A guest post from Robert Wyld and Patrick Cunanan (attorneys with Johnson Winter Slattery in Sydney, Australia).
Currently in Australia, a corporation will not be held criminally responsible for bribery by its employees, agents or officers if it can prove it exercised due diligence to prevent the crime. The process of attribution of criminal liability on a corporation under the Criminal Code Act 1995 (Cth) (Criminal Code) is a complex process and often not easy for a prosecutor to establish. The reforms are in the Crimes Legislation Amendment (Combatting Foreign Bribery) Act 2024 (Cth), see here, which introduced amendments to the Criminal Code.
Yet the reforms were, overall, a lost opportunity as the Australian Government declined to introduce a deferred prosecution agreement (DPA) scheme as in the US, the UK, Canada, Singapore and France, despite broad support. Thus, there remains little to no structured framework for corporations to voluntarily report potential criminal conduct. All that is left is the ponderous criminal justice system which has hardly been a shining success in Australia in tackling foreign bribery.
From 8 September 2024, after over a decade of draft bills and false hopes, the Criminal Code creates two important reforms:
- First, it amends the existing foreign bribery offence by simplifying the test which now turns on whether a person “improperly influences” a foreign public official; and
- Second, it introduces a new strict liability offence for an Australian corporation that fails to prevent bribery of a foreign public official by an “associate”.
That is it – no issue of intention, knowledge or reckless disregard or of proving what individuals knew or did not know or ought to have known, attributable to a corporation. The fact that an associate engages in conduct that amounts to the offence of foreign bribery means the corporation will also be criminally liable. A corporation’s only defence is that it had in place “adequate procedures” to prevent the offending conduct from occurring (see below).
Foreign Bribery Offence
The amended foreign bribery offence in section 70.2 of the Criminal Code has the following elements.
A person commits an offence if the person:
- Provides a benefit to another person;
- Causes a benefit to be provided to another person;
- Offers to provide, or promises to provide, a benefit to another person;
- Causes an offer of the provision of a benefit, or a promise of the provision of a benefit, to be made to another person;
with the intention of improperly influencing a foreign public official (who may be the other person) in order to obtain or retain business or a business or personal advantage.
The prosecutor does not need to prove that:
- The improper influence was to a particular foreign public official;
- That particular business or a particular business or personal advantage was to be obtained or
retained; or - That business or a business or personal advantage was actually obtained or retained.
Corporate Offence of Failing to Prevent Foreign Bribery
The proposed new corporate offence of failing to prevent foreign bribery in section 70.5A of the Criminal Code has the following elements:
The corporation commits an offence:
- If an associate commits an offence under section 70.2 (intentional bribery of a foreign public official) or 70.2A (the new offence of recklessly bribing a foreign public official); or
- Engages in conduct outside Australia that would constitute an offence under sections 70.2 or 70.2A; and
- The associate does so for the profit or gain of the company.
The corporation will be liable even if the associate is not convicted of the offences.
An “associate” means:
- An employee, agent or contractor of the company;
- A subsidiary of the company within the meaning of the Corporations Act;
- An entity controlled by the company within the meaning of the Corporations Act; or
- Otherwise performs services for or on behalf of the company.
The deemed criminal liability will not apply if the corporation proves that it had in place adequate procedures designed to prevent such conduct.
Penalties
The maximum penalty for a corporation in breach of section 70.5A is the greater of:
- 100,000 penalty units (as at 1 July 2024, this is equivalent to AU$33 million);
- three times the value of the gross benefit received from the offence; or
- if the court cannot determine the value of the gross benefit, 10 per cent of the annual turnover during a 12-month period.
Improper Influence
This is not a term used in Australia’s criminal law. It has been introduced from concepts used in foreign laws.
Whether there is “improper” influence is a question of fact to be determined by the trier of fact (judge or jury), and the new law provides guidance on certain factors to be taken into account by the trier of fact. The following matters may be given regard to by the trier of fact (this list is non-exhaustive):
- The recipient or intended recipient of the benefit;
- The nature of the benefit;
- The manner of provision of the benefit;
- Whether the value of the benefit is disproportionate to the consideration provided;
- The absence of any legal obligation to provide, offer or promise the benefit;
- Whether the benefit was provided, offered or promised dishonestly;
- Whether and to what extent the benefit is recorded or documented, and if so, the accuracy of the record;
- Whether there is evidence that due diligence was exercised in relation to the benefit;
- Whether the relevant conduct is contrary to a written law in force in the place the conduct occurs; and
- Whether the business or advantage was awarded on a competitive or non-commercial basis or whether there is any demonstrable conflict of interest.
The fact that the benefit may be or be perceived to be customary, necessary or required in a foreign jurisdiction, or officially tolerated or that the advantage itself is insignificant, is to be disregarded by the trier of fact.
Adequate Procedures
The prosecutor must establish that an associate engaged in conduct that constituted foreign bribery (as now defined). Once established, the corporation must prove, to avoid absolute liability applying, that it had “adequate procedures” in place to prevent such conduct occurring.
What “adequate procedures” are is not defined. The best starting point is that under the UK Bribery Act 2010, a similar defence has existed since 2010 and the UK Ministry of Justice Bribery Act Guidance here provides a useful summary of the factors a corporation must consider to rely upon the defence. The Australian Government undertook a consultation process in early 2024 here which reflected the UK position although no Australian guidance has yet been published.
The critical features for an internal compliance framework that needs to exist in order to address the adequate procedures defence are as follows, understanding that whether adequate procedures, in fact, exist, will be very fact specific.
- Appropriate and proportionate controls are implemented to prevent bribery from occurring, with controls reflecting a corporation’s operational circumstances and risk profile;
- The controls must be effective, in that there is a robust culture of integrity, demonstrated pro-compliance attitude from the board down, a strong anti-bribery compliance function, effective risk assessment and careful use and engagement with third parties;
- Responsibility and leadership from top management, reflected in how a corporation conducts business, remunerates employees and third parties and instils an ethical culture;
- An informed, and ongoing, risk assessment of a corporation’s operations with robust due diligence on new and ongoing business;
- Regular communication and training on anti-bribery and anti-corruption program, principles and ensuring all employees, whatever their cultural background and language, understand the message;
- An effective whistleblower program to receive reports on potential misconduct, an internal culture that respects, values and protects whistleblowers, a system to ensure complaints are properly investigated and consideration is given to whether suspected criminal conduct should be reported to a regulatory agency; and
- Regular monitoring and review of internal compliance programs and culture, with random audits of all business operations and the activities of third parties.
While these principles might appear trite and well known to experienced directors and compliance professionals, they are likely to form the basis of how a prosecutor views the conduct of a corporation and ultimately, how a criminal court might assess the defence. What is important is not just the corporate policies, but also their implementation on the ground. For these reasons, it is important for corporations to take a fresh look throughout its supply chain, to identify risks and to take proactive steps to manage and/or eliminate the risks.
Issues for Boards and Executives
The global supply chain is remarkably interconnected. The law often is catching up with business operations. Bribery and corruption are a scourge on all economies and it is those least able to afford it that are the victims of corruption, with the wealthy and the powerful the beneficiaries of illegal conduct.
Australia has long tended to adopt a reactive position in addressing foreign bribery risks, earning criticism from the OECD and Transparency International, amongst other organisations. Regrettably, Australia appears intent on relying on the traditional criminal law to enforce foreign bribery offences. This has, in the authors’ opinion, resulted in a less than impressive record.
By way of example, the Securency prosecution lasted over a decade and while it resulted in various guilty pleas by individuals, no one was imprisoned and several prosecutions were permanently stayed by the High Court of Australia due to egregious conduct by investigators which prejudiced the rights of accused to a fair trial here. The more recent Jacobs Australia prosecution is ongoing after nearly a decade, and while the company pleaded guilty in 2021 here, it has been mired in appeals for nearly three years. These appeals relate to the question of how the value of the benefit obtained from the criminal conduct (on a gross basis as determined by the High Court of Australia here) should be assessed on sentencing. The matter is ongoing.
There is no obligation under Australian law to report criminal conduct, save for in New South Wales. The Australian Federal Police, as investigative agency for Commonwealth offences, has published Guidance encouraging corporations to consider voluntarily reporting here and the federal statutory office of the Commonwealth Director of Public Prosecutions has likewise published a Guidance for voluntarily reporting foreign bribery here. While these are commendable, absent any transparent DPA style regime, it is likely that Australian companies will not necessarily run off to report conduct, irrespective of the existence of an absolute liability defence. Careful consideration should be made of whether, in fact and as a matter of law, the threshold tests to trigger absolute liability are satisfied and, as a matter of fact, whether adequate procedures existed in form and in substance. If not, a voluntary report may simply open up a can of worms and years of pain in the criminal justice system.
Time will tell if these reforms result in any meaningful change to the foreign bribery enforcement landscape in Australia.
