Foreign bribery offences and penalties

Foreign bribery offences

Nearly all countries have criminal laws against bribing domestic officials and a growing number of countries have laws against bribing foreign officials.

Under Australian law, the offence of bribing a foreign public official is contained in section 70.2 of the Criminal Code Act 1995 (Cth).

In December 2019, the government introduced the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 into the Senate. The Bill proposes, amongst other measures, a new corporate offence of failure to prevent foreign bribery. It also proposes to remove undue impediments to the successful prosecution of foreign bribery by expanding and clarifying the scope of the foreign bribery offence.

In November 2019, the government consulted on draft guidance on adequate procedures to prevent the commission of foreign bribery.

Elements of the offence

The current foreign bribery offence has several elements, which can be divided into steps. All of these elements must be present for the offence to apply.

A person is guilty of an offence if:

• they provide/offer/promise to provide a benefit to another person or cause a benefit to be provided, offered or promised to another person

AND

• the benefit is not legitimately due to the other person

AND

• their action was carried out with the intention of influencing a foreign public official (who may or may not be the person receiving the benefit) to obtain or retain business or a business advantage that is not legitimately due.

A benefit is any advantage and is not limited to property. It can be a non-monetary or non-tangible inducement. It does not need to be provided or offered to the foreign public official, it can be provided or offered to another person. A benefit can also be provided or offered by an agent.

Foreign public official – definition

The definition of foreign public official is very broad. It includes:

• an employee / official of a foreign government
• a member of the executive, judiciary or magistracy of a foreign country
• a person who performs official duties under a foreign law
• a member / officer of the legislature of a foreign country, or
• an employee / official of a public international organisation (such as the United Nations).

When the offence applies

The offence applies where the conduct constituting the offence occurs in Australia, or on board an Australian aircraft or an Australian ship.

The offence also applies to conduct outside Australia if, at the time of the alleged offence, the person who is alleged to have committed it is:

• an Australian citizen
• a resident of Australia
• a body corporate incorporated by or under Commonwealth, state or territory law.

The offence applies regardless of the outcome or result of the bribe or the alleged necessity of the payment.

The offence applies whether or not the alleged offender intended to bribe a particular foreign public official.

Non-deductibility under tax laws

Section 26-52 of the Income Tax Assessment Act 1997 (Cth) provides that a person cannot deduct a loss or outgoing that is determined to be a bribe to a foreign public official.

Penalties for foreign bribery

The offences for foreign bribery carry significant penalties for individuals and companies.

For individuals

The maximum penalty for an individual is 10 years imprisonment and/or a fine of 10,000 penalty units ($2.2 million.)

For body corporates

The penalty for a body corporate can be a fine issued in penalty units or it can be a proportional penalty, calculated according to the value of benefits obtained from bribery, or the annual turnover of the company.

If the value of the benefits obtained through bribery can be calculated, the maximum penalty is the greater of the following fines:

• 100,000 penalty units ($22.2 million)
• 3 times the total benefit obtained from the bribe.

If the value cannot be calculated, the maximum penalty is the greater of the following fines:

• 100,000 penalty units ($22.2 million)

• 10% of the ‘annual turnover’ of the body corporate and related bodies corporate.

These penalties reflect the serious criminal nature of bribery and the detrimental effects it has on Australian trade and reputation, and international governance.

In addition to criminal penalties, any benefits obtained by foreign bribery can be forfeited to the Australian Government under the Proceeds of Crime Act 2002 (Cth).

Corporate and agent liability

Companies need to be aware that they may be liable for the actions of their employees and agents under Australian and foreign laws. Individuals that engage in bribery while acting as an agent may also be individually liable and may be prosecuted under Australian or foreign laws.

Under Australian law, there are a number of ways a company can be held liable for foreign bribery, consistent with the principles of attributing corporate criminal responsibility set out in Division 12 of the Criminal Code.

Companies should be aware that they will be liable for foreign bribery offences where:

• the company’s board of directors, or a high managerial agent of the company, intentionally, knowingly or recklessly committed the foreign bribery offence
• the company’s board of directors, or a high managerial agent of the company, expressly, tacitly or impliedly authorised, or permitted the commission of, the foreign bribery offence by an agent of the company
• an agent of the company offered a bribe and it is shown that a corporate culture existed within the company that directed, encouraged, tolerated or led to the commission of the foreign bribery offence

or

• an agent of the company offered a bribe and it is shown that the company failed to create and maintain a corporate culture that required compliance with the laws against bribing foreign public officials.

Australian companies may also be liable under anti-corruption laws of third-party countries. The United States Foreign Corrupt Practices Act 1977, for example, has extended jurisdiction over any company issuing registered securities under US law (eg. companies listing shares on a United States stock exchange).

Individuals considering whether or not a payment to a foreign official is lawful must therefore consider a wide range of potential liability.

Companies must create and maintain a corporate culture that requires compliance with the law or they may face increased liability for the corrupt activities of company officers and agents. Companies must take reasonable steps to ensure that their employees do not commit foreign bribery offences.

Companies should also ensure that they have appropriate channels for reporting suspected breaches of the law and that individuals who do report breaches are protected from persecution within the company.

Defences to the foreign bribery offence

There are 2 defences to the Australian foreign bribery offence:

1. The advantage was permitted or required by the written laws that govern the foreign public official

This defence applies where a written law governing the foreign public official expressly permits or requires the benefit to be given. Subsection 70.3(1) of the Criminal Code lists the laws that govern different public officials.

2. The benefit provided constituted a ‘facilitation payment’

A defence is also provided where a benefit constitutes a ‘facilitation payment’. This defence can apply where:

• the benefit is ‘of a minor value’
• the benefit was offered ‘for the sole or dominant purpose of expediting or securing performance of a routine government action of a minor nature’
• the person made a record of the payment as soon as practicable afterwards.

A ‘routine government action’ does not include any decision to award or continue business, or any decision related to the terms of new or existing business.

If a payment is to qualify as a legitimate facilitation payment, detailed records must be kept including the value of the benefit concerned, the identity of the foreign official and the person receiving the benefit, and particulars of the routine government action sought. The records that must be kept are detailed in full in subsection 70.4(3) of the Criminal Code.

Individuals and companies must be aware that, even if a benefit constitutes a legitimate facilitation payment under Australian law, people making these payments may be liable for bribery under the laws that govern the foreign public official.

Case studies

Australians overseas

An Australian businessman in country X wants to enter into a contract with the local provincial authority. He offers the provincial planning officer a payment in a bid to have his tender proposal considered favourably. Even though all the activity took place in country X, the businessman can be prosecuted in Australia and could be imprisoned for up to 10 years and/or receive a fine of up to $2.2 million, regardless of whether the businessman secured the contract.

Payments through intermediaries

An Australian businesswoman wants to enter into a contract with the local provincial authority in country X. She instructs her accountant in country X to offer the provincial planning officer a payment in a bid to have her tender proposal considered favourably. Even though the businesswoman did not offer the bribe herself, and the offer of the bribe occurred in country X, the businesswoman can be prosecuted in Australia and could be imprisoned for up to 10 years and/or receive a fine of up to $2.2 million, regardless of whether the businesswoman secured the contract.

Note: if the accountant was an Australian citizen or resident of Australia, the accountant may also be prosecuted in Australia.

Payments to third parties

An Australian businessman in country X has entered into a contract with the local provincial authority. Certain legislative obligations apply to the contract. In an attempt to have those legislative obligations waived, the Australian businessman provides expensive gifts to the wife of the provincial planning officer. Even though all the activity took place in country X, and the bribe was not paid to the government official, this businessman can be prosecuted in Australia and could be imprisoned for up to 10 years and/or receive a fine of up to $2.2 million, regardless of whether the legislative obligations were waived.

Indirect benefit

An Australian businesswoman wants to win a tender in country X. The foreign official in country X arranges for the Australian businesswoman to purchase services at an inflated price and in return the foreign official will award the Australian businesswoman the government contract. The purchase of services from the foreign official at an inflated price is a benefit not legitimately due to the foreign official. The businesswomen can be prosecuted in Australia, and could be imprisoned for up to 10 years and/or receive a fine of up to $2.2 million, regardless of whether the businesswoman secured the contract.