George Pitcher: Finding the UK’s passport

Following ‘the Hinduja affair’ much has been said of ministerial contact with foreign businessmen, but what is the alternative for the UK?

In this column, I try not to write about corporate circumstances in which I have a direct professional interest, for obvious reasons and perhaps for one less obvious reason – I think it’s healthy at least once a week to express a business opinion that is entirely independent of my day job.

But there are times when the company’s involvement in a high-profile business issue of the moment provides an insight that transcends the fact that, in writing about it, I am clearly not an entirely objective commentator. One such case is that of the Hinduja brothers, who appointed my company in the wake of Peter Mandelson’s abrupt departure from the Government over his muddled memory of events surrounding one of their passport applications.

The majority of media, political and commercial folk have greeted our acceptance of this brief with interest. But I’m sorry to say that one or two eyebrows have been raised – there are clearly corporate circumstances that some consider too hot to handle, where narrow political interests can make enemies and where, undoubtedly, it would be safer not to go.

My position on this is simple. Like a barrister, I consider that everyone has a right to professional advocacy. Without wanting to sound too pompous, that’s a mark of a civilised working environment. Unlike a barrister, I don’t have to take a case on. We represent the Hindujas because we want to.

Part of the desire to act on their behalf raises questions as to how we as a nation do business, not just with foreign companies, but with industrial and trading combines from different cultures and legal jurisdictions. Rest assured that this is not the place to go into the political imbroglio that surrounded the Hammond Report. What we can and should consider is what it tells us about how the UK conducts its role in international trading.

The first point to make is that it is, frankly, naive to suggest that senior government ministers attended Diwali parties and other Hinduja social events because either they liked partying or liked hanging out with rich and powerful people.

After Indian industry was deregulated in the early Nineties, the opportunities for Western companies to work on Indian contracts have been enormous. Therefore, it would have been unnatural for ministers not to have had close contact with the Hindujas.

The Hinduja’s public business conglomerate embraces transport, energy, TMT, finance, project development, chemicals and trading. The range of its activities is constrained only by the group’s ethical exclusions of alcohol, meat, gambling, hotels, casinos and arms. The Hindujas own the Gulf Oil brand and trading activities outside the US, Spain and Portugal. They are one of two shortlisted bidders for the privatisation of 40 per cent of Air India.

So the group is enormous, if difficult to value, given India’s opaque regulatory system for private companies and the majority of the group’s interests being vested in private portfolios in investment. My point is that, like it or not, the Hindujas’ interests exert massive economic influence by their mere existence in the jurisdictions in which they operate. It would be hard for national governments not to have regular contact with them.

For successive UK governments to have done otherwise would have seriously handicapped UK companies’ opportunities to do business successfully on the Indian subcontinent. In turn, that may have adversely affected inward investment in the UK, which the group sees as offering considerable potential for its energy and TMT interests.

The Hindujas’ detractors will point to the Foreign Office’s concerns, recorded in last week’s Hammond Report, that they were subject to a corruption investigation in India, in which there were allegations that could cause the UK embarrassment. The word “dubious” has gained much currency. These detractors conveniently ignore that the same report records that these concerns had evaporated by 1997, the year in which SP Hinduja received his British naturalisation.

So the real question for Western traders with one of the fastest-growing markets in the world is this: do we expect to be able to do business with democratic regimes where corporate transparency standards are very different and where those we do business with may be subject to investigation by the local authorities? For successive UK governments, the answer to that would seem to be unequivocally affirmative.

But there are worrying signals emerging as we approach the general election campaigns proper. Never mind that the Conservatives dealt openly and enthusiastically with the Hindujas in the early Nineties (when the Foreign Office was expressing those concerns). Now William Hague is talking about the UK becoming a “foreign land” under Labour and his colleagues are arguing that the Hindujas should not have had access to ministers.

It may be that the Tories are simply trying to shore up some xenophobic support ahead of an election that they know they will lose badly. But those doing business in south-east Asia should know that the issue of the moment is not just about our trading place in Europe, but our place internationally. And the choice is between being Little Englanderss or global players.

George Pitcher is a partner of issue management consultancy Luther Pendragon

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