Anti-bribery laws and deferred prosecution agreements

By Rachel Nicolson
Anti-bribery & AML Banking & Finance Corporate Governance International Business Obligations Risk & Compliance

In brief

The Australian Government is, via two new consultations, proposing wide-ranging reforms to tackle the challenges that it faces in detecting, and prosecuting, serious corporate crime. Through proposed amendments to foreign bribery laws and the introduction of a Deferred Prosecution Agreement regime, the Federal Government is seeking to remove obstacles to prosecuting foreign bribery and increase the incentives for companies to self-report this and other misconduct. Partners Rachel Nicolson and Peter Haig , Senior Associates Christopher Kerrigan and James Campbell, and Lawyer Malak Johnson report.

How does it affect you?

  • If the proposed changes are adopted, a company could face prosecution if an 'associate' pays a bribe to a foreign public official on the company's behalf, even if the company does not know about it. This offence would mirror the controversial 'failure to prevent bribery' offence introduced in the United Kingdom in 2010. As in the UK, the only defence will be if the company can demonstrate it had in place 'adequate procedures' to prevent such conduct.
  • Other proposed changes to Australia's foreign bribery regime would make it easier for prosecutors to establish liability. Importantly, the Government proposes to lower the bar from intention to 'recklessness', establishing a new offence where a person is merely 'reckless' as to whether their conduct would improperly influence a foreign public official.
  • Together, the proposed changes to the foreign bribery legislation and the option of entering into a Deferred Prosecution Agreement (DPA) in relation to foreign bribery (and other specified corporate criminal conduct) may, in certain circumstances, tip the balance in favour of self-reporting corrupt conduct and co-operating with Australian enforcement agencies' investigations.
  • Submissions for both consultations are due on 1 May 2017, and draft legislation for the foreign bribery law changes has already been published. We will be making submissions on these proposals – we encourage you to get in touch if you would like to discuss.

The 'carrot' — a DPA scheme

On 31 March 2017, the Australian Government released a consultation paper calling for comment on the mechanics of a proposed DPA scheme in Australia. This follows on from a consultation last year on whether such a scheme should be introduced in Australia at all, as well as significant developments in the UK's jurisprudence on DPAs — including most recently the approval of the SFO's £500 million DPA with Rolls-Royce (which we reported on), and its £129 million DPA with Tesco.

A DPA is a voluntary, negotiated agreement under which the accused must comply with a range of specified terms, in return for which prosecution is deferred and, upon satisfaction of the terms, ultimately discontinued. From the traditional menu of enforcement options, DPAs sit 'somewhere between a guilty plea and a civil recovery'.1 They are already a mainstay of criminal procedure in the United States, and increasingly common in the UK.

The DPA model being proposed by the Australian Government is, for the most part, similar to the UK model. Under the proposed scheme, the prosecutor would have the discretion to invite corporations (but not individuals) who are accused of certain serious economic crimes, including foreign bribery and certain as-yet-unspecified offences under the Corporations Act 2001 (Cth), to enter into confidential DPA negotiations. Under the Australian scheme, however, once agreed, the DPA would be subject to approval by a retired, as opposed to a sitting, judge in order to avoid separation of powers concerns.

The Federal Government hopes that the introduction of DPAs will provide greater incentive to companies to self-report corporate misconduct and proactively cooperate with an investigation, by providing greater certainty of outcome and the avoidance of a conviction. As part of this effort to encourage self-reporting, the Australian Federal Police (AFP) and Commonwealth Director of Public Prosecutions (CDPP) are expected to publish Self-Reporting Guidance in the near future, following consultation on a draft Guidance released in 2016.
It is not certain, however, that the DPA 'carrot' proposed in the consultation paper will be sweet enough. In particular, two aspects of the proposed model may cause companies to pause before self-reporting and seeking a DPA:

  • The proposal that it would be a mandatory term of all DPAs that a company make a formal admission of criminal liability. This diverges from the approach adopted in the UK, and may both limit the reputational benefits offered by a DPA and increase the risk of follow-on civil litigation, including class actions.
  • The paper does not contain any guidance on the appropriate discount for a DPA when compared to a conviction following a guilty plea. It is hoped that any legislation or guidance will provide clarity on this point.

The 'stick' — amendments to Australia's foreign bribery laws

Fundamental to the success of a DPA scheme is knowledge that where the requirements for a DPA are not met, the prosecutor has a 'stick' in the form of 'the appetite, stamina and resources to prosecute in the ordinary way'.2

When it comes to investigating foreign bribery, which is one of the main offences for which DPAs will likely be employed,3 the AFP is evidencing an increasing appetite — it has 35 foreign bribery investigations on foot. The small number of prosecutions, however, indicates that Australian investigative and enforcement agencies are concerned not to bite off more than they can chew. Even where they identify wrongdoing, it is clear that obstacles to successful prosecution prevent many such cases ever reaching the courts. These obstacles are canvassed in a separate consultation paper released on 4 April 2017.

To stretch the metaphor, the proposed reforms would certainly sharpen the teeth of such agencies. They would do so in two ways. First, they would clarify and broaden the existing offence of foreign bribery. Second, they would introduce two new offences: (i) failure to prevent bribery; and (ii) recklessly bribing.

We deal with these two new proposed offences below, before covering the changes to existing laws.

Failure to prevent bribery

Under the failure to prevent bribery offence, a company would be criminally liable for bribes paid for its profit or gain by its 'associates', unless the company can prove that it had 'adequate procedures' in place to prevent such conduct. That is, the company bears the burden of establishing that it did all it reasonably could to prevent the conduct occurring, and its associate was truly 'rogue'.

The proposed Australian offence is largely based on the UK equivalent, which came into force in 2010 amidst considerable criticism as to its broad scope and the burden and cost it would place on business. There are, however, a number of key differences:

  • The UK offence does not distinguish between bribery of foreign public officials or private citizens/companies. The Australian offence will only apply to bribery of foreign public officials.
  • The UK offence imposes liability on a corporation for bribery committed by 'associated persons', meaning those who perform a service 'for or on behalf' of it. This may, depending on the nature of the relationship, include an agent or subsidiary of the company.4 The proposed Australian offence is, by comparison, clearer but potentially broader, imposing liability on Australian companies for the actions of 'associates', which includes all employees, agents, contractors and subsidiaries, as well as any other person who performs services on their behalf.
  • The UK offence imposes liability on a corporation (in the absence of adequate procedures) where an associated person bribes another person with the intention to retain business or a business advantage for the corporation. The Australian offence would be broader, applying wherever an 'associate' intentionally or recklessly bribes a foreign public official 'for the profit or gain' of the company.
  • The UK offence has expansive, or as some describe it, 'outrageously overreaching'5 extraterritorial effect. It can be committed by UK-registered corporations or overseas corporations which conduct 'part of a business' in the UK.6 By contrast, the Australian offence could only be committed by corporations incorporated or registered in Australia. The Australian offence would, however, apply to such Australian entities by reference to the conduct of foreign 'associates', even if such conduct took place outside of Australia and involved no Australian nationals or entities.

Of particular import for Australian corporations, therefore, will be the factors relevant to determining whether a company's procedures are 'adequate' for the purpose of a defence to the strict liability offence of failure to prevent bribery.

Under the proposed model, the Australian Government must publish guidance on the steps that companies can take to prevent an associate from bribing foreign public officials. We anticipate that such guidance will be similar to the UK's 'six guiding principles' on 'adequate procedures',7 which include proportionate procedures, top-level commitment and due diligence.8 This guidance may also be influenced by the International Standards Organisation's recently released standard ISO37001: Anti-bribery management systems.

Recklessly bribing a foreign public official

The current offence of foreign bribery is an offence of 'ulterior intent', whereby the prosecution must establish that the person provided the benefit with the intention of influencing a foreign public official. This element can be difficult to satisfy.

The Australian Government therefore proposes to introduce a lesser offence, which would only require that the accused was reckless (ie took an unjustified substantial risk) as to whether their conduct would influence a foreign public official. This follows similar amendments to false accounting laws last year.

Other changes

The Australian Government has also proposed amendments to the existing offence of foreign bribery which will strengthen prosecutors' prospects of successfully prosecuting foreign bribery. The changes proposed include:

  • In keeping with the US, and in contrast to the UK, extending the definition of 'foreign public official' to include candidates for political office.
  • In contrast to the US and the UK, removing the requirement of influencing a foreign public official 'in their official capacity' and extending the definition of foreign bribery to include circumstances where the offender sought a personal, as opposed to business, advantage.
  • Removing the concept of giving and receiving a benefit or advantage that is 'not legitimately due', to be replaced with the concept of 'improperly influencing' or 'dishonestly' influencing a foreign public official.

Context: part of a suite of measures

The contemplation of a DPA scheme and changes to foreign bribery laws form part of the Australian Government's broader consideration of options to facilitate a more effective response to corporate crime. Other recent and ongoing measures include:

  • a Senate Inquiry into Foreign Bribery, due to report by 30 June 2017;
  • an AFP and CDPP consultation on the Draft Self-Reporting Guideline in August 2016, due to be released shortly;
  • a Parliamentary Joint Committee on Corporations and Financial Services inquiry into whistleblower protections in the corporate, public and not-for-profit sectors, due to report by 30 June 2017;
  • a consultation by the Department of Treasury into changes to corporate sector and tax-related whistleblower laws, with submissions having closed on 10 February 2017;
  • a Senate Inquiry into Criminal, Civil and Administrative Penalties for White Collar Crime, which was released on 23 March 2017; and
  • the introduction of new offences for false accounting from 1 March 2016.

Clearly, this flurry of activity has the potential to reshape the calculus facing Australian corporations that come across instances of foreign bribery and other corporate misconduct in their ranks.


  1. Ben Morgan, Joint Head of Bribery and Corruption, UK Serious Fraud Office speech given on 8 March 2018 at a seminar for General Counsel and Compliance Counsel; see also comments of David Green, Director, in interview with The Guardian.
  2. Ben Morgan, Joint Head of Bribery and Corruption, UK Serious Fraud Office speech given on 1 December 2015 at the Managing Risk and Mitigating Litigation Conference.
  3. Although foreign bribery is not the only offence for which DPAs will be available, there is no doubt that improvement in identification and effective resolution of foreign bribery by, or on behalf of, Australian companies is a strategic driver behind the Australian Government's decision to introduce DPAs.
  4. Bribery Act 2010 (UK), ss.7, 8.
  5. Bruce W Bean and Emma H MacGuidwin, 'Expansive Reach — Useless Guidance: An Introduction to the UK Bribery Act 2010' [2011] 18(2) ISLA Journal of International and Comparative Law, 323, 339.
  6. Bribery Act 2010 (UK), s.7(5).
  7. Ministry of Justice, The Bribery Act 2010: Guidance.
  8. Proportionate procedures, top-level commitment, risk assessment, due diligence, communication (and training), monitoring and review.