Purpose of the Bill
The purpose of the Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2023 (the Bill) is to amend the Criminal Code Act 1995 (Criminal Code) and Income Tax Assessment Act 1997 to tighten the rules around bribery of a foreign public official. Specifically, the Bill seeks to:
- broaden the scope of commercial and personal conduct that may be captured under the existing offence of foreign bribery
- introduce a new offence of failure to prevent bribery of a foreign public official, and
- make consequential amendments to income tax legislation to ensure that a person cannot claim tax deductions as a result of foreign bribery.
Structure of the Bill
The Bill has one Schedule, divided into in two Parts.
Part 1 makes changes to Division 70 of the Criminal Code (Bribery of foreign public officials) to broaden the scope of the existing foreign bribery offence and introduce a new indictable corporate offence of failing to prevent foreign bribery.
Part 2 of the Bill makes consequential amendments to the Income Tax Assessment Act 1997 to ensure that persons cannot claim deductions for losses or outgoings that are connected to bribery of a foreign official (as amended by this Bill).
Foreign bribery under Australian law
Attempts to control foreign bribery by businesses has had a relatively short history in Australian law and indeed in Western industrialised economies. The United States was the first modern nation to seek to combat foreign bribery and corruption in law. In 1977, in the wake of the Lockheed controversy, the Carter Administration introduced the Foreign Corrupt Practices Act (FCPA). The FCPA required publicly held companies to institute internal accounting controls to ensure that all transactions were made in accordance with management's specific authorisation and were fairly recorded.
Until the mid-1990s, the United States remained the only major nation that made it a criminal offence to bribe a foreign public official. The impetus for a more transnational approach, including the involvement of Australia, was the signing of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-Bribery Convention). The Convention was signed in December 1997 and entered into force in February 1999. Australia ratified the treaty in 1999 and in the same year, the Howard Government passed the Criminal Code Amendment (Bribery of Foreign Public Officials) Act 1999.
That Act inserted a new division 70 into the Criminal Code. Section 70.2 currently makes it an offence to bribe a foreign public official. Section 70.3 provides a defence for conduct which was lawful in the country where the person’s conduct occurred, and section 70.4 provides a defence for facilitation payments where the benefit was minor and the conduct was engaged in for the sole or dominant purpose of expediting or securing the performance of a routine government action.
Relevantly, in the context of the current Bill, section 70.2 includes a requirement that the prosecution prove that the benefit or advantage provided to the foreign official was ‘not legitimately due’. In establishing whether a benefit or advantage is not legitimately due, the investigator (or subsequently, the Court) is to disregard the value of the benefit or ‘official tolerance’ of the benefit or advantage as well as the fact that it may be, or be perceived to be, customary, necessary or required in the situation.
The Bill proposes to remove the wording of not legitimately due and instead base the revised offence of foreign bribery on the concept of improper influence. The potential ramifications of this change are discussed further below in the Key issues and provisions section, below.
The difficulty in prosecuting foreign bribery
The revision of the existing foreign bribery offence in Division 70 of the Criminal Code is said to be based, in large part, on the difficulty in investigating and successfully prosecuting foreign bribery offences. In his second reading speech, the Attorney-General described how the offence has proven to be overly prescriptive and difficult to use. The Explanatory Memorandum to the Bill further discussed some of these difficulties:
Challenges relating to the existing foreign bribery offence include the need to show that both the bribe and the business or personal advantage sought were not legitimately due. In some cases, the threshold of ‘not legitimately due’ can present challenges. For example, bribe payments can be concealed as agent fees, making it difficult to show, beyond a reasonable doubt, that the payments were not legitimately due. Further, proving the existing offence can also require reliance on international legal assistance processes. Reliance on such processes may be required, for example, to prove that a benefit or advantage was not legitimately due or that a foreign official was working within their official duties. International legal assistance processes may take time and/or prove unsuccessful, and the investigation/prosecution may be compromised as a result (p. 12).
Challenges in monitoring and enforcing the offence of foreign bribery are also reflected in the relatively low conviction rates secured by regulators in Australia. Despite the introduction of the offence of foreign bribery by the Howard Government in 1999, the first prosecutions did not commence until 2011. The most recent figures suggest since that time, only seven individuals and three corporations have been convicted of a foreign bribery offence. The challenge is not particularly unique to Australia, with the situation of the UK revealing only a handful of convictions between 2014 and 2020.
Comparison with the 2017 and 2019 Bills
The current Bill is substantially similar to two previous Bills introduced to the Parliament:
The major difference is that the current Bill does not include a Deferred Prosecution Agreement (DPA) scheme. The inclusion of a DPA scheme was opposed by Australian Labor Party Senators during the Committee inquiry into the 2019 Bill (pp. 27–28). The reasons for this opposition are discussed below.
The 2017 Bill was introduced by the Turnbull Government in December 2017. The purpose of the 2017 Bill was to:
- amend the Criminal Code to expand the scope of the existing foreign bribery offence and introduce a new corporate offence of failing to prevent foreign bribery
- amend the Director of Public Prosecutions Act 1983 to introduce a DPA scheme for serious corporate crime under a range of existing legislation (rather than just in relation to foreign bribery offences), and
- make consequential amendments to other legislation.
The proposed DPA scheme for Australia was to be modelled off that of the UK (introduced in 2014) and would have allowed the Commonwealth Director of Public Prosecutions (CDPP) to invite a company that has engaged in serious corporate crime to negotiate an agreement to comply with a range of specified conditions.
The proposed new corporate offence of failing to prevent bribery was generally supported, including by external stakeholders such as the Uniting Church, the International Bar Association and some legal academics. The Senate Economics Reference Committee supported both the creation of the new foreign bribery offence and the introduction of a DPA scheme. The 2017 Bill lapsed, however, at the end of the 45th Parliament on 1 July 2019.
The 2019 Bill was introduced in December 2019. It was substantially similar to the 2017 Bill including seeking to expand the scope of the existing foreign bribery offence and introducing a new corporate offence for failing to prevent foreign bribery. As a point of difference, however, the 2019 Bill also included additional amendments (Schedule 3) which sought to replace the current definition of ‘dishonesty’ used in the Criminal Code. Amendments to the definition of dishonesty are not contained in the current Bill. It may be that this is a response to the somewhat controversial nature of those amendments in relation to the 2019 Bill, which was considered by the Senate Standing Committee on Legal and Constitutional Affairs and which were opposed by the ALP at that time in its dissenting report, arguing (p 28):
The Minister’s Second Reading Speech described Schedule 3 as making "technical amendments to update the definitions of dishonesty under the Criminal Code"… Regardless, the suggestion that Schedule 3 makes only "technical amendments" is clearly untenable. As outlined in cogent and detailed written and oral submissions by Professor Jeremy Gans and the Law Council of Australia, the so-called "technical amendments" in Schedule 3 would make substantive changes to as many as 58 federal dishonesty offences and, in Professor Gans' words, may lead to a situation where:
…someone who believed that he or she was acting according to ordinary people's standards will still be able to be found to be criminally dishonest so long as he or she was wrong, even reasonably, about what those standards are.
The Senate Standing Committee on Legal and Constitutional Affairs recommended that the 2019 Bill be passed (p. 25). A dissenting report by Australian Labor Party (ALP) Senators, recommended that the DPA scheme and changes to the definition of ‘dishonest’ (noted above) be deleted from the Bill. On the topic of the DPAs the ALP’s dissenting report argued (pp. 27–29):
When ordinary Australians commit crimes, they feel the full force of the law. But too often when it is companies committing the crimes, nothing happens… [T]he proposed [DPA] scheme contains insufficient safeguards to prevent companies from effectively buying their way out of meaningful punishment for corporate crime… Labor Senators do not support the creation of a two-tiered justice system where corporate criminals are granted the unique privilege of effectively negotiating their own so-called "punishment" in secret while everyone else is subject to the full force of the law in a court of law. While there may be a place for DPAs in Australia, the Government has not made the case and, in any event, the proposed scheme is clearly too weak.
In its additional comments, the Australian Greens argued (pp. 31–33) that the Senate should suspend consideration of the 2019 Bill until after the Australian Law Reform Commission (ALRC) had completed its inquiry into Australia's corporate criminal responsibility. The need to wait for the ALRC’s report to be finalised, to help inform further debate, was raised by several inquiry participants at the time.
The ALRC Report on Corporate Criminal Responsibility
The ALRC’s inquiry into corporate criminal responsibility was conducted contemporaneously with Committee examination of the 2019 Bill. In its final report, released in April 2020, the ALRC did not revisit the advantages and disadvantages of introducing a DPA scheme in Australia, however, it did recommend that judicial oversight of a DPA scheme should occur (p. 496).
On the question of a proposed new offence for failing to prevent foreign bribery (that is the new corporate offence), the ALRC concluded that:
…it may be appropriate to have mechanisms both for holding corporations responsible for directly engaging in criminal conduct such as foreign bribery, as well as holding corporations responsible for failing to prevent such conduct by their associates.
The ALRC further recommended that the Australian Government should consider applying the failure to prevent bribery offence in the 2019 Bill to other Commonwealth criminal offences in the context of transnational business activities. On this point, the ALRC suggested:
The failure to prevent model may be appropriate in relation to offences that might occur in a transnational business context, such as tax evasion, slavery and slavery-like offences, human trafficking, violation of foreign sanctions, torture, crimes against humanity, war crimes, genocide, and financing of terrorism.
Like the 2017 Bill, the 2019 Bill was never put to a vote. It lapsed on 25 July 2022 after the 46th Parliament had been prorogued.
Failure to prevent bribery under UK law
The proposed new offence of failure to prevent foreign bribery in the Bill is largely based on section 7 of the UK’s Bribery Act 2010. The UK legislation was introduced in 2010 after lengthy debate about how best to protect against both domestic and foreign bribery. As a point of difference from the current Bill, the UK’s Bribery Act 2010 deals with general bribery offences and bribery of foreign public officials. By comparison, and reflecting the constitutional limitations of the Commonwealth, the Criminal Code deals only with bribery of Commonwealth public officials and foreign officials whilst the states and territories have laws that deal with bribery generally (including state and territory government officials).
Section 7 of the Bribery Act 2010 (UK), discussed further below, makes it an offence for a commercial organisation to fail to prevent bribery by a person associated with the organisation.
Some data on the use of section 7 by the UK’s Serious Frauds Office has been released online through freedom of information requests. Similar to the current Bill, there is a defence under the Bribery Act 2010 if the organisation can prove that it had in place adequate procedures designed to prevent its associates from engaging in bribing. The standard of proof for this defence is the balance of probabilities. Also, similar to the current Bill, there is a requirement for the UK Government to publish guidance about the steps organisations may take to prevent associates from engaging in bribery. The guidance is not intended to be prescriptive and nor will compliance with the guidance provide a complete defence to criminal prosecution.
The proposed ‘failure to prevent offence’ is rather novel in the context of Australian corporate law when it comes to the actions of associates of a corporation overseas. In other jurisdictions (especially Europe) laws have been introduced that seek to further target illegal activities of subsidiary companies, partners and other associates from engaging in illegal or immoral activities (for example, human rights abuses). As is discussed further below, the ALRC’s Report on Corporate Criminal Activity suggested that it may be appropriate for Australian Government to broaden such offences past failure to prevent bribery and include ‘third party’ offences such as tax evasion, slavery, human trafficking, torture, crimes against humanity, war crimes, genocide, and financing of terrorism. In 2017 in the UK, legislation was introduced to make it a corporate offence to prevent the facilitation of tax evasion. That offence was reportedly modelled on section 7 of the Bribery Act 2010 (UK).
Senate Standing Committee on Legal and Constitutional Affairs
The Bill was referred to the Senate Standing Committee on Legal and Constitutional Affairs (L&C Committee) on 22 June 2023. The L&C Committee report on the Bill made three recommendations. First, that the government consider amending the Bill or the Bill’s Explanatory Memorandum to clarify that in the proposed corporate offence of failure to prevent bribery, the fact that foreign bribery has occurred does not, in itself, mean that adequate procedures were not implemented. Two, that the government considers the introduction of further measures to address foreign bribery, including after the reforms proposed in the Bill have been given time to have an impact. Three, the Committee recommends that the Bill be passed (pp. 15–16, [2.35], [2.39]–[2.40]).
Senator Scarr, as Deputy Chair, provided additional comments, stating that he is ‘firmly of the view that the Government should reconsider its position with respect to Deferred Prosecution Agreements’, and that if the Bill does not provide for DPAs, ‘this will represent a missed opportunity in Australia’s efforts to combat foreign bribery’ (p. 17). Ultimately, Senator Scarr recommends that the Bill be amended to provide for a DPA scheme with statutory review to occur a reasonable period of time after adoption (p. 23, [1.22]).
Senate Standing Committee for the Scrutiny of Bills
At the time of writing, the Senate Standing Committee for the Scrutiny of Bills had not considered the Bill. The Committee’s relevant comments on the 2017 Bill are summarised below, to assist in consideration of the current Bill.
The Scrutiny of Bills Committee raised two issues in its report on the 2017 Bill, both of which related to amendments that are replicated in the current Bill.
Offence-specific defence to the foreign bribery offence
Item 7 of the 2023 Bill will insert proposed subsection 70.3(2A) to establish a new defence to the offence of foreign bribery in section 70.2 of the Criminal Code as amended by the Bill. The defence is similar to an existing ‘lawful conduct’ defence in subsection 70.3(1), which, broadly, provides that a person does not commit the offence of foreign bribery if a written law in force where a person’s conduct occurred required or permitted the provision of the benefit in question. However, the new defence will apply in relation to conduct related to candidates to be foreign public officials (it is consequential to an amendment to the definition of foreign public official to include candidates for office (item 4)). As with the existing defences, a defendant wishing to rely on the new defence in proceedings for a foreign bribery offence will bear an evidential burden in relation to the matter (which would require adducing or pointing to evidence that suggests a reasonable possibility that the matter exists).
In its report on the same amendment in the 2017 Bill, the Scrutiny of Bills Committee recognised that the defendant will bear only an evidential rather than a legal burden, but nonetheless stated that it expected any reversal of the burden of proof to be justified. It did not consider that the defence meets the criteria for offence-specific defences set out in the Government’s Guide to Framing Commonwealth Offences, and requested the Attorney-General’s advice as to why an offence-specific defence is proposed (as opposed to including the matter as an element of the offence).
The then Attorney-General responded that the defence is ‘consistent with the broader principle in Australian law of a defence of lawful authority’, for which a defendant bears an evidential burden, and is appropriate because the defendant would be in a better position to point to evidence of a written foreign law he or she relied on; it would be difficult and expensive for the prosecution to prove the non-existence of a foreign law; and the question of whether a benefit was required or permitted under a written foreign law is not central to the question of culpability for the offence.
The Scrutiny of Bills Committee still considered that the proposed defence does not appear to accord with the principles in the Guide to Framing Commonwealth Offences. It requested that the information provided by the Attorney-General be incorporated into the Explanatory Memorandum, drew its concerns to the attention of senators and left the question of the appropriateness of the proposed defence to the Senate as a whole. The information is included in the Explanatory Memorandum for the current Bill.
Preventing bribery of foreign public officials
Proposed section 70.5A of the Criminal Code (inserted by item 8 of the 2023 Bill) will create a new corporate offence of failing to prevent foreign bribery. An exception will apply if a corporation can prove that it had adequate procedures in place designed to prevent its associates (which include, for example, its employees and officers) from engaging in foreign bribery (proposed subsection 70.5A(5)). Proposed section 70.5B (inserted by the same item) will require the Minister to publish guidance on the steps that a body corporate can take to prevent its associates from bribing foreign public officials. The guidance will not be a legislative instrument.
In its report on the same amendment in the 2017 Bill, the Scrutiny of Bills Committee queried the proposed interaction of the exception in proposed subsection 70.5A(5) and the guidance that the Minister will publish under proposed section 70.5B:
… It is not clear whether a body corporate that complies with guidance published by the minister would be determined to have 'adequate procedures' in place and therefore able to establish the defence in subsection 70.5A(5), or if a body corporate could comply with such guidelines but still be found by the courts to not have had adequate procedures in place.
The committee is concerned that, because the exception to the offence does not clearly articulate what would constitute 'adequate procedures', it has been left to ministerial guidance to clarify the limits of criminal liability with respect to the offence. This concern is compounded by the fact that the guidance will not be a legislative instrument.
It requested the Attorney-General’s advice on whether it is possible that a body corporate that complies with the guidance could still be convicted of the proposed offence, and on why the guidance should not be in the form of a legislative instrument and subject to disallowance.
The then Attorney-General advised that the guidance would be principles-based rather than prescriptive:
It is reasonable to expect companies of all sizes to put in place appropriate and proportionate procedures to prevent bribery from occurring within their business. However, the application of steps to prevent foreign bribery will differ substantially from corporation to corporation …
It is for this reason that I propose to provide guidance, rather than a legislated, prescriptive checklist of compliance. In this way, it will not be for Government to determine or clarify the limits of criminal liability with respect to the offence. This is appropriately a matter for courts, taking into account the circumstances of each case without the encumbrance of rigid statutory requirements.
The Scrutiny of Bills Committee was satisfied with the Attorney-General’s response and requested that the information he provided be incorporated into the Explanatory Memorandum. The Explanatory Memorandum for the 2023 Bill includes the additional information.
2018 Inquiry into foreign bribery
Senate Standing Committee on Economics
The Senate Standing Committee on Economics tabled the report on its inquiry into foreign bribery on 28 March 2018. The report included 22 recommendations, several of which are directly relevant to the 2023 Bill.
Among the Committee’s recommendations were:
- the definition of foreign public official be amended to include candidates for office (Recommendation 5)
- the foreign bribery offence apply in circumstances where a bribe was made to obtain or retain a personal advantage (Recommendation 6)
- a new corporate offence of failing to prevent bribery be enacted, and that principles-based guidance be published on steps corporations should take to implement adequate procedures to prevent foreign bribery (Recommendation 7)
- the foreign bribery offence be amended to clarify that a person is prohibited from bribing a foreign public official to obtain a business advantage for someone else, and that the payer of the bribe need not intend to obtain or retain any specific business or business advantage to be guilty of the offence (Recommendation 10).
These recommendations are implemented in the Bill.
Position of major interest groups
In its submission to the Senate Legal and Constitutional Affairs Committee, the law firm Ashurst Australia expressed concerns about the meaning of ‘adequate procedures’ under proposed subsection 70.5A(5) of the Bill. Ashurst suggested that the proposed subsection should be amended to refer to a company having procedures which were ‘reasonable in all the circumstances’ as opposed to a focus on ‘adequacy’. The rationale for Ashurst’s suggested change was based in part on the findings of a UK Court which indicated the phrase could be interpreted too narrowly, as well as conclusions in the 2022 UK Law Commission's Options Paper for Corporate Liability (p 103). As Ashurst argued in its submission:
The statutory language of "adequate", by its plain English meaning, is capable of being interpreted in a way that is outcomes-focussed (i.e. the fact foreign bribery occurred means procedures were not adequate) rather than process focussed (i.e. what is important is whether the procedures in place were appropriate) (p. 2)….
…our concern is that the language of "adequate procedures" may result in a jury incorrectly equating the fact that bribery has occurred with a lack of adequate procedures, which contradicts the intended meaning of the provision (p. 4).
The Law Council of Australia
The Law Council of Australia, in its submission, agreed with, amongst other things, the proposed extension of the foreign bribery offence to include candidates for public office (p. 5). However, it did raise some concerns about the change of the language from ‘not legitimately due’ to ‘improper influence’ in proposed section 70.2. The Law Council noted that the concept of improper influence is not well understood in Australian criminal law, and that the language of ‘dishonesty’ should also be included as an element of the offence. In its submission, the Law Council argued (at pp. 6–7):
… the Law Council considers [that] intention should be accompanied with the requirement for the person to be acting with ‘dishonesty’, which should be elevated from being a factor that may be considered at proposed paragraph 70.2A(3)(f) to an element of the offence, so that a person commits the offence if the person dishonestly does the things listed in proposed subparagraphs 70.2(1)(a)(i) to (iv).
Uniting Church in Australia, Synod of Victoria and Tasmania
The Uniting Church in Australia, Synod of Victoria and Tasmania (the Synod), in its submission to the Committee, welcomed the introduction of the new offence of failure to prevent foreign bribery as well as the broad definition of associate (p. 5). On this point, the Synod concluded:
The legislative change to make it an offence for a body corporate to fail to prevent foreign bribery by an associate is vital to prevent Australian corporations from being able to pay bribes through intermediaries (p. 5).
On the topic of changes to the existing offence of foreign bribery, the Synod suggested that a new fault element of recklessness should be included in the provision which would, in effect, ‘lower the bar on the level of evidence needed to prosecute a case involving foreign bribery successfully’ (p. 3).
Despite being broadly supportive of the Bill, the Synod did raise concerns that the Bill did not include a DPA scheme saying it was ‘deeply disappointed’ that deeply disappointed that the current Government seemed opposed to a DPA scheme (p. 1). The Synod suggested that this would effectively undermine the ability of law enforcement officers to detect and deter corporate misconduct (p. 1):
The current Government’s opposition to DPA schemes appears to rest on the mistaken belief that if DPAs are not offered, then all cases will proceed to prosecution. The reality is that in the absence of a DPA, many corporate crimes carried out by middle managers that would otherwise be self-reported to law enforcement agencies by the corporation itself will go undetected. Those responsible will never go to trial. The experience of other jurisdictions is that a DPA scheme increases the detection of corporate crimes and results in more prosecutions of the individuals inside the corporation that engaged in criminal conduct.
Law firm Allens Linklaters (Allens), in its submission, focused on the adequate procedures exemption (defence) provided for in proposed subparagraph 70.5A(5) as well as the absence of a DPA Scheme in the Bill. On the topic of DPAs, Allens argued (p. 3):
Allens maintains its strong support for the introduction of a DPA scheme, in line with our earlier comments as well as international best practice. We remain of the view that DPAs can provide an effective and efficient means of addressing corporate misconduct in suitable cases. This has been seen in practice in both the US and the UK and aligns with the OECD's landmark antibribery guidance issued in 2021 which strongly suggests that signatories, like Australia, should have in place non-trial resolution mechanisms for foreign bribery matters – such as a DPA scheme (footnotes omitted).
Transparency International (TI) welcomed the proposed amendments in the Bill through its submission to the Senate Legal and Constitutional Affairs Committee. In addition to its support for the Bill, TI suggested that the Government, also undertake the following (p. 2):
- Publish statistics on foreign bribery investigations, prosecutions and case outcomes.
- Develop a database of foreign bribery investigations and enforcement outcomes.
- Introduce a DPA scheme as per previous versions of the proposed Bill. However, ensure it includes the requirement of an admission of criminal liability as part of a DPA.
- Abolish the facilitation payments defence.
- Introduce a debarment regime to grant agencies the power to preclude companies found guilty of foreign bribery offences from being awarded contracts.
- Ensure the Bill makes it a criminal act to pay bribes to third parties to win government contracts in foreign jurisdictions, such as bribing a competitor to put in an uncompetitive bid for the contract.
The Bill is not expected to have any significant impact on consolidated revenue, although Explanatory Memorandum suggests that it may lead to more fines being imposed for the foreign bribery offence.
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.
Parliamentary Joint Committee on Human Rights
The Committee examined the 2017 and 2019 Bill and had no concerns. At the time of writing it had not yet considered the current Bill.
Key issues and provisions
The Bill makes a number of changes to the offence of bribing a foreign public official under section 70.2 of the Criminal Code and related provisions.
Current offence of bribing a foreign public official
Currently section 70.2 of the Criminal Code establishes that a person commits an offence if that person:
- provides, offers, or causes a benefit, or causes an offer or a promise of a benefit, to be provided to another person
- the person does so with the intention of influencing a foreign public official in the exercise of his or her duties
- the person does so in order to:
- obtain or retain business or
- obtain or retain a business advantage that is not legitimately due to the recipient
- the benefit provided or offered is not legitimately due to the other person.
Revised offence of bribing a foreign public official
The Bill makes a number of changes to the current offence of bribing a foreign public official under section 70.2 of the Criminal Code set out above. These changes should also be considered in connection with the Bill’s proposed introduction of a new offence of failing to prevent bribery of a foreign public official under proposed section 70.5A.
In summary, the Bill proposes to replace and remake section 70.2 by making the following changes:
- expanding the definition of foreign public official to include candidates to be a foreign public official
- removing the existing requirement that the benefit is not legitimately due to the recipient and replacing it with a requirement that the person committing the offence does so with the intention of improperly influencing the foreign public official
- removing the existing requirement that the person committing the offence intends to influence a foreign public official in the exercise of the official’s duties
- expanding a requirement that the person intends to obtain or retain business or a business advantage to also include obtaining or retaining a personal advantage and
- removing the requirement that the obtained or retained business or business advantage was not ‘legitimately due’ to the person who provided, offered, promised to provide or caused a benefit to be provided to another person.
These changes are examined in detail below.
Bill expands definition of foreign public official to include candidates for public office
Item 4 of the Bill proposes to amend the definition of ‘foreign public official’ in the Criminal Code to include a person standing, or nominated (whether formally or informally) as a candidate to be a foreign public official. The Explanatory Memorandum to the Bill (p. 11) states that:
this amendment ensures that the foreign bribery offences extend to bribes made to candidates for public office. Law enforcement experience indicates that individuals or companies may seek to bribe candidates for public office, with the intent of obtaining an advantage once the candidate takes office. It is appropriate to criminalise this conduct given that it equally undermines good governance and free and fair markets.
The inclusion of candidates for office is consistent with the Senate Standing Committee on Economics recommendation in 2018 that the definition of foreign public official be expanded. The proposed expansion was supported at the time of the Committee’s report by, amongst other stakeholders, law firm Allens Linklaters and the Australian Institute of Company Directors (pp. 62‑63).
Replacement of ‘not legitimately due’ with ‘improperly influencing’
As noted above, currently, division 70 of the Criminal Code criminalises providing, offering or promising to provide, or causing a benefit to be provided to another person, where the benefit is not legitimately due to that other person, with the intention of influencing a foreign public official in the exercise of his or her duties, in order to obtain or retain business, or to obtain or retain a business advantage that is not legitimately due to the recipient or intended recipient.
The Bill proposes to remove the requirement for the prosecution to prove the element of not legitimately due and replace it with the concept of improper influence. The offence in proposed section 70.2 will apply where a benefit is offered or provided to another person with the intent to ‘improperly influence’ a foreign public official (see further below), instead of the benefit being ‘not legitimately due’ to the person and intended to influence a foreign public official.
The Explanatory Memorandum to the Bill suggests that this term would better characterise the conduct of foreign bribery than the current term ‘not legitimately due.’
Proposed section 70.2A will provide that the determination of whether influence is improper is a matter for the trier of fact, and provide guidance on matters relevant to that determination. Proposed subsection 70.2A(2) will list matters that must be disregarded, specifically:
- the fact that the benefit (or the offer or promise to provide the benefit) may be, or be perceived to be, customary, necessary or required in the situation
- any official tolerance of the benefit and
- if particular business or a particular advantage is relevant to proving the offence, the fact that the value of the business or advantage is insignificant (if that was the case), any official tolerance of an advantage, and the fact that an advantage may be customary, or perceived to be customary, in the situation.
These matters are equivalent to those that must currently be disregarded in determining whether a benefit or business advantage is ‘not legitimately due’ under subsections 70.2(2) and (3).
Proposed subsection 70.2A(3) will provide a non-exhaustive list of matters to which a trier of fact may have regard in determining whether influence is improper, such as the recipient or intended recipient of the benefit, the nature of the benefit, and whether the benefit was provided, offered or promised dishonestly. A trier of fact may also have regard to matters not specifically listed (proposed subsection 70.2A(4)).
Proposed section 70.2A is consistent (as with many other aspects of this Bill) with the amendments proposed in 2017 and 2019 to the Criminal Code.
Part of the change is reportedly due to legislative complexity with, for example, the Law Council of Australia, arguing in 2017 (pp 35–36):
The requirements that a benefit not be legitimately due to the bribe taker and bribe giver creates unnecessary complexity to the offence. The UK Bribery Act deliberately removed these requirements from that legislation. Corporate culpability is too complex.
In response to the inquiry by the Senate Standing Committee on Legal and Constitutional Affairs into the 2019 Bill, the Attorney-General’s Department provided a rationale for the inclusion of improper influence as an element of the offence:
Some bribery does not involve dishonesty. For instance, where a company provides an open ‘scholarship’ to the child of a foreign public official. The scholarship is not necessarily intended to have a ‘dishonest’ influence, if it is done transparently. However, it could still be done with the intention of improperly influencing the foreign public official in favouring the company when business is being awarded. The UK Law Commission has observed that not all bribes are ‘dishonest’ in the sense required. An advantage conferred may be ‘illegitimate, unreasonable, disproportionate or otherwise “improper” without being dishonest’ …
While the offence is founded on ‘improper influence’, dishonesty is included as a relevant factor for determining whether influence is improper.
Influence in exercise of the official’s duties
The Bill proposes to remove the requirement that the person committing the offence intends to influence the foreign public official in the exercise of the official’s duties under existing paragraph 70.2(1)(c). As explained by the Attorney-General’s Department:
The amendments remove the requirement that the intention to influence the foreign official must be directed towards the exercise of the official’s duties. The requirement puts an unnecessary burden on the prosecution to prove the scope of a foreign public official’s duties. Additionally, proof of foreign official duties relies on international legal assistance processes, which can be protracted or unsuccessful.
The AFP has previously noted that foreign public officials can be bribed to act outside of their official duties to secure business or an advantage. For example, investigations have identified instances where senior ministers in foreign countries may have been bribed to act beyond their official duties. The foreign public official’s position of power within the foreign country, or candidacy for such a position, is the relevant consideration in criminalising conduct amounting to foreign bribery.
Obtaining a personal advantage
The proposed section 70.2 offence will also apply where a personal (as opposed to business) advantage is sought. The 2019 Bill proposed a similar change. This will implement recommendation 6 of the Senate Standing Committee on Economics’ report on foreign bribery, discussed above.
Penalty for foreign bribery
Under the proposed revised offence, the maximum penalty for engaging in foreign bribery is, for an individual, 10 years’ imprisonment or a fine of not more than 10,000 penalty units, or both (proposed subsection 70.2(3)). For a corporation, pursuant to proposed subsection 70.2(4) the offence is punishable by a fine not more than the greatest of the following:
- 100,000 penalty units
- if the court can determine the value of the benefit that the body corporate and any body corporate related to the body corporate, have obtained directly or indirectly and that is reasonably attributable to the conduct constituting the offence—3 times the value of that benefit
- if the court cannot determine the value of that benefit—10% of the annual turnover of the body corporate during the period (the turnover period) of 12 months ending at the end of the month in which the body corporate committed, or began committing, the offence.
Offence of failing to prevent foreign bribery
Item 8 of Schedule 1 will insert proposed Subdivision C of Division 70, which will include the proposed new corporate offence of failing to prevent foreign bribery and related provisions. As noted above, these provisions are similar to those introduced in the UK in 2010, and would implement recommendation 7 of the Senate Standing Committee on Economics’ report on foreign bribery.
Proposed subsection 70.5A(1) will create a new offence of failing to prevent bribery of a foreign public official that will apply to a body corporate if:
- the body corporate is a constitutional corporation, is incorporated in a Territory, or is taken to be registered in a Territory under section 119A of the Corporations Act 2001 (proposed paragraph 70.5A(1)(a))
- an associate of the body corporate commits an offence against section 70.2 or engages in conduct outside Australia that, if engaged in in Australia, would constitute an offence against section 70.2 (proposed paragraph 70.5A(1)(b)) and
- the associate does so for the profit or gain of the body corporate (proposed paragraph 70.5A(1)(c)).
The Explanatory Memorandum notes that ‘profit or gain’ will not be defined and provides an example of what is intended to be captured by the inclusion of this element of the offence:
Conduct that is done for the ‘profit or gain’ of the first person (paragraph 70.5A(1)(c)) is not defined in the legislation and would be interpreted by reference to the ordinary meaning of the words. The ordinary meaning of these words, however, is very broad. ‘Gain’ would include any sort of benefit or advantage to the body corporate. The term would cover, for example, situations where an Australian company benefits merely because it is the beneficial owner of a subsidiary company that benefited from the commission of the foreign bribery offence.
Proposed subsection 70.3(2A)(8) is a new addition that was not in the 2017 or 2019 Bills. It specifies that an offence against subsection 70.5A(1) is an indictable offence. As set out in the Explanatory Memorandum:
Section 4G of the Crimes Act provides that indictable offences are offences against a law of the Commonwealth punishable by imprisonment for a period exceeding 12 months, unless the contrary intention appears. As the new offence at subsection 70.5A(1) does not contain a penalty of imprisonment (as it only applies to bodies corporate) it must therefore be specified as an indictable offence in order for it to be considered as such.
Specifying the new offence as an indictable offence will allow prosecutions of the offence to be heard in superior courts and enables the Commissioner of the AFP and CDPP to seek certain orders under the Proceeds of Crime Act 2002 in respect of the offence, including certain types of restraining orders, forfeiture orders and pecuniary penalty orders.
Item 2 will insert a definition of associate into section 70.1. A person will be an associate of another person if the first-mentioned person:
- is an officer, employee, agent or contractor of the other person
- is a subsidiary of, or is controlled by, the other person (within the meaning of the Corporations Act) or
- otherwise performs services for or on behalf of the other person.
The definition of associate
The key definition of associate in the Bill, is defined rather expansively in proposed section 70.1. By comparison, the Corporations Act 2001 defines ‘associate’ in sections 10 to 17, providing that an associate may be:
- a director or secretary of the body, a related body corporate, or a director or secretary of a related body corporate (section 11)
- a person in concert with whom the primary person is acting, or proposes to act (section 15)
- a person who, under the regulations, is, for the purposes of the provision in which the associate reference occurs, an associate of the primary person (section 15)
- a person with whom the primary person is, or proposes to become, associated, whether formally or informally, in any other way (section 15).
However, section 16 specifically excludes certain classes of people from the definition of ‘associate’ under the Corporations Act, relevantly to the measures proposed by the Bill, including by providing that a person is not an associate of another person merely because:
one gives advice to the other, or acts on the other's behalf, in the proper performance of the functions attaching to a professional capacity or a business relationship (paragraph 16(1)(a).
In contrast, the definition of associate in the Bill is much broader and provides that a person is an ‘associate’ of another person if the first-mentioned person:
- is an officer, employee, agent or contractor of the other person
- is a subsidiary (within the meaning of the Corporations Act) of the other person
- is controlled (within the meaning of the Corporations Act) by the other person or
- otherwise performs services for or on behalf of the other person.
Proving the offence
Absolute liability will apply to certain elements of the proposed offence (proposed subsection 70.5A(2)). This will mean that the prosecution will not be required to prove fault with respect to the body corporate (such as proving that the body corporate knew about or was reckless as to the associate’s conduct), and that the body corporate will not be able to raise a defence of mistake of fact. Further, a body corporate may still be convicted of an offence against proposed subsection 70.5A(1), even if the associate has not been convicted of an offence against section 70.2 (foreign bribery) (proposed subsection 70.5A(3)).
However, to establish the proposed failure to prevent offence, the prosecution will need to prove that the associate committed an offence against section 70.2 (or engaged in conduct outside Australia that, if engaged in in Australia, would constitute an offence against section 70.2) including establishing the fault elements that make up that offence, but would not need to show that the associate has been successfully prosecuted.
The Explanatory Memorandum includes justification for the application of absolute liability to elements of the proposed offence:
In this case, applying absolute liability to the above elements of the offence in subsection 70.5A(1) is necessary to ensure the effectiveness of the new offence. In particular, it ensures that the prosecution does not need to establish any fault element in order to prove the offence. Accordingly, a corporation will not be able to avoid criminal liability committed by its associate for the profit or gain of the corporation because one or more fault elements could not be attributed to it. In this way, the offence incentivises corporations to actively ensure they have adequate procedures in place to prevent foreign bribery occurring…. Applying absolute liability in this way is appropriate to capture the distinct nature of corporate misconduct where it is a form of omission.
While a body corporate will not be able to raise a defence of mistake of fact, there is a specific exception to the offence of adequate procedures (outlined below) and a body corporate would still be able to raise other general defences provided for in the Criminal Code (except that a defence of intervening conduct or event will not be available if that conduct or event was brought about by an associate of the body corporate).
Exception: adequate procedures
Proposed subsection 70.5A(5) will provide for an exception to the proposed new offence. The offence will not apply if the body corporate can prove that it had adequate procedures in place designed to prevent the commission of an offence against section 70.2 by any associate and to prevent any associate engaging in conduct outside Australia that, if engaged in in Australia, would constitute an offence against section 70.2. A body corporate will bear a legal burden in relation to this exception, meaning it will need to prove the matter to the standard of the balance of probabilities.
While the Minister will publish guidance on the steps that bodies corporate can take to prevent an associate from bribing foreign public officials (see below), it will be up to a court to determine on a case-by-case basis whether a body corporate had adequate procedures in place. AGD states that it expects the concept will be scalable, ‘depending on the relevant circumstances including the size of the body corporate and the nature of its business and activities’.
As noted above, Ashurst argued to the L&C Committee that the phrase ‘adequate procedures’ should be replaced by the standard of ‘reasonable in all the circumstances’. This was because, arguably, adequate was capable of being interpreted in a way that is outcomes-focussed (i.e. the fact foreign bribery occurred means procedures were not adequate) rather than process focussed (i.e. what is important is whether the procedures in place were appropriate). On this issue, the L&C Committee recommended the Government consider amending the Bill (or the Bill’s Explanatory Memorandum) to clarify that where foreign bribery has occurred this will not, in itself, mean that adequate procedures were not implemented.
The maximum penalty for the proposed new offence will be equivalent to that which currently applies to bodies corporate for the offence of foreign bribery under section 70.2. Proposed subsection 70.5A(6) will provide that the maximum penalty is a fine not more than the greatest of:
- 100,000 penalty units (currently $31,300,000)
- three times the value of the benefit that the associate obtained directly or indirectly, and that is reasonably attributable to the conduct constituting the offence (or that would have constituted the offence) against section 70.2 (if the court can determine that value) or
- ten per cent of the annual turnover of the body corporate in the 12 months ending at the end of the month in which the associate committed, or began committing, the offence (or notional offence) against section 70.2 (if the court cannot determine the value of the benefit).
While not recommending a specific amendment, the Law Council considered that the difficulty of determining the value of the benefit obtained by an associate could mean that the ten percent of annual turnover figure is likely to be relied on for larger corporations. It cautioned:
This may result in significant penalties for entities, for actions, which as noted above, may well be beyond their control under existing principles of criminal attribution.
Stakeholder reaction to proposed offence of failing to prevent foreign bribery
The ALRC report on its inquiry into corporate criminal responsibility examined the failure to prevent model generally as a form of corporate criminal regulation. This examination explores the implementation of such offences in the UK, where the first failure to prevent offence was introduced in the UK through section 7 of the Bribery Act 2010. One of the key policy objectives of the UK failure to prevent foreign bribery offence was ‘to influence behaviour and encourage bribery prevention as part of corporate good governance’. The report notes that, ‘in part, the UK offences were intended to address perceived difficulties in attributing liability to corporations under the UK’s identification doctrine, and that several UK stakeholders in the Bribery Act were highly supportive of the changes resulting from the introduction of these failure to prevent offences.
As acknowledged in the Attorney-General’s second reading speech for the 2023 Bill, the draft guidance on adequate procedures to avoid criminal liability ‘will largely be modelled on the UK government's guidance that accompanies the 'failure to prevent' offence under section 7 of the UK Bribery Act’.
Many stakeholders in the ALRC inquiry considered the introduction of the UK offence as successful, and in 2019, the House of Lords Bribery Act Committee concluded that, on the whole, the offence ‘is generally agreed to have been remarkably successful’. The ‘failure to prevent’ model was again adopted in the Criminal Finances Act 2017 (UK), creating offences of failing to prevent the facilitation of tax evasion both domestically and overseas.
The ALRC considered it may be appropriate to have ‘failure to prevent’ mechanisms when it comes to criminal conduct undertaken by a corporation’s associate, noting that the failure to prevent model is well suited to offences such as failure to prevent bribery. However, some qualifications were set out.
The ALRC considered several public consultation submissions in relation to the 2019 Bill, stating that ‘the failure to prevent offence was supported by 11 out of 16 submissions’ in the Attorney-General’s Department’s public consultation, and that it was supported by ‘five out of six submissions’ to the Senate Legal and Constitutional Affairs Committee Inquiry on the 2019 Bill.
Publication of, and reliance upon, Ministerial guidance
Proposed subsection 70.5B will require the Minister to publish guidance on the steps that bodies corporate can take to prevent an associate from bribing foreign public officials. Such guidance will not be a legislative instrument. The Government states that the guidance will be:
- principles-based, and designed to be applicable to corporations of different sizes and operating in different sectors and
- similar to the guidance the UK Government has published in relation to section 9 of the Bribery Act 2010 (UK).
The Senate Standing Committee on Economics recommended:
- the Government publish an exposure draft of the guidance and allow a period of no less than four weeks for stakeholders to comment
- the guidance be published with sufficient time before the commencement of the proposed failing to prevent bribery offence to allow corporations to implement necessary compliance measures and
- the guidance should include the existence of internal corporate whistleblowing systems.
Two of those recommendations were reiterated by the L&C Committee in its report on the 2017 Bill.
Some indication of how the guidance may be intended to operate in terms of linking to the proposed exception in proposed subsection 70.5A(5) may be gleaned from the substantially similar provision in section 9 of the UK’s Bribery Act 2010. The UK’s guidance to help commercial organisations understand the sorts of procedures they can put in place to prevent bribery has been published online. The UK’s guidance describes its function as follows (p. 6):
The guidance is designed to be of general application and is formulated around six guiding principles, each followed by commentary and examples. The guidance is not prescriptive and is not a one-size-fits-all document. The question of whether an organisation had adequate procedures in place to prevent bribery in the context of a particular prosecution is a matter that can only be resolved by the courts taking into account the particular facts and circumstances of the case. The onus will remain on the organisation, in any case where it seeks to rely on the defence, to prove that it had adequate procedures in place to prevent bribery. However, departures from the suggested procedures contained within the guidance will not of itself give rise to a presumption that an organisation does not have adequate procedures.[emphasis added]
The six principles under the UK Guidance (on which Australia’s principles are expected to be largely based) are set out in the table below.
|Principles of Guidance for UK’s Bribery Act 2010|
|1. Proportionate procedures||A commercial organisation’s procedures to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation’s activities. They are also clear, practical, accessible, effectively implemented and enforced.|
|2. Top-level Commitment||The top-level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) are committed to preventing bribery by persons associated with it. They foster a culture within the organisation in which bribery is never acceptable.|
|3. Risk Assessment||The commercial organisation assesses the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment is periodic, informed and documented.|
|4. Due Diligence||The commercial organisation applies due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.|
|5. Communication (including training)||The commercial organisation seeks to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces.|
|6. Monitoring and Review||The commercial organisation monitors and reviews procedures designed to prevent bribery by persons associated with it and makes improvements where necessary.|
Source: UK Ministry of Justice, The Bribery Act 2010 - Guidance, 2011, pp. 21–31.
Under the United State’s FCPA, there is also departmental guidance available. As with the UK’s guidance, the United States guide states that it is non-binding and does not create any legal rights.
As for the current Bill, the Attorney-General has made clear that the guidance material will be finalised ‘in the coming months,’ be modelled largely off that of the UK’s guidance (presumably a principles-based approach) and that it will build on the draft guidance published by the Attorney-General’s Department under the previous government in 2019.
The absence of a DPA scheme in the current Bill
One of the key differences between this Bill and the 2017 and 2019 Bills is the absence of a DPA scheme. As noted earlier, ALP Senators recommended that the DPA provisions be removed from the 2019 Bill. In his second reading speech, the Attorney-General noted that it was premature to entertain the introduction of a DPA in Australia, and that such a scheme should only be entertained after the measures in this Bill have been given time to work.
DPA schemes are a relatively novel response to combatting corporate crime (not just foreign bribery). The United States and UK have utilised DPAs in the recent past, including for foreign bribery offences. There is evidence to suggest that Canada, France and Singapore have also utilised DPAs. The ability to enter into coordinated DPAs—where criminal conduct spans multiple jurisdictions—is one potential benefit of the DPA model. Another is the potential to ‘bundle up’ or ‘package’ disparate allegations into a single legal resolution. DPAs may also encourage companies to self-report instances of corporate crime, where they otherwise might not. On the other hand, arguments have been put that DPAs may create a ‘two tiered justice’ system, providing favourable treatment to white collar criminals, whereas ordinary Australians face the full force of the law.
The essence of a DPA is, in effect, that where a company has engaged in a serious corporate crime, prosecutors have the option to invite the company to negotiate an agreement to comply with a range of specified conditions. As the Attorney-General’s Department has made clear in the past:
The terms of the DPA would likely require the company to cooperate with any investigation, pay a financial penalty, admit to agreed facts, and implement a program to improve future compliance. A company would not be prosecuted in relation to the matters outlined in the DPA where the company fulfils its obligations under the agreement.
DPAs are increasingly used for corporate offences - like foreign bribery - which are difficult to detect, investigate and prosecute.
As noted above, in Additional Comments to the L&C report on the Bill, Liberal Party Senator Paul Scarr recommended that the Bill be amended to provide for a DPA scheme with a statutory review to occur a reasonable period of time after adoption (p. 23). As also set out above, a number of submitters to the L&C inquiry into the Bill (including TI, the Law Council, the Synod and Allens) also supported the introduction of a DPA scheme.