Business Leads Assault on Arms Trading Rules; CITY FOCUS

Daily Mail (London), December 21, 2004 | Go to article overview

Business Leads Assault on Arms Trading Rules; CITY FOCUS


Byline: RUSSELL HOTTEN

SWEETENERS, favours, gifts - most people view such words as euphemisms for bribery. In the defence industry, though, they are commissions - a necessary evil in the sometimes murky business of trading arms.

But following a string of allegations in the past couple of years about bribery and corruption, many people are saying enough is enough.

The government's own Export Credit Guarantee Department is taking the lead.

And rightly so, considering it uses taxpayers' money to insure defence firms against countries defaulting on contracts. This includes underwriting BAE Systems to the tune of [pounds sterling]1bn if the regime in Saudi Arabia - one of its biggest clients - collapses.

Last March the ECGD, part of the Department of Trade & Industry, imposed tough rules designed to root out malpractice.

But the combined weight of industry and the department's political bosses meant the regulations were watered down when they came into effect at the start of this month.

Dr Susan Hawley of the charity Corner House, which campaigns against bribery by UK firms, said: 'It does not appear as if companies are yet ready to accept a role in stopping corruption.' Corner House went to the High Court yesterday in the first step towards getting a judicial review into the revisions. Politicians such as Martin O'Neill, chairman of the Trade and Industry Select Committee, are also asking why there has been a U-turn.

It has not been a good year for the defence industry's image. Earlier this month it was disclosed that tank-maker Alvis, now owned by BAE, paid the eldest daughter of Indonesia's former ruler President Suharto [pounds sterling]6m to help win a large contract. Alvis vehemently denies it was a bribe. It has also been reported that taxpayers stumped up [pounds sterling]400m to BAE for a failed Indonesian deal.

Before this, BAE was embroiled in claims that its agents ran a slush fund to help secure and maintain contracts such as the massive Al Yamamah arms deal with Saudi Arabia. BAE protests that it has never done anything wrong.

Companies say using middlemen to oil the wheels is sometimes essential if they are to win defence contracts. Often it is the only way to reach key people in regimes that can be suspicious of the outside world. But there is a fine line between a commission and a bribe.

When Robin Cook was Foreign Secretary he promised to introduce an ethical foreign policy. The Labour government has failed to live up to these promises, but nonetheless has tried to make improvements.

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