On 22 June 2023, the Australian Government re-introduced the previously lapsed amendments to the Criminal Code Act 1995 (Cth) (the Code) with some notable changes and a plan to strengthen the legal framework for prosecuting Australian companies for foreign bribery offences. It is imperative that businesses take note of the proposed changes as they pose risks that will require robust safeguards to be put in place to avoid corporate criminal liability.
The Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2023 (Cth) (the Bill) that is before the House of Representatives takes a substantially similar shape to the previous drafts under the Turnbull and Morrison Governments with the following three key changes:
- New absolute liability offence for the failure to prevent bribery of foreign public officials
The Bill inserts section 70.5A into the Code, making it an indictable offence for a body corporate to fail to prevent bribery (through an associate of the body corporate) of a foreign public official. An ’associate’ is defined broadly as an officer, employee, agent, contractor or subsidiary of the corporation.
Importantly, it is an absolute liability offence. This means that there is no requirement to prove fault, and no defence of honest and reasonable mistake of fact.
As a ‘failure to prevent’ type offence, Australian corporations will be incentivised to proactively take steps to examine their operations, identify foreign bribery risk, and put in place policies and procedures from the Board down to build a culture that seeks to proactively prevent this behaviour.
If found liable of the offence, a body corporate will be liable for significant penalties. Specifically, the greater of:
- 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.
- Introduction of the ‘adequate procedures’ defence
Australian corporations caught by the new ‘failure to prevent’ offence can only avoid liability if they can prove that adequate procedures had been implemented at the time of the offence by the associate to prevent the risk of foreign bribery from occurring. It will likely depend on (amongst other things) the corporation’s character and size, the sector in which it operates, and the jurisdictions it conducts its business in, which will determine what will constitute ‘adequate procedures’ for any particular organisation.
The Attorney-General’s Department has previously published draft guidelines on ‘adequate procedures’ and will publish updated guidelines after the amendments commence to assist Australian businesses in this respect. In the meantime, organisations may find guidance from Austrade helpful, and UK guidelines for its corporate failure to prevent bribery offence (Bribery Act 2010 (UK) section 7) are instructive as to what Australian companies should expect to consider.
Some clear principles that can be identified from guidance include:
- measures to prevent foreign bribery should be proportionate to the nature and extent of the risk that a particular business faces; and
- measures need to be effective, clear and accessible. Examples of such measures are likely to include risk audits, proactive due diligence, careful engagement of third parties, and extensive training and compliance communications.
There will be no silver bullet for companies seeking to establish this defence. Close periodic examination of each company’s operations will be needed to ensure sufficient safeguards are put in place and that they remain current.
- Streamlined and simplified bribery offence
Following a consultation paper released in April 2017 that set out the challenges of prosecuting the current offence in section 70.2 of the Code, the Bill seeks to simplify and streamline the required elements.
The new offence removes the requirement that the foreign official must be influenced in the exercise of the official’s duties. It also removes the requirement that a benefit and business advantage must be ‘not legitimately due’ and replaces it with the concept of “improperly influencing” a foreign public official. Further, it expands the offence to cover bribery to obtain a personal (i.e. non-business) advantage.
It is expected that this will enhance the capacity to bring proceedings under this provision and address some of the evidential challenges reported by prosecuting authorities.
Deferred Prosecution Agreement scheme: an unfortunate omission?
The Bill in its current form does not introduce a Deferred Prosecution Agreement (DPA) scheme. In a previous Insight, we considered the utility and effectiveness of such a scheme for foreign bribery law enforcement.
In short, a DPA scheme would have allowed the CDPP to enter into a voluntary agreement with corporations to defer prosecutions in return for the organisation agreeing to a number of mandatory and optional requirements.
The advantage of this scheme is that it affords a degree of certainty to corporations that voluntarily disclose potential criminal conduct. The existence of such a scheme would have encouraged corporations to self-report. However, cooperation credits will still be relevant to penalty proceedings, albeit no longer having a bearing on prosecutorial discretion given the absolute liability failure to prevent offence.
Time will tell if such a scheme, which has reportedly functioned as an effective weapon to tackle foreign bribery in the UK (and its similar equivalent in the US), will be introduced in Australia.
It is critically important Australian companies start taking a close look at the extent to which they may be exposed to foreign bribery risk in the sector and in jurisdictions in which they operate, and closely review their policies and processes for preventing, identifying and mitigating the risk of foreign bribery.
Although there is a six-month grace period after the Bill receives Royal Assent, it will take time for corporations to embed adequate safeguards to proactively prevent foreign bribery. Compliance with the ‘adequate protections’ regime will likely also require ongoing and additional resourcing and attention at senior levels to ensure the new statutory defence may be relied on.
It is uncontroversial that foreign bribery is a notoriously harmful problem that impedes economic development, corrodes good governance and undermines the rule of law.
As a signatory to the OECD Anti-Bribery Convention, Australia is intent on bolstering its foreign bribery laws to give the AFP and CDPP a better chance of prosecuting misconduct. Accordingly, Australian businesses must be aware of these incoming changes and remain vigilant to avoid significant liability.
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.