Firm in Scottish Government's China deal faces corruption claims

The First Minister Nicola Sturgeon recently announced the £10bn Scottish and Chinese trade deal. Picture: Julie BullThe First Minister Nicola Sturgeon recently announced the £10bn Scottish and Chinese trade deal. Picture: Julie Bull
The First Minister Nicola Sturgeon recently announced the £10bn Scottish and Chinese trade deal. Picture: Julie Bull
One of the companies involved in an investment agreement with the Scottish Government is owned by a firm which was blacklisted by Norway's oil fund because there was an 'unacceptable risk that the company is involved in gross corruption', it has emerged.

Opposition parties have pressed Nicola Sturgeon on whether she knew of the corruption allegations before she signed a memorandum of understanding (MOU) with SinoFortone and China Railway No 3 Engineering Group (CR3).

Details of the deal - which could be worth up to £10 billion - were not officially announced by the Scottish Government at the time the MOU was signed.

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Instead, news of the agreement had been published on the SinoFortone website on March 21.

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It has emerged the council of ethics for Norway’s sovereign wealth fund recommended in 2014 that an investment in China Railway Group Limited (CRG), the owner of CR3, be dropped due “to an unacceptable risk of the company being responsible for gross corruption”.

At the end of 2013, the fund owned shares in the company worth 306 million Norwegian Krone - the equivalent of almost £26 million.

A council of ethics document to the Ministry of Finance said: “According to information obtained by the council of ethics, including information relating to legal rulings and internal disciplinary processes in the Communist Party published in the Chinese press, it is highly likely that CRG has been involved in gross corruption.

“CRG and one of its subsidiaries have apparently bribed civil servants to secure contracts to build railways and housing projects. This is reflected in two Chinese legal rulings relating to the recipients of the bribes.”

It continued: “Based on the information available, the council finds it highly likely that CRG has been involved in gross corruption and that the company does not meet national or international standards regarding compliance and anti-corruption.”

Liberal Democrat leader Willie Rennie said there are questions over the degree of scrutiny of the companies carried out before the MOU was signed.

In a letter to the First Minister, he said: “You should not be surprised that people would like to hear answers on the MOU with the Chinese companies.

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“After all, this could have been publicly announced on the day it was signed, allowing proper parliamentary scrutiny.

“I hope you will accept that the manner in which this MOU was agreed, with details only emerging in the Chinese media, raises legitimate questions over the degree of scrutiny that these companies were put under before the deal was signed.

“Did you know before you signed the MOU that the parent company of the China Railway No. 3 Engineering Group has been blacklisted by the Norwegian government because of the risk of ‘gross corruption’?”

Labour’s public services spokeswoman Jackie Baillie said: “The more we find out about the SNP’s secret deal, the more questions it raises.

“The allegations of corruption show that this deal stinks. At best, the SNP government did not undertake any due diligence on the companies involved in this deal, and at worst they are content to sign up to deals with organisations that are likely involved in ‘gross corruption’.”

An SNP spokesman said: “This memorandum of understanding will enable discussions to take place about opportunities for investment and job creation in Scotland.

“This process is at a very early stage, there is no confirmed investment and no specific set of projects being discussed. Full due diligence will be carried out on any projects and investors that come forward.

“When the UK Tory government is courting investment from China in nuclear power plants, Welsh Labour are welcoming Chinese investment in Anglesey and the Lib Dems’ former Treasury minister is vice president of a Chinese-backed investment bank, this is pure hypocrisy from the opposition.

“The SNP Scottish Government will always stand up for Scotland, protect Scottish industry and work to secure investment and jobs for Scotland.”