Australia’s anti-bribery legislation is not often referred to in the corporate world. However, there is good reason to ensure that businesses have adequate policies, procedures and expectations in place about bribery, especially if any of its activities are overseas.
Recently, there were foreign bribery allegations against Horizon Oil, which allegations caused shareholder price and reputational damage to Horizon Oil. Early last year, the Australian Financial Review ran an exposé outlining allegations that Horizon Oil had paid USD$10.3 million to an unknown shell company for that company’s 10% share in an exploration licence, when the shell company had only received that licence from the Papua New Guinean government 10 weeks earlier. Horizon Oil already held 70% of that licence.
These public allegations triggered a significant drop in Horizon Oil’s share price, and an internal investigation by the company was launched. The outcome of this investigation was that no breach of Australian foreign bribery laws was established.
Despite Horizon Oil’s internal investigation finding there was no wrongdoing, this is a prime example of how foreign bribery, regardless of whether allegations are founded or not, can cause significant damage to a company. Businesses should take great care in this regard, as the potential penalties and reputational risks are large.
The relevant provisions in relation to foreign bribery are found in the Criminal Code Act 1995 (Cth). A person will have bribed a foreign public official:
A benefit (financial or otherwise) will not be legitimately due even if such a benefit is customary, or there is an official tolerance of it.
The maximum penalties for contravening this provision for an individual is up to $2.2 million, or 10 years imprisonment, or both. If a body corporate is found to have contravened this provision, it will be liable for a maximum penalty the greatest of; $22.2 million, or a penalty three times the value of the benefit it offered, or 10% of its annual turnover.
There are defences available to this offence, including that it will not be an offence if there is a written law in that country allowing the conduct, or, if the payment is in fact a facilitation payment. A facilitation payment is a benefit of a minor nature which is made for the sole or dominant purpose of expediting or securing the performance of a routine government action of a minor nature (such as preparing paperwork or granting a licence), and a record of the conduct is made as soon as possible after it occurred.
In the case of Horizon Oil, it is not clear whether the internal investigation found that the payment made was a facilitation payment or if it was a legitimate payment for the shell company’s shares in the exploration licence.
In addition to the foreign bribery laws, there are other considerations that Australian businesses should have in respect of its conduct in relation to Australian public officials, and private persons in Australia. There is a similar prohibition against bribing a Commonwealth public officer, and state and territories have legislation prohibiting this conduct in respect of public officials and often private individuals also. The penalties are similarly high.
The offence of false accounting (the falsification of certain books and records to show a benefit that is not legitimately due or a loss that has not been legitimately incurred with the intention of facilitating, concealing or disguising this fact) is another related offence which corporations ought to be aware of.
Business should also consider when making political donations, whether there are any requirements on the donor to report or record such a donation.
Gift giving, hosting or entertaining, is generally not illegal provided it is proportionate and reasonable to the business relationship.
In light of these prohibitions entities, and especially those that have some operations or activity overseas, should consider having policies and procedures in place setting out expectations and requirements in respect of:
Similarly, businesses should ensure they have a whistleblower policy in place that can be used if any allegations are made of misconduct by the business. If the company is a large proprietary company, this policy must also be compliant with the provisions set out in the Corporations Act 2001 (Cth).
This article provides general comments only. It does not purport to be legal advice. Before acting on the basis of any material contained in this article, we recommend that you seek professional advice.
Nicole Mead, Associate in our Disputes Team
Direct Telephone: +61 8 8210 2270