This article was written by Monique Carroll with the assistance of Philippa Robinson.
As foreshadowed in our article Staying Ahead of the Curve on Anti-Bribery and Corruption in Australia, the Australian Government has now introduced the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 (Cth) (“Bill”) into parliament which clarifies and increases the scope of conduct caught by foreign bribery offences and introduces a scheme encouraging self-reporting of breaches.
Important provisions of the Bill
The key changes proposed by the Bill include:
1. A new offence in the Criminal Code Act 1995 (Cth) (“Criminal Code”) making a company strictly liable for bribery of foreign public officials conducted by its associates for the profit or gain of the company even if the conduct occurred outside of Australia (“failure to prevent foreign bribery offence”). The offence replicates s7 of the UK’s Bribery Act 2010 but has a broader application. Under the Bill, an associate is defined more broadly to expressly include officers, employees, agents and contractors and includes any person who performs services for or on behalf of the company. This definition also expressly includes all subsidiaries (even if off-shore), related entities and corporations otherwise controlled as defined by the Corporations Act 2001 (Cth).
2. A new defence will be available in respect of the failure to prevent foreign bribery offence if companies can prove that they had adequate procedures in place designed to prevent the conduct. The Minister must publish guidance on what would be considered adequate procedures.
3. Amendments to the existing foreign bribery offence in s70.2 of the Criminal Code to tidy up and improve the effectiveness of the provisions by:
- Simplifying the wording of the existing bribery offence;
- Removing the requirement that a foreign official must be influenced in the exercise of the official’s duties;
- Providing a list of factors relevant in determining whether an influence is improper;
- Extending the advantage requirement to include any personal and business advantages and capturing conduct which was not intended to obtain any specific advantage; and
- Extending the definition of foreign public official to include those officials standing for office.
4. Introduction of deferred prosecution agreements (“DPAs”) where the Commonwealth Director of Public Prosecutions (“CDPP”) may enter into an agreement with a company (not an individual) in relation to particular serious corporate offences including foreign bribery charges. The agreement, which must be approved by a retired judge, imposes a number of obligations and financial charges on a company in return for not instituting proceedings against the company in relation to the offence. DPAs can only be made if the CDPP is satisfied that the DPA is in the public interest and if the retired judge finds that the terms are fair, reasonable and proportionate and in the interests of justice.
Omissions from the Bill
The Bill does not propose to amend the existing facilitation payment defence allowing companies to make payments if the value of the benefit was of a minor nature, for the sole or dominant purpose of expediting performance of a minor, routine government action and was recorded. The Bill also omits a number of potential amendments to foreign bribery legislation which were proposed in a consultation paper earlier in the year such as the creation of a new offence based on recklessness.
What are the implications?
The Government expects that the Bill will make prosecutions significantly easier to obtain. Based on our experience with respect to the prosecution of current offences in Australia and our experience in the UK when similar changes were made, we agree that this is likely to be the case. This is because the Criminal Code currently requires the Australian Federal Police (“AFP”) and the CDPP to establish that conduct occurring overseas by foreign incorporated subsidiaries, entities or agents is attributable to an Australian company from both a conduct and knowledge perspective. The failure to prevent foreign bribery offence removes these requirements.
Under the new legislative regime, once the AFP and CDPP have established that an associate has bribed a foreign official in contravention of s70.2, the company will be criminally liable unless it can establish that it had in place adequate procedures designed to prevent the associate committing the offence. Importantly, the AFP will not need to establish a ‘jurisdictional nexus’ with Australia to establish the associate’s contravention of s70.2 and the associate need not actually be prosecuted. Once enacted, companies can expect the AFP and CDPP to pursue Australian companies for off-shore bribery offences primarily using this failure to prevent foreign bribery offence.
The AFP and DPP will likely continue to rely on the s70.2 bribery offence when the offending conduct was committed by an employee, agent or officer of the company.
A summary of the offences and available defences once the Bill is enacted into law is as follows.
Table 1: Summary of availability of defences or DPAs
1. When do these changes come into effect?
Debate on the Bill may begin as early as February when Parliament next sits and we expect Parliament to reach a decision within the first half of 2018. Amendments to the existing foreign bribery offence and the new failure to prevent foreign bribery offence will commence six months after the Bill is enacted into law. We anticipate that these provisions will not be imposed on corporations until late 2018. DPAs are expected to be available roughly half way through 2018.
2. What can your company do to protect itself?
In our previous article we discuss four practical tips to stay ahead of the increased risk of liability. In light of the Bill, these tips are now more important than ever and are reproduced here as follows:
A tailored and reliable compliance programme directed to a company’s associates and suppliers (as the case may be). You need to understand your company’s supply chain and what your ‘associates’ are doing at quite a granular level. Many compliance issues arise as a result of a failure to reliably implement well drafted policies. You need to ensure that your policies are actually being implemented.
Robust due diligence capabilities and procedures that are industry specific. Make sure that you understand the compliance issues in your specific industry and jurisdictions – don’t assume that the way you do business around the world will be accepted and legal in every jurisdiction.
Investigation nouse. You need to be able to ascertain key facts quickly to identify whether an offence has occurred so that you can consider whether a Deferred Prosecution Agreement (depending on the jurisdiction) or self-reporting scheme is appropriate prior to a formal investigation being commenced by the authorities. There is a tendency for service providers to get bogged down in a myriad of documents and other evidence which results in internal investigations taking a long time. King & Wood Mallesons is in the process of finalising an internal guide to streamline and fast track these investigations whilst maintaining legal professional privilege.
A Crisis Management Plan that considers all relevant jurisdictions. Once the regulators have visited your premises and a formal investigation has begun, the scope to improve outcomes by self-reporting will be drastically limited. In some jurisdictions, by this stage guilt may be presumed and the information and employees you need to ascertain basic facts have been detained. A cross-jurisdictional Crisis Management Plan to ascertain the facts to the greatest extent possible, negotiate with regulators, make any public disclosures and address implications in other jurisdictions, will make a valuable impact on mitigating negative outcomes from a regulatory investigation.
King & Wood Mallesons can assist you with all of these risk mitigation steps which will be the beginnings of your ‘adequate procedures’.