The report recently released by the Organisation for Economic Cooperation and Development (OECD) Working Group on Australia’s implementation and enforcement of foreign bribery laws is highly critical of Australia’s efforts to date. As a result it is expected that there will be an increase in the investigation and prosecution of foreign bribery offences. This is what occurred in Canada after a similar report was released there.
On this basis, Australian companies, particularly those which have operations in countries where the risk of corruption is high, should review their current risk assessment protocols, bribery policies and compliance programmes to ensure that they effectively address foreign bribery risks.
The implementation and enforcement of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Convention) is monitored by the OECD Working Group on Bribery in International Business Transactions.
On 12 October 2012, the Working Group adopted the Phase 3 Report on Australia’s implementation and application of the Convention (Report). The Phase 3 assessment mechanism involves peer review (experts from 2 countries act as lead examiners). It aims to assess the structures put in place by parties to the Convention to enforce the laws and rules implementing the Convention. The Phase 3 review includes an analysis of progress made by Parties to the Convention, active enforcement efforts and results. Canada and Japan acted as lead examiners for Australia’s review.
The Report was highly critical of Australia’s implementation of the Convention and anti-corruption activities, especially its handling of investigations and prosecutions. We anticipate that the criticism that has been levelled at Australia’s handling of anti-corruption cases will lead to an increase in anti-corruption enforcement in Australia. Corporations should take this opportunity to assess their risk profile in this area and address any issues.
There are many issues raised in the Report although it is the overall low enforcement of the foreign bribery offence in Australia that appears as the overriding concern. Australia’s foreign bribery offence is contained in Division 70 of the Criminal Code Act.
The Report points out that there has been only one foreign bribery prosecution in Australia. Out of 28 foreign bribery referrals to the Australian Federal Police (AFP), 21 have been concluded without charges (12 were evaluated but rejected for investigation and “terminated” whilst 9 cases were accepted for investigation and have been closed because of insufficient evidence).
The Working Group considers that the lack of prosecutions was not due to the absence of conduct caught by the bribery offence. It noted that Australian corporations play a significant economic role in many countries in parts of Asia, Africa, Polynesia and the South Pacific that have serious corruption risks. It quoted a recent study that found that 75% of the top 100 Australian listed countries operate in jurisdictions or industries with a high risk of corruption.
The Report also expressed concern in relation to the level of understanding of the facilitation payment defence under Australia’s foreign bribery laws. Facilitation payments are allowed if certain record-keeping requirements are met. To be excepted from the offence, a facilitation payment must be made to secure a routine governmental action of a minor nature, that does not result in the obtaining of a business advantage (see section 70.4(1)(b) and (2) of the Criminal Code Act).
The Working Group perceived a general misunderstanding that a bribe would constitute a facilitation payment merely if it is a small payment. The Report raised the possibility that Australian companies may be paying minor bribes, and that the practice may be prevalent, at least in certain regions in which Australian companies operate.
There are many other matters identified in the Report as areas of concern requiring improvement. The areas of concern include:
- whether sanctions against natural and legal persons for foreign bribery are effective, proportionate and dissuasive;
- the use of Australia’s corporate liability provisions which the Report states need to be enhanced;
- the need to more routinely consider confiscation in foreign bribery cases and issuing of necessary guidance regarding this process; and,
- the need to raise awareness of breaches of the foreign bribery offence as a predicate offence to money laundering.
In terms of investigations and prosecutions, the Report recommends that Australia review its overall approach to enforcement in order to effectively combat international bribery of foreign public officials.
The Working Group will monitor Australia’s foreign bribery enforcement efforts through Australia’s Phase 3 Oral Follow-Up Report in 2013. In terms of facilitation payments, the Report recommends that Australia continue to raise awareness of the distinction between bribes and facilitation payments, and encourages companies to prohibit or discourage the use of small facilitation payments in internal company controls, ethics and compliance programmes.
The AFP has also indicated, in response to criticism in the Report that there has been a lack of sufficient inquiries before rejecting allegations of corrupt practices for full investigations, that it would create a Foreign Bribery Panel of Experts (Panel) (and which has now become operational). The Report states that the Panel would take part in “periodic operations reviews” of foreign bribery cases to provide expert knowledge regarding best practices, areas for improvement and in the allocation of resources.
The foreign bribery offence is becoming a priority for the Australian government. The OECD is clearly dissatisfied with Australia’s progress in implementing its obligations under the Convention. The Report places significant pressure on Australian authorities to increase bribery investigations and prosecutions. We expect that additional resources will be allocated to the AFP, including the Panel discussed above.
It has been the experience of Norton Rose in other jurisdictions, such as Canada, that similar Phase 3 Reports resulted in a significant increase in investigatory and prosecutorial activity. We anticipate that the same will occur in Australia.