Allens

International Business Obligations

Focus: Deterring bribery here and abroad

17 March 2010

In brief: Partner Matthew Skinner and Senior Associate Tim Robinson look at the recent significant increases in penalties for individuals or companies convicted of bribing foreign or Commonwealth public officials.

How does it affect you?

  • The potential for huge fines will add to the reputational and other damage suffered by Australian companies convicted of involvement in bribery of foreign public officials and will likely act as a significant deterrent.
  • The changes underline the importance of implementing effective policies to prevent involvement in foreign corruption in all aspects of a company's business including via the actions of employees, agents or joint venture partners.
  • Companies with employees, agents or joint venture partners operating in countries where bribes are often sought may wish to review and reinvigorate their policies and procedures.

The amendments

From 20 February 2010, new legislation – the Crimes Legislation Amendment (Serious and Organised Crime) (No. 2) Act 2010 which amends the Criminal Code Act 1995 (Cth) and other relevant legislation – will dramatically raise penalties for bribery of foreign or Commonwealth public officials.

Penalties

Individuals who are found guilty of bribing a foreign1 or Commonwealth2 public official will be liable to a maximum of 10 years' imprisonment, a fine of $1 million, or both (a significant increase from the current maximum of $66,000).

Corporations found guilty of bribing a foreign or Commonwealth public official may be subject to even more onerous pecuniary penalties. The maximum penalty for a corporation has been significantly increased from $330,000 to the greater of:

  • $11 million;
  • three times the value of any benefit that the corporation has directly or indirectly obtained that is reasonably attributable to the conduct constituting the offence (including the conduct of any related corporation);
  • if the court cannot determine the value of that benefit, 10 per cent of the annual turnover of the corporation during the 12 months preceding the offence.

These penalties are likely to act as a significant deterrent to the bribing of foreign or Commonwealth public officials and are more severe than the penalties under the US Foreign Corrupt Practices Act (where the maximum penalty is two times the benefit received). The penalties are modelled on penalties that took effect in 2007 for breaches of certain of the restrictive trade practices (anti-trust) provisions in Part IV of the Trade Practices Act 1974. In that context, the penalties have not yet received detailed judicial consideration and it is difficult to predict how the courts will deal with issues such as accurately determining the value of the benefit derived by the corporation. On the issue of penalties, the High Court has emphasised that careful attention will be paid to the maximum possible penalty in criminal cases on the basis that the maximum penalties represent the intention of the legislature and provide a yardstick inviting comparison between the case at hand and the worst possible case3. As such, it is likely that the increase in penalties will have a significant effect on future sentencing decisions where companies are convicted of foreign bribery.

The penalties have been introduced following repeated criticism of Australia's (previously) low penalties for foreign bribery by independent OECD monitors charged with assessing Australia's compliance with the OECD Convention on Combating Bribery of Foreign Public Officials (signed by Australia in 1999) who have noted that Australia lacks legal sanctions against bribery of foreign and domestic officials that are 'effective, proportionate and dissuasive'4. Transparency International, a global NGO dedicated to the eradication of corruption, has also called for increases in financial penalties for bribery under Australian law5. This context indicates that a primary aim of the penalties is deterrence and this may of itself lead courts to impose penalties close to the maximum when sentencing individuals and companies convicted of foreign bribery.

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Money laundering

Foreign bribery may also involve the commission of money laundering offences in relation to the proceeds of the bribery offence (either dealing with the bribe itself, or payments made or received under contracts won by paying the bribe). Indeed, in many cases, the money laundering offences catch a wider range of conduct such as receiving, possessing or disposing of money or other property that is merely 'reasonably suspected' of being proceeds of crime6. The Crimes Legislation Amendment (Serious and Organised Crime) (No. 2) Act 2010 also amends the various money laundering offences to extend them to individuals or corporations who deal with proceeds or suspected proceeds of a criminal offence (such as foreign bribery) while overseas. This amendment means that Australian individuals and companies are at risk of prosecution for money laundering offences even if the relevant proceeds never enter Australia. The penalty for the offence of dealing with money or property valued at more than $100,000 and reasonably suspected of being proceeds of crime has also been increased to three years' imprisonment or a fine of $19,800 for individuals and $99,000 for companies7.

These amendments expand the tools available to the Australian Federal Police to investigate and prosecute Australian companies suspected of involvement in foreign bribery.

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Conclusion

Overall, the changes demonstrate the Federal Government's determination to impose serious penalties on Australian companies and individuals involved in foreign bribery and further highlight the need for all Australian companies to develop and implement a comprehensive and effective compliance program to prevent foreign corrupt conduct by subsidiaries, joint venture partners, agents and employees.

Footnotes
  1. Criminal Code Act (Cth) 1995, Schedule 1 s 70.2.
  2. Criminal Code Act (Cth) 1995, Schedule 1 s 141.1.
  3. Markarian v R (2005) 228 CLR 357 at [31].
  4. OECD, Follow-Up Report on the Implementation of the Phase 2 Recommendations – Application of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, 29 August 2009, p.5.
  5. Transparency International, OECD Anti-Bribery Convention – Progress Report 2009, p 18.
  6. Criminal Code Act (Cth) 1995 (as amended), Schedule 1 s 400.9.
  7. Criminal Code Act (Cth) 1995 (as amended), Schedule 1 s 400.9. Crimes Act (Cth) 1914 s 4B.

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