Publication
International arbitration report
In this edition, we focused on the Shanghai International Economic and Trade Arbitration Commission’s (SHIAC) new arbitration rules, which take effect January 1, 2024.
New “Failure to Prevent Bribery” Offence before Australian Parliament
Australia | Publication | July 2023
Australia is set to amend its existing bribery offence and enact a new offence of “failing to prevent bribery of a foreign official by an associate”: Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2023.1 Once passed, the Act will subject corporations to a absolute liability offences if an associate of the corporation engages in bribery for the profit or gain of the corporation. The provision is inspired by a similar provision in the UK Bribery Act 2010.
The law will result in a fundamental shift in the way corporations can be prosecuted for bribery in Australia. It will be unnecessary to prove that the bribe was authorised, or that the corporation intended for the bribe to be paid. The only defence is the existence of adequate procedures to prevent bribery.
If the Bill is passed by both Houses of Parliament, as we expect, the offence will come into force six months after Royal Assent, to allow sufficient time for government to publish guidance on adequate procedures to prevent bribery.
The new offence will result in maximum penalties of the greater of:
- AU$27.5 million;
- three times the benefit received; or
- (if the court cannot determine the benefit) 10% of the corporate group’s annual turnover.
Content
What is the current law?
The existing corporate liability provisions in the Commonwealth Criminal Code require that for a corporation to be found criminally liable for bribery.
An employee, agent or officer of the corporation needs to:
- have acted within the scope of their authority; and
- the corporation needs to have intended the offence to occur, which can be established by proving that:
- the board or a “high managerial agent” of the corporation knowingly or recklessly carried out the conduct, or expressly or impliedly authorised or permitted it;
- a corporate culture existed that “directed, encouraged, tolerated or led to non-compliance” with the anti-bribery provisions; or
- the corporation failed to “create and maintain a corporate culture that required compliance with” the anti-bribery provisions of the Criminal Code.
A corporation will not be liable for the acts of its agent if it can prove it has exercised due diligence to prevent the crime.
Who can be prosecuted with the new offence?
A constitutional corporation, which means a financial or trading corporation formed in Australia or a foreign corporation.
For a foreign entity to commit the crime, there needs to be a geographic nexus with Australia.
Who is an “associate”?
“Associate” is defined as an employee, contractor, agent, subsidiary or controlled entity of the corporation or a person that otherwise performs services on behalf of the corporation. It is, therefore, a wide group, which is significantly broader than individuals that would be considered to be the agent of the corporation. As a result, supplier due diligence programs will need to be reviewed. The associate does not need to be convicted of the offence for a prosecution to succeed.
What is ‘absolute liability’?
‘Absolute liability’ means that the crime is committed in the absence of proof of intention or fault by the corporation. The prosecution will not need to prove that the associate acted within the scope of their authority. The corporation’s intention is irrelevant.
If an associate commits bribery for the profit or gain of the corporation, then the corporation commits the crime of failure to prevent bribery, unless it can prove that it has adopted adequate procedures to prevent bribery.
What constitutes adequate procedures?
The Attorney General is required to issue guidance on adequate procedures. In the meantime, we can look to extraneous material and the United Kingdom’s guidance and practice, as well as experience in the United States.
The Bill’s explanatory memorandum states that what will be necessary to make out the adequate procedures defence will vary, depending upon factors such as the nature of the body corporate, relevant industry sector, and the relevant geographical location.
The United Kingdom Serious Fraud Office’s 2020 Guidance refers to the guidance issued by the Ministry of Justice in 2011 as to what constitutes "adequate procedures". This guidance advised that procedures put in place to prevent bribery should be informed by six broad principles being:
- Proportionate procedures
- Top-level commitment
- Risk Assessment
- Due diligence
- Communication, including training
- Monitoring and review
In our experience, to constitute adequate procedures to prevent bribery of a foreign official, anti-bribery and corruption (ABC) compliance programs must be:
Many Australian corporations have adopted anti-bribery and corruption policies, but have not implemented adequate procedures to prevent bribery, including:
- undertaking a risk assessment and designed responsive controls;
- ensuring tone from the top;
- adequately training their associates (particularly beyond staff); and
- assessing the effectiveness of their ABC controls.
Corporations in this position will not make out an adequate procedures defence. A policy alone is not enough. It must be part of an ABC compliance program responsive to risk.
Time to prepare
The Bill also introduces a range of amendments aimed at overcoming the prescriptive nature of the existing bribery offences which have to date, resulted in very few bribery prosecutions in Australia. It does not, however, introduce a Deferred Prosecution Agreement (DPA) mechanism, which we consider would encourage self-reporting of bribery and permit greater certainty of outcome for global entities operating in other jurisdictions with a DPA regime.
The proposed reforms mean that now is the time to commence the ABC risk assessment that will underpin your adequate procedures defence.
Norton Rose Fulbright works with many corporations to strengthen their procedures to prevent bribery and corruption. These processes form an essential part of an adequate procedures defence. We are able to draw on our experience from around the globe in relation to what constitutes adequate procedures and regulatory expectations. Contact us today to see how we can assist you to assess your risk of bribery and develop controls responsive to those risks.
Footnotes
1
See Division 70.5A.
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