they are effectively enforced and those who are tempted to break them believe they will be. On this point the Committee is silent.
No one has ever been convicted for foreign bribery under the much-vaunted Bribery Act 2010, and the prosecuting authorities have only secured one conviction under the old Prevention of Corruption Act 1906 for foreign bribery in the last 16 months. So while the new Act is undoubtedly a step in the right direction, its entering into force is not in itself evidence that foreign bribery by British companies is being or will be reduced. Conclusive evidence on this point will never be possible to obtain. However, convictions of companies for foreign bribery under the new Act would be one indicator that would suggest companies cannot act with impunity (as I explained in a previous posting, the structural factors tempting and enabling companies to pay bribes overseas still exist).
The Committee then says that “transparency” in Saudi Arabia has improved because “financial accounting responsibility for the defence contracts have moved from Saudi Arabia’s Ministry of Defence to its Ministry of Finance, and the ‘oil for arms’ arrangements no longer exist”. It seems reasonable to assume that the reader is meant to infer that: 1) things are getting cleaner now and 2) this is so because the “oil for arms” arrangements used in the Al Yamamah deal, the subject of the Serious Fraud Office inquiry, no longer exist. No evidence is presented, and I know of none, to suggest that the “oil for arms” arrangement facilitated or was the cause of dubious practices on the Al Yamamah deal. Moreover, the Committee totally ignores the wealth of historical evidence available at The National Archives that, from the restoration of the UK’s relations with Saudi Arabia to the Al Yamamah deal (1963 to 1985), massive corruption was rife in the UK’s arms deals with Saudi Arabia well before the “oil for arms” arrangement began.
The last part of paragraph 72, which suggests that Saudi Arabia is not the worst country when it comes to corruption, and is “seen as less corrupt than Italy” appears to be another feeble attempt to convince the reader things are improving. Transparency International’s Corruption Perceptions Index asks about the whole of a country’s public sector (as the Committee say), not just about military procurement. So this is an imperfect piece of evidence to place in a section about corruption in the UK’s arms deals with Saudi Arabia. Moreover, the Corruption Perceptions Index cannot be used to argue that things are better now than at the time the Serious Fraud Office investigation into Al Yamamah was terminated, because it cannot be compared with Indexes from previous years before 2012.
Perhaps in using the Corruption Perceptions Index, the Committee is not trying to say things are improving, but instead is suggesting that Saudi Arabia has been singled out unfairly. However, given the nature of the allegations that were investigated by the Serious Fraud Office, the fact that the Al Yamamah deal is probably one of the largest export contracts the UK has ever secured, and the conviction of BAE in the US for, among other things, its conduct in Saudi Arabia, any suggestion that the criticisms made are “unfair” is wholly misplaced.
The Committee does not appear to have taken opposing views seriously, even from those whose evidence it cites. For example, the Committee cites Jane Kinninmont’s views about improvements in “transparency” in Saudi Arabia. However, it ignores this statement by her:
We also have to be quite aware that there is a lot of scepticism among intellectuals and economists in the Gulf about corruption and the value of defence deals with western partners. Although, strategically, the availability of arms is obviously important to Governments, when you read the comments of those who are economists or human development experts from the region, they often complain about the fact that, typically, their Governments invest more in expensive arms from the US and the UK than they spend on health care and education for their own people, which is, of course, much closer to the average person’s heart.
Yes that’s right – the UK makes big bucks from Gulf arms deals (mostly with Saudi Arabia), while the populations of the Gulf put up with less spending on health care and education because of lavish arms spending by their (mostly autocratic) governments. But the Committee appears not to care. Because the arms deals benefit some UK companies and the Armed Forces get some training out of it, that is all that matters in their parochial view.
In the Committee’s discussion of corruption, nowhere is any comment made about the Saudi threats to intelligence co-operation which resulted from the Serious Fraud Office investigation into the Al Yamamah deal. These posed a grave risk to ‘British lives on British streets’, and indeed to UK nationals within Saudi Arabia (see paragraph 34 here). As the saying goes, “with friends like these, who needs enemies?”
The Serious Fraud Office was carrying out its lawful functions, sanctioned by Parliament, and indeed, during its investigation, abiding by the OECD Anti-Bribery Convention. The Committee appears unperturbed by the outrageous behaviour by our “vital” foreign policy partner. Moreover, the Committee also ignores a very interesting paper put to it on this very issue by Colin Murray, an academic at Newcastle University. He suggests that “following the collapse of the al-Yamamah investigation under Saudi threats, other partner countries employed political pressure regarding security co-operation to influence UK policy makers and courts”. If true this is deeply concerning and surely merited at least some investigation by the Committee.
Is it sensible to think there might be less corruption now in the UK’s arms deals with Saudi Arabia?
The section of the Committee’s report on corruption and UK arms deals with Saudi Arabia is poor. Further, it seems incredible to suggest that there is less corruption now in the UK’s arms deals with Saudi Arabia. Clearly as an outsider evaluation is difficult, but consider the following.
High-level Saudi threats to intelligence co-operation were successful in helping terminate the Serious Fraud Office investigation into the Al Yamamah deal. The failure of the Judicial Review action by Campaign Against Arms Trade and The Corner House means that any similar termination of a corruption investigation by the Serious Fraud Office in the future cannot be challenged in the UK Courts. Further, the Serious Fraud Office has yet to bring a successful prosecution for foreign bribery using the Bribery Act 2010. Lastly, when BAE was convicted in 2010 (for a minor accounting offence) over its conduct in a deal with Tanzania, its only conviction in the UK for dubious conduct investigated by the Serious Fraud Office, it cost the company £30 million in fines and payments to Tanzania, a tiny fraction of BAE’s annual turnover.
It does not take much experience of life to realise that past experience conditions future behaviour. Plainly unless bad behaviour is dealt with effectively it will persist. In the light of the known facts, set out above, it seems sensible to believe that there is every reason for corruption to continue in the UK’s arms deals with Saudi Arabia, and precious little incentive for anyone who may be involved to stop.
What is particularly lamentable is the Committee’s reluctance to ask the obvious questions. Here are three.
It is now a matter of public record that BAE Systems made highly dubious payments as part of the Al Yamamah deal. So the Committee could have asked what exactly did the Ministry of Defence know about these? And what action, if any did they take? Lastly, given BAE Systems was convicted in the United States for being less than frank with the authorities about these dubious activities why is it that the Ministry of Defence still relies on assurances from BAE Systems that all is above board?
The Committee has failed to undertake any serious scrutiny of the issue of corruption in UK arms deals with Saudi Arabia, and indeed cannot offer a single recommendation aimed at making it less likely the sort of behaviour that led to the Serious Fraud Office investigation of Al Yamamah will recur. This failure is important. In the light of the termination of the Serious Fraud Office’s Al Yamamah investigation, it sends a clear signal that the British establishment is quite content to see the sort of practices investigated continue.