Christmas comes early for the AFP and CDPP: Bill introduced to reform foreign bribery laws and introduce DPA scheme

In brief

The Australian Government has introduced the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 into the Senate, which, if passed into law, will significantly strengthen Australia's foreign bribery laws and introduce a Deferred Prosecution Agreement scheme for resolving corporate criminal misconduct. Partners Rachel Nicolson and Peter Haig, Senior Overseas Practitioner Christopher Kerrigan and Lawyers Shamistha Selvaratnam and Emma Moore report.

Background

As we reported earlier this year, the Australian Government consulted on a proposed model for a DPA scheme in Australia and proposed reforms to Australia's foreign bribery regime. We prepared submissions to the consultation in relation to changes to the foreign bribery laws and the consultation on the introduction of DPAs.

Earlier this week, the Australian Government introduced the Bill enacting some of those proposals into the Senate. The changes to the foreign bribery laws and the option of entering into a DPA in relation to foreign bribery (and other specified corporate criminal conduct) will reshape the corporate crime landscape in Australia.

Foreign bribery offences

The new offence: failure to prevent bribery by associates

As contemplated by the consultation paper, the Bill includes a new offence of 'failure to prevent bribery of foreign public officials'.¹ Under this offence, an Australian company will commit an offence if an 'associate' of the company commits bribery for the 'profit or gain' of the company. The bribe by the associate may be paid anywhere in the world and does not itself have to be the subject of prosecution. This is a strict liability offence, but the company will have a defence if it can prove that it had in place 'adequate procedures' designed to prevent the commission of the offence by any of its associates.²

Guidance will be published by the Minister 'on the steps that a body corporate can take to prevent an associate from bribing foreign public officials' (ie to have 'adequate procedures').³ It is hoped that this guidance closely tracks equivalent UK guidance (for its similar 'failure to prevent' bribery offence)⁴ to avoid companies being expected to do different things to satisfy different authorities under the UK and Australian regimes.

As expected, this offence is similar to the UK offence of failure to prevent bribery. In some respects, the Australian Government's proposed offence is narrower than the UK's (for example, it only applies to bribery of foreign public officials, as opposed to private citizens). In other ways, it is broader.

Most notably, under the Bill, an Australian company will commit an offence if an associate pays a bribe for 'the profit or gain' of the Australian company. The term 'associate' has been defined broadly and encompasses all officers, employees, agents, contractors, and any person who performs services for or on the company's behalf.⁵ Importantly, the definition also includes subsidiaries and controlled entities,⁶ regardless of whether they are performing services for, or on behalf of, a company. The Australian Government has stated that the words 'profit or gain' are 'intended to cover the situation where a company benefits merely because it is the beneficial owner of a subsidiary company that commits the foreign bribery offence'.⁷

The definition of 'associate' is broader than in the equivalent UK 'failure to prevent' offence, which focuses on the nature of the relationship between the company and the associate, rather than its formal status. In order to be an 'associated person' under the Bribery Act 2010 (UK), a person must be 'performing services' for, or on behalf of, the company.⁸ In order for bribes paid by the 'associated person' to lead to liability for the company under the UK offence, the 'associated person'⁹ must intend to obtain or retain business, or an advantage in the conduct of business, for the company concerned.

In our consultation submission, we warned that the inclusion of the words 'profit or gain' and such a broad definition of 'associate' would, in effect, constitute a piercing of the corporate veil. It is likely to lead to many Australian companies imposing much greater oversight over their foreign subsidiaries' conduct and, in some instances, deciding that the risk of owning companies in some jurisdictions is too great. A particular area of focus for companies is likely to be joint ventures and the risk holdings in these ventures might generate.

Amendments to the existing offence: bribery of a foreign public official

Largely in keeping with the Australian Government's proposal in its consultation, the offence under s70.2 of the Criminal Code Act 1995 (Cth) (the Code) has been repealed and replaced with the following key changes:

• The definition of foreign public official has been extended to include a candidate for political office.
• The requirement that the foreign public official must be influenced 'in the exercise of the official's duties' has been removed.
• The requirement that a person have a specific 'business' advantage in mind has been removed such that the offence now covers bribery to obtain a personal advantage.
• The concept of giving a benefit and receiving an advantage that was 'not legitimately due' has been replaced with the concept of 'improperly influencing'. Legislative guidance in relation to this concept has been provided in a new s70.2A.
• It is not necessary that the person offering or providing, or causing the offering or providing, intends to influence a particular foreign public official to obtain a particular business or a particular advantage. Nor is it a requirement that such business or advantage is actually obtained or retained.

Each of these changes was contemplated in the consultation paper. These changes are intended to 'remove undue impediments to successful investigation and prosecution of foreign bribery offending by broadening the offence, removing restrictive requirements and clarifying some requirements.'¹⁰ We anticipate that they will make proving bribery of a foreign public official significantly easier, potentially leading to more such cases being prosecuted.

In its consultation paper, the Australian Government also proposed to create a new separate foreign bribery offence for where a person is reckless (ie took an unjustified substantial risk) as to whether their conduct would improperly influence a foreign public official. The Government has taken on board the feedback received during the consultation from Allens and a number of other stakeholders and not included this proposed offence in the Bill.¹¹

'The Bill does not remove the 'facilitation payments' defence. This defence arises when a minor payment is made to expedite a routine government action. An accurate record must be kept of the payment for the defence to apply. While retaining this defence is in line with the Government's position during consultation on these reforms, this is somewhat surprising given the strong trend to remove such defences in line with OECD guidance and broader analysis that such payments are very often in breach of the law of the country where they are made.

Introducing Australia's DPA scheme

The Bill introduces a DPA scheme¹² by amendment to the Director of Public Prosecutions Act 1983 (Cth) (the DPPA), largely in line with the exposure draft summarised in our earlier Focus. Under the scheme, the Director may invite companies (but not individuals) accused of certain crimes¹³ to enter into confidential DPA negotiations.

We anticipate that the Commonwealth Department of Public Prosecutions (CDPP) will publish guidance on how DPAs will be negotiated, entered into and administered, as this will be key to providing companies with sufficient certainty to consider seeking a DPA (although the Bill merely provides that the Director may issue such guidance).¹⁴ The following table sets out the key elements of the DPA scheme.  

The consultation exposure draft proposed that a mandatory term of a DPA should be an admission of guilt. This requirement received negative feedback from consultation respondents. In a major departure from the exposure draft, under the Bill, an admission of guilt is not a requirement of a DPA.²¹ This brings the Australian scheme into alignment with the UK regime. Whether or not a company agrees to admit guilt will ultimately be a matter to be negotiated.

Once a DPA is agreed, the DPA is approved by an 'approving officer' (ie a retired judge appointed by the Minister)²² and will be published on the CDPP's website within 10 business days, unless the Director considers it appropriate in the interests of justice to publish a redacted version of the DPA or not publish it at all.

The Bill lists a number of non-exhaustive factors that may be relevant to this determination, including the risk that the disclosure may prejudice an ongoing investigation or the fair trial of a person.²³

The model chosen is in many ways a hybrid of the US and UK regimes. In the UK, a judge is involved in the supervision and approval of a DPA. In contrast, in the US, a judge only provides final approval of a DPA. Under the Australian regime, an approving officer has a narrow remit and only has the power to approve or not approve the DPA.²⁴ The approving officer must assume that the information set out in the DPA is true and correct.²⁵

The Bill provides that a DPA can be varied after it has been approved.²⁶ If a company and the Director agree to a variation to the DPA, the Director must give the DPA as varied to an approving officer and the approving officer must decide to either approve or not approve the variation.

The Bill also restricts the admissibility of certain evidence against a company, namely, documents that indicate that the company entered into negotiations for a DPA and documents that were created solely for the purpose of negotiating a DPA.²⁷ This restriction is limited if the Director is satisfied there has been a material contravention or if the inaccurate, misleading or incomplete information provision is triggered at the new s17A(3) of the DPPA.

Next steps

The significance of these proposed changes to Australia's foreign bribery laws means that not only will the Bill, if passed, shape future foreign bribery prosecutions; it will also guide internal corporate frameworks and policies with respect to best practice in foreign bribery safeguards and compliance. Self-reporting guidance from the CDPP and 'adequate procedure' guidance to be published should hopefully add further clarity to the foreign bribery framework.

The DPA scheme will be available for conduct occurring before, on or after the passing of the Bill.²⁸ The DPA scheme will come into force the day after Royal Assent is received and will be available for conduct pre-dating its commencement. In contrast, the foreign bribery amendments will come into force six months after Royal Assent is received ²⁹ and will only apply in relation to conduct engaged in on or after the amendments come into force.³⁰ As foreign bribery can take some time to come to light and then be investigated, it may be that the impact of the DPA scheme will be felt more immediately. We anticipate that the CDPP will wish to expedite some ongoing investigations (in the foreign bribery space and elsewhere) to resolution via a DPA as soon as possible after the DPA scheme comes into force.