Foreign bribery shake-up back on the table

Friday, 03 April 2020

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Laura Bacon
AICD Policy Advisor

    In December 2019, the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 (Bill) was re-introduced to the Senate by the Federal Government, aimed at addressing challenges associated with investigating and prosecuting corporations for foreign bribery offences.

    Similar to an earlier version of the Bill (which was introduced in 2017 and debated in Parliament before lapsing ahead of the 2019 election), the reform proposes amendments to the Criminal Code 1995 (Cth) (Criminal Code) to strengthen the existing foreign bribery offence, as well as introduce a new failure to prevent foreign bribery offence and a deferred prosecution agreement (DPA) scheme for body corporates.

    The Bill’s revival comes amidst a recent suite of law reform calling for increased regulatory scrutiny of corporations, including the introduction of additional whistleblower protections and the Australian Law Reform Commission’s (ALRC) concurrent inquiry into corporate criminal responsibility.

    If passed, the legislation will apply to Australian bodies corporate across a broad range of sectors, including listed and private companies, government entities and not-for-profits (including both incorporated associations and companies limited by guarantee).

    Changes to the existing foreign bribery offence

    The Bill contemplates a number of changes to the principal foreign bribery offence including:

    • extending the definition of ‘foreign public official’ to include an individual standing or nominated as a ‘candidate for office’;
    • removing the requirement that a foreign official must be influenced ‘in the exercise of their official’s duties’; 
    • replacing the requirement that a benefit and business advantage must be ‘not legitimately due’ with the concept of ‘improperly influencing’ a foreign public official; 
    • extending the offence to include bribery to obtain ‘a personal advantage’ as well as business advantages; and
    • introducing a new test of ‘dishonesty’, meaning ‘dishonest according to the standards of ordinary people’, to the Criminal Code - as a factor determinative of whether a foreign public official has been “improperly influenced”.

    New failure to prevent offence

    Following suit with the United Kingdom’s Bribery Act 2010, the Bill proposes a new strict liability offence for bodies corporate who fail to prevent foreign bribery by an ‘associate’. If convicted of the offence, a body corporate faces a maximum penalty the greater of $21 million, three times the benefit gained or 10 per cent of annual turnover.

    This means bodies corporate will be automatically liable for foreign bribery committed by an officer, employee, agent, contractor, subsidiary or person within the control of the corporation or performing services on behalf of the corporation, unless the corporation can prove it had ‘adequate procedures’ in place to prevent it. In other words, the burden of proof is on the organisation.

    DPA scheme

    The Bill also proposes the introduction of a DPA scheme to the Criminal Code, designed to encourage corporations to self-report suspected contravention of corporate crimes including foreign bribery, money laundering, fraud and several breaches of provisions under the Corporations Act 2001 (Cth) (such as market misconduct and insider trading laws).

    Modelled on frameworks in in the US and more recently, the UK, a DPA scheme would:

    • offer greater certainty of outcome and make it easier for corporations (but not individuals) to settle disputes quickly and voluntarily, without the need for the financial and reputational costs associated with criminal proceedings;
    • require organisations to agree to a number of mandatory and optional terms of the DPA – including a statement of facts (but importantly, not contain admissions of criminal liability); and
    • be subject to an approval process, where a DPA will not enter into force until the terms have been assessed by an ‘approving officer’ (a designated retired judge) to be fair, proportionate and in the interests of justice.

    Subject to fulfilling its obligations under the DPA, a corporation will not be pursued further by the Commonwealth Director of Public Prosecutions (CDPP). However, a breach of the terms of the DPA may result in the CDPP commencing criminal proceedings. In such circumstances, the agreed statement of facts, as well as any information or documents brought to the CDPP’s attention as a result of indirect disclosure during DPA negotiations, may be used as evidence against a corporation in the trial process.

    What does this mean for boards?

    The proposed reform has clear implications for the accountability of boards and management. The new failure to prevent offence will expose corporations to a greater risk of automatic criminal liability, and ultimately impose greater responsibility on corporations to prevent foreign bribery by its employees, officers, contractors, agents and subsidiaries.

    A good understanding of the new compliance burden, and proactive implementation of adequate policies and procedures to mitigate the risk of associates committing foreign bribery offences, will become essential for boards and management of Australian organisations with global operations. Organisations should also pay particular attention to any joint venture partners or entities that do business on their behalf abroad.

    What are ‘adequate procedures’?

    The Attorney-General’s Department has released Draft Guidance on the steps a corporation can take to prevent an associate from bribing foreign public officials, setting out a range of anti-bribery policies and procedures as example measures.

    Importantly, the Guidance is principles-based and notes that departure from the suggested measures does not, itself, indicate a failure to prevent foreign bribery. While not all of the policies and procedures will be relevant (depending on their size, type or industry), organisations are nonetheless encouraged to tailor effective and proportionate procedures to prevent bribery from occurring within their organisation.

    Key questions for boards

    • Risk assessments – is there a periodic risk assessment process in place to identify, analyse, prioritise and address foreign bribery risks both within and outside the organisation?
    • Management dedication – does the board and management play an active role in the implementation and promotion of the organisation’s anti-bribery policy and procedures (including effective review of procedures, critical decision-making and overseeing breaches of policies and disciplinary measures)?
    • Due diligence – does the organisation apply due diligence measures as part of the bribery risk assessment relating to associates and prospective associates (including prior to entering into new markets, business relationships or transactions, seeking tenders for work or necessary approvals from foreign government entities)?
    • Communication and training – are bribery prevention policies, procedures and training communicated throughout the organisation and made accessible to all associates?
    • Confidential reporting and investigation – is there a confidential and accessible reporting mechanism that allows internal and external stakeholders to raise concerns about bribery risks, report instances of bribery or bribery solicitation, request advice and suggest improvements to anti-bribery policies and procedures?
    • Monitoring and review of compliance systems – does the organisation regularly monitor, review, test the effectiveness of (and adjust where necessary) the anti-bribery policies and procedures (via mechanisms such as internal audit and financial control, surveys of staff and associates as well as confidential and anonymous reporting channels)?
    • Role of contractors – how reliant is the organisation on contractors to operate overseas, and how does the board and management gain confidence that they are acting lawfully?

    AICD engagement

    The AICD agrees foreign bribery and corruption causes significant harm to the governance of societies and economies abroad as well as distorting competition and the integrity of markets.

    While supportive of the Federal Government’s efforts to strengthen Australia’s foreign bribery laws, we consider it to be critical to ensure the amendments proposed by the Bill will achieve legislative reform in a fair, reasonable and proportionate manner without having unintended consequences. We have responded to the Bill’s inquiry by submission to the Senate Legal and Constitutional Affairs Legislation Committee, with a particular focus on ensuring that both the Bill’s proposed failure to prevent foreign bribery offence and operation of a DPA scheme do not run counter to well-established principles of natural justice and procedural fairness – presenting an unfair disadvantage to a defendant corporation in court proceedings.

    The Senate Legal and Constitutional Affairs Legislation Committee is due to release a Committee report on 19 February 2020.

    A copy of the AICD’s submission can be found here.

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