The dramatic news that seven Fédération Internationale de Football Association (FIFA) officials – reportedly including a vice-president – have been arrested in Zurich pending their extradition to the United States on corruption charges including wire fraud, racketeering and money laundering, should give pause to all Australians who spend time doing business in foreign jurisdictions.
It is important that individuals and companies (and other bodies corporate, for example incorporated associations) are alert to the consequences of engaging in risky conduct or transactions, whether in Australia or abroad.
The FIFA case: extradition from Switzerland to the United States
The Extradition Treaty between the Government of the United States of America and the Government of the Swiss Confederation (the Treaty), governing the extradition to the United States of persons located within Switzerland's jurisdiction, entered into force on 10 September 1997.
Under the Treaty, Switzerland has an obligation to extradite to the US persons who have been charged with an 'extraditable offence' (that is, an offence punishable under the laws of both Switzerland and the US by a period of imprisonment exceeding one year). The FIFA officials are reportedly charged with extraditable offences.
Extradition must or may be refused by Switzerland in certain circumstances – including where the acts for which extradition is sought violate provisions of law relating exclusively to currency policy, trade policy, economic policy or tax minimisation – but none of these circumstances currently appear relevant to the case of the FIFA officials.
It appears that the FIFA officials have been provisionally arrested, meaning that it is expected that a request for extradition (which must be accompanied by an arrest warrant) will follow.
The extradition process can take a year or longer, depending on whether the officials elect to use all available avenues of appeal to prevent their extradition. These avenues include an appeal to the Federal Criminal Court or, in 'particularly important' cases, to the Federal Supreme Court. The Treaty does, however, also provide for a simplified extradition process. Under this process, Switzerland may grant extradition of a FIFA official without formal extradition proceedings if the official irrevocably agrees in writing to extradition after being advised by a 'competent judicial authority' (for example, the Swiss prosecutor) of the right to formal extradition proceedings and the protection afforded by them. Currently, one of the seven FIFA officials arrested is being reported to have chosen not to oppose his extradition.
The Australian position on extradition
The extradition by Australia of persons within its jurisdiction is governed by the Extradition Act 1988 (Cth) (the Act). Under the Act Australia can only accept extradition requests from countries that have been declared 'extradition countries', being countries with whom Australia has bilateral extradition treaties.
Australians doing business overseas should be aware that, apart from the obvious jurisdictions of the US, UK and many other EU nations, Australia has extradition arrangements with nations including India, Vietnam, Malaysia and Cambodia.
In Australia the extradition process commences with the receipt by the Attorney-General's Department of an extradition request. The process comprises a number of steps and along the way a person whose extradition is sought is afforded various opportunities for review – for example, where a magistrate or judge determines that a person is eligible for surrender, that decision is reviewable by the Federal Court within 15 days of the determination (provision is also made for review of the Federal Court's decision by the Full Federal Court).
Like Switzerland, Australia's extradition treaties with other countries also require the dual criminality requirement to be satisfied through the definition of the term 'extraditable offences' as those punishable by the laws of both states with a term of at least 12 months' imprisonment.
Australia may refuse extradition in a variety of circumstances, including where it has substantial grounds to believe that the request for extradition has been made for the purpose of prosecuting or punishing a person on account of that person's race, sex, religion, nationality or political opinion (or that that person's position may be prejudiced for any of those reasons), or where it believes that the surrender is likely to have exceptionally serious consequences for the person whose extradition is sought, including because of the person's age or state of health.
As with the Swiss-American process, a party to an extradition treaty with Australia may also request the provisional arrest of a person pending a request for extradition.
What does the FIFA case show us?
The FIFA scandal is a case study in the ability and preparedness of the United States to use its anti-bribery and corruption laws to pursue citizens of other states who are located outside of its jurisdiction and whose alleged conduct is only minimally connected with the United States (in this case, by use of the US financial system for the making of impugned payments).
Like its US counterpart, the UK Bribery Act also has significant extraterritorial application. Consequently the unwillingness or inability on the part of Australian law enforcement agencies to pursue Australians suspected of being involved in foreign bribery may not be the end of the story if the impugned conduct in some way attracts the operation of another jurisdiction's foreign bribery legislation.
In this context, facilitation payments give rise to particularly interesting issues insofar as the UK Bribery Act – unlike the Australian and US legislation – criminalises facilitation payments. UK prosecutors are able to exercise discretion in determining whether to prosecute, and in doing so take into consideration factors including whether the relevant company has a clear and appropriate policy on facilitation payments and how individuals should respond to these payments, whether the policy has been correctly followed, as well as whether facilitation payments are planned for or accepted as part of a standard way of conducting business. However, it remains the case that the UK Bribery Act gives rise to at least a theoretical possibility that if part of an Australian business were conducted in the UK (for example, if an Australian company had a UK subsidiary or agent) and that Australian business were to make facilitation payments in, for example, Cambodia, it might find itself the subject of an investigation by UK authorities into possible breaches of the Bribery Act's facilitation payment provisions.
The importance of fostering a robust corporate culture of compliance
The increasing activity of regulatory agencies not only overseas but also at home, is a reminder to Australian companies of the importance of fostering a robust corporate culture of compliance. The sophisticated model of corporate criminal liability contained in the Commonwealth Criminal Code (the Code) places the onus on companies to implement appropriate attitudes, policies, rules and practices to ensure compliance with Australian laws. Australian companies must be at all times acutely aware that the corporate culture provisions of the Code may be used to ascribe to a company culpability for the conduct of its employees, agents, or officers operating overseas in circumstances where that employee, agent or officer commits an offence while acting within the actual or apparent scope of her or his employment or authority.
Where intention, knowledge or recklessness is the fault element of the relevant offence, the fault element is attributed to a company that expressly, tacitly or impliedly authorised or permitted the commission of the offence. One way in which this authorisation or permission may be established is if it can be proven that there existed within the company a corporate culture that directed, encouraged, tolerated or led to non-compliance with the relevant law. While this places the burden of proof on prosecutorial authorities, another way in which authorisation or permission by the company can be established is where the company failed to create and maintain a corporate culture requiring compliance with the relevant law. Significantly, this places a positive obligation on companies to foster a culture of compliance so that they can point to the existence of such a culture if ever required to do so. It should be noted that the UK Bribery Act also places an onus on companies to demonstrate that they have implemented adequate procedures to prevent bribery.
It is essential that companies take steps to protect themselves against prosecution in respect of the corporate culture provisions. At a minimum, companies must instil measures of protection including:
- implementing codes of conduct, whistleblower policies and compliance programs;
- training domestic and overseas staff;
- setting up appropriate reporting procedures; and
- fostering a workplace environment in which questionable practices are unambiguously forbidden.
The institution and maintenance of such mechanisms will assist in limiting the likelihood of an employee, agent or officer of an Australian company engaging in conduct that falls foul of the law.
The world will be keenly watching developments in the case of the FIFA officials.
Closer to home, the FIFA case is a stark reminder to Australian individuals and companies that they must at all times be alive to the significant risks of engaging in unlawful conduct – both at home and in foreign jurisdictions. This is particularly so in light of both the reality that the risk of extradition is not merely hypothetical (beyond the FIFA case, the Department of Foreign Affairs and Trade reports that in 2013-2014 Australia surrendered, through the extradition process, one person facing bribery and corruption offences and three facing fraud or theft charges) and the ever-increasing global and domestic focus on foreign bribery.
The April 2015 report by the OECD on the implementation of the OECD Anti-Bribery Convention in Australia reports that since October 2012, foreign bribery investigations in Australia have increased from 7 to 17. The OECD also reports that the Office of the Commonwealth Director of Public Prosecutions has been restructured to ensure that sufficient resources are available to prosecute foreign bribery, the Australian Federal Police (AFP) has established a Fraud and Anti-Corruption Centre and AFP officers have been provided with foreign bribery training by the AFP Foreign Bribery Panel of Experts. These developments are suggestive of a strong focus and commitment on the part of the Australian Government to increase investigation and enforcement in respect of its corporate foreign bribery provisions.
In these circumstances, the need for adequate anti-bribery and corruption policies and procedures cannot be overstated. It is imperative that companies doing business in foreign jurisdictions ensure their anti-bribery and corruption policies are consistent not only with Australian law and the law of the jurisdictions in which they are operating, but also the laws of other nations where there exists the risk that the operation of those laws might be enlivened.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.