16 Jun 2011

Companies warned to have clear policies to reduce prosecution risk

Melbourne, 16 June 2011: Australian companies with an international presence risk falling foul of international anti-bribery and anti-corruption laws in the absence of clear and rigorous policies to ensure those who engage with foreign government officials on their behalf do not cross the line, according to Clayton Utz Litigation & Dispute Resolution partner Andrew Morrison.

Speaking at a seminar in Melbourne today jointly hosted by Clayton Utz, Deloitte and DFAT, Mr Morrison said Australian companies with a presence or engaged in business dealings in foreign countries faced large financial penalties, and in the case of individuals, possible jail time, if they failed to employ systems or keep proper records to ensure their compliance with international anti-bribery and corruption regimes.

"Over and above Australia's own, but relatively untested, legislative regime, the formidable US Foreign Corrupt Practices Act and, from next month, the UK Bribery Act, apply far more broadly than Australian companies may realise," said Mr Morrison.

"In particular, under the UK Bribery Act, which comes into force on 1 July 2011, a company with a connection to the UK such that it falls within the UK regime can be held to account for negligently failing to have systems in place to prevent acts of bribery by those acting on its behalf.

"This underlines the importance of companies – particularly those doing business in high-risk regions such as Africa – completing stringent due diligence examinations of their offshore interests. Australian companies need policies that clearly set out the permitted ways in which employees and agents can engage with governments and foreign officials overseas, and what steps they should take if they believe they may be at risk of breaking the law."

Mr Morrison said the heightened focus by international regulators in prosecuting breaches of anti-bribery and anti-corruption laws meant that Australian companies doing business overseas must continually assess their activities and the behaviour of their business partners and local agents against conduct which they might not have previously thought unlawful.

"For example, there is a very grey area between what constitutes a "facilitation payment" – minor payments to government to secure the performance of a routine action of minor nature, which may provide a defence in Australia but still carry enormous business risk – and activity that amounts to bribery and corruption," he said.

"This is especially the case when that defence will no longer be available under the new regime, or because plea bargains may be available in the US but not here in Australia. This is another reason why companies need clear policies to ensure their employees and agents understand their legal obligations and potential liabilities, as it is all too easy to have stepped over the line. As with all legal risks, whole of company clarity and prevention is the best line of defence."

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.