How it will work and what it means for you 7 min read
After two unsuccessful attempts to strengthen foreign bribery laws, the passage of the Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2023 (CFB Bill) finally introduces new, broader foreign bribery offences for body corporates. The passage of the Bill signals Australia's commitment to combatting foreign bribery on its shores, addressing years of persistent OECD criticism in this regard. The legislation will also shape future foreign bribery prosecutions and make it easier for prosecutors to bring proceedings against corporations that engage in foreign bribery.
The CFB Bill, which passed the Senate on 29 February 2024, creates a new 'failure to prevent' foreign bribery offence for body corporates, and broadens the current foreign bribery offence by extending the category of public officials and the kinds of conduct it applies to. However, unlike its two unsuccessful predecessors, it does not contain a deferred prosecution agreement scheme—distinguishing the new Australian regime from the approach taken in the United Kingdom and the United States. How the expanded regime will work and what it means for you is discussed below.
Key takeaways
- A new failure to prevent offence creates liability for companies whose employees are found to have engaged in foreign bribery. Companies can rely on a statutory defence to this offence by showing they have in place adequate procedures to prevent the commission of a foreign bribery offence.
- Existing foreign bribery offences will now capture personal benefits (rather than only business benefits) that are offered with the intention to influence a foreign public official, and have a greater scope to address bribes that are disguised as legitimate transactions.
- The application of foreign bribery offences has also been expanded, and they will now apply to candidates for public office, not just current officeholders.
- Whilst the Government has left the door open to legislate for a deferred prosecution agreement regime (DPA regime), the CFB Bill does not currently include a DPA regime.
- Similar legislation passed under the UK Bribery Act 2010 led to an uptick in enforcement in the United Kingdom (including one successful prosecution in relation to contravention of the failure to prevent foreign bribery offence), and the agreement of nine deferred prosecution agreements for foreign bribery engaged in by corporates. We note that deferred prosecution agreements may have been the pivotal factor in the UK, a mechanism which will not (yet) be available to Australian prosecutors. However, the UK Bribery Act also compelled businesses to address their internal compliance processes and policies, and guide best practice in foreign bribery safeguards and compliance. Regulators will want to ensure the same happens in Australia and that corporates uplift their policies and procedures to ensure they can avail themselves of the adequate procedures defence.
Background
The CFB Bill is the third attempt since 2017 to reform Australia's foreign bribery laws. The Crimes Legislation Amendment (Combatting Corporate Crime) Bill (CLACCC Bill) (which broadly mirrored the reforms contained in the CFB Bill) was introduced in 2017 and again in 2019 but lapsed before it could be passed on both occasions.
What does the CFB Bill do?
Most significant for companies is the new failure to prevent offence created by the CFB Bill. Modelled on reforms to the UK Bribery Act 2010, this offence does two things:
- it makes companies liable for failing to prevent foreign bribery by an 'associate'; and
- it gives companies a defence for failure to prevent foreign bribery by an associate if they can show they had adequate procedures in place to prevent the commission of the offence.
Importantly, this is an absolute liability offence. This means a company will commit the offence if an ‘associate’ of the company commits bribery for the ‘profit or gain’ of the company and be liable for the same penalty as if it had committed the foreign bribery offence itself. There is no requirement for the prosecution to establish any fault element by the company to prove the offence.
For the purpose of this offence, an 'associate' is defined broadly and includes all officers, employees, agents, contractors and any person who performs services for or on the corporation’s behalf. Importantly, this includes subsidiaries and controlled entities, regardless of whether they are performing services for, or on behalf of, a corporation.
There will be no requirement to show that the company was otherwise involved, authorised or permitted the offence.
Corporates that can show they had adequate procedures in place to prevent the commission of the offence or associates engaging in foreign bribery will have a defence to the offence. In this way, the offence incentivises corporations to actively ensure they have adequate procedures in place to prevent foreign bribery.
The new offence for foreign bribery is also designed to overcome challenges in establishing the criminal liability of businesses that engage in wilful blindness with respect to foreign bribery and misconduct by their employees and other associates.
In addition to the new offence, the CFB Bill reforms and expands existing foreign bribery offences to capture a greater range of conduct, including conduct that might be linked to, or obscured by, legitimate transactions. In essence, under the existing foreign bribery offence, 'foreign bribery' occurs if:
- Person A gives a benefit to Person B;
- the benefit is not legitimately due to Person B; and
- Person A does so with the intention to influence a foreign public official in the performance of their duties, to obtain or retain business or a business advantage that is not legitimately due.
The CFB Bill reframes the offence around an intention to improperly influence a foreign public official rather than requiring prosecutors to demonstrate that the benefit provided was ‘not legitimately due’. It also removes the existing requirement that the benefit or business advantage be ‘not legitimately due’, and does not require that the foreign public official be influenced in the exercise of their official duties.
The reframing of the existing foreign bribery offence means that a broader spectrum of benefits will be caught, and investigators will look behind a transaction to consider its true purpose—ie whether a bribe has been concealed behind a legitimate payment. Further, consistently with the types of conduct that can be investigated by the National Anti-Corruption Commission (which we discussed here), it will not be necessary for prosecutors to prove that a public official was actually influenced by the payment of a bribe (or other advantage). It will be sufficient that the person who gives the benefit intended to influence the public official.
In order to reflect the experience of law enforcement investigating foreign bribery, the CFB Bill also removes the requirement that an improper benefit be given to retain business or a business advantage. The expanded offence means that bribery conducted to obtain a personal advantage will also be unlawful. Attorney General Mark Dreyfus specifically contemplated the bestowal of a personal honour, the processing of a visa request or a reduction in an individual's personal tax liability as the kinds of conduct that would now be caught by the foreign bribery offence.
In addition, the CFB Bill extends the foreign bribery offence to include the bribery of candidates for public office, not just current holders of public office.
The simplification and expansion of the Australian foreign bribery regime brings it closer in line with the regimes in the US and UK.
If found liable for the offence, a body corporate will be subject to significant penalties. In particular, this is the greater of:
- 100,000 penalty units (currently $31.3 million);
- three times the value of the benefit directly or indirectly obtained that is reasonably attributable to the conduct constituting the offence; and
- if the value of the benefit obtained cannot be determined, 10% of the annual turnover during a 12-month period.
As with the new failure to prevent offence, the expansion of the existing foreign bribery offence contributes to a heightened risk environment around foreign bribery for companies.
What does the CFB Bill not do?
Unlike each of its predecessors, the CFB Bill does not contain a DPA regime—despite strong support for such a regime from Senators Michaelia Cash (on behalf of the Opposition) and David Pocock. Senator Cash proposed amendments to the Bill to include a DPA regime on the basis that DPA regimes incentivise self-reporting and increase investigation and prosecution of corporate offending. However, Labor Senators indicated that the Government will only entertain the introduction of such a scheme as a measure of last resort and after the measures introduced by the Bill have been implemented and given time to operate—noting that there are existing mechanisms in place to allow companies to self-report suspected offences. By way of a compromise, the Senate amended the Bill to provide for a statutory review after 18 months. The statutory review will be tabled in Parliament and will consider whether a DPA regime should be introduced.
The lack of a DPA regime currently distinguishes the new Australian regime from the approach taken in the United Kingdom and the United States where DPA regimes are in place, as well as the earlier iterations of the CLACCC Bill. In the UK specifically, DPAs are available for breaches of its failure to prevent offence—further incentivising companies to proactively self-report suspected foreign bribery and cooperate with regulators. Our view remains that the inclusion of a DPA regime is international best practice to incentivise good corporate behaviour in identifying, reporting and remediating potential bribery. We are hopeful that such a regime will be introduced following the statutory review.
What should I do to prepare for the CFB Bill to take effect?
The CFB Bill requires the Attorney-General to publish guidance on what constitutes adequate procedures, however ultimately what constitutes ‘adequate procedures’ will be determined by the courts on a case-by-case basis. It is envisaged that this concept would be scalable—its requirements would depend on the circumstances, including the nature of the body corporate concerned and the relevant sector and geographical location in which it operates.
As part of the Government's consultation on the 2019 iteration of the Crimes Legislation Amendment (Combatting Corporate Crime) Bill, the Attorney General's Department released draft guidance on adequate procedures to prevent the commission of foreign bribery. Although the Government has foreshadowed it will release updated guidance regarding what constitutes adequate procedures, we generally expect such procedures to include:
- risk assessments
- appropriate tone from the top
- due diligence and third-party controls
- communication and training
- effective reporting mechanisms
- continuous monitoring and review.
In light of the passage of the CFB Bill, we recommend companies consider whether to:
- refresh risk assessments to assess their bribery risk profile;
- review their anti-bribery and corruption policies, and assess whether current controls are appropriate to address these new compliance risks;
- apply anti-bribery due diligence procedures before entering into new business and supplier relationships;
- adopt effective reporting and grievance mechanisms to allow internal and external stakeholders to raise concerns about bribery risks, accompanied by an effective response system to allow for the investigation of those concerns; and
- refresh anti-bribery training and raise awareness of new requirements.