Corruption is, sadly, unregulated

Bribery is a habit that many major British arms companies indulge in, but few are prepared to talk about in public - a bit like middle-aged married men masturbating while their wives are out. If you are caught doing the latter, though, I would recommend that you don't use the excuse: "Well, if I didn't do it, someone else would." Not unless you want to end up on the window ledge of Buckingham Palace in a Batman costume, asking David Blunkett to make room for one more.

The main difference between the two practices is that one of them is wrong. Or, if I can rephrase that to avoid confusion among strict Catholics and Taliban supporters: one of the two practices is illegal. One of them is also supported by Patricia Hewitt at the Department of Trade and Industry. Can you guess which?

Britain has long dragged its feet on combating bribery. When BAE Systems was caught pumping large sums of money into a Jersey bank account belonging to the foreign minister of Qatar, around the same time as it was striking an arms deal with Qatar, the company said it had done nothing illegal. This may be true. It became illegal for UK firms to use bribery abroad in 2002, when the OECD's anti-corruption working group started to mutter about imposing economic sanctions on the UK.

Trying to prevent bribery in some UK companies is a Herculean task. And nowhere is the shit piled so high against the Augean stable doors than at the Export Credits Guarantee Department, which is under Hewitt's DTI. The ECGD provides underwriting (insurance) for UK businesses supplying goods, such as arms and power stations, in medium- to high-risk markets such as Nigeria, Indonesia and India. You'd have to be the kind of person that appears in Heat magazine pretty regularly not to connect the words "arms" and "Indonesia" with possible backhanders. Yet, for years, the ECGD has merrily used public money to back what were in fact bent deals, and has successfully investigated none.

So hopes were raised in March when the ECGD wrote to its corporate customers to inform them that "enhanced provisions in respect of bribery and corruption" were to be issued. The new measures, it said, were a "balanced package . . . to the ultimate benefit of all UK companies". So were the bastions of British corporate integrity such as the Confederation of British Industry happy with the changes? Apparently not, as minutes from the ECGD's advisory committee state that the revised procedures were "not... well received by major customers".

So the ECGD, not wishing to upset its customers, embarked on a major consultation, solely with big business, and promptly issued new, watered-down guidelines. Let's call these "probity lite".

Under "probity lite", companies that get ECGD backing do not have to supply the names and addresses of any commission agents they use if they deem the information commercially confidential. Yet commission agents are the most obvious conduit for bribes. In the case of the 1996 Alvis deal, backed by the ECGD, to supply tanks to Indonesia, the commission agent happened to be the daughter of that country's president. In the Rolls-Royce deal for the Godavari power station in India, which was also backed by the ECGD, the commission agents happened to be owned by the managing director of the power station responsible for awarding the contract.

Under the "probity lite" regulations, neither of these cases would have been exposed. The regulations require the ECGD to write to any firm it suspects of financial wrongdoing before it carries out an inspection. So, in effect, a briber will get a note saying: "Hide the evidence; you have five days." How would this work in other areas of law-breaking? Perhaps the police could send notes to crack dealers, saying: "The sniffer dog has a cold at the moment, so we'll pop round later looking for drugs."

The list of changes to the original procedures is well documented in papers prepared by the Corner House, an anti-corruption NGO, which is taking the ECGD to judicial review in the next few weeks.

The ECGD did not invite either the Corner House or Transparency International, another anti-corruption body, to any meetings during its "extensive" consultations on the regulations. Yet it managed eight meetings with the Society of British Aerospace Companies, the British Exporters Association, the British Bankers' Association and the CBI.

That may seem unbalanced enough, but at least none of those bodies had itself been accused of corruption. By contrast, the Serious Fraud Office is investigating allegations that BAE Systems bribed Saudi Arabia's defence procurement minister Prince Turki bin Nasser. BAE Systems attended six of the meetings, as did Rolls-Royce. Airbus, 20 per cent owned by BAE, attended five. It is not recorded if ECGD officials checked their watches and wallets after the sessions.