Chapter 2

Australia's anti-foreign bribery framework

2.1        Australia has signed and ratified the Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Convention), as well as the United Nations Convention Against Corruption (UNCAC). The principles enshrined in these conventions are embodied in Australia's criminal law—including through explicit anti-bribery provisions in the federal Criminal Code Act 1995 (Criminal Code). Despite this commitment Australia's record in investigating and prosecuting foreign bribery matters is poor and, as a result, Australia has been criticised on its implementation of the conventions, particularly the OECD Convention.

2.2        This chapter examines Australia's international foreign bribery obligations and the way in which they have been implemented through domestic law. It then outlines recent developments in anti-foreign bribery legislation before looking at relevant reports examining the effectiveness of Australia's foreign bribery framework.

International obligations

OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Convention)

2.3        The OECD Convention was adopted by the OECD on 21 November 1997. It entered into force on 15 February 1999 and has been ratified by all 34 OECD member countries, as well as Argentina, Brazil, Bulgaria and South Africa.[1] Australia signed the OECD Convention on 7 December 1998 and it was ratified in Parliament on 18 October 1999.[2]

2.4        The preamble to the OECD Convention states that:

...bribery is a widespread phenomenon in international business transactions, including trade and investment, which raises serious moral and political concerns, undermines good governance and economic development, and distorts international competitive conditions...all countries share a responsibility to combat bribery in international business transactions...[3]

2.5        Article 1 of the OECD Convention requires that signatories criminalise the bribery of foreign public officials:

Each Party shall take such measures as may be necessary to establish that it is a criminal offence under its law for any person intentionally to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business.[4]

2.6        Article 1 also requires that signatories criminalise the incitement, aiding and abetting, and authorisation of bribery of foreign public officials.[5]

2.7        The OECD Convention also contains provisions relating to sanctions, jurisdiction, enforcement, mutual legal assistance and extradition.[6]

United Nations Convention against Corruption (UNCAC)

2.8        UNCAC entered into force on 14 December 2005, and has 140 signatories and 178 parties. It was signed by Australia on 9 December 2003 and ratified by the Parliament on 7 December 2005.

2.9        Article 1 sets out the purposes of the UNCAC:

  1. To promote and strengthen measures to prevent and combat corruption more efficiently and effectively;
  2. To promote, facilitate and support international cooperation and technical assistance in the prevention of and fight against corruption, including in asset recovery;
  3. To promote integrity, accountability and proper management of public affairs and public property.[7]

2.10        Chapter III of UNCAC deals with criminalisation and law enforcement. In particular, article 16 provides:

  1. Each State Party shall adopt such legislative and other measures as may be necessary to establish as a criminal offence, when committed intentionally, the promise, offering or giving to a foreign public official or an official of a public international organization, directly or indirectly, of an undue advantage, for the official himself or herself or another person or entity, in order that the official act or refrain from acting in the exercise of his or her official duties, in order to obtain or retain business or other undue advantage in relation to the conduct of international business.
  2. Each State Party shall consider adopting such legislative and other measures as may be necessary to establish as a criminal offence, when committed intentionally, the solicitation or acceptance by a foreign public official or an official of a public international organization, directly or indirectly, of an undue advantage, for the official himself or herself or another person or entity, in order that the official act or refrain from acting in the exercise of his or her official duties.[8]

2.11        Chapter IV of UNCAC deals with international cooperation, making provision for extradition, transfer of sentenced persons, mutual legal assistance, transfer of criminal proceedings, law enforcement cooperation, joint investigations and special investigative techniques.[9]

Domestic implementation of international obligations

Current legislative framework

The foreign bribery offence

2.12        Division 70 of the Criminal Code embodies Australia's ratification of the OECD Convention. Division 70 was inserted in the Criminal Code by the Criminal Code Amendment (Bribery of Foreign Public Officials) Act 1999. It was designed to:

2.13        Subsection 70.2(1) of the Criminal Code, as amended, provides that:

  1. A person is guilty of an offence if:
    1. the person:
      1. provides a benefit to another person; or
      2. causes a benefit to be provided to another person; or
      3. offers to provide, or promises to provide, a benefit to another person; or
      4. causes an offer of the provision of a benefit, or a promise of the provision of a benefit, to be made to another person; and
    2. the benefit is not legitimately due to the other person; and
    3. the first-mentioned person does so with the intention of influencing a foreign public official (who may be the other person) in the exercise of the official’s duties as a foreign public official in order to:
      1. obtain or retain business; or
      2. obtain or retain a business advantage that is not legitimately due to the recipient, or intended recipient, of the business advantage (who may be the first-mentioned person).

2.14        This liability can also attach to a body corporate:

  1. This Code applies to bodies corporate in the same way as it applies to individuals. It so applies with such modifications as are set out in this Part, and with such other modifications as are made necessary by the fact that criminal liability is being imposed on bodies corporate rather than individuals.
  2. A body corporate may be found guilty of any offence, including one punishable by imprisonment.[11]

2.15        Prosecutions of foreign bribery by Australian corporations are not necessarily pursued under the Criminal Code and, depending on the type of offence, may be prosecuted under other Commonwealth or state legislation.[12]

2.16        The Criminal Code also provides for an Australian company to be held criminally liable for the acts of an employee, agent or officer acting within the actual or apparent scope of his or her employment.[13] In some circumstances this will mean that the current foreign bribery offence will apply to foreign subsidiaries of Australian companies. Section 12.3 of the Criminal Code outlines how the fault element of an offence can be attributed to the company, including by:

  1. proving that the body corporate's board of directors intentionally, knowingly or recklessly carried out the relevant conduct, or expressly, tacitly or impliedly authorised or permitted the commission of the offence, or
  2. proving that a high managerial agent of the body corporate intentionally, knowingly or recklessly engaged in the relevant conduct, or expressly, tacitly or impliedly authorised or permitted the commission of the offence, or
  3. proving that a corporate culture existed within the body corporate that directed, encouraged, tolerated or led to non-compliance with the relevant provision, or
  4. proving that the body corporate failed to create and maintain a corporate culture that required compliance with the relevant provision.[14]

2.17        Therefore, dependent on the specific circumstances of a case, it may be possible to show that an individual in a foreign subsidiary is acting as an agent of the parent Australian company; and 'if one of the means of attributing liability above can be established, the Australian parent company would be liable for the acts of that individual'.[15]

Penalties

2.18        Australia's foreign bribery legislation carries severe penalties through the Criminal Code. These were strengthened substantially in 2012. The applicable penalties currently are:

Defences

2.19        The two defences to the foreign bribery offence are that:

2.20        In order for the lawful conduct defence to be made out, it must be shown that the conduct of the foreign public official was lawful in the foreign public official's country, subject to a written law in force in that foreign country or in the part of the foreign country as the case may be. The source of applicable law will differ according to the nature of the connection of the officer with the foreign government or public international organisation.[20]

2.21        In order for the facilitation payment defence to be made out: the value of the payment must be minor; the payment must be made for the sole or dominant purpose of expediting or securing the performance of a routine government action of a minor nature; and as soon as practicable after the conduct occurred, the payer must make and keep a signed record of the payment setting out its value, date, the identity of the foreign public official and any other person directly involved in the payment, and particulars of the relevant routine government action. The facilitation payment defence is discussed in more detail in Chapter 7.

Territorial and nationality requirements

2.22        Section 70.5 of the Criminal Code outlines the territorial and nationality requirements of the foreign bribery offence. Specifically, it applies where the conduct constituting the offence:

2.23        As such, if a company or its subsidiary is not incorporated under Australian law, then it is not covered by Australia's foreign bribery offence unless the relevant conduct occurred in Australia or on board an Australian aircraft or an Australian ship.

Time for commencement of prosecutions

2.24        The time period for commencing a prosecution under any of the above provisions is the same as for all criminal offences—which pursuant to section 15B of the Crimes Act 1914 means that a prosecution may be commenced against an individual at any time if the maximum penalty is a term of imprisonment of more than six months in the case of a first conviction. Likewise, a prosecution of a body corporate may be commenced at any time if the maximum penalty is a fine of more than 150 penalty units in the case of a first conviction.

2.25        Therefore, as the offence carries a maximum term of imprisonment of 10 years for an individual and a maximum fine of 100 000 penalty units for a body corporate, a criminal prosecution for the offence of foreign bribery can be commenced at any time.

False accounting provisions

2.26        In 2016 the Criminal Code was amended to insert new false accounting provisions. This was, in part, in response to recommendations by the OECD Working Group on Bribery in 2012 that Australia tailor existing false accounting offences to address foreign bribery as well as increase the maximum sanctions against legal persons for false accounting.[22]

2.27        The new false accounting laws created a criminal offence, punishable by significant penalties, of intentionally or recklessly falsifying accounting documents.[23] Specifically, Division 490.1 of the Corporations Act 2001 (Corporations Act) creates an offence for intentional false dealing with accounting documents; and Division 490.2 creates an offence for reckless dealing with accounting documents. Penalties for individuals are 10 years imprisonment and/or 10 000 penalty units; and for corporate offenders 100 000 penalty units or three times the value of the benefit if established; or 10 per cent of 12 month turnover if value cannot be established. Offences apply to any Australian resident, citizen or corporation as well as any employees or persons engaged to do work for the corporation, in and outside Australia. The accounting documents themselves need not be in Australia, and can apply to accounting documents that are kept under Commonwealth law, or kept to record the receipt or use of Australian currency.[24]

Recent developments

2.28        This part of the chapter is separated by the subject matter of recent developments in anti-foreign bribery legislation and is not in chronological order.

Amendments to the foreign bribery offence

2.29        In April 2017, the Attorney-General's Department (AGD) released draft legislation and a public consultation paper outlining proposed amendments to the foreign bribery offence in the Criminal Code (2017 consultation paper). In summarising the need for change, the 2017 consultation paper noted:

The Government is exploring possible amendment to this offence to improve its effectiveness in addressing foreign bribery, and to remove possible impediments to a successful prosecution...

The offence in its current form poses challenges for typical cases of foreign bribery, which may involve the use of third party agents or intermediaries, instances of wilful blindness by senior management to activities occurring within their companies and a lack of readily available written evidence.[25]

2.30        The 2017 consultation paper outlined the following proposed amendments to the foreign bribery offence:

2.31        A detailed analysis of these proposals is contained in Chapter 4 of this report.

A proposed Deferred Prosecution Agreement (DPA) scheme

2.32        In March 2016, AGD released a public consultation paper on a possible scheme for DPAs (2016 discussion paper);[27] and in March 2017, a second public consultation paper on a proposed model for a DPA scheme in Australia for serious corporate crime (2017 DPA model).

2.33        A DPA is a voluntary, negotiated settlement between a prosecutor and a defendant.[28] With respect to the consultation paper on the 2017 DPA model, the AGD noted:

The Australian Government is considering options to facilitate a more efficient and effective response to corporate crime by encouraging greater self-reporting by companies. A key focus of this consideration is a possible DPA scheme.[29]

2.34        Under a DPA scheme, where a company or company officer 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. These conditions typically require the company to cooperate with any investigation, admit to agreed facts, pay a financial penalty, and implement a program to improve future compliance. A company will not be prosecuted in relation to the matters that were the subject of the DPA where the company fulfils its obligations under the agreement.[30]

2.35        A breach of the terms of a DPA may result in the prosecuting agency commencing prosecution or renegotiating the terms of the DPA with the company.[31]

2.36        A detailed analysis of this proposal is contained in Chapter 5 of this report.

Proposed reforms to corporate and tax whistleblower provisions

2.37        The government committed under the Open Government National Action plan to harmonise corporate sector whistleblower provisions with those existing in the public sector and to introduce legislation for this, together with tax whistleblower provisions, by December 2017.[32]

2.38        In December 2016, the Treasury released a public consultation paper on corporate and tax whistleblowing, which concluded in February 2017.[33]

2.39        In October 2017, the government released an exposure draft of the Treasury Laws Amendment (Whistleblowers) Bill 2017 and supporting explanatory material for consultation. The proposed reforms to the Corporations Act included:

Amendments currently before Parliament

2.40        Following the above consultations on proposed reforms, in December 2017 the government introduced the:

2.41        The CCC bill proposes a number of amendments to the existing foreign bribery offence, including:

2.42        The CCC bill also seeks to introduce a new corporate offence of failing to prevent foreign bribery and a DPA scheme, which would apply to foreign bribery and other specified serious corporate offences.

2.43        The EWP bill proposes to consolidate, strengthen and broaden the existing whistleblower protections and remedies for corporate and financial sector whistleblowers. The proposed amendments include:

2.44        The CCC bill and the EWP bill are discussed further in Chapters 4, 5 and 6 of this report.

Assessment of Australia's implementation of international obligations

2.45        The organisations that facilitate the international conventions provide ongoing assessments of member countries' implementation of the obligations. In general, these bodies have concluded that Australia's implementation, though improving over time, remains incomplete. The result is that Australia is seen on the international stage as failing to adequately tackle the problem of foreign bribery.

Effectiveness of Australia's implementation of the OECD Convention

2.46        There are a number of reports on Australia's implementation of the OECD Convention which have made recommendations to improve the effectiveness of Australia's anti-foreign bribery laws. The OECD has published the following monitoring reports relating to the implementation of the convention in Australia:

2.47        The Phase 3 OECD Report and follow-up report, as well as the Phase 4 OECD report are discussed below.

2.48        In the 2012 Phase 3 OECD Report, the OECD noted that:

The foreign bribery offence is becoming a priority for the Australian government. Australia's first National Anti-Corruption Plan aims to create a 'whole-of-government approach' to corruption; it is expected to be adopted by December 2012. In February 2012, Australia concluded a proactive public consultation on the facilitation payment defence. Guidance has been amended to clarify that the facilitation payment defence is restricted to payments of a minor value, and to eliminate certain examples that had caused concerns. The maximum fine against legal persons for foreign bribery was substantially raised in 2010. The sharing of tax information was enhanced with the ratification in August 2012 of the Convention on Mutual Administrative Assistance in Tax Matters and the amending Protocol.[36]

2.49        However, the OECD felt that Australia had not done enough to criminalise, prosecute and penalise instances of foreign bribery:

While the Working Group on Bribery welcomes Australia's recent efforts, it has serious concerns that overall enforcement of the foreign bribery offence to date has been extremely low. Only one foreign bribery case has led to prosecutions. These prosecutions were commenced in 2011 and are on-going. Out of 28 foreign bribery referrals that have been received by the Australian Federal Police (AFP), 21 have been concluded without charges.[37]

2.50        In the 2015 Phase 3 Follow-up Report, the OECD declared that Australia had made good progress on addressing a number of important recommendations. It cited:

2.51        The OECD noted that Australia had fully implemented 16 of its previous recommendations but nine remained partially implemented and eight not implemented at all.[39] The OECD observed that increased enforcement is required to determine whether the use of Australia's corporate liability provisions has been enhanced, and whether false accounting is being vigorously pursued.[40] It also remarked that more could be done with respect to enforcement.[41]

2.52        The Phase 4 OECD Report was released in December 2017.[42] It noted that Australia has stepped up its enforcement of foreign bribery since 2012, when the OECD Working Group on Bribery last evaluated Australia's implementation of the OECD Convention, with seven convictions in two cases and 19 ongoing investigations. However, in view of the level of exports and outward investment by Australian companies in jurisdictions and sectors at high risk for corruption, the report found that Australia must continue to increase its level of enforcement.[43]

2.53        In addition to highlighting recent reforms to the AFP and the CDPP to increase foreign bribery enforcement, the report identifies several other achievements and good practices, including:

2.54        The report further makes a number of recommendations to Australia aimed at strengthening its foreign bribery enforcement. Key recommendations highlight the need for Australia to:

Effectiveness of Australia's implementation of UNCAC

2.55        Article 63 of UNCAC set up a Conference of the States Parties to the UNCAC. The Conference was tasked with improving the capacity of and cooperation between States Parties to achieve UNCAC's objectives, and promoting and reviewing its implementation. In turn, the Conference established an Implementation Review Group of the UNCAC.[46] Since 2010, the Implementation Review Group has typically met twice a year in Vienna.

2.56        States that are parties to UNCAC are required to undergo a review of their implementation of key chapters of the UNCAC every five years.[47] Australia's implementation of Chapters III (Criminalisation & Law Enforcement) and IV (International Cooperation) of UNCAC was reviewed in 2012 and found to be fully compliant.[48]

2.57        In relation to criminalisation and law enforcement, Australia was commended on the following:

2.58        However, the following measures were identified to further strengthen existing anti-corruption measures:

2.59        In relation to international cooperation, the following successes and good practices were identified:

2.60        Additionally, it was recommended that Australia:

Continue to periodically review policies and legal mechanisms to provide the widest measure of mutual legal assistance, including taking statements of suspects or accused persons, in investigations, prosecutions and judicial proceedings.[52]

2.61        In February 2015, the Australian government submitted to the United Nations Office on Drugs and Crime that since the completion of the 2012 peer review, it had made significant progress in responding to two recommendations identified in the final peer review report.[53] The first, the adoption and implementation of legislation establishing a comprehensive scheme for public sector whistle-blower protection via the Public Interest Disclosure Act 2013; and the second, the review of policies and legal mechanisms to provide the widest measure of mutual legal assistance via the Extradition and Mutual Assistance in Criminal Matters Legislation Amendment Act 2012 and the Cybercrime Legislation Amendment Act 2012. In addition, the government drew attention to the AGD's commitment to initiate a review the operation of amendments to the Australian mutual legal assistance framework introduced with the Extradition and Mutual Assistance in Criminal Matters Legislation Amendment Act 2012.[54]

2.62        The second cycle of the independent review by the Implementation Review Group of Australia's implementation of key chapters II (Preventative measures) and V (Asset recovery) of UNCAC is not yet complete. However, the reviewing countries and governmental experts list appear to have been decided.[55]

Committee view

2.63        The committee welcomes the release of the Phase 4 OECD report and suggests that the government prioritise the consideration and implementation of the recommendations in that report.

2.64        The committee notes that Australia has received generally positive feedback regarding its implementation of the OECD Convention and UNCAC in its domestic law. The committee emphasises that both the OECD Working Group on Bribery and the UNCAC Implementation Review Group have made a number of recommendations that would improve Australia's foreign bribery regime which have yet to be fully implemented.

2.65        The committee notes recent initiatives to close loopholes in the legislative regime, introduce false accounting provisions and efforts to address challenges in prosecution and investigation. However, the committee is of the view that more needs to be done to enhance the effectiveness of Australia's implementation of the OECD Convention and UNCAC.

Recommendation 1

2.66        The committee recommends that the Australian Government prioritise the consideration and implementation of the recommendations in the Phase 4 OECD report, and ensure that proposed legislative changes to the foreign bribery offence and related measures to strengthen Australia's foreign bribery regime are implemented or enacted consistent with the Phase 4 OECD report.

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