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Focus: New anti-corruption legislation

16 October 2009

In brief: Partner Matthew Skinner (view CV) and Senior Associate Tim Robinson look at new Commonwealth legislation that means individuals and corporations will face tougher legal sanctions if convicted of bribing foreign or Commonwealth public officials.

How does it affect you?

  • The Australian Federal Government has introduced legislation proposing a very significant increase in the penalties for individuals and companies that engage in foreign bribery and corruption. Under the proposed legislation, maximum penalties may extend to the higher of A$11m, three times the value of the benefit attributable to the corrupt conduct (ie three times the profit obtained on a contract obtained by bribery) or, if the benefit cannot be determined, up to 10 per cent of the company's annual turnover.
  • The increased penalties further underline the importance for all Australian companies of planning and implementing measures to prevent foreign corruption.

Introduction

The Australian Federal Government has recently introduced legislation into Parliament that will substantially increase the penalties for bribing foreign and Commonwealth public officials. This includes basing the maximum penalty for corporations on the value of any benefit that was obtained by committing the offence and comes after some criticism from international anti-corruption organisations.

These reforms underline the Government's commitment to strengthen legal sanctions against corruption and should put Australian corporations on notice of the substantial reputational, operational and now financial risks they will assume should they, their subsidiaries, their agents or their employees engage in corrupt conduct in the course of doing business either in Australia or overseas.

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Responding to international criticism

Since Australia ratified the OECD Convention on Combating Bribery of Foreign Public Officials in 1999, independent OECD monitors have repeatedly criticised Australia's relatively low penalties for foreign bribery. Past OECD reports have noted that Australia lacks legal sanctions against bribery of foreign and domestic officials that are 'effective, proportionate and dissuasive' in light of the scale and importance of many Australian companies (as well as multinational corporations with headquarters in Australia) in the global marketplace1. Transparency International, a global NGO dedicated to the eradication of corruption, has also called for increases in financial penalties for bribery under Australian law2.

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The amendments

In September 2009, the Federal Attorney-General, Robert McClelland, introduced the Crimes Legislation Amendment (Serious and Organised Crime) Bill 2009 (No. 2). Among a raft of reforms aimed at preventing, investigating and prosecuting organised criminal activity, the Bill amends the Criminal Code Act 1995 (Cth) to strengthen the penalties for the offences of bribing foreign public officials (section 70.2) and Commonwealth public officials (s141.1).

Under the Bill, individuals who are found guilty of bribing a foreign or Commonwealth public official will be liable to a maximum of 10 years' imprisonment, a fine of $1,100,000, or both (a significant increase from the current maximum fine of $66,000). The Explanatory Memorandum to the Bill explains that, '[t]he inclusion of a significant monetary penalty for individuals is to deter bribery of foreign public officials where the existing financial penalty may be perceived as "a cost of doing business" when international transactions worth millions of dollars occur.'3

Corporations found guilty of bribing a foreign or Commonwealth public official may be subject to even more onerous pecuniary penalties. Under the Bill, the maximum penalty for a corporation will be the greatest of the following:

  • A$11,000,000;
  • three times the value of any benefit that the corporation has directly or indirectly obtained that is reasonably attributable to the conduct constituting the offence (including the conduct of any related corporation);
  • if the court cannot determine the value of that benefit, 10 per cent of the annual turnover of the corporation during the 12 months preceding the offence.

These penalties are likely to act as a significant deterrent to bribing foreign or Commonwealth public officials and reflect the stated intention of the Bill to ensure that 'the risk of being successfully prosecuted for [the] offence outweighs the potential benefit from the transaction/benefit procured through the bribe.'4 The new penalties are potentially more severe than the penalties under the US Foreign Corrupt Practices Act (maximum penalty of two times the benefit received) and the proposed UK Bribery Bill (unlimited fines).

The new penalties also highlight the need for all Australian companies to develop and implement a comprehensive and effective compliance program to prevent foreign corrupt conduct by subsidiaries, joint venture partners, agents and employees.

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Footnotes
  1. OECD, Follow-Up Report on the Implementation of the Phase 2 Recommendations – Application of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, 29 August 2009, p.20.
  2. Transparency International, OECD Anti-Bribery Convention – Progress Report 2009, p 18.
  3. Explanatory Memorandum, Crimes Legislation Amendment (Serious and Organised Crime) Bill (No. 2) 2009, p.184.
  4. Explanatory Memorandum, p.185.

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