Written by Senior Overseas Practitioner Christopher Kerrigan and Associate Malak Johnson
Australia's lack of enforcement of foreign bribery legislation has attracted increasing criticism in recent years, but the Federal Government is expected to soon table legislation proposing wide-ranging reforms. We look at two key proposed changes for Australian companies.
The Organisation for Economic Co-operation and Development (OECD) Working Group on Bribery is one group that has, in recent years, criticised Australia's lack of enforcement of foreign bribery legislation. However, it appears that the coming 12 months might see the 'rubber hit the road' with respect to foreign bribery laws in Australia. The Senate Inquiry into foreign bribery is due to report in December 2017. In the same month, the OECD Working Group on Bribery will be conducting its 'Phase 4' review of Australia's bribery laws. Finally, following on from a consultation earlier this year, the Australian Government is expected to table legislation proposing wide-ranging reforms to foreign bribery laws in the not-too-distant future. If the exposure draft legislation consulted on remains indicative of the future direction of foreign bribery laws, Australian companies can expect significant changes, as the Australian Government looks to address the challenges it faces in detecting, and prosecuting, foreign bribery. If adopted, the proposed changes will make it easier to prosecute bribery of foreign public officials and push the burden of policing compliance on to Australian companies.
The first new offence being contemplated by the Australian Government is a 'failure to prevent bribery offence'. Under this offence, an Australian company would be liable for bribes paid for its profit or gain by an 'associate', unless the company can prove that it had in place 'adequate procedures' to prevent such conduct. That is, the company bears the burden of establishing that it did all it reasonably could to prevent the conduct having occurred, and its associate was truly 'rogue'.
The proposed offence is largely based on the well-known (and controversial) United Kingdom equivalent. However, as canvassed in our Focus: Anti-bribery laws and deferred prosecution agreements, the proposed offence diverges from its UK equivalent in a number of material respects. Most notable is the definition of 'associate'. The proposed definition of 'associate' under the Australian offence captures all employees, agents, contractors and subsidiaries. As currently drafted, the definition would include non-controlled subsidiaries. While the equivalent definition in the Bribery Act 2010 (UK) of 'those who perform a service for or on behalf of a company' creates some uncertainty in its application, it does serve to limit the categories of persons (including subsidiaries) who are captured. The proposed Australian offence also applies to 'recklessly bribing' by an Australian company's associates, a new legal concept the Australian Government proposes introducing (see below). Unlike the UK Bribery Act, the Australian failure to prevent offence would be limited to bribery of foreign public officials and would not extend to 'commercial bribery'.
As our submissions to the consultation noted, as currently drafted, this offence would mean that an Australian company could incur criminal liability for the conduct of an uncontrolled subsidiary operating in an overseas jurisdiction, even if the parent company is unaware of such conduct.
The second offence proposed by the Australian Government is a new separate foreign bribery offence where a person is reckless (ie took an 'unjustified substantial risk') as to whether his or her conduct would improperly influence a foreign public official. This follows similar amendments to false accounting laws last year.
As our submission noted, an offence based on recklessness would be inconsistent with the legislative position overseas, including in the UK and the United States. Further, we consider that the offence may preclude Australian companies from participating in legitimate relationship-building activities and promotional expenditure for fear they could be deemed to be taking an 'unjustified substantial risk' that a foreign public official could be improperly influenced by such activities.
The contemplation of 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 the consultation by the Australian Government into a proposed model for a deferred prosecution agreement (DPA) scheme in Australia (you can read Allens' submissions here), and the Parliamentary Joint Committee on Corporations and Financial Services inquiry into whistleblower protections in the corporate, public and not-for-profit sectors, now due to report by 17 August 2017.
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.