Australian companies who conduct business abroad need to be aware of the imminent substantial change to the law regarding foreign bribery offences.
Overview of new foreign bribery offence
The Australian Government has recently introduced the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 (Bill) into Parliament which increases the scope of company conduct which may be caught by foreign bribery offences.
Once the changes to the Criminal Code Act 1995 come into effect (probably mid-2018), a company will be strictly liable for bribery of foreign public officials conducted by its associates for the profit or gain of the company even if a conduct occurred out of Australia.
In other words, there will be a penalty for failure to prevent foreign bribery.
Under the Bill, an associate will be defined broadly to expressly include officers, employees, agents and contractors and any person who performs services for or on behalf of the company. This definition also expressly includes all subsidiaries (even if off-shore), related entities and corporations controlled as defined by the Corporations Act 2001. This is important because companies will have to ensure that any associates are acting properly in respect of their commercial dealings with local public officials, for example in obtaining licenses, permits or conducting business generally in a foreign country.
This will mean an even greater level of scrutiny will be required by public and private companies in Australia in respect to how they do business overseas.
The Bill is likely to make prosecuting foreign bribery easier. In the UK, similar changes were made and as a result, there was an increase in the number of prosecutions.
The new offence removes the requirement of proving that the Australian company both engaged in the alleged conduct and that they had knowledge of such conduct.
The new offence effectively pierces the corporate veil and imposes legal liability on the ultimate holding company, who engages third parties service providers.
How to avoid being impacted
1. Ensure that there are adequate procedures in place to prevent bribery from occurring.
Once the Australian Federal Police and the Commonwealth Director of Public Prosecutions have established that an associate has bribed a foreign official, the company will be criminally liable unless it can establish that it had in place adequate procedures designed to prevent the commission of the foreign bribery offence by its associates.
The requirement to prove that there were adequate procedures in place effectively reverses the onus of proof, so that responsibility is on the company to provide evidence of their procedures.
Companies can use the guidance that is to be published by the Minister for Justice, as part of their procedures to prevent foreign bribery. Under the Bill, the Minister for Justice must publish guidance on the steps companies can take to help prevent its employees, agents and contractors from engaging in foreign bribery.
The UK Ministry for Justice published six guidance principles, to assist companies in developing adequate procedures. These may reflect the type of guidance that the Australian Minister for Justice is likely to publish.
The six principles are:
- establish procedures to prevent bribery by persons associated with it that are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation’s activities
- ensure the top-level management of a commercial organisation are committed to preventing bribery by persons associated with it
- continue to assess the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it
- continue to apply due diligence procedures
- ensure that bribery prevention policies and procedures are embedded and understood throughout the organisation
- monitor and review procedures.
2. Ensure that Board members and all other relevant staff are adequately informed of legislative amendments.
3. Examine and address the company’s overall approach to corporate crime. This requires ensuring that the Board and all other relevant staff members are proactive in their approach so that the company can avoid being investigated and prosecuted for criminal offences.
4. Australian companies need to be vigilant in continuing to develop internal procedures, keep the executive updated and closely monitor third party service providers.