The Senate is set to hold an inquiry into the effectiveness of Australian laws designed to tackle foreign bribery. Senator Nick Xenophon, who moved for the inquiry said it is "widely known to be illegal for Australian companies and organisations to engage in bribery and corruption overseas. What this inquiry will examine is why cases are so hard to bring and rarely result in convictions."
The Inquiry will consider whether Australia should introduce provisions similar to those which have proven effective in the US and UK.
In March this year, Labor Senator Sam Dastyari expressed concern that Australia is lagging the US and the UK in enforcing foreign bribery laws.
He referred to foreign bribery allegations involving BHP and some other well known Australian entities. The allegations against BHP related to bribes paid to Chinese officials in the lead up to the 2008 Olympics.
The Senator's concerns proved prophetic as two weeks later BHP was charged with violating the US Foreign Corrupt Practices Act, in relation to this same alleged conduct.
BHP Billiton reached a settlement with the US Securities and Exchange Commission (SEC), agreeing to pay a US $25 million penalty. While the SEC acknowledged the assistance of the Australian Federal Police in its investigation, it is puzzling why the matter wasn't spearheaded by the AFP and not prosecuted under Australia's anti-bribery and corruption laws.
The new Senate Inquiry is likely to explore this, and other issues relating to Australia's foreign bribery laws.
WIDE-RANGING REVIEW OF BRIBERY AND CORRUPTION LAWS
The Committee's terms of reference demonstrate the Inquiry will be a wide-ranging review of Australia's laws to tackle bribery and corruption. It will investigate the effectiveness of the organisations that have responsibility for investigation and enforcement, and consider whether some of the measures used in the US and UK should be introduced in Australia.
It is clear Australia lags behind global best practice in both adequacy of laws and enforcement. We can expect to see recommendations for reform when the Committee presents its findings in mid-2016. Some of the probable recommendations include:
- the introduction of a new offence of failing to prevent bribery;
- introduction of deferred prosecution agreements; and
- improved protection for whistleblowers
A NEW OFFENCE
One failing of Australia's anti-bribery and corruption laws is that to establish corporate liability for a foreign bribery offence, the prosecutor must prove the corporate culture of the organisation implicitly (or overtly) encouraged or condoned the conduct.
This is in stark contrast to the UK (where it is an offence for a corporation to fail to prevent bribery from occurring) and the US (where the company is liable for acts of its employees and agents, and corporate culture for compliance is only relevant to the exercise of prosecutorial discretion).
The Senate Inquiry is expected to examine whether Australia should follow the UK example.
Introducing a failure to prevent bribery offence would be a strong incentive for improved compliance in the corporate sector. The offence also makes sense from a policy perspective, because while a bribe-paying employee may receive some benefit from doing so, the real economic beneficiary is inevitably the employer.
DEFERRED PROSECUTION AGREEMENTS (DPAS)
These are agreements between a company and a prosecuting authority whereby a company can avoid a bribery or corruption conviction by negotiating a proportional sanction with the prosecutor.
Both the US and the UK have DPAs. They are part of the "carrot and stick" approach to bribery and corruption compliance. The arrangements aim to promote early self reporting of potential criminal conduct (in return for the "carrot" of certainty, lower penalties and lower costs of resolution).
The "stick" is that the failure to be proactive and self-report may mean that a prosecutor is more inclined to seek a criminal conviction and sanction.
In Australia, DPAs are not available and there is no guidance or clear incentive related to self reporting. New measures to provide such guidance are long overdue and would be welcome.
Even without these potential reforms, companies should engage with law enforcement and other authorities (including the AFP and ASIC) to self-report incidents of bribery and corruption, director misconduct, and book-keeping issues.
PRIVATE SECTOR WHISTLEBLOWER PROTECTION
The Senate Inquiry will also look at whether improved whistleblower protection is needed. Australia's current protection is limited to statutory protection for public sector whistleblowers and very limited protection for private sector whistleblowers.
Both the US and UK have strong provisions protecting private sector whistleblowers. The inquiry will examine whether Australia should adopt similar measures.
In the US, the SEC also has the power to reward whistleblowers with cash payments based on the unique information they provide. This has successfully increased the flow of whistleblower information to the authorities.
MEANWHILE, IN AUSTRALIA...
There is no doubt the AFP has made strides in its investigation of bribery and corruption. It has increased resourcing, reopened old investigations and started new ones. There are 14 current bribery and corruption investigations underway, some of which are publicly known and others that remain confidential.
But a record of two convictions and many matters 'underway' suggests there is still much work to be done, and that law reform is needed.
The Economics Reference Committee is due to deliver its report into the effectiveness of Australia's anti-bribery and corruption regime in mid-2016.
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