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This is Part Two of our four-part series on the impact of the findings and recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Following a detailed review of the current foreign bribery regime, the AG highlighted a number of key challenges faced by regulatory and enforcement agencies in investigating and securing convictions for breaches of the Commonwealth foreign bribery laws (as contained in the Criminal Code (Cth)).
The Foreign Bribery Paper outlines a number of proposals to overcome some of those difficulties through the following initiatives:
Clarifying that the foreign bribery offence is about ‘improperly influencing’ a foreign public official, rather than providing the foreign public official with a benefit that is ‘not legitimately due’: The Foreign Bribery Paper is critical of the current legal framework, which requires the prosecution to show that the bribe and the business advantage sought by providing the bribe is not legitimately due to either the receiver of the bribe or the provider of the bribe respectively. This necessary threshold is described as having presented “challenges” to prosecutors (such as in having to prove what is or is not legitimately due to a foreign public official) and is not an element present in international foreign bribery laws. The AG proposes to substitute the element of ‘not legitimately due’ with the concept of ‘improperly influencing’ a foreign public official to obtain or retain business or an advantage. The Foreign Bribery Paper also canvasses a number of alternative tests which could be adopted, such as a ‘dishonesty’ concept.
Create a new foreign bribery offence based on recklessness: The AG highlights the challenges to prosecuting authorities in establishing that the provider of the bribe ‘intended’ to provide or promise a benefit, and also intended that this would influence a foreign public official. The AG proposes to introduce a lesser offence which would only require that the provider of the bribe was reckless as to whether their conduct would improperly influence a foreign public official. The proposed penalty for this offence is half that of the intentional offence, but the lower threshold of ‘recklessness’ will significantly increase the risks of contravention.
Create a new corporate offence of failing to prevent foreign bribery: A consistent criticism of Australia’s prosecution record relates to the perceived failure to take action against corporations. While the current laws contain provisions which extend corporate criminal liability to companies in certain scenarios, the AG notes the challenges experienced in establishing criminal liability given the complex nature of foreign bribery. The intention of this new corporate offence is to improve corporate compliance culture through making companies automatically liable for bribery, except where they can show they had proper internal controls and compliance frameworks in place to prevent bribery. What is proposed is similar to the ‘Adequate Procedures’ defence established by the UK under their Bribery Act.
There were some additional proposals to help improve prosecutorial outcomes:
These proposals reflect the Government’s desire to significantly improve its poor prosecution record. Since these changes substantially broaden the scope of criminal actions and reduce the requirements to prove offences, they represent an increased risk to individuals and corporations.
The long mooted DPA model would see DPAs available, at prosecutor discretion, to companies (but not individuals) in cases involving serious Commonwealth corporate crime and would represent a potentially significant new addition to the federal enforcement toolkit. In a nutshell, DPAs are agreements between a prosecutor and a company liable for prosecution, under which, in exchange for having the prosecution suspended or dropped, the company agrees to actions potentially including the payment of financial penalties and costs and agreements to implement corporate compliance programs.
The DPA paper lays out a model for how an Australian DPA regime might operate.
The premise behind introducing a DPA regime in Australia is the hope that it could provide flexibility to law enforcement, and a significant incentive for companies to self-report foreign bribery and other corporate crime in Australia. Australian regulatory and prosecuting authorities have acknowledged the absence of any incentives for corporations to self-report breaches (or potential breaches) and that this may be a contributing factor to Australia’s comparatively low prosecution record.
As previously noted, DPAs are already in use in both the US and the UK. Consistent in DPAs across both jurisdictions is the requirement that the company to agree to a statement of facts, and implementation of remedial or compliance measures. In 2015, the UK implemented its first DPA, involving a Tanzanian subsidiary of Standard Bank, which provided no immunity from prosecution of conduct not disclosed. In 2010, a US DPA involving Wachovia Bank required the bank to pay a fine of US$50M, in addition to the forfeiture of US$100M in contravening transactions.
Whether the introduction of a DPA regime in Australia would present a significant incentive for companies to self-report remains an open question. The likelihood of securing a DPA would have to be clearly set out in any DPA regime and there must be a significant level of comfort provided to corporations regarding the use of information provided to prosecutors in the event a DPA is not agreed, or not approved by a retired judge. This is particularly critical in the class actions environment in which Australian corporations currently operate. The proposed self-reporting DPA scheme falls short of the true prosecutorial immunity granted by the ACCC’s cartel immunity policy for example.
Submissions in response to the Consultation Papers are due by 1 May 2017 and there is no guidance given in the consultation papers as to how quickly those proposals will translate to legislation. The Gilbert + Tobin Corporate and Regulatory Investigations team will continue to monitor developments on these 2 critical proposals.