8 September, 2016
1. Domestic bribery (private to public)
1.1 Legal framework
Divisions 141 and 142 of the Criminal Code Act 1995 (Cth) (the “Australian Criminal Code”) make it illegal under Australian law:
- to promise or offer a bribe or corrupting benefit to a Commonwealth public official; or
- to provide or cause to be provided a bribe or corrupting benefit to a Commonwealth public official.
- Individuals and corporations may be charged with these criminal offenses and it is not necessary to prove that the defendant, whether that is an individual or corporation, knew that the official was a Commonwealth public official.
Each Australian State and Territory has laws prohibiting bribery and corruption of State or Territory public officials or officers.
Under the new Part 10.9 of the Australian Criminal Code, it is also an offense for an individual or corporation to intentionally or recklessly facilitate, conceal or disguise in their accounting documents an occurrence of bribery, corruption or loss to a person that was not legitimately incurred (the “False Accounting Offences”). Under Section 490.5, proof that a benefit (not legitimately due) was actually received or given by the accused or another person is not required.
1.2 Definition of bribery
Bribery requires intention and conduct. The conduct must be to dishonestly provide or offer a benefit (or cause it to be provided or offered) to a Commonwealth public official. The intention must be to influence the official in the exercise of the official’s duties.
The benefit may be intangible, such as the provision of hospitality or entertainment.
There is essentially little difference between a bribe and corrupting benefit other than the offense of providing or offering a corrupting benefit does not require an intention to influence the official. It is sufficient that the receipt or expectation of the receipt of the corrupting benefit would tend to influence a public official in the exercise of the official’s duties.
As a result, under the bribery offense, because the defendant must intend to influence the official, the defendant’s culpability is greater. So too is the maximum penalty when compared to the offense of offering or providing a corrupting benefit to a Commonwealth public official.
Australian State and Territory laws have a similar focus, though some target different types of public official. One example is specific laws for bribery of elected State officials.
1.3 Definition of Commonwealth public official
The Australian Criminal Code contains a lengthy definition of Commonwealth public official, including categories or classes of individuals. The definition expressly includes Australian (Commonwealth/Federal) public service employees, defense force members, members of the Australian Federal Police, service providers contracted to the Commonwealth, members of statutorily appointed bodies (such as chancellors of universities) or Commonwealth holders of office such as members of Parliament, judicial officers and the Governor-General.
Whether employees of publicly owned companies in Australia will be deemed to be Commonwealth public officials will primarily depend on whether they are considered to be employed by the Commonwealth and whether they exercise powers or perform functions conferred on them by a law of the Commonwealth.
Australian State and Territory laws are usually equally broad, though specific laws apply to different types of State or Territory public officials.
1.4 Consequences of bribery
(a) For individuals
In bribing a Commonwealth public official:
- up to 10 years’ imprisonment; and/or
- a fine up to 10,000 Penalty Units (currently equivalent to AUD1.8 million).
- In offering or providing corrupting benefits to a Commonwealth public official:
- up to five years’ imprisonment; and/or
- a fine up to 300 Penalty Units (currently equivalent to AUD54,000).
In respect of the False Accounting Offences:
- if intentional – 10 years’ imprisonment and/or a fine of AUD1.8 million; or
- if reckless – five years’ imprisonment and/or a fine of AUD900,000.
(b) For corporations
In bribing a Commonwealth public official, the maximum penalty is the greater of:
- 100,000 Penalty Units (currently equivalent to AUD18 million);
- triple the value of the illicit benefit; or
- 10 percent of the annual turnover of the corporation in the year preceding the offense.
In offering or providing corrupting benefits to a Commonwealth public official, the penalty is a fine of up to 1,500 Penalty Units (currently equivalent to AUD270,000).
The Australian Criminal Code provides for corporate liability where the conduct of individuals was within the scope of their employment, and:
- the board of directors or a high managerial agent knowingly or recklessly permitted or carried out the offense;
- a corporate culture existed that tolerated the offense; or
- the organization failed to create a corporate culture that required compliance with the law.
In respect of the False Accounting Offences:
- if intentional – the greater of AUD18 million fine, 3 times the value of the benefit or 10 percent of the annual turnover of the body corporate; or
- if reckless – the greater of AUD9 million fine, 1.5 times the value of the benefit or 5 percent of the annual turnover of the body corporate.
1.5 Political contributions
Contributions to political parties or associated entities are regulated by Part XX of the Commonwealth Electoral Act 1918 (Cth). In general terms, contributions to political parties are allowed but must be disclosed if exceeding AUD13,000 over the year (effective 1 July 2015 up to 30 June 2016). The threshold is indexed to the official inflation measure so it generally increases each year.
Separate provisions apply for individual States and Territories. These are often far more proscriptive. For example,
in New South Wales (NSW), total yearly donations above certain limits are banned. Disclosure is generally required for contributions above AUD1,000.
1.6 Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)
The Australian Criminal Code does not contain quantitative limitations on hospitality expenses, but these are specifically within the concept of a “benefit” for the purposes of bribery or corrupting benefits.
2. Domestic bribery (private to private)
2.1 Legal framework
There is no Commonwealth private to private bribery offense in Australia. However, private bribery, kickbacks and secret commissions are criminal offenses under some Australian State and Territory laws. For example, in the State of New South Wales (NSW), this is governed by the Crimes Act 1900 (NSW) (the “Crimes Act”). The False Accounting Offences described above in Section 1.1 may also be applicable.
2.2 Definition of private bribery
The scope of any private bribery offenses varies between Australian States and Territories but, for example, in the State of NSW, the law prohibiting bribery is called the offense of secret commissions. It is an offense when an agent dishonestly accepts money or benefits from a third party in return for departing from a duty he owes to that agent’s principal.
2.3 Consequences of private bribery
Penalties referred to are those for the State of NSW.
For individuals involved:
- up to seven years’ imprisonment;
- a fine up to 1,000 Penalty Units (currently equivalent to AUD110,000); and/or
- repayment of the benefit received or given.
Note that penalties are higher in other States. For example, Victorian offenses carry 10-year maximum terms of imprisonment.
2.4 Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)
The Crimes Act does not establish quantitative nor qualitative limitations on hospitality expenses, but those types of benefits could fall within the scope of the offenses.
3. Corruption of foreign public officials
3.1 Legal framework
Australian law to bribe a foreign public official. Limited defenses are included. The facilitation payment defense is one of few such defenses that continue to exist globally, although it has considerable restrictions. The False Accounting Offences described above in Section 1.1 may also be applicable.
3.2 Definition of corruption of foreign public officials
Other than the identity of the target or recipient of the bribe, the elements of the offense of bribing a foreign public official are similar to those of bribing a Commonwealth public official. However, the foreign public official offense contains an additional element, which is stated in italics in the next paragraph.
Bribing a foreign public official under Australian law requires intention and conduct. The conduct must be to dishonestly provide or offer a benefit (or cause it to be provided or offered) to a foreign public official. The intention must be to influence the official in the exercise of the official’s duties in order to obtain or retain a business advantage that is not legitimately due.
The benefit may be intangible, such as the provision of hospitality or entertainment.
3.3 Definition of foreign public official
Foreign public official is defined broadly and includes employees or officials of foreign government bodies (including military or police service people), contractors to foreign government bodies, intermediaries of foreign public officials, members of the judiciary of a foreign country, employees of public international (inter-governmental) organizations, persons performing duties for an office under a law of that country, and any person in the service of a foreign government body.
3.4 Consequences of corruption of foreign public officials
(a) For the individuals involved
- up to 10 years’ imprisonment; and/or
- a fine up to 10,000 Penalty Units (currently equivalent to AUD1.8 million).
(b) For corporations
The maximum penalty is the greater of:
- 100,000 Penalty Units (currently equivalent to AUD18 million);
- triple the value of the illicit benefit; or
- 10 percent of the annual turnover of the corporation in the year preceding the offense.
The Australian Criminal Code provides for corporate liability where the conduct of individuals was within the scope of their employment, and:
the board of directors or a high managerial agent knowingly or recklessly permitted or carried out the offense;
a corporate culture existed that tolerated the offense; or
the organization failed to create a corporate culture that required compliance with the law.
3.5 Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)
The Australian Criminal Code does not contain quantitative limitations on hospitality expenses even though these are specifically within the concept of a “benefit” for the purposes of bribery or corrupting benefits.
4. Facilitation payments
The Australian Criminal Code provides that making a facilitation payment can constitute a defense to the charge of bribing a foreign public official. The defense is not available to a charge of bribing a Commonwealth public official.
The defense essentially requires that:
- the benefit was of a minor nature;
- the provider of the benefit made a written record of the relevant conduct as soon as practicable; and
- the benefit was offered to expedite or secure the performance of a routine government action of a minor nature.
Somewhat controversially, lawfully made facilitation payments are considered legitimate business expenses for the purposes of reducing a company’s taxable income under Australian law.
5. Compliance programs
5.1 Value of a compliance program to mitigate/eliminate the criminal liability for legal entities
Two instances where the Australian Criminal Code imposes criminally liability on a corporation are:
- where it is proven that a corporate culture existed within the corporation that directed, encouraged, tolerated or led to non-compliance with the relevant provision; or
- where the corporation failed to create and maintain a corporate culture that required compliance with anti-corruption law.
Compliance programs are instruments that corporations rely on to discourage and prevent bribery and corruption within their organization and will assist in demonstrating that an appropriate culture exists.
Even if during a criminal prosecution a compliance program is found to be inadequate and does not fully exculpate a corporation, it may be a mitigating factor for the purpose of sentencing.
5.2 Absence of a compliance program as a crime
It is not an offense under the Australian Criminal Code to be without a compliance program; it is only a factor that can be taken into account if a corporation is charged with bribery as a result of an employee’s or agent’s conduct.
5.3 Elements of compliance program
(a) Legal framework
The Australian Criminal Code does not regulate the elements of any compliance program. There is no Australian legislation, case law or regulatory guidance that sets out the elements to incorporate into a compliance program. Australian Standard AS:8001-2008 Fraud and Corruption Control together with the associated suite of corporate governance Australian Standards are not mandatory in this context but are of some assistance when tailoring compliance programs to suit any organization.
(b) Recommended practice
Baker & McKenzie recommends that corporations adopt a compliance program that is tailored to the corporation’s geographical and operational risks, and ensure that it is comprehensively and continually communicated, monitored and enforced. While there is no Australian legislation, case law or regulatory guidance that sets out the elements to incorporate into a compliance program, the UK Ministry of Justice Guidelines and the DOJ/SEC Guidance will provide a starting point in understanding the elements that regulators globally will expect corporations to have considered.
6. Regulator with jurisdiction to prosecute corruption
The Australian Federal Police investigate bribery and corruption allegations at a Commonwealth/Federal level. State and Territory police investigate pursuant to State and Territory laws.
Prosecution under Australian Commonwealth/Federal law is under the auspices of the Commonwealth Director of Public Prosecutions, although the Australian Federal Police may commence the court process (and continue to be involved). At a State and Territory level, the relevant State or Territory department of public prosecutions would be involved in conjunction with the State or Territory police.
The Australian Securities and Investments Commission is the main corporate regulator and can be involved in investigations into corrupt conduct where an Australian corporation is involved.
For further information, please contact:
Georgie Farrant, Partner, Baker & McKenzie
georgie.farrant@bakermckenzie.com
