ARTICLE
22 April 2024

Substantial Strengthening Of Australia's Foreign Bribery Laws: Are Your Procedures Up To Scratch?

JD
Jones Day

Contributor

Jones Day is a global law firm with more than 2,500 lawyers across five continents. The Firm is distinguished by a singular tradition of client service; the mutual commitment to, and the seamless collaboration of, a true partnership; formidable legal talent across multiple disciplines and jurisdictions; and shared professional values that focus on client needs.
The Australian Federal Parliament has passed the Crimes Legislation Amendment (Combatting Foreign Bribery) Act 2024 ("Act"), some six years after a bill to create a 'failure to prevent' foreign bribery offence was first introduced.
Australia Criminal Law
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In Short

The Situation: The Australian Federal Parliament has passed the Crimes Legislation Amendment (Combatting Foreign Bribery) Act 2024 ("Act"), some six years after a bill to create a 'failure to prevent' foreign bribery offence was first introduced.

The Result: The Act comes into effect on 9 September 2024. It introduces a new criminal offence, wherein a company's employee or 'associate' bribes, or facilitates the bribery of, foreign government officials. While absolute liability applies to a number of the elements of the offence, establishing that there were adequate procedures in place is a complete defence to a charge.

Looking Ahead: We anticipate that we will see an increase in prosecutions in Australia for foreign bribery. Consequently, the new offence significantly increases the risk for Australian and foreign companies with an Australian connection doing business outside of Australia, including by lowering the bar for liability, and establishing a positive onus on a company to prove in their defence that adequate procedures were in place to prevent foreign bribery by an associate.

The Context for the Act

While Australia is a signatory to the Organisation for Economic Cooperation and Development's ("OECD") Anti-Bribery Convention, the level of enforcement for foreign bribery in Australia has been low compared to its international peers. Transparency International Australia reports that, in the last 25 years, only three corporations and seven individuals have been successfully convicted for foreign bribery in Australia.

Under the pre-existing anti-foreign bribery laws, a defendant corporation could avoid liability for the criminal act of its employee, agent, or officer being ascribed to it by demonstrating that it had performed due diligence for the purpose of preventing the bribery occurring. The OECD has repeatedly expressed that it considers these existing laws, and the enforcement of them, are inadequate, especially given the activities of Australian companies in significant global sectors such as energy and resources.

The New Absolute Liability Offence

If a company's associate, which is defined broadly and includes not only officers and employees, but also contractors, agents, anyone who performs services for the company, controlled entities, and subsidiary entities, bribes a foreign public official, or candidate for public office (which itself is a current and pre-existing offence under section 70.2 of the Criminal Code Act 1995 (Cth) ("Code")), for the benefit of a corporation, then that corporation, in failing to prevent that act of bribery, is liable under the new section 70.5A of the Code, unless the adequate procedures defence, which is discussed below, occurs.

Critically, the associate need not have been convicted under section 70.2 of the Code, nor does the corporation need to be aware of, or have authorized, the bribery for the corporation to be liable under the new section 70.5A offence.

Further, while inclusion of such a regime was debated, the Act does not include a deferred prosecution regime for corporations wishing to proactively cooperate under the new regime, meaning that the full force of the law will be in effect from 9 September 2024. This is discussed further below.

Regarding the adequate procedures defence, which will act as a complete defence to liability under the new section 70.5 of the Code, the Act does not prescribe what courts must consider in determining whether or not 'adequate procedures' were in place. The Act mandates that the Attorney-General publishes guidance on the steps that a corporation can take to prevent associates engaging in foreign bribery, but this has yet to occur (although draft guidelines have been published previously).

What Will Be the Penalties for Failure to Prevent Foreign Bribery?

If convicted, corporations can be liable for up to the greater of:

  • 100,000 penalty units (currently AUD $31,300,000); or
  • If the value of the benefit obtained from the conduct can be determined, three times the total benefit of the offence; or
  • If the value of the benefit obtained from the conduct cannot be determined, 10% of the annual turnover of the corporation over the relevant 12-month period.

The meaning of "value of the benefit obtained" has recently been clarified. In August 2023, the High Court of Australia delivered a decision in The King v Jacobs Group (Australia) Pty Ltd in relation to the penalties for foreign bribery and the meaning of the phrase 'the value of the benefit' in connection with contracts secured by the Jacobs Group. The High Court determined that the meaning of the 'value of the benefit' was the gross benefit obtained under the relevant contracts, and not the net benefit, which was calculated after deducting costs of performing the contracts.

The Expanded Scope of Foreign Bribery

The Act also introduces amendments that will broaden the scope of what is defined as foreign bribery.

From 9 September 2024, the bribery of a foreign official offence (section 70.2 of the Code) will also apply to criminalise the bribery of candidates for foreign public office, in addition to elected officials.

Further, the previous (and at the time of publication, the current) wording of the offence of bribing a foreign public official requires that the person providing or procuring the bribe does so with the intention to obtain or retain business, or a business advantage. The Act augments this requirement to include, the additional intention to obtain a personal advantage (where 'advantage' is not limited to property).

The Act will also see the replacement of concept of 'benefits not legitimately due' as the threshold test of bribery with the broader concept of 'improper influence'. This is another step towards lowering the bar for prosecutions—the test will no longer be whether the benefit was legitimately due, but rather whether the person intends to improperly influence an official. There is no requirement for prosecutors to prove that the official was actually influenced by the benefit.

The Act also provides guidance on what can be considered by a court in determining whether the intended influence is 'improper'. Some of the aspects a court may consider are whether the benefit is proportionate to the value of what was provided (or purported to have been provided) in exchange for the benefit, the benefit was provided or offered in the absence of legal requirements to do so, and to what extent the provision or offer of the benefit was documented. Factors such as the actual or perceived custom, necessity or requirement of providing the benefit, the official tolerance of the benefit offered or the advantage sought, the value of the advantage, and the fact that the advantage is, or perceived to be, customary, are not permitted to be taken into account by a court.

Like 'associates', the definition of corporation is broad. The new offence will apply to both foreign corporations and domestic corporations. There does, however, need to be an Australian nexus. Specifically, one of the following needs to be satisfied:

  • The conduct (bribing a foreign official) by the associate occurred wholly or partly in Australia (including on an Australian aircraft or ship); or
  • The conduct, while occurring wholly outside of Australia, was committed by a citizen or resident of Australia, or a corporation constituted under the laws of Australia.

The Absence of a DPA Scheme

The Act does not contain a deferred prosecution agreement ("DPA") scheme, and therefore the Act will not lead to the resolution of foreign bribery investigations by means of DPAs, as occurs in the United States and the United Kingdom. The OECD Working Group on Bribery in December 2023 encouraged the Australian Parliament to introduce a DPA scheme on the basis that the absence of a DPA scheme is likely to have an adverse impact on enforcement.

Further to these comments from the OECD, Opposition Senator Cash and Independent Senator Pocock also argued for the introduction of a DPA schemes. However, the Labor Government stated that they would prefer to wait and see how the existing reforms fare. The Act includes a mandatory statutory review after 18 months, at which point the introduction of a DPA regime may be revisited.

What Steps Should Companies Take Now?

In order to protect against potential liability for the conduct of 'associates' and to provide a basis to avoid and defend prosecutions, companies should now begin a review and uplift of their compliance, training and assurance procedures and programs.

As noted above, the amendments discussed in this Commentary will come into effect on 9 September 2024.

While the Attorney-General has not yet published guidance on the steps that a corporation can take to prevent associates engaging in foreign bribery, we anticipate that 'adequate procedures' are likely to include:

  • Risk assessment and due diligence procedures;
  • Monitoring and review of compliance programs;
  • Board and managerial-level dedication to foreign bribery prevention;
  • Whistleblower reporting mechanisms; and
  • Effective communication and training of staff.

While policies and procedures will be important, there will need to be systems in place that are designed to ensure these are effective, including being brought to the attention of all of a corporation's associates, and the monitoring of compliance and conduct with consequences for noncompliance.

Given that the concept of 'adequate procedures' is derived from the United Kingdom's Bribery Act 2010, we also anticipate that case law in the United Kingdom may provide some guidance for Australian courts in interpreting the requirements of this defence. If this is the case, it will not simply be sufficient to have documented policies and procedures, even if such policies are expressly directed to preventing foreign bribery. However, it will remain to be seen how, or to what extent, the Australian courts follow the UK precedents. For further commentary on recent developments in the UK governing corporate criminal liability, see our previous Jones Day Commentary.

Three Key Takeaways

  1. Significant increase in risk exposure and expected increase in enforcement: The Act will substantially expand the risk of significant liability for foreign bribery for foreign or domestic companies operating in Australia that also conduct business outside of Australia. Australian authorities will be motivated to bring prosecutions under these new laws, now that they have finally been passed some six years after first being introduced.
  2. The onus is on companies to establish adequate procedures: To the extent they ever could, companies can no longer ignore or overlook the conduct of the broad group of people falling within the definition of their 'associates'. The 'failure to prevent' foreign bribery offence shifts the onus from the individual to the corporation at large: if an associate commits foreign bribery, the company can only avoid liability if it can establish a defence based on its adequate procedures.
  3. Act now: Companies only have less than six months to review and amend their current policies and procedures around foreign bribery and adopt appropriate compliance measures before the new offence goes into effect. This process needs to be comprehensive, robust, and well-documented to enable companies to discharge the onus on them to mitigate the risk of liability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

ARTICLE
22 April 2024

Substantial Strengthening Of Australia's Foreign Bribery Laws: Are Your Procedures Up To Scratch?

Australia Criminal Law

Contributor

Jones Day is a global law firm with more than 2,500 lawyers across five continents. The Firm is distinguished by a singular tradition of client service; the mutual commitment to, and the seamless collaboration of, a true partnership; formidable legal talent across multiple disciplines and jurisdictions; and shared professional values that focus on client needs.
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