Government to change law on compensation for victims of financial crimes committed by British companies abroad

In Parliament yesterday, the Government confirmed that a memorandum of understanding has been signed (on Thursday 15 March) between the UK Department for International Development, the Government of Tanzania, the Serious Fraud Office and BAe Systems, for BAe Systems to pay £29.5 million plus accrued interest to improve the Tanzanian education system, in order to implement the undertaking given by the company when it was convicted thirteen months ago (on 21 December 2010) of a serious accounting offence connected to the sale of an overpriced air traffic control system to Tanzania.

 

The money will be used to buy textbooks for all 16,000 primary schools in the country, benefiting 8.3 million children, with an emphasis placed on the key subjects of Kiswahli, English, Maths and Science.  Funds will also be used to provide all 175,000 primary school teachers with teachers’ guides, syllabi and syllabi guides to help improve their teaching skills.  Up to £5 million will be spent on the purchase of desks to benefit primary school children living in nine districts where the need for investment in education is considered greatest.  The procurement process will be rigorously and independently monitored to ensure the money is used solely for the benefit of the Tanzanian people.

 

The Government also confirmed in the House of Commons yesterday in response to my oral question, that the UK Government will legislate to empower judges to compel those convicted of transnational financial crimes to make restitution to the country in which the crime was committed, to avoid relying on a voluntary agreement, as was the case with BAe Systems in the Tanzania case.  My exchange with the The Solicitor-General can be read here.

 

I have been campaigning for twelve years for tougher laws against transnational bribery and other financial crimes and welcome the agreement that has finally been reached on making the payment and also the Government’s decision to change the law so that judges will now be able to order British companies who have defrauded victims abroad, to pay compensation to those victims.

 

In the case of BAe and Tanzania, it took over a year for the Memorandum of Understanding to be signed because it relied on a voluntary agreement between the various parties.  The court ruled on 21 December 2010 that BAe should pay back £29.5 million to the Government of Tanzania.  They were also required to pay costs, which are not normally sought in SFO cases.  I pressed the Director of the Serious Fraud Office, Richard Alderman to seek costs in a meeting in the House of Commons on 24 November 2010.  Since then, the Secretary of State for Justice, Ken Clarke has confirmed that costs will usually be sought to boost the SFO’s budget for investigating and prosecuting serious frauds.

 

Following its conviction, BAe delayed making the payment, and I persuaded the House of Commons International Development Committee to hold an inquiry into the affair.  BAE Systems were called to give oral evidence on 19 July 2011.  At the evidence session I warned the company’s Group General Counsel, Philip Bramwell, that it “would do your company a great deal of good if the entire £29.5 million was passed to a third party – DFID seems to be the most obvious one – before we write the report”.  The following day, 20 July 2011, BAE wrote to the Secretary of State for International Development agreeing to make the payment of £29.5 million and proposing “that we should adopt the suggestion made by one of the members of the committee (Hugh Bayley) that the payment should be made to DFID.”

 

DFID asked BAE to make the payment direct to the Government of Tanzania, which the BAE Chairman, Dick Olver, confirmed they would do.  However, it still took almost eight months for last week’s Memorandum of Understanding to be signed.  My Parliamentary Question to chase progress, answered on 31 January 2012, and my follow up question, answered on 13 March, can be read here.

 

Following my questions and the agreement being reached, the funds of £29.5 million (plus accrued interest) are expected to be transferred by BAe Systems to the Tanzanian Government within 14 working days.

 

I am glad that an agreement has now been reached for BAE to pay back every penny it earned from this contract.  The money will be used by the Tanzanian Government to benefit the people of the country.  It is the poor who lose out when corrupt officials in developing countries sign dodgy contracts.  In this case, Tanzanian people lost out when cash which should have been spent on schools and health care was used instead to pay for a grossly overpriced and unnecessary radar system.

 

This case sends a clear signal that British companies must be transparent about international contracts and abide by the law.  This agreement is a first for the Serious Fraud Office who piloted the compensation payment through the UK legal system.  I have been campaigning for the UK Government to change the law, so that those who are convicted of criminal offences abroad can be made to pay compensation through UK courts.  I am pleased that the Government has agreed to change the law and hope that this will deter British companies from committing financial crimes which boost their profits but damage poor people in developing countries.