Bills Digest no. 12 2007–08
International Trade Integrity Bill 2007
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
Financial implications
Main provisions
Conclusion
Endnotes
Contact officer & copyright details
Passage history
International
Trade Integrity Bill 2007
Date introduced:
14 June 2007
House: House of Representatives
Portfolio: Attorney-General
Commencement:
Sections 1-3 commence on
the date of Royal Assent. Schedule 1 commences on proclamation, or
six months after Royal Assent, whichever is earlier. Schedule 2
commences on the day after Royal Assent.
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
See
also the Senate
inquiry into the Bill tabled 1 August 2007.
Purpose
The purpose of the International Trade
Integrity Bill 2007 (the Bill) is to enhance the operation of
Australian laws to strengthen enforcement of all United Nations
(UN) sanctions and combat foreign bribery . [1] Amongst other things, the Bill
implements the Australian Government s response [2] to recommendations 1-3 made in the
Report of the Inquiry into Certain Australian Companies in relation
to the UN Oil-for-Food Programme (Cole Inquiry Report).
[3]
On the 2 August 1990, Iraq s military forces
invaded Kuwait. On the same day, the United Nations Security
Council (UNSC) adopted Resolution 660,
condemning the Iraqi invasion of Kuwait and demanding an immediate
and unconditional withdrawal of Iraqi forces from Kuwait. On 6
August 1990, the UNSC adopted Resolution 661
placing economic sanctions on Iraq. [4] Resolution 661 notably placed an
international legal obligation on UN member states to ensure that
their nationals did not provide funds or resources to any persons
or bodies within Iraq.
Following the defeat of Iraqi forces in the
1991 Gulf war, the UNSC did not remove the economic sanctions
retaining them pursuant to Resolution 687
as leverage to press for proof of Iraqi disarmament and other
goals. Resolution 687 permitted certain commercial sales of food to
Iraq and other materials and supplies for essential civilian needs
(paragraph 20).
Via the Customs (Prohibited Exports) Regulations
1958, regulation 13CA was introduced on 8 August 1990 to implement
trade sanctions against Iraq and Kuwait in accordance with UN
Security Council Resolution 661. To enable commercial sales
permitted under Resolution 687, a new subregulation 13CA(2) was
introduced to provide a more flexible formula, enabling the
Minister to grant a permission for an exportation if the Minister
was satisfied that permitting the exportation would not infringe
the international obligations of Australia. A number of other
customs and financial regulations were introduced alongside the
Customs (Prohibited Exports) Regulations 1958, but they are not
relevant to the Bill. [5]
It was not long before it became evident that
the economic sanctions were causing enormous suffering for the
people of Iraq. The UN Security Council responded by passing
Resolution
986 in April 1995, establishing the Oil-For-Food-Programme.
Basically, the Oil-For-Food-Programme enabled the Iraqi government
to raise revenue through the sale of its major export, oil. With
this revenue, the Iraqi government was able to purchase
humanitarian goods including basic food stuffs that were not
embargoed under the economic sanctions. This program commenced in
December 1996. At the time, Australia had been a supplier of wheat
to Iraq for over four decades and was understandably motivated to
maintain one of its traditional export markets. From 1999, while it
was still a statutory authority, the AWB was winning contracts
under the Oil-For-Food Programme. [6] Contracts had also to be approved by the UN. The
primary UN administrative unit for assessing contracts in terms of
compliance with UNSC resolutions was the New York-based Contracts
Processing and Management Division (CPMD) of the Oil-For-Food
Programme.
Following the
defeat of Iraq by the US-led coalition in the second Gulf War, the
UNSC adopted Resolution
1483 on 22 May 2003 ending all prohibitions relating to trade
with Iraq established by UNSC Resolution 661 and subsequent
resolutions, with the exception of prohibitions related to the sale
or supply to Iraq of arms and related material.
Thus, regulation 4QA of the Customs (Prohibited Imports)
Regulations 1956 and regulation 13CA of the Customs (Prohibited
Exports) Regulations 1958 were repealed on 29 May 2003.
Soon after establishment of the Coalition
Provision Authority in April 2003, evidence started to come to
light suggesting that the Saddam Hussein regime had been operating
a transactions kickbacks scheme effectively circumventing the
impact of the economic sanctions.
In April 2004, United Nations Secretary
General Kofi Annan appointed an independent, high-level inquiry to
investigate the administration and management of the Oil-for-Food
Programme in Iraq. The appointed Independent Inquiry Committee
(IIC) was chaired by Paul Volcker, former Chairman of the United
States Federal Reserve.
The
Manipulation of the Oil-for-Food Programme by the Iraqi Regime the
Volcker Report, released on 27 October 2005, found
inter alia that the Australian Wheat Board (AWB) later AWB
Limited, [7] was the
world s largest participant in the Iraqi Oil-For-Food Programme and
the biggest single contributor of kickbacks. In exchange for
trouble-free disembarkation of wheat purchased under the
Oil-for-Food Programme, the AWB paid approximately $US224 million
in inland transportation fees and after-sales services fees to
Alia. Alia is a Jordanian trucking company, which Australian
intelligence services were alleged to have discovered in 1999 was
partly owned by the Iraqi government. [8] However, Alia actually provided no
transportation or distribution services for Australian wheat in
Iraq. For its role as an intermediary, Alia received a small
percentage of the 'transportation fees', and chanelled the rest to
Saddam Hussein's government. The transportation fees paid by AWB
were offset by increases in the price received for its wheat sales.
Payments by the AWB for transportation fees were approved by the
the UN Security Council Sanctions Committee. Following receipt of
these approvals, the AWB sought permission from the delegate of the
Minister for Foreign Affairs as was required under regulation 13CA.
The delegate relied on the UN approval for assurance that the
shipments were in accordance with the terms of the UN
sanctions.
Based on the evidence it received, the Volcker
Report concluded that the AWB did not possess actual knowledge of
Iraq s partial ownership of Alia, and it did not know that Alia
never provided transportation services, or that so-called
transportation fees were being remitted to Iraq. [9] However, the Volcker Report did
note that there were a sufficient number of circumstantial
irregular signals, that should have alerted the AWB to the fact
that Iraq would have been in a position to be unjustly benefitting
from the way in which commerical operations were being
transacted.
As a result of the findings of the Volcker
Report, extensive reforms of UN practices were instituted:
including broader and more rigorous financial
disclosure requirements, a stronger policy to protect
whistleblowers, and a review of all oversight and audit
arrangements. [The UN Secretary-General signalled his intention] to
pursue these and other reforms with even greater vigour [ ] and
[looked] to member states for their support.
[10]
The Cole Inquiry
The Cole Inquiry (formally the Inquiry
into Certain Australian Companies in relation to the UN
Oil-For-Food Programme) was a Royal Commission set up by the
Australian Government in November 2005. The Cole Inquiry was
initiated in response to the findings of the Volcker Report. The
release of the Volcker Report was accompanied by a strong statement
by UN Secretary-General Kofi Anan. The Secretary-General noted:
that a vast network of kickbacks and surcharges
has been exposed, involving companies registered in a wide range of
Member States, and certified by them as competent to conduct
business under the programme. He [hoped] national authorities will
take steps to prevent the recurrence of such practices in the
future, and that they will take action, where appropriate, against
companies falling within their jurisdiction. [11]
Cole Inquiry Terms of Reference
(a) whether any decision, action, conduct, payment or writing of
any of the three Australian companies mentioned in the Final Report
(Manipulation
of the Oil-for-Food Programme by the Iraqi Regime the Volcker
Report) of the Independent Inquiry Committee into the
United Nations Oil-for-Food Programme, or any person associated
with one of those companies, might have constituted a breach of any
law of the Commonwealth, a State or Territory; and
(b) if so, whether the question of criminal or other legal
proceedings should be referred to the relevant Commonwealth, State
or Territory agency.
On 27 November 2006 Commissioner Cole s report
was tabled in Parliament. While the Cole Report focused on the Iraq
sanctions, its findings and recommendations clearly had application
to the Australian administration of UN Security Council sanctions
generally.
[ ] that the
Customs (Prohibited Exports) Regulations 1958 be
amended to incorporate a prescribed form that those applying for
permission to export would be required to complete. I further
recommend that the Regulations be amended so as to:
-
make it an offence to knowingly or recklessly
provide in an application information that is false or misleading
in a material particular.
-
make it an offence to knowingly or recklessly
omit a material particular from an application for a permission to
export.
-
render invalid any permission to export granted
on the basis of an application that was false or misleading in a
material particular or that omitted a material particular.
The prescribed form should be required to be
signed by a senior executive of an exporting company, who should
also be personally liable for knowingly or recklessly signing a
form that is false or misleading in a material particular or omits
a material particular. The penalty for so doing should be
imprisonment for 10 years.
[ ] that there be inserted in the Commonwealth
Criminal Code, perhaps in Chapter 4, offences for acting contrary
to UN sanctions that Australia has agreed to uphold. The statute
should prohibit direct or indirect unapproved financial or trading
transactions designated by the Governor-General. Breach of statute
should be an offence of strict liability. The penalty for breach
should be severe, equivalent to three times the value of the
offending transactions, by way of monetary fine for corporations
and up to 10 years' imprisonment for individuals.
[ ] that there be conferred on an appropriate
body a power to obtain evidence and information of any suspected
breaches or evasion of sanctions that might constitute the
commission of an offence against a law of the Commonwealth.
[ ] that consideration be given to amending the
Royal Commissions Act 1902 to permit the Governor General in
Council by Letters Patent to determine that in relation to the
whole or a particular aspect of matters the subject of inquiry,
legal professional privilege should not apply.
On 2 December 2006 the Australian
Financial Review pointed out that:
Terence Cole never set out to investigate legal
professional privilege, but its reform may be a legacy of his
inquiry.
[12]
The article noted that Commissioner Cole was
deeply unimpressed with the way in which AWB and its lawyers used
legal professional privilege when deciding to make document
available to the Inquiry. Commissioner Cole was quoted as saying
that:
AWB s response to this inquiry was one of
non-cooperation, lack of frankness and resort to litigation to
endeavour to keep from disclosure documents and material relevant
to this inquiry. I do not doubt that the decision to keep secret
the damaging material was taken by AWB and its directors because of
the awkwardness of AWB s position.
[13]
The article also pointed out that Commissioner
Cole was not the first to complain about the use and abuse of
claims of privilege during Royal Commissions. Commissioner Cole s
reportedly savage assessment of the conduct of the AWB in relation
to the shield of legal professional privilege makes it unsurprising
that one of the recommendations of the Cole Inquiry called for a
re-think of the contextual use of legal professional privilege.
[14]
[ ] that there be a review of the powers,
functions and responsibilities of the body charged with controlling
and monitoring any Australian monopoly wheat exporter. A strong and
vigorous monitor is required to ensure that proper standards of
commercial conduct are adhered to.
On 8 May 2007, the Australian Government
tabled its
response to the Cole Inquiry. The proposed amendments contained
in this Bill address recommendations one to three. Regarding
recommendation 4, the Government stated:
Recommendation 4 related to the application of legal
professional privilege in royal commission proceedings.
On 30 November 2006 the Australian Government announced an
inquiry by the Australian Law Reform Commission (ALRC) into legal
professional privilege as it relates to the activities of
Commonwealth investigatory agencies.
The Australian Government accepts that the Cole Inquiry raised
important questions in relation to legal professional privilege and
its impact on Commonwealth investigations which require further
consideration. The ALRC will look at legal professional privilege
and its impact on all Commonwealth bodies, including royal
commissions, that have coercive information gathering or associated
power. The ALRC is to provide its report to Government by December
2007.
Recommendation 5 related to wheat export marketing
arrangements.
On 12 January 2007, the Australian Government
announced the appointment of a Wheat Export Marketing Consultation
Committee to undertake extensive consultation with the Australian
wheat industry, particularly growers, about their wheat export
marketing needs. The Committee reported to the government on 29
March 2007. This report will be used by the government to inform
the decision on future wheat export marketing arrangements.
[15]
The Government has also sought to address
Recommendation 5 in its recent amendment to Wheat Marketing Act
1989. The Wheat Marketing Amendment Act 2007 had as
one of its central aims an expansion of the scope of the Wheat
Export Authority s information gathering powers in order to allow
it to request information from parties other than the AWB, where it
believes the request relates to the performance of its functions .
[16]
In addition to the five specific
recommendations, Commissioner Cole also recommended a Task Force be
established to consider possible prosecutions in consultation with
the Commonwealth and Victorian Directors of Public Prosecutions. On
20 December 2006 the Australian Government announced the
establishment of the Task Force. The Task Force is led by a senior
former Australian Federal Police (AFP) officer Peter Donaldson. Mr
Donaldson and a team of AFP officers, Australian Securities and
Investments Commission staff and a member of the Victorian Police
are working on Commissioner Cole s findings of possible criminal
conduct.
[17]
On 19 January 2007, it was reported that 4 of
the 11 former senior executives facing possible criminal charges
over the affair have received more than $65 million in golden
handshakes. [18]
On 14 March 2007, the Australian
reported that the AWB taskforce was looking into unsourced
allegations arising out of the Cole Inquiry as to whether agents of
AWB may have made payments to officials in Pakistan and Indonesia.
[19]
Australia has signed up to international
anti-corruption standards, in recognition of the cost and ongoing
harm caused by this sort of activity. [20] Australia is a signatory to both the
UN Convention Against Corruption (2005) and the
Organisation for Economic Cooperation and Development (OECD)
Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions (1999).
When the Volcker report was released, there
was some speculation whether AWB officers might have committed a
foreign bribery offence under the Criminal Code 1995.
Whilst the Cole Commission found that this did not appear to be the
case, the evidence unearthed in the Commission s hearings did
generate public and political debate on the issue. For example, On
22 December 2006 the Australian Financial Review reported
that:
The Labor Party called on the government to
tighten tax laws and the way they related to bribery after AWB was
allowed to claim deductions for trucking fees paid to Saddam
Hussein s regime.
[21]
The Labor spokesman on justice and customs,
Senator Joseph Ludwig, said the government should examine the
inconsistencies between the Income Tax Assessment Act
1997 and the Criminal Code, which would help close the
loophole. [22]
Federal Treasurer Peter Costello was reported
as responding that:
Labor s proposed amendments would not have
changed the fact there was insufficient evidence to find that AWB
had paid bribes under the Criminal Code, a pre-requisite to
disallowing it as a tax deduction.
[23]
Also, in January 2006, a report of the
OECD working party on Bribery in International Business
Transactions regarding Australia s implementation of the
OECD Bribery Convention was released. As a result of the
working party s report, the Commonwealth undertook to narrow the
scope of a defence available in the Criminal Code relating to an
alleged foreign bribery offence. See discussion of item
3 in Schedule 2 in the Main Provisions
part of the Digest.
The Bill addresses both of these matters
through amendments in Schedule 2.
In a Media Release outlining the amendments
contained in the Bill, Attorney-General Philip Ruddock stated
that:
Australia led the world in conducting the
public, transparent and independent Cole Inquiry. These changes
continue Australia s tough stance.
the Government s response has exceeded
Commissioner Cole s recommendations.
[24]
The Cole Inquiry has attracted significantly
wide-ranging and sustained public interest.
A notable and enduring theme in some press
commentary has been dissatisfaction with the scope of the Cole
Inquiry's terms of reference set out by Prime Minister John Howard.
Opposition parties and a range of commentators have argued that the
less than satisfactory scope [25] of the Cole Inquiry had hamstrung Commissioner
Cole from looking at the relevant behaviour and competence of
ministers in terms ensuring the enforcement of UN sanctions against
Iraq. [26] The
terms of reference given to the Cole Inquiry have also been
perceived as precluding it from addressing the behaviour of the AWB
board [27] and even
more apparent fundamental governance issues. [28]
In early 2006, 21 of Australia s top lawyers
and legal scholars wrote an open letter to the government urging
that the terms of reference of the Cole Inquiry be expanded.
[29] The Government
responded by stating that that inquiry had adequate powers to
determine whether there had been any wrongdoing, and that it would
not extend the terms of inquiry without a request from Commissioner
Cole. [30]
It is therefore not surprising that most of
the commentary surrounding the Bill seems to be largely centred on
arguing that the Bill and the Government should be addressing more
than just the recommendations flowing from the terms of reference
of the Cole Inquiry.
In his book Against the Grain:
the AWB Scandal and Why it Happened, Stephen Bartos, a
Professor of governance at the University of Canberra argued
that:
The board of a company is or should be responsible for how a
company is run and for the culture within the company.
Culture is not within the Cole inquiry s terms
of reference, but it is at the heart of why the alleged kickbacks
occurred.
[31]
Bartos points out that the Stock Exchange does
promulgate
Principles of Good Corporate Governance and Best Practice
Recommendations, which have been developed by its
Corporate Governance Council. However, Bartos suggests that most of
those principles do not appear to have been followed by the AWB
Board, and acknowledges that a written code is a necessary but not
sufficient condition for good corporate governance. It is the
responsibility of a board and in turn the CEO and senior management
to ensure that an organisation behaves ethically. [32] At the time of writing his book,
Bartos states that:
Commissioner Cole had been shown no evidence
that the AWB board ever deliberated over ethical issues raised by
alleged kickbacks in fact, the clearest evidence that they did not
consider the matter is that the kickbacks appear to have continued
for so long.
[33]
While Commissioner Cole did conclude that
there had been a failure of corporate culture , [34] the Inquiry was not explicitly
directed at interrogating the very structures and culture of action
and inaction which generated systemic failure. [35] Writing along these lines, in an
article titled The real scandal published in The
Australian on 29 November 2006, Paul Kelly offers the
following observations on where he believes the failures of AWB lie
and thus sheds light on the areas in need of reform:
Understand the failure of governance here. The Howard cabinet
engineered a flawed privatisation of AWB by converting a public
monopoly into a even more dangerous private monopoly able to
operate without proper transparency [ ] monitored by a toothless
Wheat Export Authority, clueless about AWB s frauds and powerless
to investigate its monopoly operations .
Cole was not asked to examine AWB s monopoly power. Yet, he gets
to the issue on page 2 of his report. [ ] He recommends a review of
powers to ensure there is proper monitoring of any monopoly wheat
exporter.
In a revealing view of DFAT, Cole outlines the reasons why the
department failed to investigate such warnings, thereby touching on
governance failure. DFAT regarded AWB as a company of utmost
integrity and this belief was reasonably held . DFAT saw its role
as being to support Australia s economic interests against
allegations from competitors.
Critically, DFAT did not see itself as an investigatory agency
and it possessed neither the systems nor procedures to investigate
alleged breaches of sanctions. It lacked the commercial and price
expertise to make such judgements and it did not try
In short, responsibility for compliance with UN sanctions lay
with the exporting nation yet there was no adequate mechanism
within the Australian Government to ensure sanctions were being
upheld.
This is a governance and policy failure. [36]
Australia s international legal
obligations
According to J rgen Kurtz, Director of the
International Economic Law Program at the University of Melbourne,
under international law Australia has an obligation to institute
relevant measures to give effect to UN Security Council
Resolutions. In this context, Australia was under a duty to provide
effective measures to ensure that Government entities and
Australian companies were not breaching the sanctions regime
against Iraq. [37]
In a submission to the Senate Inquiry into the
International Trade and Integrity Bill 2007, Dr Ben Saul (Director
of the University of Sydney s Centre for International and Global
Law) has raised what he considers to be the outstanding
international legal questions as to whether
Australia had a duty to ensure (as a matter of strict liability)
that its companies were not in breach of sanctions, and whether
that duty could be discharged by relying on the United Nations
vetting of commercial contracts.
[38]
A legal opinion commissioned by Mr. Kevin Rudd
(the then Shadow Minister for Foreign Affairs) and prepared by Bret
Walker SC argued that:
[regulation] 13CA of the Customs (Prohibited
Exports) Regulations imposed on the Minister (or his authorised
delegate) an obligation not to approve the export of wheat unless,
on the material available to the decision maker, he was satisfied
that granting such export permission would not breach Australia's
obligations under the UN sanctions imposed by Resolution 661 and
Article 25 of the UN Charter.
[39]
While Commissioner Cole stated that this
argument had some respectability he thought that there was an
alternative construction of rregulation13CA which was also had
merit:
Since the only possible source of breach of
Australia's international obligations was breach of the UN
resolutions restricting trade with Iraq, UN acceptance that a
contract, having been examined by UN experts, was consistent with,
and not contrary to, the resolutions that permitted limited trade
with Iraq provided a sound basis for the Minister or his delegate
to grant approval for export.
[40]
Nonetheless, Dr Saul has suggested that:
At a minimum, the Bill should include a specific
provision creating a strict liability offence for any Australian
official or minister to (intentionally or recklessly) authorise or
permit the export or import of UN-sanctioned goods (additional to
the proposed offences of actually importing or exporting such
goods). Such an offence would make it clear to Australian officials
that a proper inquiry must be made into whether proposed trade may
violate sanctions and that negligence is not a sufficient defence.
[41]
The Explanatory Memorandum states that the
Government will commit $4.6 million over four years to tackle the
first three recommendations of the Cole Inquiry Report. The funding
is targeted at enhanced implementation, monitoring and compliance
of bilateral sanction regimes through the use of a
whole-of-government approach.
Charter of the United Nations Act
1945
The object and purpose of the Charter of
the United Nations Act 1945 (UNC Act) is to to enable
Australia to apply sanctions giving effect to certain decisions of
the Security Council .
This defines two new terms proposed to be
inserted in the UNC Act. Notably, it includes the term UN sanction
enforcement law . This is a law so specified by the portfolio
Minister via legislative instrument. Laws can only be so designated
to the extent they give effect to decision of the UNSC that member
States carry out certain measures, not involving the use of force,
as a required to maintain or restore international peace and
security. An example would be a Commonwealth law implementing an
economic sanctions order by the UNSC.
The other term is Commonwealth designated
entity , which is also to be specified by legislative instrument.
Such entities will have the role of administering UN sanctions
through powers conferred by provisions in the Bill covered later in
this Digest.
Proposes the insertion of subsections
6(2) and 6(3) providing for a general regulation making
power so as to give effect to decisions of the UNSC as they exist
from time to time.
Of possible concern is the operation of
proposed paragraph 6(2)(a). This provides for the
automatic incorporation via regulation of persons or entities
proscribed by the UNSC. At least within the terrorism context, the
UNSC s proscription powers have raised human rights concerns,
specifically relating to procedural fairness. Proscription (or
listing) refers to the public identification and official
condemnation of certain persons and or organisations, based on
their activities or behaviour which have been criminalised by the
state, thus preventing or seriously limiting those activities or
behaviour. The criminalisation of certain activities which may
harm, endanger or detract from the safety and wellbeing of human
beings, does not in and of itself raise human rights issues.
Rather, it is the basis upon which the proscription of individuals
and or organisations occurs that may raise human rights issues.
Proscription powers have been characterised by a range of
commentators as being typically based on rather weak standards of
proof, untested evidence and lack of opportunity for affected
persons to respond. [42] The impact of proscription may have a discriminatory
impact, serving to limit an individual s or organisation s freedoms
or opportunities.
However in the Senate Inquiry into the
International Trade Integrity Bill 2007 a representative from DFAT
offered the following explanation as to why the element of
procedural fairness could not be accommodated in the Bill:
The automatic incorporation by reference
provision would apply to the broad financial sanctions imposed by
the Security Council as they relate to the nomination by the
Security Council of specific individuals and entities. These are
binding obligations imposed by the Security Council which do not
allow for the member states to make any kind of allowances in terms
of the question of procedural fairness. In other words, we do not
have either the opportunity or the right, under the operation of
the Charter of the United Nations, to provide for any deferral of
the registration, under the Australian law, of individuals named by
the Security Council as being individuals to whom sanctions ought
to be applied. Bearing this in mind, we are not able to build in a
procedural fairness element because that would not be consistent
with our obligations under the UN charter.
[43]
Notwithstanding the response and reasoning
provided by the DFAT representative to the Senate Inquiry, it may
also be noted that the 2003 UNSC
Resolution 1456 calling on all States to:
[ ] take urgent action to prevent and suppress
all active and passive support to terrorism [ ]
States must also ensure that any measure taken
to combat terrorism complies with all of their obligations under
international law, and should adopt such measures in accordance
with international law, in particular international human rights,
refugee, and humanitarian law.
Thus, Australia s obligations to assist in
combating terrorism may reach a point where their
operationalisation must be appropriately balanced [44] with other intersecting
international legal obligations, thereby necessitating
accommodation of the element of procedural fairness.
Proposes the insertion of subsection
13A which has the effect of invalidating a licence,
permission, consent, approval or authorisation granted under
regulations, if that grant was made on the basis of an application
that was false or misleading in a material particular. Item
7 provides that this amendment only applies to
applications that were made on or after the commencement of this
section.
While there is a well-understood presumption
against retrospectivity, the prospective operation of this section
potentially removes a number of possible offenders from its
capture. Indeed, it is curious that there would not have already
existed at least a strong tacit or obvious requirement as to the
integrity of the information contained in an application which was
an important factor in deciding its success.
Existing subsection 20(1) of the current UNC
Act makes it an offence for a person to deal with freezable
assets. [45]
Item 16 proposes new penalties for individuals
convicted of an offence under new
subsection 20(1) and proposes offences and new
penalties for bodies corporate.
In the case of an individual,
proposed subsection 20(3A) increases the maximum
prison sentence from 5 to 10 years, and also introduces option of a
fine instead of, or in addition to, the prison sentence.
Proposed subsection 20(3B) provides that for the
purposes of proposed subsection 20(3A) the maximum
fine is 2,500 penalty units ($275 000), or, if the offence relates
to a transaction or transactions the value of which the court can
determine, then: 3 times the value of the transactions or 2,500
penalty units, whichever is the greater. The fault element in
subsection 20(3) of the current UNC Act is
retained.
Proposed subsections 20(3C) and
20(3D) mirror subsections 20(1) and 20(2)
of the current UNC Act, creating the same offence for bodies
corporate and making that offence a strict liability one in
keeping with the recommendation of Cole Inquiry Report.
Proposed subsection 20(3E) provides a defence to
an offence dealing with a freezable asset if the body
corporate is able to prove that the use or dealing was solely for
the purpose of preserving the value of the asset, or the body
corporate took reasonable precautions, and exercised due diligence,
to avoid contravening subsection 20(3C).
Proposed subsection 20(3F)
provides that the penalty for a body corporate is 10,000 penalty
points ($1 100 000), or where the offence relates to transactions
the value of which can be determined, 10,000 penalty units or three
times the value of the transactions, whichever is the greater
amount.
Proposed subsection 20(3C)
provides that in the case of a freezable asset, it is an
offence for a body corporate to hold an asset and use or deal with
the asset; or allow the asset to be used or dealt with; or to
facilitate the use of the asset or dealing with the asset (where it
is not in accordance with a notice under section 22).
This item proposes the insertion of
subsection 20(4) which provides that extended
geographical jurisdiction category A applies to offences under
proposed subsection 20(3C) thus by extending the
scope of the geographical jurisdiction of the offence, this
proposed amendment strengthens Australia s ability to taken action
against bodies corporate who commit such an offence.
This item proposes new subsections that
provide a new penalty for individuals convicted under the existing
subsection 21(1) of an offence of giving an asset to a proscribed
person or entity, and proposed subsection 21(2C)
provides for a similar offence and new penalty to apply to bodies
corporate. The penalties are the same as those applying to the
offences under section 20 discussed above
The amendment contained in this item proposes
that extended geographical jurisdiction category A applies to
offences under proposed subsection 21(2C). Thus by
extending the scope of the geographical jurisdiction of the
offence, this proposed amendment strengthens Australia s ability to
taken action against bodies corporate who commit such an
offence.
Proposed section 22B has the
effect of invalidating any authorisation granted under section 22
to deal with a freezable asset, if that authorisation was
made on the basis of an application that was false or misleading in
a material particular. Item 25 provides that this
amendment only applies to applications that were made on or after
the commencement of this section. The commentary made under
item 6 applies equally here.
Proposed section 27 provides
an offence for individuals or bodies corporate that engage in
conduct that contravenes a UN sanction enforcement law (see
item 2). In connection with a UN sanction enforcement law,
proposed section 28 provides an offence for
providing false or misleading information, or omitting any matter
or thing without which the information or document is misleading
.
The same penalties are provided for conviction
of offences under proposed sections 27 and 28 as
those applying to the offences under section 20 discussed above.
The Explanatory Memorandum states that severity of these penalties
are in keeping with Cole Inquiry Recommendations and reflect the
Government s determination to encourage ethical behaviour and
compliance with laws relating to the administration of UN sanctions
. [46]
The Explanatory Memorandum points out that the
power to require the production of documents so as to assist with
the administration of regulatory functions and enforcement of
sanctions is not new; it has precedent in the production orders
issued by other Commonwealth bodies such as the Australian and
Investments Securities Commission and the Australian Competition
and Consumer Commission. [47]
Proposed section 29 provides
that the CEO of a Commonwealth entity (such as a Commonwealth
department or statutory agency) may give any information or
document to the CEO of a designated Commonwealth entity (see item
2) for a purpose in connection with the administration of a UN
sanction enforcement law.
Proposed section 30 gives the
CEO of a designated Commonwealth entity the power to require a
person to provide documents for the purpose of determining whether
UN sanction enforcement law has been complied with.
Proposed section 32 makes it an offence (carrying
a maximum penalty of 12 months imprisonment) to fail to comply with
such a request for information under proposed section
30. Proposed section 31 enables the CEO
to require that the information provided be verified by oath or
affirmation.
Self incrimination is not an excuse for
failing to provide information requested under proposed
section 30. However, proposed section 33
provides that information received under proposed section
30 is not admissible evidence against the person in any
criminal proceedings or other proceedings that would expose the
person to a penalty, other than for an offence under
proposed sections 28 or 32.
Proposed section 36 provides
that a person who in good faith, provides or makes use of
information or a document under proposed sections 28, 30,
34 or 35 is protected from liability in any proceedings
for contravening a law that may arise from that conduct or in any
civil proceedings for loss or damage of any kind .
Given that there is protection when the
Government is the active seeker of this information, it is not
clear why similar explicit protection from penalty or retribution
is not necessarily afforded when a whistleblower discloses such
information. These whistleblowers can of course be persons in the
private sector and it maybe difficult to craft such a protection.
Consideration of a uniform approach to stronger whistleblower
protection would be in line with reforms of UN practices, and would
respond to the call by former UN Secretary-General Kofi Annan
mentioned earlier in this Digest - for member states to follow
suit. It is noteworthy that in its July 2007 Progress Report on
Enforcement of the OECD Convention on Combating Bribery of Foreign
Public Officials, Transparency International expressed the
view that Australia had unsatisfactory whistleblower protection
both in the public and private sectors. [48] In its submission to the Senate
Inquiry into the International Trade Integrity Bill 2007,
Transparency International Australia emphasized this point stating
that they:
[ ] consider it is urgent that special
legislative protection be also afforded to whistleblowers in this
context.
[49]
Proposed section 37 places an
obligation on any person who applies for a licence, or
authorisation under a UN sanction enforcement law, to retain any
records or documents relating to that application for the period of
5 years. The same obligations are introduced for a person who is
granted a licence or authorisation.
Proposed section 38 enables
the CEO of a designated Commonwealth entity to delegate to an SES
employee any or all of the functions under the UNC Act.
Customs Act 1901
This item proposes a definition of
UN-sanctioned goods to subsection 4(1) of the Customs Act.
Proposed section 52
invalidates a licence, permission, consent or approval granted in
respect of importation of UN-sanctioned goods, where the
information upon which application on which the approval was based
was false or misleading in a material particular, or omitted any
matter or thing without which the information or document is
misleading in a material particular . Item 30
states that proposed section 52 only applies to a licence,
permission, consent or approval granted in respect of an
application made on or after the commencement of proposed section
52.
Items 31 and 32 mirror
items 29 and 30 respectively,
though deal with licence, permission, consent or approval granted
to export UN-sanctioned goods.
Proposed section 233BABAA
enables regulations to be made which prescribe specified goods as
UN-sanctioned goods. However, certain requirements must be met.
Firstly, the import or export of the putative prescribed goods must
be prohibited under the Customs (Prohibited Imports) Regulations
1956 or the Customs (Prohibited Exports) Regulations 1958.
Secondly, that the regulation under which the import or export of
that good is prohibited, gives effect to decision of the UNSC that
member States carry out certain measures, not involving the use of
force, as a required to maintain or restore international peace and
security.
Proposed sections 233BABAB
and 233BABAC makes it an offence to import or
export UN-sanctioned goods respectively, where the import or export
of that good was prohibited absolutely, or prohibited unless the
approval of a particular person had been obtained and, at the time
of the importation or exportation it had not been obtained. In the
case of importation or exportation of a good which is prohibited
absolutely, the absolute liability attaches to the offence.
However, in the case where there was a failure to obtain approval
from a particular person, strict liability attaches to the
offence.
For an individual, offences under
proposed sections 233BABAB and
233BABAC are punishable either by imprisonment for
not more than 10 years, and/or a fine of 2,500 penalty units or
three times the value of the goods to which the offence relates,
whichever is the greater amount. The penalty for bodies corporate
is 10,000 penalty units or 3 times the value of the goods to which
the offence relates, whichever is the greater amount.
The Explanatory Memorandum states that:
These offences will be strict liability offences
for bodies corporate. The Government considers that all offences
relating to behaviour in breach of UN sanctions should carry equal
penalties to encourage companies and individual directors to ensure
high ethical standards in all dealings in relation to UN sanctions.
[50]
Under proposed section 233C,
it is an offence to make and sign an application in an approved
form, under the Customs (Prohibited Imports) Regulations 1956 or
the Customs (Prohibited Exports) Regulations 1958 in relation to
the importation or exportation of UN-sanctioned goods, and the
application contains information that is false or misleading in a
material particular or omits information, without which the
application is misleading in a material particular. For an
individual, the offence carries a maximum penalty of 10 years
imprisonment and/or 2,500 penalty units. For a body corporate, the
offence carries a maximum penalty of 12,500 penalty units.
In their submission to the Senate Inquiry into
the International Trade Integrity Bill 2007, Transparency
International Australia provided the following comment on Schedule
2:
The amendments proposed to both Part 70 of the Criminal Code Act
and to the Income Tax Assessment Act are welcome.
They will, when enacted, strengthen the provisions creating the
offence of bribery abroad. They serve to implement key points made
in the Phase 2 report on Australia s application of its obligations
under the OECD Convention and the 1997 OECD Recommendation on
combating bribery in international business transactions.
It must be accepted that there are formidable difficulties in
successfully mounting a prosecution and imposing sanctions under
Part 70 of the Criminal Code due in large part to the fact that the
criminal conduct takes place outside Australia. The planned
amendments to Section 70 of the Criminal Code will, to a degree,
reduce some of the difficulties and make the legislative intent
plainer.
However, we have some concern, as a technical drafting matter,
that the amendment proposed to the tabulation provision, Subsection
70.3(1), could be enhanced somewhat and made clearer. [51]
Criminal Code Act
1995
The relevant Commonwealth law dealing with
bribery of foreign officials is contained in the Criminal Code
Act 1995, as inserted by the Criminal Code (Bribery of
Foreign Public Officials) Act 1999, which implements
Australia's obligations under the
OECD Anti-Bribery Convention. [52]
Proposed subsection 70.2(1A)
provides that a benefit paid to a foreign public official may still
be unlawful even if it failed to gain the business advantage
desired.
One of the factors that must be proven under a
section 70.2 offence is that the benefit given to the foreign
official was not legitimately due to them. Currently, paragraph
70.2(2)(a) requires the court to disregard the fact that the
benefit might have been perceived to be customary in determining
whether the benefit was legitimately due to the official.
Item 2 enlarges the scope of paragraph
70.2(2)(a) by requiring that the court also disregard the
fact that the benefit might be perceived to be necessary or
required This amendment works in conjunction with item 3 below.
This item proposes an amendment to subsection
70.3(1) clarifying that the defence under this
subsection to bribing a foreign official, is only available when
the benefit given is required or permitted by written law
of the country or place that governs the behaviour of a foreign
public official . Currently, the defence is made out, when amongst
other situations, the benefit was not against the law of
the relevant place. The effect of the amendment is to limit the
scope of the defence.
Income Tax Assessment Act
1997
Proposed subsection 26-52(2A)
clarifies that a benefit paid to a foreign public official may be a
bribe even if the business advantage that was sought was actually
obtained or retained.
The proposed amendment to
subsection 26-52(3) clarifies that an amount is
not a bribe to a foreign public official if it was required or
permitted by written law of the foreign public official s country.
The Explanatory Memorandum states that this is to be the case,
regardless of the results of payment or the alleged necessity of
payment . [53]
Proposed subsection 26-52(4)
is designed to achieve consistency with the definition of
facilitation payment in the Criminal Code Act. Thus, an amount paid
to a foreign public official is not a bribe only if the value of
the benefit is minor in nature and incurred for the sole or
dominant purpose of securing or expediting the performance of a
routine government action of a minor nature .
Based on the commentary relating to the
operation of the OECD Convention on Combating Bribery of
Foreign Public Officials in International Business
Transactions published by the American Society of
International, this amendment seems to be consistent with the
understanding of Article 1(1) of the OECD Convention. According to
Geoffrey Watson:
The Commentary to Article 1(1) asserts that the
provision does not cover small "facilitation" payments to foreign
officials to induce them to perform their functions. Even if such
payments are illegal under the foreign country's law, they
apparently do not constitute payments made "to obtain or retain
business or other improper advantage." The Commentary acknowledges
that this type of petty corruption is a "corrosive phenomenon" but
argues that it should be addressed by "support for programmes of
good governance" rather than criminal sanctions, which do not seem
a "practical or effective" alternative. Again, the Foreign Corrupt
Practices Act contains an analogous provision: it permits a
"facilitating or expediting payment" designed to "expedite or to
secure the performance of a routine governmental action" by a
foreign official.
[54]
This mirrors the amendment to the Criminal
Code Act 1995 proposed by item 2 in
Schedule 1.
The amendments proposed in this Bill endeavour
to make an important contribution to strengthening Australia s
legal framework so as to provide for relatively more effective
implementation of United Nations sanctions regimes, in greater
conformity with Australia s obligations under the UN Charter. While
the proposed amendments have generally received a positive
response, [55]
concerns have been raised regarding the comprehensiveness of the
amendments and the possible undesirable human rights consequences
flowing from the amendment proposed by item 5 in schedule 1.
Endnotes
[1] . Explanatory Memorandum, p. 1.
[4] . The economic sanctions provided for a rather
comprehensive trade embargo excluding supplies intended strictly
for medical purposes, and, in humanitarian circumstances,
foodstuffs These were to be implemented and monitored by the
Security Council sanctions committee.
[6] . Stephen Bartos,
Against the Grain: the AWB Scandal and Why it Happened,
UNSW Press, New South Wales, 2006, pp.16 19.
[7] . In July 1999,
the Australian Wheat Board Limited became the privatized version of
the former Australian Wheat Board, a statutory marketing authority
which enjoyed monopoly rights over Australian wheat exports.
[8] . Kevin Rudd,
Questions Without Notice , House of Representatives,
Debates, 27 March 2006; Kevin Rudd, Second Reading: Royal
Commissions Amendment Bill 2006 , House of Representatives,
Debates, 30 May 2006; AWB Scandal , Sydney Morning
Herald, 28 November 2006, p. 10.
[9] . The Volcker
Report, 27 October 2005, pp. 251, 255-7, 325 and 395 99.
[12] . Marcus
Priest, United Against Privilege , Australian Financial
Review, 2 December 2006, p. 22.
[14] . See further,
Moira Coombs, Royal Commissions Amendment (Records) Bill 2006
,
Bills
Digest, no. 61, 2006 07 Parliamentary Library, Canberra,
2006.
[16] . Peter Hicks
and Angus Martyn, Wheat Marketing Amendment Bill 2007 ,
Bills
Digest, no.186, 2006 07, Parliamentary Library, Canberra,
19 June 2007.
[18] . AWB payouts
a rort , Courier Mail, 19 January 2007, p. 20.
[19] . Caroline
Overington, Claims AWB cash funded terrorists , The
Australian, 14 March 2007, p. 3.
[21] . Mark Davis,
Labor calls for urgent review of tax deductions , Sydney
Morning Herald, 28 November 2006, p.12.
[22] . Tracy Lee,
Untested law threatens kickback victory , The Australian
Financial Review, 22 December 2006, p. 4.
[25] . Letters
section, Cole must have power to probe ministers legal liability ,
The Australian, 13 April 2006, p. 11.
[26] . Commentary
by Kevin Rudd (Opposition Foreign Affairs Spokesman) in an
interview with Michael Brissenden, Cole Inquiry clears Govt of any
wrongdoing , ABC 7:30 Report, 27
November 2006.
[27] . Bartos, op.
cit., p. 26.
[28] . Editorial,
Government fails test on governance , The Australian, 30
November 2006, p. 11; Kenneth Davidson, An indictment of
politicised bureaucrats , The Age, 30 November 2006, p.
15; Dimity Kingsford Smith, Corporate culture overrides ethics ,
Australian Financial Review, 30 November 2006, p. 55.
[29] . Letters
section, Cole must have power to probe minister s legal liability ,
The Australian, 13 April 2006, p. 11.
[30] . Michael
Pelly, Left up to Cole to set his own jurisdiction , Sydney
Morning Herald, 14 April 2006, p. 4.
[31] . Bartos, op.
cit., pp. 26 27.
[36] . Paul Kelly,
The real scandal , The Australian, 29 November 2006, p.
16.
[38] . Submission No.2, p. 1. Senate Inquiry into
the International Trade and Integrity Bill 2007.
[41] . Submission No.2, p. 1. Senate Inquiry into
the International Trade and Integrity Bill 2007.
[42] . See for
example Sarah Joseph, Australian Counter-Terrorism Legislation and
the International Human Rights Framework UNSW Law Journal,
Volume 27(2), 2004,
pp. 436 440; Ben Saul, Defining Terrorism in International
Law, Oxford University Press, Oxford, 2006, pp. 231 233.
[43] . Senate
Inquiry into the International Trade and Integrity Bill 2007, p.
14.
[45] . freezable asset means an
asset that:
(a) is owned or controlled by a proscribed
person or entity; or
(b) is a listed asset; or
(c) is derived or generated from assets
mentioned in paragraph (a) or (b)
[46] . Explanatory Memorandum, p. 7.
[52] . For a useful
background on the 1999 Act, refer to Jennifer Norberry, Criminal
Code (Bribery of Foreign Public Officials) Bill 1999 , Bills
Digest, no. 176, 1998 99 Parliamentary Library, Canberra,
11 May 1999.
[53] . Explanatory Memorandum, p. 2.
[55] . Leonie Wood,
Law expert hails key to Cole recommendation as essential ,
Age, 29 November 2006, p.8. The Senate Inquiry into the
International Trade Integrity Bill 2007, recommended that the Bill
be passed without amendment.
Juli Tomaras
3 August 2007
Law and Bills Digest Section
Parliamentary Library
© Commonwealth of Australia
This work is copyright. Except to the extent of uses permitted
by the Copyright Act 1968, no person may reproduce or transmit any
part of this work by any process without the prior written consent
of the Parliamentary Librarian. This requirement does not apply to
members of the Parliament of Australia acting in the course of
their official duties.
This work has been prepared to support the work of the Australian
Parliament using information available at the time of production.
The views expressed do not reflect an official position of the
Parliamentary Library, nor do they constitute professional legal
opinion.
Feedback is welcome and may be provided to: web.library@aph.gov.au. Any
concerns or complaints should be directed to the Parliamentary
Librarian. Parliamentary Library staff are available to discuss the
contents of publications with Senators and Members and their staff.
To access this service, clients may contact the author or the
Library’s Central Entry Point for referral.
Back to top