The Australian Government recently released draft amendments to the Commonwealth Criminal Code Act 1995 in relation to Australia’s foreign bribery regime ‘to improve the effectiveness of the offence in addressing foreign bribery, and to remove unnecessary barriers to successful prosecution;’ and a proposed model for a deferred prosecution agreement scheme ‘to facilitate a more effective and efficient response to corporate crime by encouraging greater self-reporting by companies.’
While we welcome these proposed reforms, both have potentially serious implications for Australian companies and their internal controls.
Proposed amendments to the Foreign Bribery Offence in the Criminal Code Act 1995
The Australian Government has recently proposed reforms to Australia’s commonwealth foreign bribery regime. The key changes would expand Division 70 of the Commonwealth Criminal Code by:
- broadening the definition of foreign public official (‘FPO’), to include candidates for public office(s);
- removing the requirement to prove, as an element of the offence, an intention to influence a FPO in the exercise of their official capacity;
- creating a new offence for being reckless as to whether the alleged conduct will improperly influence a FPO in the exercise of their official capacity; and
- clarifying that the conduct need not have been done for specific business or advantage in mind; and that the business or advantage can be obtained for someone else.
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. The proposed maximum penalty is 100,000 penalty units (or AUD$18 million in 2017) - the same maximum penalty as exists for corporations that commit the primary offence of bribery.
How will the proposed reforms affect companies?
In addition to the proposed changes mentioned above, the reforms also propose to increase the burden on corporations to implement and enforce adequate procedures designed to prevent offences relating to potential bribery of FPOs, including by unauthorised employees’ conduct.
Similarly to section 7 of the Bribery Act 2010 (UK), 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.
Accordingly, companies bear the burden of establishing that they have adequate procedures in place having regard to each set of facts. It is still unclear how the courts will assess the adequacy of the procedures, but the reforms propose that the Federal Minister for Justice will publish guidelines to assist Australian companies in this process.
If enacted, the welcome 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.
Proposed model for a deferred prosecution agreement scheme in Australia
The Australian government has also released a consultation paper proposing a model for a Deferred Prosecution Agreement (‘DPA’) scheme in respect of corporate crimes.
DPAs have been used extensively in the US and were drawn upon to introduce the DPA scheme into the UK in February 2014. The proposed Australian model largely mirrors the UK scheme.
How will the proposed DPA scheme operate?
The proposed model contemplates a voluntary negotiation between a company and the Commonwealth Director of Public Prosecutions (‘CDPP’) in which companies may be granted amnesty for an offence in exchange for complying with certain requirements, potentially 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.
Once agreed in principle, the DPA will then need to be approved by a retired judge, subject to them being satisfied the DPA is in the interests of justice and in the public interest.
Important evidentiary considerations
Like the scheme in the UK, any admissions in the statement of facts will be considered to be admissions under the relevant crime legislation. As a result, companies will need to engage in negotiations of DPAs with care to avoid providing information and materials which may ultimately be used in subsequent proceedings, should a DPA not be finalised.
While materials that are created ‘solely to facilitate, support or facilitate the DPA negotiations’ cannot be used for a purpose other than the DPA negotiations, primary documents including business records and or documents created during an internal investigation, will not be afforded the same protection.
Typically a DPA, under the proposed scheme, will include a requirement for the offending company to pay a penalty and to reform its internal compliance mechanisms.
While a DPA will not necessarily avoid pecuniary penalties, experience in both the US and UK has shown that a DPA can carry several benefits that can outweigh the costs. Most significantly, offending companies will not be found by a court to have contravened the law, and as a consequence they will avoid potential risks in connection with restrictions from engaging in key operations abroad and save both time and the expense of managing/defending 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.
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.