Significant reforms to United Nations sanction laws

By Randal Dennings and Graeme Howatson.

Key Points:
The Government is introducing new compliance obligations for companies or persons who engage in conduct in connection with United Nations sanctions.

The Australian Government has responded to the recommendations of the Cole Inquiry by introducing the International Trade Integrity Bill 2007 into Parliament on 14 June 2007.

The Bill, which amends the Charter of the United Nations Act 1945 and other Acts, introduces new compliance obligations for companies or persons who engage in conduct in connection with United Nations ("UN") sanctions.

Some of the main provisions of the Bill:

• create a new offence applying to persons or corporations who engage in conduct that contravenes an UN sanction in force in Australia
• create a new offence applying to persons or corporations who knowingly or recklessly provide false or misleading information in relation to the administration of UN sanctions, including in relation to issuing of permits or authorisations
• impose strict liability on corporations which engage in conduct that contravenes a UN sanction in force in Australia or which contravenes a condition of a permit or authorisation
• invalidate any permission granted if the application for permission is false or misleading in a material particular; and
• require persons to retain for five years documentation in connection with permit applications and compliance with permit conditions.

Heavy penalties can be imposed for committing these offences. For example, the contravention of an UN sanction or a condition of a permit or authorisation by an individual attracts a penalty of:

• imprisonment for not more than ten years; or
• a fine of $275,000, or three times the value of the transaction (if this is ascertainable), whichever is greater; or
• both.

In the case of a body corporate, the penalty that can be imposed is a fine of $1,100,000, or three times the value of the transaction (if this is ascertainable), whichever is greater. A body corporate has a defence to these offences if it proves it took reasonable precautions and exercised due diligence to avoid the contravention. This defence is similar to the defence found in some other Commonwealth legislation (for example, section 34(2) of the Financial Transaction Reports Act 1988).

Copies of the Bill and the Explanatory Memorandum to the Bill can be downloaded from the Federal Parliament website.

Another significant issue arising from the Cole Inquiry was whether legal professional privilege should be allowed to prevail in royal commissions. While the proposed bill does not make any changes to the legal position of privileged information, the issue is being considered by the Australian Law Reform Commission, with a report of their findings expected to be released in December this year.

For further information, please contact Randal Dennings.