Failure to Prevent Foreign Bribery and Deferred Prosecution Agreements: the latest reforms proposed to Australia's corporate criminal regime

What you need to know

• On 2 December 2019, the Federal Government tabled the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 (2019 Bill) in the Senate. 
• The 2019 Bill introduces new offences which stand to significantly expand exposure to corporate criminal liability – including the introduction of a new "failure to prevent" foreign bribery offence.
• The 2019 Bill also introduces a Deferred Prosecution Agreement (DPA) scheme which will enable a corporation to negotiate outcomes for identified criminal conduct in certain circumstances.

The 2019 Bill is the latest in a flurry of developments aimed at strengthening Australia's corporate crime framework. Its objective is clear: to "address challenges associating with detecting and addressing serious corporate crime".

The 2019 Bill contains the following four main proposals: 

1. broadening the existing offence of bribery of a foreign public official (section 70.2 of the Criminal Code); 
2. introducing a new corporate offence of "failure to prevent foreign bribery";
3. amendments to various "dishonesty" offences in the Criminal Code; and
4. introduction of a DPA scheme.

How does the 2019 Bill differ from the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 (2017 Bill)?

The 2019 Bill builds on the 2017 Bill, which lapsed at the end of the last Federal Parliament in June 2019. In particular, it introduces the proposed amendments to 'dishonesty' offences outlined at point 3 above.

It also slightly tweaks elements of the DPA model as was proposed in the 2017 Bill, for example, by not requiring a corporation to admit guilt and instead only requiring that certain facts "be agreed". 

Broadening the offence of bribing foreign public officials

The 2019 Bill proposes to expand the offence of bribery of a foreign public official (section 70.2 of the Criminal Code), by: 

1. extending the definition of ‘foreign public official’ to include a candidate for public office;
2. extending the offence to cover bribery to obtain a personal (i.e. non-business) advantage;
3. replacing the requirement that a benefit and business advantage must be ‘not legitimately due’ with the concept of ‘improperly influencing’ a foreign public official; and
4. removing the requirement that the foreign public official must be influenced in the exercise of the official’s duties.

New corporate offence of failure to prevent foreign bribery

The 2019 Bill creates a new offence for corporations of failing to prevent foreign bribery (proposed section 70.5A of the Criminal Code), similar to the corporate failure to prevent  bribery offence introduced in the United Kingdom in 2010 (in effect from 1 July 2011). 

Under the proposed offence, a company will be criminally liable where an "associate" (which is broadly defined to include an officer, employee, contractor, agent or other service provider) bribes a foreign public official for the profit or gain of the company, unless the company can demonstrate that it had "adequate procedures" in place to prevent the offence.

It is an offence of absolute liability. This means that, in the absence of demonstrating "adequate procedures" to prevent foreign bribery:

• the prosecution will not be required to prove fault elements (ie, recklessness or intention) on the part of the corporation; and
• the corporation is not entitled to a defence of mistake of fact. 

The maximum penalty applicable to the offence is substantial: the greater of $21 million, 10 per cent of annual turnover, or three times the benefit gained from the conduct. 

The offence stands to greatly increase the risk of companies being prosecuted for bribery offences. The potential significance of the offence is demonstrated by a number of high profile prosecutions in the UK under the similar UK failure to prevent bribery offence, including the £497.25 million settlement between the UK Serious Fraud Office and Rolls-Royce PLC for failure to prevent bribery and other offences.

What are "adequate procedures"?

The 2019 Bill proposes that the Attorney-General be required to publish guidance on the types of measures that are likely to constitute "adequate procedures" and therefore a defence to the "failure to prevent" offence (proposed section 70.5B of the Criminal Code). 

The Commonwealth has released draft guidance for public consultation (here), with submissions sought by the end of February 2020.  The draft guidance sets out the "five main factors" of an effective anti-foreign bribery compliance program:

1. a robust culture of integrity within the corporation; 
2. demonstrated pro-compliance conduct by top level management and/or the board of directors;  
3. a strong anti-bribery compliance function; 
4. effective risk assessment and due diligence procedures; and 
5. careful and proper use of third parties.

Again, there is considerable similarity between this draft guidance, and the guidance issued by the UK Ministry of Justice for the equivalent UK failure to prevent offence (see here). 

If the UK experience is anything to go by, establishing the "adequate procedures" defence will be a high bar to meet at trial.  An "adequate procedures" defence was rejected in February 2019 in R v Skansen Interiors Limited, the only UK case to test it so far (see our alert here). Relevantly, that case established that, for the "adequate procedures" defence to be established, the compliance program must be fit for purpose (reflecting the size and risk profile of the company) and properly implemented.