Cleaning up the Arms Trade
01 June 2002

The arms trade accounts for 50 per cent of all corrupt international transactions, stated a report launched by Transparency International (TI) in April.

The arms industry is worth $40 billion a year - and the 'commissions' (or bribes) it pays to governments average at least 10 per cent of contracts. 'Corruption plays a significant role in influencing arms procurement,' says Laurence Cockroft, Chairman of TI's UK chapter. '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 that a breakthrough is on its way. 'With international mergers, it is a time of real opportunity to clean up the whole industry,' she said at the launch of TI's report. 'The time is now ripe to have a proper, transparently managed security sector.' Short bases her optimism on the British Government's new legislation to counteract corruption, which is part of the Anti-Terrorism Act prompted by 11 September.

Short is also spurred by her concern to tackle global poverty. She believes transparency in the arms industry could bring 'enormous benefits' to developing countries. '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.' Corrupt arms expenditure diverts taxpayers' money away from schools, hospitals, roads and transport infrastructure.

Of course, Short continued, poor nations need adequate defence. '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.'

Britain's arms industry is one of the world's largest and, says Cockroft, most secretive. He gives the example of British Aerospace's refusal to respond to TI's inquiries about its sale of an air traffic control system to Tanzania, which has been described as needlessly complex and expensive.

Asked about this, Clare Short said the issue dated back over ten years, and her department 'doesn't have the information to understand how this contract was made'. But she also added: 'I find it very difficult to think that a contract like that could have been made cleanly.'

The Cold War, she continued, had led to 'bloated defence sectors' throughout Africa, where 20 per cent of the population still lived in countries in conflict. There was a need to reduce the circulation of small arms and light weapons throughout Africa, under the auspices of a recent UN convention on small arms control.

If the British industry is secretive, at least one French defence company has had a change of heart. CSF Thompson beat a South Korean contract to sell frigates to Taiwan. The Taiwan government's anti-graft body later reported that the contract was strongly influenced by pay-offs and the French Foreign Minister of the time, Ronald Dumas, was convicted last year of receiving improper payments. The scandal was Thompson's nadir, said Cockroft. It has now changed its name to Thales and has published its own compliance system and collaborates with TI.

Cockroft listed several reasons why corruption is so widespread in the arms industry: the excuse that secrecy is needed to guard national security; the huge size of contracts, which makes 'commissions' easy to hide; the complexity of specifications which makes bribes hard to detect; and the 'revolving door syndrome', whereby former government officials look to join defence companies on retirement, risking a conflict of interests.

Paul Eavis, Director of Saferworld, a London-based post-Cold-War research body, pointed out that the Export Credit Guarantee Department now insists that UK exporters give guarantees that they will not engage in corrupt practices.

He picked out four actions the British government should take to clamp down on corruption. First, an exporting licence should be conditional on the company declaring that it is not engaging in any corrupt practices. The licence would be revoked if any employee was found to be engaged in corruption.

Secondly, he stressed the need for transparency and the disclosure of information. He wants the UK government to publish the value of individual export licences, and the quantities of arms involved, each year.

Thirdly, he called for better systems for tracking large bills and monitoring payments. And, finally, he believed the government should give greater protection to whistleblowers within companies who expose corrupt practices.

Even with all the necessary legislation in place, the big issue remains: will there be prosecutions? Britain's old anti-corruption laws, dating back to over 100 years ago, proved ineffectual. The new anti-bribery legislation replaces them - and Cockroft said that the Crown Prosecution Service, the Serious Fraud Office and the Home Office are all taking it very seriously indeed.
Michael Smith