Australian companies who do business overseas would be wise to watch closely as a Senate inquiry into foreign bribery moves to finalise its report. As we noted last year ( here), the inquiry's focus is reforming the law to eliminate foreign corrupt practices. Submissions, which have now closed, were made to the inquiry by academics, policy groups and corporations. While these submissions were authored by a broad range of interests, including industry bodies and multinationals like BHP Billiton, a number of suggested reforms feature prominently. We highlight some of these below.

Parents exposed

Australia's prohibitions on foreign bribery, which are contained in Division 70 of the Criminal Code, currently do not recognise the inherent bond between parent companies and their subsidiaries. This means that if a foreign-registered subsidiary of an Australian parent company engages in conduct that would otherwise fall foul of the foreign bribery laws:

  • no prosecution can be brought against the subsidiary, as it is not subject to the jurisdiction of Australia's foreign bribery laws; and
  • no liability can be established against the Australian parent unless the subsidiary's conduct can be directly attributed to the Australian parent through the parent's conduct (and the conduct of an employees or agents).

Submissions to the inquiry have encouraged legislative reform to broaden the reach of Australia's foreign bribery legislation to attribute liability on parent companies for the conduct of their subsidiaries and other corporate relationships, including joint ventures.

Focus on self-reporting

The Australian Federal Police, who are responsible for the enforcement of Australia's current anti-bribery regime, are unlikely to ever have the resources to investigate, let alone prosecute, all instances of corporate corruption.

In this environment, the concept of encouraging corporations to police themselves is gaining momentum. The Law Council of Australia, among others, has proposed that the law should develop ways to encourage companies to self-report on their breaches. One method of doing so would be to introduce deferred prosecution agreements (also known as DPA) as an alternative to prosecution for alleged breaches of anti-bribery legislation. A DPA is an agreement between a prosecutor and a company accused of economic offences, such as fraud or foreign bribery, which allows the company to avoid a criminal conviction in return for compliance with certain conditions. This type of self-reporting, while more lenient on the transgressing company, would lighten the load on prosecuting agencies, be they the AFP or a future, targeted anti-corruption body.

However, as we have noted previously ( here), if DPAs are introduced into the Australian regulatory landscape companies should carefully consider the implications of committing themselves to such agreements.

Lighting the way forward

In the same vein of encouraging compliance rather than attacking those who act illegally, Transparency International and others have proposed that the government should provide clear guidelines for companies on 'best practice' in anti-corruption. Such guidelines have already been developed for the US and UK jurisdictions by their respective governments. Although adherence to official guidance would not serve as a complete defence to any prosecution, it would go some way to providing companies with clarity around the processes and procedures required to maintain a corporate culture of compliance with Australia's foreign bribery laws.

At a time when perception of corruption is on the rise in Australia, with the nation having slid to 14th on the most recent Transparency International Index Corruption Perceptions, government action to stamp out foreign corrupt practices by Australian businesses will be welcome. The Senate inquiry's report is due to be released on 1 July 2016. There will doubtless be significant ramifications for Australian businesses and Holding Redlich will provide an update then.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.