Bills Digest No. 176  1998-99 Criminal Code (Bribery of Foreign Public Officials) Bill 1999


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer and Copyright Details

Passage History

Criminal Code (Bribery of Foreign Public Officials) Bill 1999

Date Introduced: 10 March 1999

House: Senate

Portfolio: Justice and Customs

Commencement: Six months and one day after Royal Assent unless commenced earlier by Proclamation.

 

Purpose

To amend the Criminal Code Act 1995 (Cwlth) to criminalise the bribery of foreign public officials.

Background

United Nations Declaration against Corruption and Bribery in International Commercial Transactions

On 16 December 1996 the United Nations General Assembly adopted the United Nations Declaration against Corruption and Bribery in International Commercial Transactions. Under this Declaration, Member States pledge to prevent individuals or private or public corporations claiming tax deductions for bribes paid to public officials. Member States also agreed to criminalise the bribery of foreign public officials in an effective and coordinated manner.(1)

OECD Convention on Combating Bribery of Foreign Public Officials

As well as being a member of the United Nations, Australia is also a member of the Organisation for Economic Co-operation and Development (OECD).(2) The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the Convention) was opened for signature in December 1997. Participation in the Convention is not limited to nations who are members of the OECD.(3) All 29 OECD members have signed the Convention and 12 signatories have deposited instruments of ratification or acceptance. Additionally, there are five non-member signatories-Argentina, Brazil, Bulgaria, Chile and the Slovak Republic. Some OECD members have already changed their laws in accordance with the Convention.(4) The Convention came into effect in February 1999.

The Convention requires Parties to take the measures necessary to establish domestic legislation criminalising the bribery of foreign public officials in the performance of their official duties. The Convention focuses on the 'supply side' of bribery. According to the OECD this is because 'As the largest exporters of trade and investment in the world, our multinationals represent, by far, the greatest potential source of bribe money.'(5) Further, the Convention targets 'large-scale' bribery-that is, '...bribery for the purpose of obtaining or retaining international business'(6)-rather than 'grease' or facilitation payments which are made to induce public officials to perform functions which are part of their routine duties.(7)

The World Bank estimates that bribes and 'pay-offs' amount to about $US80 billion per year and that this is the 'tip of the iceberg.'(8)

In December 1997, the Government announced its intention to prepare a consultation draft bill implementing the Convention. In February 1998, a copy of the Government's consultation draft was forwarded to the Joint Standing Committee on Treaties (JSCOT). Other consultative measures taken by the Government are outlined in the Explanatory Memorandum.(9) The Convention itself and its National Interest Analysis (NIA) were tabled in Parliament in March 1998.

JSCOT supported Australian ratification of the OECD Convention and recommended that a Bill modified in accordance with its recommendations be introduced into the Parliament as soon as possible. Its recommendations about changes to the public consultation draft are found in its 16th Report.(10) The Government accepted some of these recommendations and rejected others.(11)

JSCOT's recommendations and the Government's responses

Some of the recommendations made by JSCOT and the Government's responses to them are briefly outlined below.

Fault elements of offences

JSCOT recommended that the fault elements necessary to ground an offence under the legislation be broadened to include recklessness.(12) The consultation draft bill required intention to be the fault element of an offence.

Under the Criminal Code, conduct is intentional if, for example, the person means to engage in that conduct. A person has an intention in relation to a result if he or she means to bring that result about.(13)

An example of recklessness under the Code is where a person is aware that there is a substantial risk that a circumstance or result will occur and taking the risk is unjustifiable.(14) JSCOT was concerned that situations where a principal pays an inflated amount of money to an agent or consultant and turns a blind eye to the use by the agent of part of the money for bribes would not be caught if intention to influence a foreign public official in the conduct of his or her public duty was required.

The Government rejected JSCOT's recommendation.(15) The Bill as introduced into the Senate confines the fault elements of an offence under the legislation to conduct which is intentional. It is the view of the Government that if fault elements were expanded to include recklessness, the legislation would travel beyond the requirements of the OECD Convention and also beyond the parameters of domestic bribery offences proposed for the Model Criminal Code.(16) The Government also noted that tacit approval of bribery is covered by the general principles of criminal responsibility in Part 2.5 of the Criminal Code.

Jurisdictional basis of the legislation

The exposure draft bill provided that some of the relevant conduct must occur inside Australia before conduct would be caught by the legislation. JSCOT recommended that the jurisdictional basis of the legislation be extended to include any of territoriality, nationality, residence, place of incorporation or business operation.(17) JSCOT said:

Once it is accepted that the conduct sought to be proscribed is essentially international criminal activity that is likely to take place wholly outside Australia, the question is whether imposing a territorial nexus as a precondition to the exercise of jurisdiction over such an offence will render the legislation ineffective and unenforceable.

We have concluded that, to ensure that the objectives and intent of the Bills and met, it is necessary that the focus of the legislation be reflected in the exercise of extra-territorial jurisdiction.

We have also concluded that the objectives of the Bill would be more readily achieved if jurisdiction for the offence of bribery was based on nationality, and that this basis should be defined as widely as possible to include any of territoriality, nationality, residence, place of incorporation or business operation.(18)

An example given to the Committee of the application of the nationality principle is Part IIIA of the Crimes Act 1914 (Cwlth) which deals with child sex tourism. Part IIIA criminalises some offences on the basis of Australian nationality or residence even though the relevant conduct takes place wholly overseas.

The Government accepted JSCOT's recommendation about jurisdiction in part. It agreed that the legislation should be extended to conduct occurring outside Australia if the perpetrator is an Australian citizen or a corporation incorporated in Australia. It rejected the recommendation in relation to residency or business operations in relation to corrupt conduct occurring outside Australia.

The Government responded in part:

[JSCOT] considered that jurisdiction was the central issue on which the effectiveness of the Bill would be judged. It concluded that the conduct sought to be proscribed is essentially international criminal activity likely to take place wholly outside Australia and that the objectives and intent of the Bill will not be met unless jurisdiction for the offence is broader.

The Government accepts the JSCOT recommendation insofar as it agrees to extended jurisdiction on the basis of nationality and place of incorporation but not on the basis of residency or business operations where the conduct is outside Australia. The Government considers that foreign businesses which conduct operations in Australia and residents who are citizens of other countries should be the responsibility of their home jurisdiction in relation to corrupt conduct which occurs outside Australia.(19)

Facilitation benefits

Facilitation benefits are small payments made to induce public officials to perform official functions like issuing licences and permits.(20) They are generally illegal in the country concerned.

JSCOT considered that there were considerable difficulties involved addressing the subject of facilitation benefits. For example, it conceded that some foreign public officials are dependent on facilitation benefits to supplement their income and that such benefits need to be provided by Australian firms in order to do business in some foreign countries. The Committee also pointed out that the OECD Convention is designed to address large-scale corruption aimed at obtaining an improper advantage rather than small-scale payments for non-discretionary government acts.

When JSCOT was examining the legislation in exposure draft form, the draft bill provided options for defences to a charge of bribery. These defences were that the benefit received was less than a threshold amount or that it was of 'small' value. JSCOT recommended that the legislation adopt a purposive approach to the provision of facilitation benefits, that anyone paying a facilitation benefit should be required to record the transaction, and that a 'facilitation benefit' defence along the lines of that in the US Foreign Corrupt Practices Act 1997 should be available.(21) It also suggested that there should be a penalty for non-compliance with the recording requirement.(22)

The Government accepted these recommendations with some changes.(23) In particular, it agreed that a facilitation benefit defence based on the US legislation-with some modifications-should be provided.(24) Further, it agreed that a 'facilitation benefit' defence should only be available if the transaction is recorded as soon as possible and identified as a facilitation benefit. However, failure to record the transaction is not an offence.(25)

Penalties

JSCOT recommended that penalties should be increased and be of similar magnitude to those set out in section 76 of the Trade Practices Act 1974.(26)

The penalty for bribing a foreign public official in both the exposure draft and in the Bill before the Parliament is 10 years imprisonment. Under section 4B of the Crimes Act 1914 this penalty can be converted into a monetary figure by a court-a maximum fine of $66,000 for an individual and $330,000 for a corporation. Maximum fines in section 76 of the Trade Practices Act are $500,000 for an individual and $750,000 to $10,000,000 for a corporation. JSCOT took the view that the penalties contained in the draft bill were too low in view of the seriousness of the offence.

The Government rejected JSCOT's recommendation on the grounds that the penalties in the Trade Practices Act are civil penalties and are therefore a 'soft option' compared to the Bill's provisions which criminalise conduct and provide for imprisonment and/or a fine.(27)

Main Provisions

Item 2 of Schedule 1 inserts new Chapter 4 into the Criminal Code. New Division 70 of that Chapter deals with the bribery of foreign public officials.

Clause 70.1 is a definitions section. 'Benefit' is defined to include any advantage and is not confined to property. 'Business advantage' means advantage in the conduct of business. 'Foreign public official' is also defined. The expression includes employees, officials or contractors of foreign governments, persons appointed under foreign law, those serving in foreign governments (including the military and police), members of the executive, legislature or judiciary of a foreign country, employees and contactors of public international organisations.

Clause 70.2 creates an offence of bribing a foreign public official. Subclause 70.2(1) provides that it is an offence to provide, offer to provide or arrange for a benefit to be offered to a person if the benefit is not legitimately due to that person and the offer is made to influence a foreign public official obtain or retain business. The penalty is a maximum of 10 years imprisonment.

In determining whether a benefit is not legitimately due, the fact that the benefit is customary or is officially tolerated is to be disregarded. So, too, is the value of the benefit [Sub-clause 70.2(2)].

In determining whether a business advantage is not legitimately due, the fact that the benefit is customary or officially tolerated are to be disregarded [sub-clause 70.2(2)].

Defences are set out in clauses 70.3 and 70.4. In clause 70.3, the defences relate to the situation where the conduct complained of is lawful in the foreign public official's country. For example, where a person is charged with the bribery of a foreign public official who is an employee of a foreign government body, that person will have a defence if it is assumed that their conduct occurred wholly in the central administration of that body and the conduct would not have been unlawful in that place.

Clause 70.4 relates to facilitation payments. Under clause 70.4 a person has a defence against a charge of bribing a foreign public official if the person's conduct was solely or mainly to expedite or secure the performance of a routine and minor government action and the person made a record of the conduct in accordance with subclause 70.4(3). Additionally, for the defence to be relied upon successfully, the defendant must have kept the record, or the record must have been lost or destroyed for reasons beyond the defendant's control or the prosecution must be stale.(28) Subclause 70.4(3) provides that a record complies with the subsection if it contains the listed matters. These include the value of the benefit conferred, the date of the conduct, the identity of the foreign public official, the nature of the routine government action that was sought to be facilitated and the person's signature.

A 'routine government action' is defined in subclause 70.4(2) and is an action by a foreign public official that is ordinarily performed by that official and includes such things as granting a permit to conduct business, processing a visa or work permit or providing police protection. Certain matters are not encompassed by the definition of 'routine government action.' For example, the expression does not include decisions about awarding new business [subparagraph 70.4(c)(i)]. Nor does it involve encouraging a decision about whether to award new business [subparagraph 70.4(2)(d)(i)].

Paragraph 70.5(1)(a) provides that a person does not commit an offence of bribing a foreign public official unless the conduct occurs wholly or partly within Australia or on board an Australian ship or aircraft. If the proscribed conduct occurs wholly outside Australia then the legislation will operate only if the perpetrator is an Australian citizen or a company incorporated in Australia. The terms 'Australian aircraft' and 'Australian ship' are defined in subclause 70.5(2).

Clause 70.6 provides that new Division 70 does not exclude or limit the operation of Commonwealth, State or Territory laws.

Endnotes

  1. United Nations, Press Release GA/9206, 'General Assembly endorses outcome of UNCTAD IX, adopts anti-corruption declaration, stresses challenges of global financial integration,' 16 December 1996.

  2. There are 29 OECD members. The original 20 members were Western European and North American nations. Australia joined OECD in 1971. Other member nations are Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States.

  3. Joint Standing Committee on Treaties, OECD Convention on Combating Bribery and Draft Implementing Legislation, 16th Report, June 1998.

  4. Among them are Belgium, Canada, Germany, Japan, Korea and the United States. See http://www.oecd.org//daf/nocorruption/. For a table of information about the steps that participating countries have taken or plan to take to implement the Convention (as at 19 April 1999) see http://www.oecd.org//daf/nocorruption/annex2.htm.

  5. http://www.oecd.org//daf/nocorruption/faq.htm.

  6. Ibid.

  7. Ibid.

  8. Ibid.

  9. Page 8.

  10. JSCOT, op.cit.

  11. Government Response to the Joint Standing Committee on Treaties Report, 'OECD Convention on Combating Bribery and Draft Implementing Legislation'.

  12. JSCOT, op.cit., p.38.

  13. Criminal Code, section 5.2.

  14. Criminal Code, section 5.4.

  15. Government Response, op.cit., p.5.

  16. Ibid.

  17. JSCOT, op.cit., p.59.

  18. Ibid., p.58.

  19. Government Response, op.cit, p.9.

  20. JSCOT, op.cit., p.67.

  21. Ibid., p.85.

  22. Ibid.

  23. Government Response, op.cit., pp.11-14.

  24. Ibid., p.13.

  25. Ibid., p.18.

  26. JSCOT, op.cit., p.89.

  27. Government Response, op.cit., p.15.

  28. Stale, in this case, means that the prosecution was instituted more than 7 years after the alleged offence [subparagraph 70.4(1)(a)(iii)].

 

Contact Officer and Copyright Details

Jennifer Norberry
11 May 1999
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

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ISSN 1328-8091
© Commonwealth of Australia 1999

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Published by the Department of the Parliamentary Library, 1999.

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