The government's decision to drop the probe into an arms deal has cast a shadow over its anti-corruption drive, argues Beverley Whittaker


Those who think that corruption is something that only happens in jurisdictions less sophisticated than our own are mistaken. In a report in 2000, the Home Office estimated that the UK economy loses in excess of £14 billion a year through corruption and fraud alone. This figure is likely to be much higher now.



Therefore, the government has introduced a raft of legislation in an attempt to alter this worrying trend. Most recently, it brought forward the Fraud Act 2006, which came into force earlier this year, and a new Corruption Bill, which is awaiting its second reading in the House of Lords.



Before this legislation, the prosecuting authorities had to wrangle with a complex array of provisions in the Theft Act, Prevention of Corruption Acts 1889-1916, and the common law of conspiracy to defraud to secure a conviction. This regime was consistently criticised for being too narrow and complicated, allowing defendants to avoid conviction through technicalities or loopholes in the law.



Under the new law, the Fraud Act replaces the eight offences of deception under the Theft Act and creates a clear general offence of fraud that can be committed in three main ways: by false representation, by failing to disclose information, and by abuse of position. It is intended that, by creating a clear offence, convictions will become much easier and quicker, and that this will ultimately act as a deterrent.



The Corruption Acts deal with offences that involve an abuse of office, whether in the public or private sector, for a personal gain such as the giving or receiving of a bribe. The results of a government consultation into the effectiveness of the Corruption Acts indicated that the current law is considered to be obscure and inadequate - this is partly due to the historical piecemeal nature of the legislation and also to the increasing frequency and value of cross-border transactions.



The new Corruption Bill will repeal the Corruption Acts by creating a single statute, which will include several new offences intended to bring the law up to date, such as bribery of foreign public officials, corrupt practices abroad and bid rigging.



It would seem that the government is keen on taking a tough approach in combating fraud and corruption. However, all of this comes in the wake of the government's decision to drop the Serious Fraud Office probe into the BAE Systems arms deal with Saudi Arabia last December. The investigation centred on allegations that BAE had set up a slush fund to sweeten an arms deal with the Saudi Arabian government. Media reports have suggested that the government's decision stemmed from threats by Saudi Arabia to cut intelligence links with the UK and to pull out of a major defence deal, which could have resulted in the loss of thousands of UK jobs.



The Organisation for Economic Co-operation and Development (OECD) has launched its own inquiry into whether the decision breached the UK's responsibility to root out corruption. Under the terms of the OECD anti-corruption treaty, member countries cannot use economic or political reasons for terminating an inquiry into corruption.



Despite the government's recent drive towards reforming the law on fraud and corruption, the decision to drop the BAE/Saudi Arabia investigation will in some minds dilute the anti-corruption message that Whitehall is trying to convey.



Beverley Whittaker is a commercial partner at Surrey law firm Stevens & Bolton