Appendix 1 - Australian Government response to the Report of the Inquiry into Certain Australian Companies in relation to the UN Oil-for-Food Programme
Introduction
On 27 November 2006 the Australian Government tabled the
Report of the Inquiry into Certain Australian Companies in relation to the UN
Oil-for-Food programme by Commissioner Terence Cole QC (the Report).
The Australian Government is pleased to respond to the
Report. The first three of Commissioner Cole’s recommendations have been
accepted.
The Government has in fact gone further than Commissioner Cole's
recommendations with proposed changes to Australian laws to strengthen
enforcement of UN sanctions and fight foreign bribery.
Again, the Australian Government thanks Commissioner Cole
and those assisting him for their excellent work on the Report.
In regard to recommendations 4 and 5, public inquiries have
already commenced. 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.
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.
Recommendations 1 – 3 in relation to enforcing UN sanctions
Commissioner Cole's first three recommendations are designed
to strengthen Australian law and administration of the domestic enforcement of
UN sanctions.
In considering the implementation of Commissioner Cole's
recommendations, it is important to note that the Report was focussed on the
administration of a specific export trading sanctions regime which relied upon
the operation of the Customs (Prohibited Exports) Regulations 1958. The
Report properly did not consider other UN sanctions implemented by regulations
made under the Charter of the United Nations Act 1945 (Charter of the UN
Act) such as import trading sanctions, financial services sanctions, freezing
of assets and travel restrictions.
The Australian Government has considered these other
sanction regimes and has sought to apply Commissioner Cole's recommendations in
a way that improves all current and future UN sanctions regimes in Australia.
The Government has in fact gone further than Commissioner Cole's
recommendations with proposed changes to Australian laws to strengthen
enforcement of UN sanctions and fight foreign bribery.
Recommendation one
"I recommend 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."
Response
The Government accepts Commissioner Cole's recommendation
that Australian law should require complete and accurate information in support
of any permission to export goods which are subject to UN sanctions and impose
significant consequences for any breach of that obligation. The Government will
also implement this recommendation for other Australian UN sanction regimes.
Accordingly, the Government will introduce legislation to:
- amend the Customs (Prohibited Exports) Regulations 1958
and the Customs (Prohibited Imports) Regulations 1956 to require
applications for permission to export or import goods subject to a United
Nations sanctions regime to be made on an approved application form which
requires a declaration and certification by a senior executive of the applicant
company as to the accuracy and completeness of the information
- amend the Customs Act 1901 to deem a permission to export
or import UN sanction goods not to have been granted if it was granted on the
basis of false and misleading information
- revise and increase financial penalties for importing and
exporting goods in breach of UN sanctions
- declare UN sanction goods to be prohibited imports or exports
with penalties of 10 years imprisonment for importing or exporting prohibited
goods without a valid permit, and
- amend the Customs Act and the Charter of the UN Act to introduce
criminal offences for providing false or misleading information in connection
with the administration of UN sanction regimes. Penalties of 10 years
imprisonment apply with appropriate financial penalties for corporations.
Offences can be laid against the company providing the information, any officer
who signed any approved application form and any other officer or employee of
the company complicit in the provision of the false or misleading information.
Recommendation two
"I recommend 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."
Response
The Government accepts recommendation two and will ensure
Australian law properly criminalises conduct which breaches UN sanction
regimes. Rather than inserting a new offence in the Criminal Code as
recommended by Commissioner Cole, the Government will insert a new offence into
the Charter of the UN Act.
The Government will impose strict liability on corporations
but not on individuals, as recommended by Commissioner Cole. The Government
considers that it is neither fair, nor useful, to subject individuals to 10
years imprisonment for unintended actions or unforeseen consequences unless
these resulted from an unjustifiable risk, that is, recklessness. Accordingly,
the offence for conduct that breaches a UN sanction will require proof of fault
where individuals are concerned.
Recommendation three
"I recommend 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."
Response
In his findings Commissioner Cole notes that "no power
exists for any Commonwealth entity to obtain evidence and information for the
purpose of securing compliance with" UN sanctions. The Australian
Government will address this by introducing legislation to give Government
agencies responsible for granting permits in relation to UN sanctions
appropriate powers to:
- undertake due diligence before any permission is granted
- monitor, effectively, continuing compliance with any conditions
or requirements of the permission, and
- identify any possible breaches of the law for referral to
relevant law enforcement agencies.
There will also be appropriate penalties for any failure to
comply with a requirement to provide required information or documents. Rather
than giving these powers to one body, the Government will give these powers to
various agencies responsible for granting permits in relation to UN sanctions.
Agencies will make appropriate administrative changes to give effect to these
new powers.
Further changes relating to foreign bribery and tax deductions
The Government will also be addressing two issues that do
not flow directly from Commissioner Cole’s recommendations, but which Commissioner
Cole commented on in his report. These relate to foreign bribery and tax
deductions. The Government will:
- amend the Income Tax Assessment Act 1997 (ITAA) to align
the definition of facilitation payments to the definition in the Criminal Code
to allow deductibility only for minor facilitation payments, and
- amend Division 70 (Foreign Bribery) of the Criminal Code to
clarify that the defence in section 70.3 applies only where the law of the
foreign country states that the advantage in question is permitted or required
and that the offence can be made out regardless of the results of the payment
or the alleged necessity of the payment, and amend the corresponding provision
of the ITAA.
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