Insights / February 21st, 2020

Foreign Bribery - new corporate risk (part 2)

In our previous insights “Corporate: Foreign Bribery (Part 1)”, we discussed the new federal Bill intended to introduce expansions to Australia’s anti-bribery laws. In this insights, we discuss elements especially relevant to companies, their directors and senior management and practical steps we recommend they should take.

Company liable for bribery

Under Division 12 of the Commonwealth Criminal Code, if a company’s officer, employee or agent commits a bribery offence, the company can also be held liable for the foreign bribery offence where:

  • the company’s directors or a high managerial agent (in effect, a senior executive or manager) of the company intentionally, knowingly or recklessly committed the foreign bribery offence;

  • the directors or a high managerial agent expressly, tacitly or impliedly authorised or permitted the commission of the offence;

  • it is shown that a corporate culture existed within the company that directed, encouraged, tolerated or led to the commission of the foreign bribery offence; or

  • it is shown that the company failed to create and maintain a corporate culture that required compliance with the laws against bribing foreign public officials.

Corporate culture is defined as an attitude, policy, rule, course of conduct or practice existing within the company generally or in the part of the company in which the relevant activity takes place.

Failure to prevent bribery

Under the proposed new section 70.2 of the Criminal Code, a company will be deemed guilty of an offence where an associate (allegedly) commits a foreign bribery offence. We previously noted that “associate” can include someone over whom the corporation has little or no control and who is not prosecuted for or convicted of an offence. Thus, the Commonwealth Director of Public Prosecutions (CDPP) can say to a company “I say that your associate committed a foreign bribery offence with the intention of a profit or gain for the company. It is too hard for us to prosecute or convict him/her. But you (the company) are guilty. Now prove you are innocent if you can.”

To make out a defence, the company must prove that it had adequate measures in place designed to prevent associates from committing foreign bribery.

The Government’s draft Guidance document outlines examples of what the Government considers to be “adequate procedures”.

Politicians said to have committed some wrong, are very quick to cry “innocent until proven guilty”. It is strangely ironic and deeply regrettable that the Bill continues the trend of recent years of governments deeming companies and their directors guilty of offences, imposing on them the onus of proving their innocence.

Regardless of what we think of the Government’s legislative approach, if the Bill becomes law, directors of companies that have any trading arrangements in foreign jurisdictions should consider the following action points.

Company action list

  • Companies must assess their foreign bribery risk levels related to their type of business, where they do business and who does business on their behalf. They should document the risk assessment steps taken and the basis for their conclusions about their risk levels.

  • Companies that have higher risks of bribery occurring (eg. substantial business conducted through agents in a jurisdiction perceived as receptive to bribery and corruption), will need to implement stronger policies and procedures that are adequate to prevent bribery.

  • They should put in place formal written anti-bribery policies, preferably correlated with other relevant policies or codes of conduct. Policies and procedures should cover their own employees and closely related contractors but should also have to have regard to overseas based independent contractors and agents.

  • They will need to implement effective communication and training steps at the introduction of policies and in an updating, ongoing or “refresher” manner. A “set and forget” policy approach will not be sufficient. This will be key to showing a compliance culture.

  • Directors and senior management must not only enunciate zero tolerance for foreign bribery but must also ensure that practical policy implementation steps are in place. They will be at risk if they delegate and cease to be actively watching over corporate culture.

  • Companies will not be able to take a soft approach or turn a blind eye to questionable behaviour but will need to adopt a robust culture of compliance and enforcement. That approach will need to be demonstrable (read “able to be proved”).

  • Companies must examine, implement and maintain appropriate procedures for the engagement of contractors and agents, particularly those engaged in overseas jurisdictions. Companies should have procedures designed to appropriately vet contractors and agents at the point of engagement and in their ongoing activities.

  • Amongst other things, the contractual documents utilised by companies should contain provisions that reinforce the company’s zero tolerance policy and that require contractors and agents to comply with those policies.

  • Companies should provide to relevant personnel, red flag lists to assist personnel to be alert to circumstances that may indicate the risk of foreign bribery occurring.

  • Boards should consider how they will carry out investigations, including in foreign jurisdictions, in the event that an instance of foreign bribery is identified or suspected.

  • Since 1 January 2020, public companies have had to have written whistleblower policies. The introduction of the foreign bribery amendments indicates that all companies for which foreign bribery is a risk ought to have effective whistleblower policies and reporting procedures.

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.