According to the world-wide anti-corruption body Transparency International (TI), the arms trade is still one of the world’s most corrupt business sectors, accounting for 50 per cent of all corrupt international transactions.

London

When General Eisenhower coined the phrase ‘industrial-military complex’ in 1953 he might not have foreseen that, half a century later, the arms trade would still be shrouded in secrecy and mystery. But according to the world-wide anti-corruption body Transparency International (TI), the arms trade is still one of the world’s most corrupt business sectors, accounting for 50 per cent of all corrupt international transactions.

‘Commissions’—the euphemism for bribes—paid by manufacturers to governments average at least 10 per cent of contracts, in an industry worth $40 billion a year. ‘Corruption plays a significant role in influencing arms procurement,’ says Laurence Cockroft, Chairman of TI’s UK chapter. ‘But despite repeated scandals this situation has been largely ignored by governments, NGOs and academics.’

Not any longer, it seems. Britain’s redoubtable International Development Minister, Clare Short, believes there is a real chance of a breakthrough. ‘With international mergers, it is a time of real opportunity to clean up the whole industry,’ she says. ‘The time is now ripe to adopt a code to do that, to have a proper, transparently managed security sector.’ Short bases her optimism on the new legislation to counteract corruption, put in place by the British government last February as part of the Anti-Terrorism Act. Prompted by the terrorist atrocities of September 11th, the new legislation also follows an anti-corruption convention of the Organisation of Economic Co-operation and Development, ratified in 1997 by member countries, aimed at outlawing the bribery of foreign public officials.

Short is also spurred by her own concern to tackle global poverty. ‘Extending the principles that are entrenched in the OECD convention, and now clearly enacted into UK law, into the defence industry could bring enormous benefits to developing countries,’ she said at the launch in London, Thursday, of TI’s new report into corruption in the arms trade. ‘This sector tends to be the most secretive,’ she said. ‘Corruption hovers in clusters around it and it causes the continuation of desperate poverty for lots of people across the world’—not least through the misallocation of tax payers’ money on arms expenditure which might otherwise go into schools, hospitals, roads and transport infrastructure.

But Short was also careful not to decry the whole of the arms trade. Poor nations needed adequate defence and ‘the legitimate arms trade has nothing to fear from a call to clean up, to have legitimate conduct to procure properly, to have transparent and well managed security sectors. No decent [defence] company has anything to fear from the clean up that I hope Transparency International’s campaign will lead to’.

Cockroft says the British arms industry, one of the world’s biggest, is also one of the most secretive. TI, he says, gets no response from its approaches to British Aerospace, for instance, the company involved in the sale of a civilian air traffic control system to Tanzania, criticised as an over-complex and expensive contract for Tanzania’s requirement. Asked about this, Clare Short said the issue dated back to over 10 years ago, and her department ‘doesn’t have the information to understand how this contract was made’.

If the British industry is secretive, at least one French defence company has had a change of heart. C.S.F. Thompson changed its name to Thales, in a bid to rebrand itself, after it had gazzumped a South Korean contract to sell frigates to Taiwan. The displacement volume of the French frigates was 50 per cent more than those on offer from South Korea, and their cost doubled to $2.8 billion. But Thompson won the contract and the Taiwan government’s anti-graft body later reported that the contract was strongly influenced by pay-offs. The then French foreign minister, Ronald Dumas, who helped orchestrate the sale, was convicted last year for receiving improper payments. The scandal was Thompson’s nadir, says Cockroft, but now the newly named company, Thales, has published its own compliance system and collaborates with Transparency International.

Cockroft says there are several reasons why corruption is so widespread in the arms industry: the excuse of secrecy in guarding national security; the huge size of contracts, amounting to billions of Euros, so that ‘commissions’ can be easily hidden; the complexity of specifications which makes bribes hard to detect (‘Mystification provides an opportunity to over specify in ways that are difficult to challenge,’ Cockcroft says); and the ‘revolving door syndrome’, first identified by General Eisenhower, whereby former government officials look to join defence companies on retirement. Whilst this is not corrupt in itself, it could lead to a conflict of interests, says former Air Marshal Sir Timothy Garden. In Britain, for instance, between 1985-95, over 2,000 Ministry of Defence civil servants and armed forces personnel joined British and overseas defence companies and management consultancies.

Paul Eavis, Director of London-based Saferworld, a post Cold-War research body, points out that the Export Credit Guarantee Department now insists that UK exporters give guarantees they will not engage in corrupt practices, if they are to gain export credit. ‘We have an opportunity now with the new export control bill, still working its way through parliament, which aims to tighten the existing legislative framework for arms exports,’ Eavis says.

He picks out four actions the British government should take to clamp down on corruption:

First, an exporting license should only be conditional on the company declaring that it is not engaging in any corrupt practices—‘a kind of no-bribery warrantee’. This could take the form of a separate document signed by a senior executive, or be written into the license application itself. The license would be revoked if any employee was found to be engaged in corruption. Putting this guarantee into the export license would make it easier to hold companies to account. Eavis believes the UK and Swedish governments should push this recommendation at European Union level to member governments.

Secondly, the need for transparency and information disclosure: ‘It is only through greater openness that you are really going to tackle corruption,’ Eavis says. The UK government should publish the value of individual export licenses, and the quantities of arms involved, in the UK annual report on strategic export controls. This would also show what weapons are going where.

Thirdly, better systems for tracking really large bills and monitoring payments, such as through the national criminal intelligence service. And, finally, providing greater protection to individuals within companies who expose corrupt practices. Companies’ codes of ethics could give greater protection to whistleblowers, Eaves says.
If all this sound like a call for a moral rearmament, the big issue still remains: with all the necessary legislation in place, will there be prosecutions? Britain’s old anti-corruption laws, dating back to over a hundred years ago, had proved ineffectual. But Cockroft says that the Crown Prosecution Service, the Serious Fraud Office and the Home Office are all taking the new anti-bribery legislation very seriously.