Insights / February 14th, 2020

Foreign Bribery - new corporate risk (part 1)

Companies will be deemed guilty of bribery offences by an associate unless companies can prove they have adequate procedures in place designed to prevent their associates from committing foreign bribery.

The new anti-bribery amendment Bill is similar to one introduced in 2017 but not enacted. The new Bill, if it becomes law, will dramatically increase exposure of companies, directors and senior management for foreign bribery even where they had no knowledge of or involvement in an offence. The Bill has a number of very important implications.

There are 2 parts to the Bill. The first part expands the concept of bribery and will make it easier for the Commonwealth Director of Public Prosecutions (CDPP) to prove bribery of a foreign public official. The second part adds a new offence deeming a company to be guilty of the offence of failing to prevent foreign bribery where a company’s associate (allegedly) committed bribery for the profit or gain of the company. This note outlines the changes. Our next note will focus on steps that companies, directors and senior management will need to take.

1st part - Expanded foreign bribery offences

Under Australia’s existing anti-bribery law, it is a bribery offence to give, offer or promise a foreign public official a benefit with the intention of gaining or retaining business or a business advantage that is “not legitimately due”. That concept will be replaced with an intention to “improperly influence” a foreign public official in order to retain or gain the advantage. For the offence to occur, it is not necessary that the foreign public official was actually influenced. It is enough that the person intended to improperly influence a foreign public official. The offence can occur even if no particular official was intended to be influenced. Further, the bribe need not have been given or offered to the foreign public official. The offence will occur if the bribe is given or offered to another person with a view to improperly influence an official. Thus, a benefit or an advantage, however small or lacking in value, given to, say, a family member or an associate of a foreign public official could trigger the offence.

Company liability

A company can be liable for a bribery offence because of the actions of an employee or agent. The corporate offence can arise if the company’s board or senior management expressly or impliedly knew about or allowed the bribery. The offence can also arise if it is shown that either a corporate culture tolerated or to led to the bribery or that the company failed to create and maintain a corporate culture that required compliance with anti-bribery laws. This is in addition to the new “failure to prevent” offence discussed below.

With the draft Bill, the Government has released a draft guidance document (Guidance) that outlines these substantive foreign bribery offences and provides examples of how the anti-bribery provisions may apply.

2nd part – new “failure to prevent” offence

The Bill introduces a new offence of a company failing to prevent foreign bribery. One can imagine that the CDPP went to the Government, complaining it was too difficult to convict companies for alleged foreign bribery offences. The Guidance itself tells the story – “it can be challenging to establish criminal liability for corporations under the existing corporate criminal liability provisions”. The new Bill responds by deeming a company to be guilty of the offence of failing to prevent foreign bribery where a company’s associate (allegedly) committed bribery for the profit or gain of the company. Thus, the company is automatically guilty unless it can prove that it had “adequate procedures” in place to prevent foreign bribery by its associates. This absolute liability on the company is a blatant reversal of the fundamental criminal law principle of “innocent until proven guilty”. An “associate” is defined very broadly and includes an employee or agent or contractor of the company or anyone who performs services for or on behalf of the company.

A company may have little or no real control over the actions of an associate in another jurisdiction. But the company may find itself being prosecuted if the associate offers to someone a benefit even of insignificant value or that is quite standard in the local culture, with a view to improperly influencing some foreign public official to obtain an advantage for the company. This may sound very vague. That is how the Bill reads. The CDPP won’t have to prove much at all. It doesn’t even have to prosecute the person it says committed the bribery. It can just launch the company prosecution and the company is deemed guilty. The company would have the onus of proving the person was not an associate, there was no benefit or it had in place adequate procedures designed to prevent bribery.

Company penalties

If a company is convicted of either the substantive bribery offence or the “failure to prevent” offence, the maximum penalty it faces would be the greater of $21m, 3 times the value of the benefit obtained or 10% of the company’s annual turnover.

In our next note we will discuss actions that boards and their directors should take in light of this new proposed legislation.

Please contact us if you wish to discuss the impact of the anti-bribery legislation, the introduction or updating of an anti-bribery policy. Our team can also provide you with advice in relation to the introduction of effective Australian or foreign anti-bribery procedures, personnel training programs or Australian or foreign corruption inquiries or investigations.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.