Australia: Punishment and reward: Deferred Prosecution Agreements (DPAs) and tough new foreign bribery offences

Just one day before the end of the final Parliamentary sitting week for the year, the government has introduced new legislation that will establish a regime for Deferred Prosecution Agreements (DPA) and tough new foreign bribery offences.

When passed, the legislation will make it easier to prosecute individuals and corporations who engage in bribery overseas by simplifying the elements of the offence and widening the scope of conduct viewed as corrupt. A new offence aimed at corporations that don't have adequate safeguards and procedures to prevent foreign bribery should leave the C-suite in no doubt as to the importance of reviewing internal policies.

But in a sign the government has no intention of dragging offenders through years of prolonged investigations and litigation – seven years being the average for foreign bribery offences – a new DPA framework will make it easier to settle disputes quickly and without the financial and reputational cost of a criminal trial.

In addition to foreign bribery offences, DPAs will be available for a number of serious corporate crimes contained in the Criminal Code, the Corporations Act, the Anti-Money Laundering and Counter-Terrorism Financing Act and the Autonomous Sanctions Act.

At the same time, the government also introduced a bill to enhance whistleblower protections and obligations on organisations. The combination of these three pieces of legislation will significantly increase the need for a review of a corporation's risk register as well as the probability of regulator action in a wider range of areas.

SHOULD COME AS NO SURPRISE

The introduction of these reforms should come as no surprise. The government has been signalling for months its intention to give regulators greater powers to crackdown on Australian companies behaving badly overseas. The legislation also comes after an extensive consultation process, with feedback from earlier drafts of the Bill evident in the legislation introduced into the Senate this week.

These reforms are part of a broader process being implemented by the government to crackdown on corporate crime. They supplement false accounting rules introduced in 2016 and new whitleblower protections, which are expected to be passed in the New Year. These measures are all designed to meet Australia's obligations under the OECD Anti-bribery Convention.

The Bill will be debated in Parliament between 5 February and 28 March 2018.

FOREIGN BRIBERY: WHAT'S NEW?

For those who have been following the process, a number of changes between the draft legislation and the Bill introduced into Parliament will be evident. The omission of a foreign bribery offence based on recklessness is an obvious and likely welcome example.

But the overall content of the Bill is unsurprising. As expected, two new offences will be created targeting individuals and corporations:

  1. Bribing a foreign public official (section 70.5A); and
  2. Failing to prevent bribery of a foreign public official (section 70.2)

In contrast to the existing provisions, obtaining or retaining business or a business advantage is no longer required. Any advantage, including personal – whether specific or not – will be enough to fall within the scope of the new offence.

Who is a foreign public official?

The definition of a foreign public official has been broadened to include candidates running for office. This change was supported during the consultation process, although there are still questions about when a person is standing or is nominated informally – at what point does a person informally declare they are standing for office? The public policy reasons for this change are obvious: bribing candidates to provide advantage once they have been elected has the same negative outcomes for governance and fair markets.

Improperly influencing

The new legislation prohibits the 'improper influencing' of a foreign public official.

The existing offence requires the Commonwealth prosecutor to demonstrate that a benefit or advantage conferred was 'not legitimately due'. This approach is out-of-step with regimes in the USA, UK, Canada and New Zealand. It can lead to confusion when a payment is disguised as a legitimate business transaction.

This change divided opinions in the consultation process, with many submissions arguing that the lack of case law in Australia defining 'improper influence' means it will take some years to provide effective advice on the management of business activities. However, what is improper will be a matter for the trier of fact. The Bill outlines a non-exhaustive list of factors that can be considered, including an additional factor which was introduced after the consultation process - whether there has been dishonesty.

Corporations in the dock

The days of blaming a rogue employee when something goes wrong are over. The new offence of failing to prevent foreign bribery puts corporations squarely in the dock.

Under the new legislation, corporations that don't have adequate safeguards and procedures to prevent foreign bribery can be held liable for offences committed by their associates – this can occur even when the associate has not been charged or convicted. The only defence is to prove that adequate safeguards and internal procedures were in place.

The concept of an associate includes an officer, employee, agent or contractor of the corporation. It also covers subsidiaries and entities that are controlled by the corporation, or any person or entity that performs services on behalf of the corporation – the corporate veil will not protect an organisation from the sins of the corporate family. The practical implication of this is that you need to look very closely at who you do business with and who does business on your behalf. Particular attention needs to be paid to your joint venture partners. A corporation's only defence is to prove that it had adequate procedures in place designed to prevent the offence occurring. The burden of proof is on the organisation. Pushing your best practice procedures onto those you do business with – in a meaningful way which is monitored, rather than a "tick the box process" will have to become standard operating procedure.

With the legislation likely to come into effect in the second-half of 2018, the C-suite will need to focus on bolstering an organisation's foreign bribery policies and procedures. The Minister is likely to publish guidance on what is expected. In the meantime, the International Standards Organisation's Anti-bribery management system (ISO37001) is a good place to start.

Penalties

For individuals, the penalties are imprisonment for up to 10 years, and a penalty up to 10,000 penalty units ($210,100). For corporations the penalties are a fine or no more than the larger of: 100,000 penalty units ($2.1 million); three times the value of the resulting to the corporate family; or 10% of the annual turnover (not profit) in the 12 months prior to the conduct.

When will it start?

If this legislation is passed and assented to in the February-March 2018 sittings, it will apply from as soon as August 2018.

DEFERRED PROSECUTION AGREEMENTS: A NEGOTIATED OUTCOME

Deferred Prosecution Agreements (DPA) have been making headlines in recent years, with major multinationals such as BAE Systems and Rolls-Royce entering into DPA's and agreeing to pay fines of around US$400 million and US$800 million respectively – see this article.

In both cases the offences related to contraventions of US and UK anti-bribery legislation.

The government released a consultation paper earlier this year, and has now released legislation to bring DPAs into effect. DPAs will allow the Commonwealth Director of Public Prosecutions (CDPP) to enter into a voluntary agreement with corporations – not individuals – to defer prosecutions in return for the organisation agreeing to a number of mandatory and optional requirements. If the company complies with the agreement, the CDPP won't pursue the matter further.

What must be in a DPA?

The DPA should contain, at a minimum, the following mandatory elements:

  • a statement of facts relating to each offence specified in the DPA;
  • the last day for which the DPA will be in force;
  • the requirements to be fulfilled by the person under the DPA;
  • the amount of financial penalty to be paid by the person to the Commonwealth;
  • the circumstances which constitute a material contravention of the DPA;
  • that the person consents to the CDPP instituting a prosecution of the person on indictment for an offence specified in the DPA without the person having been examined or committed for trial;
  • identification of the circumstances that will constitute a material contravention (so that DPAs don't fall over and expose corporations to prosecution for minor, non-essential non-compliance).

An important departure from the March 2017 consultation model, is that entering a DPA will not require an admission of guilt. This is of real importance to corporations in these days of class actions.

Other elements which may also be included are:

  • compensation for victims;
  • a donation to charity or a third party;
  • a forfeiture of benefits made from the offence outlined in the DPA;
  • the implementation of compliance programs;
  • the payment of the Commonwealth's costs in negotiating the DPA.

Not off the hook

DPAs will not be a get out of jail free card for corporate wrongdoers. For a DPA to be accepted, the CDPP must be satisfied that it is in the public interest. DPAs will also need to be issued by an "approving officer" who must approve it if satisfied the terms are reasonable, appropriate and in the interests of justice.

Approving officers will be former judges appointed by the Minister for five year terms.

Where a company breaches a DPA, the agreed statement of facts from the agreement can be used as evidence in the Crown's case. Documents created for the purpose of negotiating a DPA, however, will not be admissible.

DPAs will cover a range of serious corporate crimes including foreign bribery, fraud, money laundering, dealing with proceeds of crime, breaching sanctions laws, and a number of provisions in the Corporations Act (including the market misconduct and insider trading provisions).

For corporations, a DPA will give certainty that an investigation has come to an end, that their exposure to the regulator is known, and, by nature of the regulator's approval, that their commitments to reform their culture and operations should be satisfactory.

There is another important benefit for corporations: if a DPA is complied with, then there will be no judicial finding that the corporation has engaged in any contravention of the law. This is important because such findings can often "debar" a corporation from taking part in foreign government tenders or in business operations and tenders with other organisations which may have very strict corporate governance standards. This was recognised in the Rolls-Royce case (paragraph [53]ff), where the Court, in approving the DPA, expressly considered the benefit to the company being able to continue conducting business.

When will it start?

The Deferred Prosecution Agreement framework should come into effect in early-mid 2018.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Chambers Asia Pacific Awards 2016 Winner – Australia
Client Service Award
Employer of Choice for Gender Equality (WGEA)

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions