Will companies be automatically liable for inadequate policies?
The Commonwealth Government has proposed reforms to Australia’s foreign bribery regime, which include expanding the scope of the current offence under the Criminal Code to include:
- expanding the definition of foreign public official, to include candidates for office;
- removing the limiting requirement of influencing a foreign public official in the exercise of their official capacity;
- creating a new offence for recklessness; and
- clarifying that the accused need not have a specific business or advantage in mind; and that the business or advantage can be obtained for someone else.
Importantly the proposed reforms include creating a new offence for corporations for failing to prevent foreign bribery. Australian companies will be liable for significant penalties as a consequence of their rogue employees’ conduct.
In addition to the new foreign bribery laws, the government also released its proposed model for a deferred prosecution agreement scheme.
The changes indicate a desire of the Australian government to strengthen its foreign bribery regime and to follow aspects of the UK and US frameworks, thus implementing the OECD Anti Bribery Convention to a greater degree.
Offence for inadequate foreign bribery policies and procedures.
The proposed new corporate offence of failing to prevent foreign bribery places the onus on Australian companies to develop robust anti-bribery and corruption policies and procedures.
Similarly to section 7 of the UK Bribery Act 2010, the proposed offence renders companies automatically liable for bribery committed by their domestic and foreign employees, contractors, and agents, except where the company can demonstrate it had in place adequate procedures to prevent such conduct.
The company bears the burden of establishing that it had adequate procedures in place, with the courts to make a determination on a case by case basis. It is unclear how the courts will assess adequacy. The reforms propose that the Minister for Justice will publish guidelines to assist Australian companies in formulating policy and procedures. The proposed new offence establishes a maximum penalty of at least $18 million, and, where the employee’s conduct was intentional it may be a higher figure being as much as 10 per cent of the annual turnover for the 12 months ending in the month that the conduct occurred. This is the same maximum penalty as exists for corporations that commit the primary offence of bribery.
If enacted, the new legislation will require Australian companies to comprehensively re-evaluate the strength and coverage of their internal controls with a particular focus on closely reviewing their anti-bribery and corruption policies, procedures and training. The new laws will also require Australian companies to be parties to prosecutions of rogue employees and to prove to the court that their policies and procedures were adequate in the circumstances.
Proposed deferred prosecution agreement scheme
The Australian government has also released a consultation paper proposing a model for a Deferred Prosecution Agreement (DPA) scheme in respect of corporate crimes. The proposed model largely mirrors schemes which exist in the UK.
The model contemplates a voluntary negotiation between a company and the Commonwealth Director of Public Prosecutions in which companies may be granted amnesty for an offence in exchange for complying with certain requirements, including an agreed statement of facts and list of offences (with any financial loss or gain detailed), an admission of criminal liability on behalf of the company, agreement to cooperate with investigations that may follow, and consent to making the DPA available to the public. The DPA then needs to be approved by a retired judge and will only be approved if it is in the interest of justice and the public interest to do so.
As with the model in the UK, any admissions in the statement of facts, are considered to be admissions under the relevant crime legislation. Corporations need to engage in the negotiation of a DPA with care to avoid providing information and materials to the CDPP which can ultimately be used in subsequent proceedings, should a DPA not be finalised. Material that is created “solely to facilitate, support or facilitate the DPA negotiations” cannot be used for a purpose other than the DPA negotiations. However, primary documents including business records, or documents created during an internal investigation will not be captured by the protection.
DPAs have been used extensively in the US and were introduced recently in the UK. Typically they require the company to pay a penalty and to reform its internal compliance mechanisms. Experience in the US and UK has shown that a DPA can carry several benefits, foremost that companies will not be found by a court to have contravened the law, and will not risk being barred from engaging in key operations abroad, and may further avoid the time and expense of managing a prosecution. The ability to negotiate a DPA in Australia in parallel with other jurisdictions is a welcome development given the global nature of anti-corruption regulation.
The reforms have been published in a Consultation Paper and the Attorney General’s Department is seeking public submissions which close on May 1, 2017.
Time will tell whether the Australian government implements the stricter regime further aligning the Australian position with its obligations under the OECD Anti-Bribery Convention.