International Development Committee Inquiry into Financial Crime and Development

In early 2011, the International Development Committee of the House of Commons (the lower house of the UK’s parliament) announced an Inquiry into Financial Crime and Development. The inquiry’s premise is that “financial crimes undermine development when public money is diverted from necessary legitimate expenditure programmes in order to enrich private individuals.”

Its example was that of BAE Systems, convicted in December 2010 of failing to keep proper books and records in relation to the sale of an air traffic control system to Tanzania. BAE agreed to pay £29.5 million for the benefit of the people of Tanzania, an amount representing the price of the sale minus the company’s fine of £500,000.

This Corner House submission states that those found guilty in the UK of financial crimes in developing countries should be required by the court to make reparations, which are more than simply financial payments. The evidence stresses that BAE’s proposed payment for the benefit of the people of Tanzania is not reparations, compensation or damages, but simply a refund a decade later of money paid for goods that were not fit for purpose. The UK court did not require BAE to make any payments; the agreement to do so is solely between the SFO and the company.

The submission stresses that reparations and payments must be completely separated from fines, confiscation orders, sentences and other penalties for financial crimes. It states that BAE should have no say over this payment.

To ensure that the payment is used for the benefit of the people of Tanzania, many questions need to be asked and wider advice sought in a transparent decision-making process. In general, the UK authorities need to give further thought to carrying out reparations and payments without contributing to the problems that triggered the crime in the first place.

Written evidence was also submitted to this Inquiry by Campaign Against Arms Trade, Christian Aid, Global Witness, Transparency International (UK), Tearfund and CAFOD, DfID, SFO and BAE Systems.

The Corner House submitted further written evidence on 14 July 2011, stating that it would be lawful for BAE Systems to make a direct payment to Tanzania arising from its settlement agreement with the Serious Fraud Office. The company had been arguing that to do so would run foul of EU and UK legislation on political donations.

The Inquiry heard oral evidence on 19 July 2011 from BAE, the Serious Fraud Office, DFID and the Department of Justice.

MPs on the International Development Committee severely criticised BAE for creating delays in making a payment agreed 16 months earlier to benefit the people of Tanzania. The SFO Director indicated that he would consider a "contempt of court" charge if the company did not pay soon. "There's a question of when justice delayed becomes justice denied" said IDC Chair Malcolm Bruce, MP.

MPs described the advisory board set up by BAE to decide on how the money should be spent as a "complete sham"; Bruce said it was "offensive" for the company to suggest it knew better how to spend the money than the government of Tanzania.

The IDC's final report was published on 15 November 2011 in two volumes, Vol 1 and Vol 2.

The Government issued its response to the Committee's report on 27 March 2012. It welcomed the Committee's Report; the Committee's support to ensure that the payment from BAE Systems would be made as soon as possible; and that the payment would be used effectively for development purposes. It stated that the Report

provides clear and useful recommendations on both the specifics of the BAE Tanzania case; and on the handling of future cases.