Third time's the charm? Australia looks to introduce a 'failure to prevent' foreign bribery offence (again)

What you need to know

• The Government's recently introduced Bill to reform Australia's foreign bribery offences:
• looks to simplify and expand some aspects of the existing foreign bribery offence; and
• introduces a new corporate offence of failing to prevent foreign bribery. The new offence would see companies liable for foreign bribery by their employees, contractors, or other associates, unless they can show they had 'adequate procedures' in place to prevent such activity.

What you need to do

• Keep a watching brief on the Bill;
• Look out for draft guidance about what 'adequate procedures' will operate as a defence to allegations of failing to prevent foreign bribery;
• Start to consider whether and how to update your existing anti-bribery and corruption policies, procedures, and training to make sure they pass muster as 'adequate procedures'.

Overview of the Bill

On 22 June 2023, the Government introduced the Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2023.

The Bill broadly does two things. 

First, it amends the existing foreign bribery offence in the Criminal Code (Cth) to introduce a series of extensions and refinements, intended to simplify the prosecution of foreign bribery. These changes involve:

(i) extending the offence to include bribery of candidates for public office (not just current holders of public office);

(ii) extending the offence to include bribery conducted to obtain a personal advantage, not only business advantage;

(iii) removing the existing requirement that the benefit or business advantage be ‘not legitimately due,’ and replacing it with the concept of ‘improperly influencing’ a foreign public official;

(iv) removing the existing requirement that the foreign public official be influenced in the exercise of their official duties; 

(v) making it clear that it is not necessary that the person providing the bribe had a specific business, or business or personal advantage in mind, and that these could be obtained by someone else; and

(vi) spelling out the factors that may be considered when determining whether or not there has been 'improper influence.'

The Explanatory Memorandum for the Bill states that these changes are a response to difficulties Australian law enforcement has experienced in pursuing prosecutions under the existing offence, describing the existing offence as "overly prescriptive and difficult to use."

Second, the Bill introduces a new corporate offence of failing to prevent bribery. A company will be criminally liable where an associate of the company (meaning officers, employees, agents, contractors, other service providers, or other associates) has committed bribery for the profit or gain of the company, unless the company can show that it had ‘adequate procedures’ in place to prevent the commission of foreign bribery by its associates. The maximum penalty for this new offence is the greatest of the following:

• 100,000 penalty units ($27.5 million);
• if the court can determine the value of the benefit obtained by the associate from the conduct, three times that value;
• if the court cannot determine the value of that benefit, 10% of the company's annual turnover for the 12 month period ending at the month in which the associate committed, or began committing, the bribery.

The Explanatory Memorandum states that this new offence is designed to overcome challenges in establishing criminal liability of companies that are 'wilfully blind' to misconduct by their employees and other associates, and to incentivise companies to implement and maintain adequate procedures to prevent foreign bribery from occurring. It cites the UK's introduction of an equivalent offence in 2010 as having increased the adoption of corporate compliance programs.

This sounds familiar…

The Bill is in very similar terms to bills introduced by prior Coalition governments, in 2017 and 2019. However, each of those bills lapsed when Parliament was prorogued ahead of Federal elections.

The key difference with those earlier bills is that the current Bill does not also provide for the introduction of a deferred prosecution agreement (DPA) scheme. A DPA is a voluntary settlement between a criminal prosecutor and a defendant company, where the defendant agrees to comply with certain requirements (such as compensating victims and paying a financial penalty) in exchange for prosecution being deferred and, if the agreed requirements are met, discontinued.

In the Attorney General's second reading speech introducing the current Bill, he indicated that a DPA scheme would only be considered once the measures in this Bill 'had been implemented and given time to work'.

Will there be guidance on what constitutes 'adequate procedures' to prevent foreign bribery?

Yes. The Bill specifies that guidance on the types of measures that are likely to constitute 'adequate procedures' must be issued within 6 months of the Bill receiving royal assent. The Government has indicated that this guidance will largely be modelled on the UK government's guidance relating to the equivalent offence under section 7 of the UK Bribery Act.  That guidance emphasises that companies should adopt a 'risk-based' approach to managing bribery risks (that is, an approach which focuses efforts on where it will have the most impact, and which is proportionate to the risks faced by the company). The UK guidance also outlines six core principles that should inform any procedures put in place: (1) proportionate procedures; (2) top-level commitment; (3) risk assessment; (4) due diligence; (5) communication, including training; and (6) monitoring and review. 

At the time of the 2019 Bill, draft guidance on 'adequate procedures' was issued for consultation. The Government has indicated that it will build on that earlier work in finalising guidance to accompany the current Bill, and will also have regard to existing guidance published by the Australian Trade Commission, the OECD and other international organisations. It remains to be seen whether development of that guidance will involve a refreshed public consultation process.

What's next?

The Bill has been referred to the Senate Legal and Constitutional Affairs Legislation Committee, with that Committee due to report on the Bill by 26 July 2023.

In the meantime, companies should keep a watching brief on the Bill, look out for any draft guidance about 'adequate procedures', and start to reflect on how their existing anti-bribery and corruption policies, procedures and training may need to be updated to pass muster as 'adequate procedures' in defence of any allegation of failing to prevent foreign bribery.

Ashurst has extensive experience advising companies in relation to managing anti-bribery and other compliance risks, and we would be happy to speak with you about preparing for the likely reforms.