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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019



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ISSN 1328-8091

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BILLS DIGEST NO. 99, 2019-20 28 MAY 2020

Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 Cat Barker Foreign Affairs, Defence and Security Section Karen Elphick Law and Bills Digest Section

Contents

The Bills Digest at a glance .............................................. 5

History of the Bill ............................................................ 6

Purpose of the Bill ........................................................... 6

Structure of the Bill and this Digest .................................. 7

Committee consideration ................................................ 7

Senate Standing Committee on Legal and Constitutional Affairs .................................................. 7

2019 Bill ..................................................................... 7

2017 Bill ..................................................................... 7

Senate Standing Committee on Economics ................ 7 Senate Standing Committee for the Scrutiny of Bills .............................................................................. 8

2019 Bill ..................................................................... 8

2017 Bill ..................................................................... 8

Policy position of non-government parties/independents...................................................... 8

Australian Labor Party ............................................... 8

Australian Greens ...................................................... 8

Centre Alliance .......................................................... 9

Others ........................................................................ 9

Financial implications ...................................................... 9

Statement of Compatibility with Human Rights................ 9

Parliamentary Joint Committee on Human Rights ..... 9 Schedule 1—Foreign bribery .......................................... 10

Commencement ........................................................... 10

Background ................................................................... 10

UK offence of failing to prevent bribery ................... 11

Date introduced: 2 December 2019

House: Senate

Portfolio: Attorney-General

Commencement: Sections 1-3 will commence on Royal Assent. See pages 10, 29 and 43 of this Digest for details of the commencement of Schedules 1-3.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at May 2020.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 2

OECD Working Group report on Australia’s compliance with the Anti-Bribery Convention ......... 13 Committee consideration .............................................. 13

Senate Standing Committee on Legal and Constitutional Affairs ................................................ 13

Senate Standing Committee on Economics .............. 13 Scrutiny of Bills Committee ....................................... 14

Offence-specific defence to the foreign bribery offence..................................................................... 14

Preventing bribery of foreign public officials .......... 15 Position of major interest groups................................... 16

New corporate offence of failing to prevent bribery ....................................................................... 16

Reforms to the existing foreign bribery offence ....... 18 Additional suggested reforms ................................... 18

Key issues and provisions .............................................. 19

Expanding the definition of foreign public official to include candidates for office ................................ 19

Other amendments to the existing foreign bribery offence .......................................................... 19

Improper influence .................................................. 20

Removing the requirement of influencing a foreign public official in the exercise of the official’s duties ........................................................ 22

New corporate offence of failing to prevent foreign bribery........................................................... 22

Proving the offence ................................................. 23

Exception: adequate procedures ............................ 24

Penalty ..................................................................... 24

Issue: application of absolute liability/associate engaging in conduct for the profit or gain of the body corporate ........................................................ 25

Issue: placing of a legal burden on the defendant to establish the adequate procedures exception ................................................................. 25

Issue: definition of associate ................................... 26

Issue: potential for the new offence to become the default for foreign bribery prosecutions .......... 27 Jurisdictional scope ................................................. 27

Guidance on preventing foreign bribery ................. 27 Schedule 2—Deferred prosecution agreements ............. 29

Commencement ........................................................... 29

Background ................................................................... 29

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 3

Consultation ............................................................ 29

ALRC Review into Australia’s corporate criminal responsibility regime ............................................... 30

Committee consideration .............................................. 30

Senate Standing Committee on Economics .............. 30 Senate Standing Committee on Legal and Constitutional Affairs ................................................ 31

2019 Bill ................................................................... 31

2017 Bill ................................................................... 32

Position of major interest groups................................... 32

Law Council of Australia ............................................ 32

Australian Institute of Company Directors ............... 32 Criminal and corporate law academics ..................... 33 The Synod .................................................................. 33

Attorney-General’s Department ............................... 34

Key issues and provisions .............................................. 34

Offences for which DPAs may be used ..................... 34

Table 1: offences prescribed by subsection 17B(1) ...................................................................... 34

Negotiation of a DPA ................................................. 36

Entering negotiations ............................................ 36

Conduct of negotiations ........................................ 37

Use and disclosure of information acquired during negotiations ................................................... 37

Use in evidence ....................................................... 37

Use by other Commonwealth entities .................... 38 Credit for self-reporting ............................................ 39

Compulsory content of a DPA ................................... 39

Requirement for formal admissions ....................... 40

Consequences of material breach of a DPA ............ 40 Process for approval of a DPA ................................... 40

Resolution of a dispute over a material contravention of a DPA ............................................. 41

Public oversight and non-publication of a DPA ........ 42 Schedule 3—Dishonesty definitions in the Criminal Code ............................................................................. 43

Commencement ........................................................... 43

Background ................................................................... 43

Committee consideration .............................................. 47

Senate Standing Committee on Legal and Constitutional Affairs .............................................. 47

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 4

Scrutiny of Bills Committee ..................................... 47

Position of major interest groups................................... 48

Law Council of Australia ............................................ 48

Attorney-General’s Department ............................... 48

Professor Jeremy Gans .............................................. 49

Australian Federal Police ........................................... 49

Key issues and provisions .............................................. 49

Nature of the amendments ...................................... 49

Simplifying prosecution of Commonwealth offences ..................................................................... 50

The relative merits of alternative definitions of dishonesty ................................................................. 52

The precise legal effect of the amendments is uncertain ................................................................... 54

Special considerations for the ‘general dishonesty’ offences ................................................. 55

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The Bills Digest at a glance The Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 is an omnibus amendment Bill containing three separate sets of proposed amendments.

An earlier version of this Bill was introduced into the 45th Parliament on 6 December 2017, but lapsed on prorogation of Parliament prior to being debated in either House of Parliament. Schedules 1 and 2 to the 2019 Bill are substantively the same as the 2017 Bill (there are some minor differences between the two versions). Schedule 3 to the 2019 Bill is new.

Schedule 1—Foreign bribery

The Bill will expand the scope of the existing foreign bribery offence, including by capturing candidates for office in the definition of foreign public official and applying the offence where a personal (as opposed to business) advantage is sought. It will also introduce a new corporate offence of failing to prevent foreign bribery, modelled on an offence introduced in the United Kingdom in 2010. Many of the changes implement recommendations of the Senate Standing Committee on Economics made following its inquiry into foreign bribery.

The amendments to the existing foreign bribery offence appear likely to facilitate improved enforcement of the offence, and are generally supported by stakeholders. While the proposed new corporate offence is also supported by most stakeholders, some raised concerns including the reversal of the onus of proof and the breadth of definitions.

Schedule 2—Deferred prosecution agreements

The Bill will introduce deferred prosecution agreements (DPAs) into Australia. DPAs can be useful in overcoming some of the difficulties associated with obtaining sufficient evidence to prosecute corporate crime and therefore reducing lengthy and expensive investigations.

Introduction of a DPA scheme is generally supported by major interest groups, though a range of concerns about the detail of the scheme have been expressed. Particular issues include:

• whether the criteria setting out the circumstances in which a DPA can be entered into should be specified in legislation

• the circumstances in which the existence and content of a DPA may be kept secret and for how long

• what use can be made of information disclosed in negotiations

• whether or not a corporation should be required to make formal admissions in a DPA

• whether a DPA must identify, not only the circumstances which would constitute a material breach of the DPA but also, what the consequences of a material breach would be and

• whether or not a DPA should be subject to judicial approval and supervision.

The Australian Law Reform Commission (ALRC) reported to the Attorney-General on 29 April 2020 on its inquiry into Corporate Criminal Responsibility. The report, which has not yet been made public, includes consideration of DPAs.

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Schedule 3—Dishonesty definitions in the Criminal Code

Schedule 3 proposes to replace the current two stage definition of ‘dishonesty’ used in the Criminal Code Act 1995 with a single-stage definition based on the common law definition in Peters v R (1998) 192 CLR 493. A similar amendment was made to the Corporations Act 2001 in 2019.

Commonwealth prosecutors have indicated that the current two-stage definition can be difficult to prove and that having different definitions of dishonesty for the Criminal Code and the Corporations Act can cause confusion for juries during trials where offences from both Acts are charged. Although the proposed amendments would ensure the definitions of dishonesty were the same in many Commonwealth criminal trials, they would create conflicting definitions in other trials, particularly if a trial involves both Commonwealth and NSW, SA or ACT dishonesty offences.

The proposed single-stage definition would remove or change one of the fault elements required to be proved in a number of Criminal Code property offences including theft and receiving. It is technically difficult to identify what the particular fault elements to be proved for each dishonesty offence in the Criminal Code will be if Schedule 3 is enacted. The effects on more than 30 Criminal Code offences are not particularised in the Explanatory Memorandum. Without more detailed analysis to provide assurance of how the changes will impact Commonwealth dishonesty offences, the risk of unintended consequences appears to be high. The problem may be particularly acute for the broad ‘general dishonesty’ offences in sections 135.1 and 474.1 which might, after the proposed amendments, impose disproportionately high penalties.

History of the Bill An earlier version of this Bill (the 2017 Bill) was introduced into the 45th Parliament on 6 December 2017. The 2017 Bill lapsed on prorogation of Parliament prior to being debated in either House of Parliament.1

Schedules 1 and 2 to the 2019 Bill are substantively the same as the 2017 Bill (there are some minor differences between the two versions).

Schedule 3 to the 2019 Bill is new.

This Bills Digest replicates some of the relevant material from the Bills Digest for the 2017 Bill.2

Purpose of the Bill The purpose of the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 (the 2019 Bill) is to:

• amend the Criminal Code Act 1995 (Criminal Code) to expand the scope of the existing foreign bribery offence and introduce a new corporate offence of failing to prevent foreign bribery (Part 1 of Schedule 1)

1. Parliament of Australia, ‘Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 homepage’, Australian Parliament website. 2. C Barker and M Biddington, Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017, Bills digest, 105, 2017-18, Parliamentary Library, Canberra, 8 May 2018.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 7

• amend the Director of Public Prosecutions Act 1983 (DPP Act) to introduce a deferred prosecution agreement scheme for serious corporate crime (Part 1 of Schedule 2)

• make consequential amendments to the DPP Act, Income Tax Assessment Act 1997, A New Tax System (Goods and Services Tax) Act 1999, Administrative Decisions (Judicial Review) Act 1977 and the Crimes Act 1914 (Part 2 of Schedule 1 and Parts 2 and 3 of Schedule 2) and

• amend the definition of ‘dishonest’ in the Criminal Code (Schedule 3).

Structure of the Bill and this Digest This is an omnibus amendment Bill with three separate sets of proposed amendments. Each of the Schedules are analysed separately in this Digest, with the background, position of interest groups, and key issues and provisions discussed under the heading for each Schedule.

Committee consideration

Senate Standing Committee on Legal and Constitutional Affairs

2019 Bill The Senate Standing Committee on Legal and Constitutional Affairs (L&C Committee) reported on its inquiry into the 2019 Bill in March 2020.3 The majority report contained the single recommendation that the Bill be passed. A dissenting report by Australian Labor Party Senators recommended that Schedules 2 and 3 (containing the proposed DPA scheme and changes to the definition of ‘dishonest’ respectively) should be deleted from the 2019 Bill.4 Additional comments by the Australian Greens recommended that the Senate suspend its consideration of the Bill until the Attorney-General has tabled the ALRC’s report on its review of Australia’s corporate criminal responsibility regime.5

2017 Bill The L&C Committee reported on its inquiry into the 2017 Bill on 20 April 2018.6 The Committee made four recommendations: two relating to foreign bribery, one to the proposed DPA scheme, and the last of which was that the Bill be passed. Details of the Committee’s recommendations are set out in the analysis of Schedules 1 and 2 below.

Schedule 3, which proposes changing the definition of ‘dishonest’ in the Criminal Code, was not included in the 2017 Bill.

Senate Standing Committee on Economics The Senate Standing Committee on Economics tabled the report on its inquiry into foreign bribery on 28 March 2018. The report included 22 recommendations, several of which are directly

3. Senate Legal and Constitutional Affairs Legislation Committee (L&C Committee), Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019, The Senate, Canberra, March 2020. 4. Ibid., p. 27.

5. Ibid., p. 31. See: Australian Law Reform Commission (ALRC), ‘Review into Australia’s corporate criminal responsibility regime’, ALRC website, last updated 30 April 2020. 6. L&C Committee, Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017, The Senate, Canberra, 20 April 2018.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 8

relevant to the 2019 Bill (both the foreign bribery reforms and the introduction of DPAs).7 Details of the Committee’s recommendations are set out in the analysis of Schedules 1 and 2 below.

Senate Standing Committee for the Scrutiny of Bills

2019 Bill The Senate Standing Committee for the Scrutiny of Bills (Scrutiny of Bills Committee) raised one issue in its report on the 2019 Bill, concerning the proposed amendments to the definition of ‘dishonest’ in Schedule 3.8 Details are included in the analysis of that Schedule below.

The Committee also drew Senators’ attention to its earlier comments on the foreign bribery amendments in the 2017 Bill.9

2017 Bill The Scrutiny of Bills Committee raised two issues in its report on the 2017 Bill, both of which related to the foreign bribery amendments in Schedule 1 to the 2017 Bill (which are replicated in Schedule 1 to the 2019 Bill).10 Details are included in the analysis of Schedule 1 below.

Note that the 2017 Bill did not include Schedule 3.

Policy position of non-government parties/independents

Australian Labor Party In a dissenting report to the L&C Committee’s report on the 2019 Bill, Labor Senators supported the amendments to foreign bribery offences in Schedule 1. However, they recommended that Schedules 2 and 3 be deleted from the Bill because they considered that those schedules were neither sensible nor supported by a clear and considered rationale.11

Australian Greens Senator McKim published additional comments in the L&C Committee’s report on the 2019 Bill noting that the Greens:

• broadly support the objectives of the Bill

• have concerns about Schedule 3 and

• recommend that the Senate suspend consideration of the Bill until after the ALRC report on corporate criminal responsibility is tabled.12

7. Senate Economics References Committee (Economics Committee), Foreign bribery, The Senate, Canberra, 28 March 2018. 8. Senate Standing Committee for the Scrutiny of Bills (Scrutiny of Bills Committee), Scrutiny digest, 3, 2020, The Senate, 26 February 2020, pp. 29-32. 9. Scrutiny of Bills Committee, Scrutiny digest, 1, 2020, The Senate, 5 February 2020, p. 15. 10. Scrutiny of Bills Committee, Scrutiny digest, 1, 2018, The Senate, 7 February 2018, pp. 17-20. 11. L&C Committee, 2019 Bill inquiry, op. cit., p. 27. 12. Ibid., pp. 31-33. ALRC, ‘Review into Australia’s corporate criminal responsibility regime’, op. cit.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 9

Centre Alliance Senator Patrick expressed concern in 2018 in relation to provisions of Schedule 2 giving the CDPP discretion not to publish DPAs, and recommended amendments to ensure a minimum level of disclosure.13

Others Other non-government parties and independents have not publicly stated their positions on the 2017 or 2019 Bills as at the date of this Digest.

Financial implications The Explanatory Memorandum states that the 2019 Bill is ‘unlikely to have a significant impact on consolidated revenue’, but notes:

• removing impediments to successful prosecutions for foreign bribery may result in increased recovery of penalties for the offence

• costs incurred by Commonwealth agencies as a result of the DPA process in Schedule 2 will be absorbed by these agencies. There will be other costs for the party to a DPA by way of financial penalties or compensation to Commonwealth agencies associated with the negotiation and administration of a DPA. DPAs may lead to the recovery of penalties in cases that may not have proceeded to prosecution and

• the amended definition of ‘dishonest’ in the Criminal Code may result in increased recovery of penalties for dishonesty offences in the Code.14

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the 2019 Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.15

Parliamentary Joint Committee on Human Rights The Parliamentary Joint Committee on Human Rights considered that neither the 2017 Bill nor the 2019 Bill raised any human rights concerns.16

13. L&C Committee, 2017 Bill inquiry, op. cit., pp. 35-38. 14. Explanatory Memorandum, p. 4. 15. The Statement of Compatibility with Human Rights can be found at page 6 of the Explanatory Memorandum to the 2019 Bill. 16. Parliamentary Joint Committee on Human Rights (PJCHR), Human rights scrutiny report, 1, 2018, 6 February 2018, p. 78;

PJCHR, Human rights scrutiny report, 1, 2020, 5 February 2020, p. 94.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 10

Schedule 1—Foreign bribery Division 70 of the Criminal Code criminalises providing, offering or promising to provide, or causing a benefit to be provided to another person, with the intention of influencing a foreign public official in the exercise of his or her duties, in order to obtain or retain business, or to obtain or retain a business advantage that is not legitimately due to the recipient or intended recipient. Currently, the main provisions are sections 70.1 (definitions), 70.2 (offence), and 70.3 and 70.4 (defences).

Schedule 1 of the 2019 Bill will amend section 70.1, repeal and replace the offence in section 70.2 to make several amendments to it, amend the lawful conduct defence in section 70.3 and insert proposed Subdivision C, which will include the proposed new corporate offence of failing to prevent foreign bribery and related provisions.

Commencement The main amendments to the foreign bribery offence in Part 1 of Schedule 1 and the consequential amendment to the DPP Act in item 11 of Schedule 1 will commence six months after Royal Assent. The consequential amendments to the Income Tax Assessment Act 1997 in items 12-15 of Schedule 1 will commence on the first 1 January, 1 April, 1 July or 1 October to occur after the end of the period of six months from Royal Assent.

Background Australia ratified the Organisation for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Officials in International Business Transactions (Anti-Bribery Convention) in 1999.17 Parliament enacted Division 70 of the Criminal Code, which implements the key obligation of criminalising bribery of foreign public officials, the same year.18 Division 70 makes it an offence to provide, offer or promise to provide, or cause a benefit to be provided to another person, with the intention of influencing a foreign public official in the exercise of his or her duties, in order to obtain or retain business, or obtain or retain a business advantage that is not legitimately due to the recipient or intended recipient.

To date, there have only been two foreign bribery prosecutions in Australia: one in which Securency International Pty Ltd, Note Printing Australia (NPA) Limited and three individuals pleaded guilty to conspiracy to bribe a foreign public official (one of those individuals and two others also pleaded guilty to false accounting in relation to payment of commissions to a Malaysian agent); and another in which three individuals pleaded guilty to conspiracy to bribe a foreign public official to secure contracts for their construction company, Lifese, in Iraq.19

17. Convention on Combating Bribery of Foreign Officials in International Business Transactions, done in Paris on 17 December 1997, [1999] ATS 21 (entered into force for Australia 17 December 1999). 18. C Barker, Australia's implementation of the OECD Anti-Bribery Convention, Research paper series, 2019-20, Parliamentary Library, Canberra, 28 August 2019, p. 8. 19. Ibid., pp. 11-12.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 11

In April 2017, the Government released a consultation paper and an exposure draft of proposed reforms to Australia’s foreign bribery laws.20 The consultation paper stated:

… Due to its nature, foreign bribery is inherently difficult to detect and enforce. Offending is often offshore, with evidence hard to identify and obtain. It can be easily concealed—with bribes disguised as agent fees or other seemingly legitimate expenses.

The offence in its current form poses challenges for typical cases of foreign bribery, which may involve the use of third party agents or intermediaries, instances of wilful blindness by senior management to activities occurring within their companies and a lack of readily available written evidence. 21

The proposed reforms aim to remedy those shortcomings by:

• expanding the definition of foreign public official to include candidates for office

• providing that the foreign bribery offence is about ‘improperly influencing’ a foreign public official (instead of the current language which refers to a benefit being ‘not legitimately due’)

• removing the requirement for a bribe to be provided, promised or offered so as to influence the foreign public official in the exercise of his or her official duties

• expanding the foreign bribery offence to apply where a personal (as opposed to business) advantage is sought

• clarifying that the advantage sought may be for someone other than the person providing, promising or offering a bribe

• clarifying that the accused does not need to have specific business or a specific business advantage in mind and

• creating a new corporate offence of failing to prevent foreign bribery.

UK offence of failing to prevent bribery The proposed new offence of failing to prevent foreign bribery is similar to an offence introduced in the United Kingdom in 2010 as part of an overhaul of its domestic and foreign bribery laws.22 Under section 7 of the Bribery Act 2010 (UK), a commercial organisation is guilty of an offence if a person associated with the organisation bribes another person intending to obtain or retain business, or an advantage in the conduct of business, for the organisation.23 It is a defence if the organisation can prove that it had adequate procedures in place to prevent persons associated with the organisation from engaging in bribery. The relevant UK Minister has published guidance on procedures that commercial organisations can put in place to prevent bribery, as required by section 9 of the Bribery Act.24

20. Attorney-General’s Department (AGD), Combatting bribery of foreign public officials: proposed amendments to the foreign bribery offence in the Criminal Code Act 1995, AGD, [Canberra], April 2017; Crimes Legislation Amendment Bill 2017: Exposure Draft.

21. AGD, Combatting bribery of foreign public officials, op. cit., p. 1. 22. T Edmonds and O Gay, Bribery Bill [HL]: Bill No 69, Research paper, 10/19, House of Commons Library, London, 1 March 2010. 23. Bribery Act 2010 (UK), section 7. ‘Associated person’ is defined in section 8. 24. Ministry of Justice (UK), The Bribery Act 2010: Guidance about procedures which relevant commercial organisations can put

into place to prevent persons associated with them from bribing, Ministry of Justice, London, 2011.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 12

The UK’s offence of failing to prevent bribery represented a novel approach to holding companies accountable for the conduct of their employees and other associates by extending corporate liability beyond traditional limits:

The main problem confronting prosecutors in this country today is how to put companies in the dock, together with those individuals who have behaved corruptly for their benefit.

In order to indict a company, we need to prove that at least one individual who was a 'controlling mind' of that company had been involved in the corruption.

In practice that means someone at or very close to Board level. You can immediately appreciate the difficulty in proving that especially in global companies where much of the decision making is devolved away from the Board.

The new Act sweeps away this requirement and introduces a new corporate offence of failing to prevent bribery.

This is a novel concept under English law and one which we are likely to see more of [in] the years to come. 25

The UK offence commenced in July 2011, but the first conviction was not obtained until December 2015, when Sweett Group PLC pleaded guilty to failing to prevent a bribe intended to secure and retain a contract in the United Arab Emirates. The company was ordered to pay £2.25 million in February 2016.26 The UK’s Serious Fraud Office has since entered into several deferred prosecution agreements in relation to this offence.27 The first contested prosecution for the offence concluded in March 2018, with Skansen Interiors being found guilty of the offence. One of Skansen’s former directors had previously pleaded guilty to foreign bribery and Skansen was unsuccessful in its argument that it had adequate procedures in place.28

Like the UK offence, the proposed corporate offence of failing to prevent foreign bribery in the 2019 Bill will impose liability on a corporation for the actions of a person associated with it unless the corporation can prove that it had adequate procedures in place to prevent such conduct. As is the case in the UK, the offence will be accompanied by a provision requiring the Minister to provide written guidance on preventative measures.

25. R Amaee (Serious Fraud Office (SFO)), World Bribery and Corruption Compliance Forum, speech, 14 September 2010. See also V Robinson (General Counsel, SFO), Bribery Bill and anti-corruption: breakfast seminar with Grant Thornton, speech, 10 November 2009.

26. SFO, Sweett Group PLC sentenced and ordered to pay £2.25 million after Bribery Act conviction, media release, 19 February 2016. The amount comprised a fine of £1.4m and confiscation of £851,152.23: SFO, ‘Sweett Group’, SFO website, 12 May 2016.

27. See for example: SFO, ‘Standard Bank PLC’, SFO website, updated 3 September 2019; SFO, ‘Rolls Royce PLC’, SFO website, updated 22 February 2019. Information on SFO cases is available at: SFO, ‘Our cases’, SFO website, n.d. 28. O Qureshi, A Wilkinson and I Fernandez, ‘UK’s first consideration of the Bribery Act’s adequate procedures defence’, FCPA Professor, blog, 19 March 2018; J Ludlam, C Thomson and H Garfield, ‘UK: “Adequate procedures” and self reporting under

the spotlight as jury rejects Section 7 defence’, Global Compliance News, 14 March 2018.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 13

OECD Working Group report on Australia’s compliance with the Anti-Bribery Convention The OCED Working Group on Bribery adopted a report on the fourth evaluation of Australia’s compliance with the Anti-Bribery Convention in December 2017.29 The Working Group identified several achievements and positive developments, including reforms passed since the previous assessment, establishment of the Fraud and Anti-Corruption Centre in the Australian Federal Police (AFP), establishment of the Fintel Alliance (a public-private partnership aimed at combating money laundering, terrorist financing and organised crime), and the engagement of AFP liaison officers around the world in foreign bribery investigations.30 The Working Group also made 15 recommendations; however, with one exception, the recommendations did not relate to legislative reforms.

The Working Group recommended Australia enact whistleblower protections for the private sector equivalent to those that apply to the public sector under the Public Interest Disclosure Act 2013.31 That recommendation is not dealt with in the 2019 Bill.32 The Working Group noted but did not provide any assessment of the reforms proposed in the 2017 Bill, stating:

While as a matter of practice, the [Working Group] does not assess proposed legislation, the lead examiners acknowledge that the amendments introduced into the Australian Parliament in December 2017 are intended to clarify and strengthen Australia’s foreign bribery offence. 33

Committee consideration

Senate Standing Committee on Legal and Constitutional Affairs In its report on the 2017 Bill, the L&C Committee recommended that:

• as part of the public consultation on the minister's guidance on adequate procedures for the failing to prevent foreign bribery, the Government should ‘consider publishing an exposure draft which allows corporate stakeholders a four week period to provide comment’ and

• the Government should ‘include internal corporate whistleblowing systems as part of any recommended adequate procedures designed to prevent foreign bribery by its associates’.34

Senate Standing Committee on Economics Among the Committee’s recommendations in its March 2018 report on foreign bribery were that:

• the definition of foreign public official be amended to include candidates for office (Recommendation 5)

• the foreign bribery offence apply in circumstances where a bribe was made to obtain or retain a personal advantage (Recommendation 6)

29. Organisation for Economic Cooperation and Development (OECD) Working Group on Bribery, Implementing the OECD Anti-Bribery Convention: phase 4 report: Australia, OECD, 2017. 30. Ibid., pp. 20-1, 32-3, 35, 57. 31. Ibid., pp. 57-9. 32. The recommendation was addressed through enactment of the Treasury Laws Amendment (Enhancing Whistleblower

Protections) Act 2019. 33. Ibid., p. 33. 34. L&C Committee, Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017, op. cit., pp. 25-26

(Recommendations 1 and 2).

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• a new corporate offence of failing to prevent bribery be enacted, and that principles-based guidance be published on steps corporations should take to implement adequate procedures to prevent foreign bribery (Recommendation 7) and35

• the foreign bribery offence be amended to clarify that a person is prohibited from bribing a foreign public official to obtain a business advantage for someone else, and that the payer of the bribe need not intend to obtain or retain any specific business or business advantage to be guilty of the offence (Recommendation 10).36

The 2019 Bill would implement all of the above recommendations. The Committee did not make any recommendations relevant to the amendments in the 2019 Bill that will provide that the foreign bribery offence is about ‘improperly influencing’ a foreign public official (instead of a benefit being ‘not legitimately due’) and remove the requirement for a bribe to be provided, promised or offered so as to influence the foreign public official in the exercise of his or her official duties.37

The majority of the Committee also recommended that the ‘facilitation payments’ defence to the foreign bribery offence in the Criminal Code and related provisions in the Income Tax Assessment Act 1997 be ‘abolished over a transition period, to enable companies and individuals to adjust their business practices and procedures to comply with the law as amended’.38 That recommendation was not supported by Coalition Senators.39

Scrutiny of Bills Committee The Scrutiny of Bills Committee raised two issues in its report on the 2017 Bill, both of which related to amendments that are replicated in Schedule 1 to the 2019 Bill. The Committee drew Senators’ attention to its comments on the 2017 Bill in its initial report on the 2019 Bill.40

Offence-specific defence to the foreign bribery offence Item 7 of Schedule 1 to the 2019 Bill will insert proposed subsection 70.3(2A) to establish a new defence to the offence of foreign bribery in section 70.2 of the Criminal Code as amended by the Bill. The defence is similar to an existing ‘lawful conduct’ defence in subsection 70.3(1), which, broadly, provides that a person does not commit the offence of foreign bribery if a written law in force where a person’s conduct occurred required or permitted the provision of the benefit in question. However, the new defence will apply in relation to conduct related to candidates to be foreign public officials (it is consequential to an amendment to the definition of foreign public official to include candidates for office (item 4 of Schedule 1)). As with the existing defences, a defendant wishing to rely on the new defence in proceedings for a foreign bribery offence will

35. Recommendations 8 and 9 related to the consultation process and timing recommended for the guidance. Recommendation 17 was that the guidance includes the existence of internal corporate whistleblowing systems: Senate Economics References Committee, Foreign bribery, op. cit., pp. 83-4, 131.

36. Ibid., pp. 61-3, 67-83, 85-7. 37. The Committee considered these amendments, but did not make recommendations on them: Ibid., pp. 63-7, 84-7. 38. Ibid., pp. 161-2 (Recommendation 18). The defence is set out in section 70.4 of the Criminal Code Act 1995 (Criminal Code). 39. Ibid., p. 205. AusTrade explains that facilitations payments are ‘customary, unofficial minor payments to secure or speed a

routine government action.’ Section 70.4 of the Criminal Code outlines how a facilitation payment can be a defence to bribery, for example where the value of the benefit was of a minor nature, the conduct was engaged in for the sole or dominant purpose of expediting or securing the performance of a routine government action of a minor nature and a record was made of the conduct. 40. Scrutiny of Bills Committee, Scrutiny digest, 1, 2020, op. cit., p. 15.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 15

bear an evidential burden in relation to the matter (which would require adducing or pointing to evidence that suggests a reasonable possibility that the matter exists).41

In its report on the same amendment in the 2017 Bill, the Scrutiny of Bills Committee recognised that the defendant will bear only an evidential rather than a legal burden, but nonetheless stated that it expected any reversal of the burden of proof to be justified.42 It did not consider that the defence meets the criteria for offence-specific defences set out in the Government’s Guide to Framing Commonwealth Offences, and requested the Attorney-General’s advice as to why an offence-specific defence is proposed (as opposed to including the matter as an element of the offence).43

The Attorney-General responded that the defence is ‘consistent with the broader principle in Australian law of a defence of lawful authority’, for which a defendant bears an evidential burden, and is appropriate because the defendant would be in a better position to point to evidence of a written foreign law he or she relied on; it would be difficult and expensive for the prosecution to prove the non-existence of a foreign law; and the question of whether a benefit was required or permitted under a written foreign law is not central to the question of culpability for the offence.44

The Scrutiny of Bills Committee still considered that the proposed defence does not appear to accord with the principles in the Guide to Framing Commonwealth Offences. It requested that the information provided by the Attorney-General be incorporated into the Explanatory Memorandum, drew its concerns to the attention of senators and left the question of the appropriateness of the proposed defence to the Senate as a whole.45 The Explanatory Memorandum for the 2019 Bill includes the additional information provided by the Attorney-General.46

Preventing bribery of foreign public officials Proposed section 70.5A of the Criminal Code (inserted by item 8 of Schedule 1) will create a new corporate offence of failing to prevent foreign bribery. An exception will apply if a corporation can prove that it had adequate procedures in place designed to prevent its associates (which include, for example, its employees and officers) from engaging in foreign bribery (proposed subsection 70.5A(5)). Proposed section 70.5B (inserted by the same item) will require the Minister to publish guidance on the steps that a body corporate can take to prevent its associates from bribing foreign public officials. The guidance will not be a legislative instrument.

In its report on the same amendment in the 2017 Bill, the Scrutiny of Bills Committee queried the proposed interaction of the exception in proposed subsection 70.5A(5) and the guidance that the Minister will publish under proposed section 70.5B:

41. Criminal Code, section 13.3. 42. Scrutiny of Bills Committee, Scrutiny digest, 1, 2018, op. cit., p. 18. 43. Ibid.; AGD, A guide to framing Commonwealth offences, infringement notices and enforcement powers, AGD, Canberra, 2011, pp. 50-1.

44. Scrutiny of Bills Committee, Scrutiny digest, 3, 2018, The Senate, 21 March 2018, pp. 95-6. 45. Ibid., p. 96. 46. Explanatory Memorandum, p. 17.

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… It is not clear whether a body corporate that complies with guidance published by the minister would be determined to have 'adequate procedures' in place and therefore able to establish the defence in subsection 70.5A(5), or if a body corporate could comply with such guidelines but still be found by the courts to not have had adequate procedures in place.

The committee is concerned that, because the exception to the offence does not clearly articulate what would constitute 'adequate procedures', it has been left to ministerial guidance to clarify the limits of criminal liability with respect to the offence. This concern is compounded by the fact that the guidance will not be a legislative instrument.

47

It requested the Attorney-General’s advice on whether it is possible that a body corporate that complies with the guidance could still be convicted of the proposed offence, and on why the guidance should not be in the form of a legislative instrument and subject to disallowance.48

The Attorney-General advised that the guidance would be principles-based rather than prescriptive:

It is reasonable to expect companies of all sizes to put in place appropriate and proportionate procedures to prevent bribery from occurring within their business. However, the application of steps to prevent foreign bribery will differ substantially from corporation to corporation …

It is for this reason that I propose to provide guidance, rather than a legislated, prescriptive checklist of compliance. In this way, it will not be for Government to determine or clarify the limits of criminal liability with respect to the offence. This is appropriately a matter for courts, taking into account the circumstances of each case without the encumbrance of rigid statutory requirements.

49

The Scrutiny of Bills Committee was satisfied with the Attorney-General’s response and requested that the information he provided be incorporated into the Explanatory Memorandum.50 The Explanatory Memorandum for the 2019 Bill includes the additional information provided by the Attorney-General.51

Position of major interest groups The positions taken by stakeholders in submissions to the L&C Committee’s inquiries into the 2017 and 2019 Bills, and by the ALRC in a recent discussion paper, are summarised below. Further detail is set out under ‘Key issues and provisions’.

New corporate offence of failing to prevent bribery The proposed new corporate offence of failing to prevent bribery was supported by the Uniting Church—Synod of Victoria and Tasmania (the Synod), the International Bar Association (IBA),

47. Scrutiny of Bills Committee, Scrutiny digest, 1, 2018, op. cit., pp. 19-20. 48. Ibid., p. 20. 49. Scrutiny of Bills Committee, Scrutiny digest, 3, 2018, op. cit., pp. 98-9. 50. Ibid., p. 100. 51. Explanatory Memorandum, p. 20.

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Dr Vivienne Brand (of the College of Business, Government and Law at Flinders University), and the law firm Morgan, Lewis and Bockius.52

The Australian Institute of Company Directors (AICD) supported the introduction of the offence, but raised concerns about the reversal of the onus of proof and the breadth of the definition of ‘associate’.53 Similarly, Professor Simon Bronitt and Zoe Brereton (of the TC Beirne School of Law at the University of Queensland) considered that there were ‘strong reasons to support’ the offence, but raised concerns about the application of absolute liability and the potential for the offence to become the ‘default’ offence used in all foreign bribery prosecutions.54 While not explicitly supporting or objecting to the offence, Professor Liz Campbell (of the Faculty of Law at Monash University) suggested that the exception should be framed around ‘reasonable’ instead of ‘adequate’ procedures.55

The Law Council of Australia (LCA) recommended that the offence be ‘reconsidered given several problematic features of the offence’, specifically the breadth of the definition of ‘associate’, the interaction of the offence with the existing foreign bribery offence, the reversal of the onus of proof, the application of absolute liability, and the proposed penalties.56 The LCA also suggested that consideration of the proposed offence should be deferred until after the ALRC’s final report on its review of Australia’s corporate criminal responsibility regime has been published, noting the position set out in the ALRC’s discussion paper.57

As part of its review of corporate criminal responsibility, the ALRC released a discussion paper in November 2019. The discussion paper included consideration of specific offences, including ‘failure to prevent’ offences as enacted in the UK, Canada and New Zealand and proposed in the 2017 Bill. The ALRC’s position was that the difficulties that the proposed offence seeks to remedy would be addressed more broadly under its proposed changes to the corporate criminal responsibility provisions in Part 2.5 of the Criminal Code, which it considered would render the proposed offence superfluous if adopted.58

52. Justice and International Mission Unit, Synod of Victoria and Tasmania, Uniting Church in Australia (the Synod), Submission to the L&C Committee, Inquiry into the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 (2019 Bill inquiry), 13 January 2020, p. 4 (see also the Synod, Submission to L&C Committee, Inquiry into the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 (2017 Bill inquiry), 22 January 2018, pp. 4-5); International Bar Association Anti-Corruption Committee (IBA), Submission to L&C Committee, 2017 Bill inquiry, 23 January 2018, p. 2; V Brand, Submission to L&C Committee, 2017 Bill inquiry, 7 February 2018, p. 1; Morgan, Lewis and Bockius LLP, Submission to L&C Committee, 2017 Bill inquiry, 6 February 2018.

53. Australian Institute of Company Directors (AICD), Submission to L&C Committee, 2019 Bill inquiry, 10 January 2020, pp. 1-4; (see also AICD, Submission to L&C Committee, 2017 Bill inquiry, 8 February 2018, pp. 2-5). 54. S Bronitt and Z Brereton, Submission to L&C Committee, 2017 Bill inquiry, 14 March 2018, pp. 6-8. 55. L Campbell, Submission to L&C Committee, 2019 Bill inquiry, 14 January 2020. 56. Law Council of Australia (LCA), Submission to L&C Committee, 2019 Bill inquiry, 14 January 2020, pp. 6, 10-13 (see also LCA,

Submission to L&C Committee, 2017 Bill inquiry, 9 February 2018, pp. 5, 7-9). 57. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 6, 11. See Australian Law Reform Commission (ALRC), ‘Review into Australia’s corporate criminal responsibility regime’, ALRC website, last modified 30 April 2020. 58. ALRC, Corporate criminal responsibility, Discussion paper, 87, ALRC, November 2019, pp. 136-143. The ALRC’s proposal for a

single method for attributing liability to corporations is set out at pp. 128-135.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 18

Reforms to the existing foreign bribery offence The Synod and the AICD supported all of the proposed reforms to the existing foreign bribery offence.59 These reforms were also supported by the LCA and the IBA, except:

• the LCA and the IBA recommended that the current test of a benefit being ‘not legitimately due’ should be replaced by a ‘dishonesty’ test instead of the proposed amendment, under which the offence would apply if a benefit is offered or provided to another person with the intent to ‘improperly influence’ a foreign public official and

• the LCA suggested an alternative amendment to that proposed for expanding the offence to cover bribery of foreign public officials in relation to actions outside of the official’s authority.60

Additional suggested reforms The Synod recommended that the 2017 and 2019 Bills be amended to apply the fault element of recklessness to the foreign bribery offence (the existing offence requires proof of intention).61 The enactment of a separate offence based on recklessness was among the proposed reforms in the Government’s April 2017 consultation paper, but was not included in the 2017 or 2019 Bills.62 The AGD’s submission to the L&C Committee’s inquiry into the 2017 inquiry outlined some of the considerations behind the decision not to proceed with such an offence:

The AFP and CDPP [Commonwealth Director of Public Prosecutions] support the creation of such an offence, noting that it would effectively capture instances of wilful blindness by suspects, including senior company officers (such as directors). Most foreign bribery cases involve bribes paid by third parties in circumstances where the suspects (individuals and companies) are wilfully blind as to the activities of their agents (including employees, subsidiaries and third party agents). While the offence of failing to prevent foreign bribery would go some way to addressing this scenario, it is possible that companies and individuals may still be able to structure their affairs in ways which allow them to limit or avoid exposure to criminal liability for conduct that should be criminalised.

After balancing these arguments against other views expressed in submissions received in response to the April 2017 discussion paper, the Government elected not to proceed with a recklessness offence.

A number of submissions received in response to the 2017 discussion paper raised concerns that the offence would set too low a standard for culpability …

Submissions also identified that a recklessness offence would be inconsistent with international standards … 63

The LCA and the IBA supported that offence being omitted from the 2017 Bill.64

59. The Synod, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 2-3; AICD, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 1. 60. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 5-9, 13; IBA, Submission to L&C Committee, 2017 Bill inquiry, op. cit., pp. 2-3. 61. The Synod, Submission to L&C Committee, 2017 Bill inquiry, op. cit., p. 2; The Synod, Submission to L&C Committee, 2019 Bill

inquiry, op. cit., p. 2. 62. AGD, Combatting bribery of foreign public officials, op. cit., pp. 7-8. 63. AGD, Submission to L&C Committee, 2017 Bill inquiry, n.d., pp. 6-7. 64. LCA, Submission to L&C Committee, 2017 Bill inquiry, op. cit., p. 6; IBA, Submission to L&C Committee, 2017 Bill inquiry,

op. cit., p. 3. The LCA did not comment on the matter in its submission to the inquiry into the 2019 Bill.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 19

The Synod also suggested enactment of an additional offence criminalising the paying of bribes to third parties in order to win government contracts overseas, ‘such as bribing a competitor to put in an uncompetitive bid for the contract’.65

Morgan, Lewis and Bockius recommended the repeal of the ‘facilitation payments’ defence to the foreign bribery offence.66 As noted above, the majority of the Senate Standing Committee on Economics recommended the repeal of this defence in its March 2018 report on foreign bribery.

Key issues and provisions

Expanding the definition of foreign public official to include candidates for office Foreign public official is defined in section 70.1 of the Criminal Code. Item 4 of Schedule 1 will insert proposed paragraph (m) to expand that definition to also include ‘an individual standing, or nominated, (whether formally or informally) as a candidate to be a foreign public official’ covered by any of the existing categories of foreign public official listed in paragraphs (a) to (k) of the definition. These include, for example, an employee of a foreign government body, a member of the executive or the judiciary, a member or officer of the legislature of a foreign country or part thereof, and an employee of a public international organisation. The Explanatory Memorandum states that law enforcement experience indicates that bribes may be offered to candidates for public office with the intent of obtaining an advantage after the candidate takes office.67 This amendment will implement recommendation 5 of the Senate Standing Committee on Economics’ report on foreign bribery.68

Subsection 70.3(1) sets out the ‘lawful conduct’ defence to the foreign bribery offence in section 70.2. Broadly, the defence provides that a person does not commit the offence of foreign bribery if a written law in force where a person’s conduct occurred required or permitted the provision of the benefit in question. Item 7 will insert proposed subsection 70.3(2A) to establish a new defence that is similar to the existing defence in subsection 70.3(1), but which will apply to conduct related to candidates to be foreign public officials. As with the existing defences, a defendant wishing to rely on the new defence in proceedings for a foreign bribery offence will bear an evidential burden in relation to the matter (which would require adducing or pointing to evidence that suggests a reasonable possibility that the matter exists).

Other amendments to the existing foreign bribery offence Item 6 of Schedule 1 will repeal existing section 70.2 and replace it with proposed sections 70.2 and 70.2A. The key differences between the existing offence and the new provisions are that the new offence will:

• apply where a benefit is offered or provided to another person with the intent to ‘improperly influence’ a foreign public official (see further below), instead of the benefit being ‘not legitimately due’ to the person and intended to influence a foreign public official69

65. The Synod, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 1, 3-4. 66. Morgan, Lewis and Bockius LLP, Submission to L&C Committee, 2017 Bill inquiry, op. cit. 67. Explanatory Memorandum, p. 12. 68. Senate Economics References Committee, Foreign bribery, op. cit., p. 63. 69. Proposed paragraph 70.2(1)(b), replacing current paragraph 70.2(1)(b).

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 20

• not be limited to instances where a benefit is offered or provided with the intent to influence a foreign public official in the exercise of the official’s duties70

• also apply where a personal (as opposed to business) advantage is sought (this will implement recommendation 6 of the Senate Standing Committee on Economics’ report on foreign bribery)71

• more clearly apply where an advantage is sought for someone other than the person providing or offering a benefit (this will implement the first part of recommendation 10 of the Senate Standing Committee on Economics’ report on foreign bribery) and72

• apply regardless of whether the person offering the benefit intends to obtain or retain specific business or a specific advantage (this will implement the second part of recommendation 10 of the Senate Standing Committee on Economics’ report on foreign bribery).73

The maximum penalties that apply to individuals and bodies corporate will remain unchanged.74

Proposed section 70.2A will provide that the determination of whether influence is improper is a matter for the trier of fact, and provide guidance on matters relevant to that determination. Proposed subsection 70.2A(2) will lists matters that must be disregarded, specifically:

• the fact that the benefit (or the offer or promise to provide the benefit) may be, or be perceived to be, customary, necessary or required in the situation

• any official tolerance of the benefit and

• if particular business or a particular advantage is relevant to proving the offence, the fact that the value of the business or advantage is insignificant (if that was the case), any official tolerance of an advantage, and the fact that an advantage may be customary, or perceived to be customary, in the situation.

These matters are equivalent to those that must currently be disregarded in determining whether a benefit or business advantage is ‘not legitimately due’ under subsections 70.2(2) and (3).

Proposed subsection 70.2A(3) will provide a non-exhaustive list of matters to which a trier of fact may have regard in determining whether influence is improper, such as the recipient or intended recipient of the benefit, the nature of the benefit, and whether the benefit was provided, offered or promised dishonestly. A trier of fact may also have regard to matters not specifically listed (proposed subsection 70.2A(4)).

Improper influence Some stakeholders raised concerns with the concept of improper influence in submissions to the L&C Committee’s inquiries into the 2017 and 2019 Bills. The LCA and IBA submitted that the current test of a benefit being ‘not legitimately due’ should instead be replaced by a ‘dishonesty’

70. Current paragraph 70.2(1)(c) is not replicated in the proposed new provisions. 71. Proposed paragraph 70.2(1)(b); current paragraph 70.2(1)(c); Senate Economics References Committee, Foreign bribery, op. cit., p. xvii. 72. Proposed paragraph 70.2(1)(b); current paragraph 70.2(1)(c); Senate Economics References Committee, Foreign bribery,

op. cit., p. xviii. 73. Proposed paragraph 70.2(2)(b); Senate Economics References Committee, Foreign bribery, op. cit., p. xviii. 74. Proposed subsections 70.2(3) and (4); current subsections 70.2(4) and (5).

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test.75 The LCA considered that the ‘novel and undefined’ concept of improper influence will introduce complexity and further uncertainty about the scope of the foreign bribery offence:

In contrast, the concept of 'dishonesty' is currently well-established and understood in Australian criminal law. The current definition in Chapter 7 of the Criminal Code encompasses both a subjective and objective test, which permits a trier of fact to make well-informed decisions with respect to the factual circumstances surrounding allegations of foreign bribery …

Moreover, the concept of 'dishonesty' already applies to a range of other criminal offences, including the domestic bribery provisions in Division 141 of the Criminal Code. Accordingly, introducing this concept in relation to the foreign bribery offence would serve to harmonise the language of the bribery offences in the Criminal Code, and provide greater certainty as to the operation of the provisions.

76

Morgan, Lewis and Bockius suggested that consideration be given to including a high level definition of what constitutes improper influence in the Bill.77

AGD’s submission to the L&C Committee’s inquiry into the 2019 Bill noted that submissions it received on the consultation paper and exposure draft provisions were divided on the issue.78 It provided the following rationale for preferring the concept of improper influence to dishonesty:

The Department, AFP and CDPP have closely considered the points raised in submissions. On balance, the Department considers that the proposed approach of ‘improper influence’ is preferable. Some bribery does not involve dishonesty. For instance, where a company provides an open ‘scholarship’ to the child of a foreign public official. The scholarship is not necessarily intended to have a ‘dishonest’ influence, if it is done transparently. However, it could still be done with the intention of improperly influencing the foreign public official in favouring the company when business is being awarded. The UK Law Commission has observed that not all bribes are ‘dishonest’ in the sense required. An advantage conferred may be ‘illegitimate, unreasonable, disproportionate or otherwise “improper” without being dishonest’. Proposed subsection 70.2A(3) of the Bill details matters that a trier of fact may have regard to when determining whether influence is improper (the list is non-exhaustive). These matters are based on the experience of foreign bribery investigators and prosecutors, and provide the trier of fact with relevant factors on which to inform his or her determination.

79

As noted by AGD, whether a benefit was offered or given dishonestly is among the matters listed in proposed subsection 70.2A(3) to which a trier of fact may have regard in determining whether influence is improper.

75. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 8-9; IBA, Submission to L&C Committee, 2017 Bill inquiry, op. cit., pp. 2-3 (see also LCA, Submission to AGD, Proposed amendments to the foreign bribery offence in the Criminal Code Act 1995, 8 May 2017, pp. 2-3 and IBA, Submission to AGD, Proposed amendments to the foreign bribery offence in the Criminal Code Act 1995, 26 April 2017, pp. 3-5). The AICD took the same position as the LCA and IBA in its submission on the 2017 Bill; in its submission on the 2019 Bill the AICD accepted the proposed change, stating ‘we recognise that certain forms of bribery do not always involve dishonesty’ and noting that determination of whether influence is improper may involve consideration of whether a benefit was provided, offered or promised dishonestly: AICD, Submission to L&C Committee, 2017 Bill inquiry, op. cit., p. 2; AICD, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 1.

76. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 8-9 (the LCA does not support the changes proposed to the definition of ‘dishonest’ in Schedule 3 to the 2019 Bill (see pp. 20-25 of the same submission)). See also IBA, Submission to L&C Committee, 2017 Bill inquiry, op. cit., pp. 2-3.

77. Morgan, Lewis and Bockius, Submission to L&C Committee, 2017 Bill inquiry, op. cit. 78. AGD, Submission to L&C Committee, 2019 Bill inquiry, n.d., p. 7. 79. Ibid. Footnote references have been omitted from this quotation and can be viewed in the source document.

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Removing the requirement of influencing a foreign public official in the exercise of the official’s duties As noted above, the 2019 Bill would amend the foreign bribery offence so that it is not limited to instances where a benefit is offered or provided with the intent to influence a foreign public official in the exercise of the official’s duties. The LCA suggested that instead of simply omitting this requirement, the approach taken in the Bribery Act 2010 (UK) might be preferable.80 Subsection 6(4) of the UK Act provides that references to influencing a foreign public official in the performance of his or her functions as such an official include any omission to exercise those functions and any use of the official’s position as such an official, even if not within the official’s authority.81

New corporate offence of failing to prevent foreign bribery Item 8 of Schedule 1 will insert proposed Subdivision C of Division 70, which will include the proposed new corporate offence of failing to prevent foreign bribery and related provisions. As noted above, these provisions are similar to those introduced in the UK in 2010, and would implement recommendation 7 of the Senate Standing Committee on Economics’ report on foreign bribery.82

Proposed subsection 70.5A(1) will create a new offence of failing to prevent bribery of a foreign public official that will apply to a body corporate if:

• the body corporate is a constitutional corporation, is incorporated in a Territory, or is taken to be registered in a Territory under section 119A of the Corporations Act 2001 (proposed paragraph 70.5A(1)(a))

• an associate of the body corporate commits an offence against section 70.2 or engages in conduct outside Australia that, if engaged in in Australia, would constitute an offence against section 70.2 (proposed paragraph 70.5A(1)(b)) and83

• the associate does so for the profit or gain of the body corporate (proposed paragraph 70.5A(1)(c)).

Item 2 will insert a definition of associate into section 70.1. A person will be an associate of another person if the first-mentioned person:

• is an officer, employee, agent or contractor of the other person

• is a subsidiary of, or is controlled by, the other person (within the meaning of the Corporations Act) or

• otherwise performs services for or on behalf of the other person.

The Explanatory Memorandum notes that ‘profit or gain’ will not be defined and provides an example of what is intended to be captured by the inclusion of this element of the offence:

80. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 13. 81. Bribery Act 2010 (UK), subsection 6(4). 82. Senate Economics References Committee, Foreign bribery, op. cit., p. xviii. 83. The Explanatory Memorandum states that inclusion of conduct outside Australia that, if engaged in in Australia, would

constitute an offence against section 70.2 is intended to cover ‘situations where a subsidiary of a body corporate engages in conduct abroad that would constitute the foreign bribery offence’ (p. 18).

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Conduct that is done for the ‘profit or gain’ of the body corporate (paragraph 70.5A(1)(c)) is not defined in the legislation and would be interpreted by reference to the ordinary meaning of the words. The ordinary meaning of these words, however, is very broad. ‘Gain’ would include any sort of benefit or advantage to the body corporate. The term would cover, for example, situations where a company benefits merely because it is the beneficial owner of a subsidiary company that commits the foreign bribery offence.

84

Proving the offence Absolute liability will apply to certain elements of the proposed offence (proposed subsection 70.5A(2)). This will mean that the prosecution will not be required to prove fault with respect to the body corporate (such as proving that the body corporate knew about or was reckless as to the associate’s conduct), and that the body corporate will not be able to raise a defence of mistake of fact.85 Further, a body corporate may still be convicted of an offence against proposed subsection 70.5A(1), even if the associate has not been convicted of an offence against section 70.2 (foreign bribery) (proposed subsection 70.5A(3)).

However, to establish the proposed failure to prevent offence, the prosecution will need to prove that the associate committed an offence against section 70.2 (or engaged in conduct outside Australia that, if engaged in in Australia, would constitute an offence against section 70.2), including establishing the fault elements that make up that offence.86 This would include establishing that the associate provided or offered a benefit, or caused the provision or offer of a benefit, with the intention of improperly influencing a foreign public official. It is possible that the prosecution may find it difficult in practice to prove beyond reasonable doubt that an associate, who may not have any connection with Australia, has engaged in conduct outside Australia that would constitute an offence in Australia, and did so for the profit or gain of the first person.

The Explanatory Memorandum includes justification for the application of absolute liability to elements of the proposed offence:

In this case, applying absolute liability to the above elements of the new offence is necessary to ensure the effectiveness of the new offence and the enforcement regime. This would ensure that the offence operates as intended, where the only way to avoid liability for the body corporate to avoid liability is by having adequate procedures in place, as explained further below. This is necessary to overcome challenges in establishing liability of corporate entities for foreign bribery, and to ensure that companies are not able to avoid possible liability through wilful blindness. The application of absolute liability to paragraph 70.5A(1)(a) is necessary as this aspect of the offence is a jurisdictional element. It is not appropriate to permit the defence of mistake of fact to the offence elements in paragraph 70.5A(1)(b). It is sufficient that the fault elements of the underlying conduct by the associate described in those subparagraphs would still need to be established by the prosecution.

87 [emphasis added]

While a body corporate will not be able to raise a defence of mistake of fact, there is a specific exception to the offence of adequate procedures (outlined below) and a body corporate would still be able to raise other general defences provided for in the Criminal Code (except that a

84. Explanatory Memorandum, p. 18. 85. Criminal Code, section 6.2. 86. Explanatory Memorandum, pp. 18-19. 87. Ibid., p. 18.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 24

defence of intervening conduct or event will not be available if that conduct or event was brought about by an associate of the body corporate).88

Exception: adequate procedures Proposed subsection 70.5A(5) will provide for an exception to the proposed new offence. The offence will not apply if the body corporate can prove that it had adequate procedures in place designed to prevent the commission of an offence against section 70.2 by any associate and to prevent any associate engaging in conduct outside Australia that, if engaged in in Australia, would constitute an offence against section 70.2. A body corporate will bear a legal burden in relation to this exception, meaning it will need to prove the matter to the standard of the balance of probabilities.89

While the Minister will publish guidance on the steps that bodies corporate can take to prevent an associate from bribing foreign public officials (see below), it will be up to a court to determine on a case-by-case basis whether a body corporate had adequate procedures in place. AGD stated that it expects the concept will be scalable, ‘depending on the relevant circumstances including the size of the body corporate and the nature of its business and activities’.90 The Attorney-General considered that ‘companies with effective and well integrated compliance regimes would not be convicted of the failure to prevent foreign bribery offence’.91

Penalty The maximum penalty for the proposed new offence will be equivalent to that which currently applies to bodies corporate for the offence of foreign bribery under section 70.2. Proposed subsection 70.5A(6) will provide that the maximum penalty is a fine not more than the greatest of:

• 100,000 penalty units (currently $21 million)92

• three times the value of the benefit that the associate obtained directly or indirectly, and that is reasonably attributable to the conduct constituting the offence (or that would have constituted the offence) against section 70.2 (if the court can determine that value) or

• ten per cent of the annual turnover of the body corporate in the 12 months ending at the end of the month in which the associate committed, or began committing, the offence (or notional offence) against section 70.2 (if the court cannot determine the value of the benefit).93

While not recommending a specific amendment, the LCA considered that the difficulty of determining the value of the benefit obtained by an associate could mean that the ten percent of annual turnover figure is likely to be relied on for larger corporations. It cautioned:

88. Proposed subsection 70.5A(4) and sections 10.1 and 12.6 of the Criminal Code. Defences of general application to Commonwealth criminal offences are set out in Part 2.3 of the Criminal Code. 89. Criminal Code, sections 13.4 and 13.5. 90. AGD, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 9. 91. Scrutiny of Bills Committee, Scrutiny digest, 3, 2018, op. cit., p. 99. 92. The value of a penalty unit is set by section 4AA of the Crimes Act 1914, and is currently $210. 93. Proposed section 70.5C (equivalent to current subsection 70.2(6) and (7), which will be repealed) will set out the meaning of

annual turnover.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 25

This may result in extremely significant penalties for entities, for actions, which as noted above, may well be beyond their control, and potentially for the acts of individuals who may be intentionally acting against the interests of the organisation. 94

Issue: application of absolute liability/associate engaging in conduct for the profit or gain of the body corporate The LCA and Bronitt and Brereton raised concerns about the application of absolute liability to elements of the proposed offence.

Bronitt and Brereton considered that the application of absolute liability will mean that distinctions between more and less culpable conduct will be lost:

A corporation may fail to implement adequate procedures to prevent foreign bribery due to inadvertence, carelessness or ineptitude, but equally it may fail to prevent foreign bribery intentionally, knowingly, recklessly or dishonestly. Framed as a form of absolute liability, the FPFB [failing to prevent foreign bribery] offence is a blunt ‘catch all’ provision that does not differentiate between different degrees of corporate culpability.

95

The LCA was concerned specifically with the application of absolute liability to the element of the proposed offence that the associate engaged in the conduct for the profit or gain of the body corporate (proposed paragraph 70.5A(1)(c), emphasis added). The LCA considered that it is not clear exactly what would need to be proved for the offence to be made out, and how that would be done:

… the primary offence does not require that the associate does so for the profit or gain of the first person (the body corporate charged with the failing to prevent offence). Therefore, the circumstance of the associate doing so for the profit or gain of the first person is likely to be a contested matter. However, proposed section 70.5A would allow a body corporate to be convicted because of the commission by the associate of a primary offence even if the associate has not been convicted of that offence. If the associate is not convicted of the offence, absolute liability should not apply to the corporation because a physical element will need to be proved on the part of the associate under paragraph 70.5A(1)(c) and it is not clear how this could be proved.

96

The Scrutiny of Bills Committee did not comment on the application of absolute liability in its report on the 2017 Bill.

Issue: placing of a legal burden on the defendant to establish the adequate procedures exception The LCA and the AICD did not consider it appropriate that the onus of proof be reversed in relation to establishing that a body corporate had adequate procedures in place to prevent foreign bribery. They both argued that if this matter is to be cast as an exception instead of as an element of the offence, that the defendant should bear only an evidential burden (which would require adducing

94. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 12. 95. Bronitt and Brereton, Submission to L&C Committee, 2017 Bill inquiry, op. cit., p. 7. 96. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 11-12.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 26

or pointing to evidence that suggests a reasonable possibility that it had adequate procedures in place)97 instead of the proposed legal burden.98

The Scrutiny of Bills Committee did not comment on the imposition of a legal burden in its report on the 2017 Bill.

Issue: definition of associate The LCA and the AICD were concerned that the definition of associate is too broad.99 The LCA noted the breadth of the concept when compared to general provisions in Part 2.5 of the Criminal Code concerning corporate criminal liability, and stated:

The Law Council is concerned that proposal creates a significant disparity between the application of the principles of criminal responsibility for natural persons and the application of principles of criminal responsibility for corporations and officers of corporations who have contravened Commonwealth laws. Of further concern, the proposed scheme appears to create the potential for a corporation to be held responsible for the acts of a range of individuals who may intentionally be acting against the interests of the corporation.

100

The AICD argued that the definition should be limited to ‘those officers, employees, agents and contractors acting under delegation and/or within the actual or apparent scope of their authority’ and exclude subsidiaries, over which it argued some parent companies had limited control despite being a majority stakeholder.101 If the definition is to retain subsidiaries, the AICD suggested that it be amended to more closely align with the definition in the Bribery Act 2010 (UK), which it characterised as a ‘substance over form’ approach.102 Under the UK Act, a person is associated with a commercial organisation if they perform services for or on behalf of the organisation. A determination of whether a person performs services for or on behalf of the organisation is to be made ‘by reference to all the relevant circumstances and not merely by reference to the nature of the relationship’ between the person and the organisation.103

Conversely, the IBA considered that the definition may be too narrow:

[the term] should clearly and unambiguously capture conduct by an[y] natural or incorporated person, including any association (incorporated or unincorporated) or persons operating through a trust or any other structure designed or created to facilitate the relevant conduct in a manner to shield others from potential liability … the question of whether the payer of the bribe performs services on behalf of a company should be determined by reference to all the relevant circumstances rather than what appears to be an exclusive list.

104

97. Criminal Code, section 13.3. 98. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 11; AICD, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 2-3. 99. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 10; AICD, Submission to L&C Committee, 2019 Bill inquiry,

op. cit., pp. 3-4. 100. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 10. 101. AICD, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 3-4. 102. Ibid. 103. Bribery Act 2010 (UK), section 8. 104. IBA, Submission to L&C Committee, 2017 Bill inquiry, op. cit., p. 3.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 27

Issue: potential for the new offence to become the default for foreign bribery prosecutions Bronitt and Brereton expressed concern that the features of the proposed offence outlined above could mean that it will become the default or ‘go to’ offence for foreign bribery. They raised concerns about the potential combined impacts of the proposed offence and the introduction of DPAs:

As a broad ‘fallback’ offence, the FPFB offence is likely to assume a key role in DPA negotiations in foreign bribery cases. It is vital that negotiations over foreign bribery allegations do not inappropriately divert away from criminal prosecution cases of serious bribery (determined by assessing blameworthiness and harm) that would properly merit investigation, prosecution and punishment through the criminal justice system.

105

Jurisdictional scope Proposed subsection 70.5A(7) will provide that section 15.1 of the Criminal Code (extended geographical jurisdiction—category A) applies to the proposed new offence. One of the circumstances this will capture is where the conduct constituting the alleged offence occurs wholly outside Australia and the person is a body corporate incorporated by or under an Australian law.106 Morgan, Lewis and Bockius suggested that jurisdiction should be expanded to also include corporations ‘carrying out business in Australia’.107 This would mirror the jurisdictional reach of the equivalent offence in the Bribery Act 2010 (UK).108

Guidance on preventing foreign bribery Proposed subsection 70.5B will require the Minister to publish guidance on the steps that bodies corporate can take to prevent an associate from bribing foreign public officials. Such guidance will not be a legislative instrument. The Government stated that the guidance will be:

• principles-based, and designed to be applicable to corporations of different sizes and operating in different sectors and109

• broadly consistent with the guidance the UK Government has published in relation to section 9 of the Bribery Act 2010 (UK).110

It committed to consult publicly on the guidance and review and incorporate stakeholder feedback.111

The Senate Standing Committee on Economics recommended:

• the Government publish an exposure draft of the guidance and allow a period of no less than four weeks for stakeholders to comment

105. Bronitt and Brereton, Submission to L&C Committee, 2017 Bill inquiry, op. cit., p. 8. 106. Criminal Code, paragraph 15.1(1)(c). 107. Morgan, Lewis and Bockius LLP, Submission to L&C Committee, 2017 Bill inquiry, op. cit. 108. Bribery Act 2010 (UK), section 7. 109. Scrutiny of Bills Committee, Scrutiny digest, 3, 2018, op. cit., pp. 98-99. 110. Ibid. See also AGD, Submission to L&C Committee, 2017 Bill inquiry, op. cit., p. 9. 111. Ibid.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 28

• the guidance be published with sufficient time before the commencement of the proposed failing to prevent bribery offence to allow corporations to implement necessary compliance measures and

• the guidance should include the existence of internal corporate whistleblowing systems.112

Two of those recommendations were reiterated by the L&C Committee in its report on the 2017 Bill.113

The Government released draft guidance on 2 December 2019 and sought public submissions by 28 February 2020.114 It stated that following consultations, a final version would be published before the new offence commences.115 The draft guidance notes that among the key elements of bribery prevention are ‘reporting obligations, protections and secure channels for whistleblower reporting’.116

112. Senate Economics References Committee, Foreign bribery, op. cit., pp. 83-4, 131 (Recommendations 8, 9 and 17). 113. L&C Committee, Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017, op. cit., pp. 25-26 (Recommendations 1 and 2). 114. AGD, ‘Draft guidance on adequate procedures to prevent the commission of foreign bribery’, AGD website; AGD, Consultation

draft: draft guidance on the steps a body corporate can take to prevent an associate from bribing foreign public officials, Australian Government, November 2019. 115. AGD, ‘Draft guidance on adequate procedures to prevent the commission of foreign bribery’, AGD website. 116. AGD, Consultation draft: draft guidance on the steps a body corporate can take to prevent an associate from bribing foreign public officials, op. cit., p. 18.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 29

Schedule 2—Deferred prosecution agreements Schedule 2 will amend the Director of Public Prosecutions Act 1983 (DPP Act) to introduce a deferred prosecution agreement (DPA) scheme for serious corporate crime. A DPA in essence involves an agreement between a prosecutor and a corporation that criminal proceedings against a corporation will be suspended in return for the corporation complying with agreed conditions.117 DPAs have not previously been used in Australia. They are used in several overseas jurisdictions as one method of overcoming difficulties associated with obtaining evidence to prosecute corporate crime. Jurisdictions that use some form of DPA include the US, UK, Canada, France and Singapore.118

Commencement The deferred prosecution agreement scheme in Part 1 of Schedule 2 will commence the day after Royal Assent along with certain consequential amendments in Part 3. Consequential amendments to the tax law in Part 2 will commence on the first 1 January, 1 April, 1 July or 1 October to occur after the day the Act receives Royal Assent.

Background Investigations into corporate crime may require assessment of large amounts of complex data and evidence located overseas. This can require long and expensive investigations and court proceedings, particularly where a corporate defendant is well-resourced. The DPA scheme is designed to address these challenges by providing incentives to companies to self-report misconduct and assist law enforcement in corporate criminal investigations and prosecutions.

Consultation There has been extensive consultation on, and exposure of the draft of, the proposed DPA scheme. AGD released a consultation paper on the introduction of a DPA scheme in Australia in March 2016.119 Seventeen submissions were received and 15 of those endorsed, or conditionally endorsed, introduction of a DPA scheme.120 A second consultation paper in March 2017 sought views on a proposed model.121 The AFP and the CDPP published the Best Practice Guidelines on Self-Reporting of Foreign Bribery and Related Offending by Corporations122(Best Practice Guidelines) in December 2017.

The reforms were discussed at the Government Business Roundtable on Anti-Corruption held on 31 March 2017. Senior representatives from business and government discussed practical steps to better protect Australian business from the corrosive effects of corruption, and to support them to build corporate cultures of integrity. In April 2017 the Department convened further discussions with

117. ALRC, Corporate criminal responsibility, Discussion paper, 87, ALRC, Brisbane, November 2019, p. 183. 118. Ibid. 119. AGD, Improving enforcement options for serious corporate crime: consideration of a deferred prosecution agreements scheme in Australia, Public consultation paper, AGD, Canberra, March 2016.

120. AGD, Improving enforcement options for serious corporate crime: a proposed model for a deferred prosecution agreement scheme in Australia, Public consultation paper, AGD, Canberra, March 2017, pp. 1-2. 121. Ibid. 122. Australian Federal Police (AFP) and Director of Public Prosecutions (DPP), Self-reporting of foreign bribery and related

offending by corporations, AFP and CDPP best practice guidelines, 8 December 2017.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 30

representatives from industry, law firms, civil society and academia. The Bill has been developed with regard to the issues raised throughout these consultation phases. 123

The 2017 Bill was introduced into the Senate on 6 December 2017 and lapsed on 1 July 2019. Schedule 2 to the 2019 Bill is substantively the same as Schedule 2 of the 2017 Bill (there are some minor differences between the two versions).

ALRC Review into Australia’s corporate criminal responsibility regime On 10 April 2019 the ALRC received Terms of Reference to undertake a comprehensive review of the corporate criminal responsibility regime, with a particular focus on the need for effective laws to hold corporations to account for criminal misconduct. The proposed introduction of DPAs in the 2017 Bill was discussed in ALRC Discussion Paper 87, Corporate Criminal Responsibility.124 Chapter 9 outlined key arguments for and against the introduction of a DPA scheme and asked for views on whether such a scheme should be implemented in Australia. The ALRC reported to the Attorney-General on 29 April 2020. The report will become public when the Attorney-General tables it in Parliament, which should occur within 15 sitting days.125

Committee consideration

Senate Standing Committee on Economics The Senate Standing Committee on Economics conducted an inquiry into measures governing the activities of Australian corporations, entities, organisations, individuals, government and related parties with respect to foreign bribery. As part of that inquiry it considered the effectiveness of existing legislative provisions with respect to measures to encourage self-reporting (including but not limited to, civil resolutions, settlements, negotiations, plea bargains, enforceable undertakings and deferred prosecution agreements). Among the Committee’s recommendations in its March 2018 report were:126

• that the government introduce a deferred prosecution agreement scheme for corporations, supported by a strong legislative framework which requires strict compliance and allows for adequate responses in the event of a breach (Recommendation 11)

• other than in exceptional circumstances, deferred prosecution agreements be published, together with details on how a company has complied with the terms and conditions, and any breach, variation or termination (Recommendation 12)

• a DPA Code of Practice make provision for the appointment and methodology of independent external monitors at the company’s expense to monitor compliance with a deferred prosecution agreement (Recommendation 13)

123. AGD, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 3. 124. ALRC, Corporate criminal responsibility, op. cit. 125. ALRC, ‘Review into Australia’s corporate criminal responsibility regime’, ALRC website, last modified 30 April 2020. 126. Economics Committee, Foreign bribery, op. cit.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 31

• as part of the public consultation on the draft Code of Practice, the government publish an exposure draft and allow a period of no less than four weeks for stakeholders to provide comment (Recommendation 14).127

Senate Standing Committee on Legal and Constitutional Affairs

2019 Bill The L&C Committee recommended that the Senate pass the Bill.128 It acknowledged the concerns of major interest groups and noted the amendments recommended, but concluded:

… the committee is satisfied that the proposed scheme contains appropriate safeguards to ensure that the public can have confidence in the system. The committee is also reassured by the department's advice that the DPA scheme would serve as an additional enforcement tool and not as a substitute for the robust investigation and prosecution of corporate crime.

129

Labor Senators recommended that Schedules 2 and 3 be deleted from the Bill on the basis that they were neither sensible nor supported by a clear and considered rationale.130 In particular the dissenting report expressed concern:

• the proposed DPA scheme contained insufficient safeguards to prevent companies from effectively buying their way out of meaningful punishment for corporate crime131

• the proposed scheme does not take into account the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (‘Banking Royal Commission’)132

• there is a risk that the CDPP will use DPAs too often and in inappropriate circumstances

• the proposed scheme is too weak in that:

- the CDPP is not required to take any prescribed steps, such as consulting victims of crime, before negotiating a DPA with a corporation and - the CDPP is given a broad discretion to withhold any (or even all) details of a DPA from the public if he or she considers it to be ‘in the interests of justice’ to do so.133 Senator McKim published additional comments in the L&C Committee’s report on the 2019 Bill noting that the Greens:

• broadly supported the objectives of the Bill

• did not expressly comment on Schedule 2 and

• recommended that the Senate suspend consideration of the Bill until after the ALRC report on corporate criminal responsibility is tabled.134

127. Ibid., p. 111. Extracted from C Barker and M Biddington, Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017, Bills digest, 105, 2017-18, Parliamentary Library, Canberra, 8 May 2018, p. 9. 128. L&C Committee, 2019 Bill inquiry, op. cit., p. vii. 129. Ibid., p. 25. 130. Labor Senators, Dissenting Report, L&C Committee, 2019 Bill inquiry, p. 27. 131. Ibid. 132. K Hayne, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry: final report,

vol. 1, The Commission, Canberra, 2019. The final report did not consider DPAs but did recommend changes in approach to ‘enforceable undertakings’ at pp. 440-446. 133. Labor Senators, Dissenting Report, L&C Committee, 2019 Bill inquiry, op. cit., p. 28.

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2017 Bill Senator Rex Patrick published additional comments in the L&C Committee report on the 2018 Bill, expressing concern over the discretion given to the CDPP to decide not to publish a DPA. Senator Patrick believed that a proper balance of the interests of justice against the public interest and the need for transparency required:

• removal of the discretion to not publish a DPA

• that there be a minimum disclosure standard for all DPAs (covering the relevant offence to which the DPA relates, the last date for which the DPA will be in force, and any applicable financial penalty to be paid to the Commonwealth) and

• once the reason for any non-disclosure has expired, the full DPA must be published.135

Position of major interest groups Most major interest groups support introduction of a DPA scheme, though there are a number of recommendations for amendments.

Law Council of Australia The Law Council of Australia (LCA) strongly supported the adoption of a DPA scheme in Australia on the basis that the UK scheme has been successful, and the scheme provides opportunities to avoid some of the cost, delay and uncertainty of traditional criminal prosecutions.136 The LCA supported the enactment of Schedule 2 without waiting for the pending ALRC report.137

Several of the concerns expressed by the LCA related to ensuring there were sufficient incentives for corporations to participate in the scheme.138

The LCA’s recommendations are very similar to those it made in submissions to the L&C Committee 2017 Bill inquiry.139 Its detailed comments on a number of issues and proposed provisions are explained under the heading ‘Key issues and provisions’ below.

Australian Institute of Company Directors The Australian Institute of Company Directors (AICD) endorsed the proposed DPA scheme as striking ‘an appropriate balance between incentivising corporations to self-report and the need to hold corporations accountable for serious corporate crime’.140 The AICD proposed:

• clarification that although a corporation will be required to admit to certain agreed facts detailing the nature and scope of their offending, there is no requirement for formal admissions of criminal liability in respect of offences and

134. Australian Greens, Additional Comments, L&C Committee, 2019 Bill inquiry, pp. 31-33. 135. R Patrick, Additional Comments, L&C Committee, 2017 Bill inquiry, op. cit., pp. 35-38. 136. LCA, Submission to L&C Committee, 2019 Bill inquiry, p. 13. 137. Ibid., p. 14. 138. Ibid., p. 16. 139. LCA, Submission to L&C Committee, 2017 Bill inquiry, op. cit. 140. AICD, Submission to L&C Committee 2019 Bill inquiry, op. cit., p. 4.

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• contrary to proposed section 17H(4), the Bill should make clear that information or documents disclosed to a Commonwealth agency as an indirect result of information disclosed during DPA negotiations are made on a ‘without prejudice basis’.

Criminal and corporate law academics Professors Fiona Haines and Christine Parker from the University of Melbourne expressed concern regarding the potential lack of public transparency, and recommended amendments. They submitted that the judicial oversight embedded in the UK scheme should be adopted in Australia. They also submitted that as a minimum, where a DPA is not published, the CDPP should publish substantive reasons and that the DPA be published as a matter of course on completion. They also considered it important that Parliamentary consideration of the Bill be delayed until the lessons from the ALRC inquiry could be incorporated.141

Professor Liz Campbell from Monash University submitted that the DPA scheme should be called a non-prosecution agreement (NPA) since if a DPA is approved, criminal proceedings against the corporation are not commenced. By contrast, in the UK a prosecution is commenced but then suspended on approval of a DPA.142

Professor Campbell expressed concern that the DPAs may supplant individual criminal liability. The experience in both the US and the UK has been that DPAs and NPAs are typically not accompanied by prosecution of individuals. She noted:

Commissioner Hayne in the Royal Commission interim report (2018: 2.2) was concerned about the lack of corporate prosecutions being brought by ASIC, in that its criminal prosecutions have all been directed at individuals. The introduction of DPAs could lead to the pendulum swinging the other way, so to speak, by focusing on corporate rather than human actors.

143

Professor Campbell also:

• submitted the Bill should be amended to assert that DPAs should not be available for recidivist corporate offenders144 and

• agreed with Professor Brent Fisse’s submission to the L&C Committee 2017 Bill inquiry that it should be a prerequisite to approval of a DPA, rather than a typical expectation, that a corporation cooperate in investigation and prosecution of culpable individuals.145

The Synod The Uniting Church in Australia, Synod of Victoria and Tasmania, supported enactment of Schedule 2, though it recommended some amendments; however, it did not wish Parliament to delay the Bill, being concerned at the length of time already taken to achieve reform.146 It expressed concern that company personnel involved in criminal conduct may use DPA negotiations as a fishing expedition to determine the strength of the prosecution case.

141. F Haines and C Parker, Submission to L&C Committee 2019 Bill inquiry, 9 January 2020, pp. 1-2. 142. Campbell, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 3. 143. Ibid., p. 4. 144. Ibid., pp. 3-4. 145. Ibid., p. 4. 146. The Synod, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 1.

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The Synod recommended the DPA scheme should be subject to a review in five years’ time to assess its effectiveness and the Government develop guidelines for calculating reparations for victims of criminal offences covered by a DPA.147 Two other matters are covered in the discussion of key issues and provisions below.

Attorney-General’s Department AGD advised the L&C Committee that DPA schemes were well supported internationally:

While the DPA reforms are novel in the Australian context, they reflect the international community’s increasing support for and reliance on DPAs as an additional tool in combatting foreign bribery and other economic crimes … the Organisation for Economic Cooperation and Development (OECD) Working Group on Bribery routinely monitors the effectiveness of non-trial resolution mechanisms and has previously made recommendations supporting the introduction and implementation of DPA-like schemes. Studies by the OECD have found that DPA-like resolutions have proved an important enforcement mechanism in the foreign bribery context since the entry into force of the OECD Anti-Bribery Convention. During Australia’s Phase 4 follow-up review in December 2019, the Working Group on Bribery welcomed the reintroduction of the Bill including the proposed introduction of a DPA scheme into Australia.

Similar schemes have been used successfully in jurisdictions including the United Kingdom and United States to uncover and enforce penalties for corporate misconduct. In these jurisdictions, DPA and DPA-like schemes have led to stronger, not weaker, enforcement outcomes. This is because such schemes have incentivised voluntary reporting and cooperation with law enforcement as well as the longer term implementation of stronger internal compliance mechanisms to uncover, address and prevent future misconduct. Such schemes have also provided law enforcement with alternative avenues for resolution of cases where no further investigative steps are possible due to the absence of further evidence (for example, where that evidence is held overseas).

148

Key issues and provisions

Offences for which DPAs may be used Proposed section 17B of the DPP Act prescribes a list of specific offences to which a DPA may be applied. These are listed in Table 1. The LCA supported the list of offences as well as the inclusion of certain secondary liability offences (such as incitement or conspiracy to commit a relevant offence) under Division 11 of the Criminal Code.149 Regulations may prescribe additional offences for the purposes of the DPA scheme.150

Table 1: offences prescribed by subsection 17B(1)

Anti-Money Laundering and Counter-Terrorism Financing Act 2006

35H—Unauthorised access to verification information 35J—Obtaining access to verification information by false pretences 35K—Unauthorised use or disclosure of verification information

147. Ibid., pp. 1-2. 148. AGD, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 4-5 [citations removed]. 149. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 14; proposed paragraph 17B(2)(a). 150. Proposed paragraph 17(2)(b).

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 35

Part 4—Reports about cross-border movements of physical currency and bearer negotiable instruments (except Division 4—Information about reporting obligations) 74—Unregistered persons must not provide certain remittance services 123—Offence of tipping off 136—False or misleading information 137—Producing false or misleading documents 138—False documents 139—Providing a designated service using a false customer name or customer anonymity 140—Receiving a designated service using a false customer name or customer anonymity 141—Customer commonly known by 2 or more different names—disclosure to reporting entity 142—Conducting transactions so as to avoid reporting requirements relating to threshold transactions 143—Conducting transfers so as to avoid reporting requirements relating to cross-border movements of physical currency 162—External audits—compliance

Autonomous Sanctions Act 2011

16—Contravening a sanction law 17—False or misleading information given in connection with a sanction law

Charter of the United Nations Act 1945

20—Dealing with freezable assets 21—Giving an asset to a proscribed person or entity 27—Contravening a UN sanction enforcement law 28—False or misleading information given in connection with a UN sanction enforcement law

Corporations Act 2001

1041A—Market manipulation 1041B—False trading and market rigging—creating a false or misleading appearance of active trading etc. 1041C—False trading and market rigging—artificially maintaining etc. trading price 1041D—Dissemination of information about illegal transactions 1041E—False or misleading statements 1041F—Inducing persons to deal 1041G—Dishonest conduct 1043A—Prohibited conduct by person in possession of inside information 1307—Falsification of books

Criminal Code Act 1995

70.2—Bribing a foreign public official 131.1—Theft 134.1—Obtaining property by deception

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 36

134.2—Obtaining a financial advantage by deception 135.1—General dishonesty 135.4—Conspiracy to defraud 141.1—Bribery of a Commonwealth public official 142.1—Corrupting benefits given to, or received by, a Commonwealth public official 144.1—Forgery 145.1—Using forged document 145.2—Possession of forged document 145.3—Possession, making or adaptation of devices etc. for making forgeries 145.4—Falsification of documents etc 145.5—Giving information derived from false or misleading documents 400.3—Dealing in proceeds of crime etc.—money or property worth $1,000,000 or more 400.4—Dealing in proceeds of crime etc.—money or property worth $100,000 or more 400.5—Dealing in proceeds of crime etc.—money or property worth $50,000 or more 400.6—Dealing in proceeds of crime etc.—money or property worth $10,000 or more 400.7—Dealing in proceeds of crime etc.—money or property worth $1,000 or more 400.8(1)—[Intentional] Dealing in proceeds of crime etc.—money or property of any value 400.9—Dealing with property reasonably suspected of being proceeds of crime etc 480.4—Dishonestly obtaining or dealing in personal financial information 480.5—Possession or control of thing with intent to dishonestly obtain or deal in personal financial information 480.6—Importation of thing with intent to dishonestly obtain or deal in personal financial information 490.1—Intentional false dealing with accounting documents 490.2—Reckless false dealing with accounting documents

Source: Parliamentary Library, based on proposed subsection 17B(1) of the DPP Act, at item 7 of Schedule 2 to the Bill.

Negotiation of a DPA

Entering negotiations Proposed subsection 17A(1) provides that the CDPP may enter into a DPA if the CDPP thinks it is appropriate to do so. There are no criteria for that decision in the Bill.

Note that proposed subsection 31(1AAA) of the DPP Act, inserted by item 10 of Schedule 2 to the Bill, provides the CDPP can delegate ‘all or any of the Director’s functions or powers under Part 3 (other than those under subsections 17B(3), 17C(4), 17D(8) and 17F(7))’ to a staff member who is an SES employee and a legal practitioner.

Proposed subsection 11(2A) of the DPP Act, at item 6 of Schedule 2, permits the CDPP to give directions or guidelines in relation to negotiating, entering into, or administering DPAs. AGD published a Deferred Prosecution Agreement Scheme Code of Practice: Consultation Draft (Draft Code of Practice) in May 2018 which provided some guidance on the matters the CDPP was to

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 37

take into account, especially the factors to be considered in assessing the public interest.151 Consultation closed on 9 July 2018 and AGD published nine of the submissions received.152 The Draft Code of Practice has not to date been published in final form.

The Draft Code of Practice provides that, although a corporation may request negotiations, negotiations will only occur after the CDPP has invited the corporation to enter DPA negotiations through a formal letter of offer setting out the process and what will be required.153

The LCA recommended that ‘the criteria setting out the circumstances in which a DPA can be entered into should be specified in legislation’.154 Professor Campbell recommended the Bill be amended to assert that DPAs should not be available for recidivist corporate offenders.155

Conduct of negotiations The LCA was concerned that officers of the AFP and CDPP would need new skills in corporate negotiation and compromise. The LCA suggested that a comprehensive program of education in relation to the finalised DPA scheme for all relevant regulators (the CDPP, the AFP, ASIC, AUSTRAC and the ATO) would be necessary to ensure they embrace the relevant principles and approach:

It is important that the CDPP and AFP have available to them the full range of skills, knowledge and experience necessary to engage in the process of corporate negotiation and compromise that would be an essential feature of the DPA scheme created by the Bill. 156

Use and disclosure of information acquired during negotiations

Use in evidence Proposed subsection 17H(1) prohibits particular documents from being used in evidence in legal proceedings against a corporation that is, or was, a party to DPA negotiations (including where these negotiations did not result in a DPA). This kind of provision is often referred to as a ‘use immunity’. It applies to documents (other than the DPA itself) that indicate the person entered into negotiations for a DPA, or which were created solely for the purpose of negotiating a DPA, including any record of negotiations or drafts of the DPA.

Proposed subsection 17H(4) clarifies that any information or document obtained as an indirect consequence of a disclosure of, or any information contained in, any document described in the paragraph above, can be admitted in evidence.

The LCA welcomed the protection against the admissibility of statements made during negotiations of the DPA, but recommended the protection afforded by proposed section 17H should go beyond a ‘use immunity’ to also provide a ‘derivative use immunity’.157

151. AGD, Deferred Prosecution Agreement Scheme code of practice: consultation draft, (Draft code of practice), AGD, Canberra, May 2018. 152. AGD, ‘Deferred prosecution agreement scheme code of practice’, AGD website, n.d. 153. AGD, Draft code of practice, op. cit., pp. 4-5. 154. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 15. 155. Campbell, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 3-4. 156. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 14. 157. Ibid., pp. 15-16.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 38

The AICD supported the use immunity in proposed section 17H, but objected to proposed subsection 17H(4). It asserted that proposed subsection 17H(4) would allow a Commonwealth agency to begin a new investigation or inquiry using any document or information brought to its attention as an indirect result of disclosure during DPA negotiations:

In our view, this would not only run counter to principles of natural justice and procedural fairness (including the application of legal professional privilege and privilege against self-incrimination), but also undermine the efficacy of a DPA scheme to incentivise corporations to self-report and engage openly and honestly in DPA negotiations. Rather, we consider the Bill should make clear that information or documents disclosed in this manner are made on a ‘without prejudice basis’.

158

Use by other Commonwealth entities Proposed section 17K also allows disclosure to other Commonwealth entities, in certain circumstances, of information obtained as a direct result of the negotiating, entering into, or administering, of a DPA. This may include disclosure to a court or tribunal for the purposes of proceedings before, or in accordance with an order made by, that court or tribunal.159

The Draft Code of Practice states:

A corporation will only be offered a DPA if it engages in full and frank discussions with Commonwealth agencies and the CDPP during, and in the lead up to, DPA negotiations. The DPP Act limits how information divulged by the corporation during these discussions will be used. Section 17K of the DPP Act only permits the further disclosure of information obtained as a direct result of negotiating, entering into or administering a DPA in specified circumstances. Broadly speaking, this provision allows for the disclosure of information for law enforcement and judicial purposes, and for the purposes of assisting Commonwealth entities to exercise their powers, functions or duties. Although information provided by a corporation during DPA negotiations will be shared amongst relevant Commonwealth agencies, Commonwealth agencies will work to ensure this information remains confidential from the public unless:

• the disclosure of the information is compelled by law, or

• the disclosure is agreed to as part of the DPA negotiation. For example, the company may be required, as a condition of continuing DPA negotiations, to disclose information to an independent monitor (see paragraphs 3.16 - 3.20) and/or to victims of the misconduct (see paragraph 3.13). 160

The LCA was concerned that the potential for disclosure would make corporations unwilling to enter negotiations.

… as presently drafted, [proposed section 17K] may insert uncertainty into negotiations under the DPA Scheme, that could affect the overall success of negotiations as companies who disclose information while negotiating, entering into, or administering a DPA would be at risk of this information being disclosed further in a range of ways that may be adverse to the company.

161

The LCA also submitted the entire negotiation process for a DPA should be conducted on a ‘without prejudice’ basis. It recommended:

158. AICD, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 4. 159. Proposed subsection 17K(3), item 4 in table. 160. AGD, Draft code of practice, op. cit. p. 6. 161. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 15.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 39

• ‘the Privacy Commissioner should be consulted on the privacy implications of proposed section 17K and any issues raised by the Privacy Commissioner should be addressed prior to the provision’s enactment’ and

• the limited ‘use immunity’ provided by proposed section 17H should be extended to a derivative use immunity, and any information or document obtained as a direct or indirect consequence of a disclosure made during the process of negotiating a DPA should be inadmissible in any related criminal prosecution.162

The Synod expressed concern that company personnel involved in criminal conduct may use DPA negotiations as a fishing expedition. It recommended the Bill contain provisions to ensure company personnel involved in DPA negotiations did not disclose information provided by the CDPP or an investigative agency.163 Proposed section 17K, which provides for certain disclosures by Commonwealth public officials, does not authorise such disclosure by company personnel, so this could be dealt with by the AFP and CDPP exercising careful control of investigative information and perhaps making non-disclosure a formal condition of negotiations.

Credit for self-reporting The LCA submitted that corporations may be reluctant to self-report if there was a possibility they would gain insufficient benefit from that process. It recommended:

• companies should be provided with a strong indication that self-reporting, together with full co-operation, will generally result in a DPA

• the DPA will be modified to take into account the degree, and benefit derived from both the co-operation and self-reporting of certain matters, particularly disclosure of otherwise unknown offences and

• there should be a specific requirement in the legislation for the determination of the financial penalty in the DPA to take into account the degree, nature and benefit of self-reporting by the corporation.164

Compulsory content of a DPA Proposed subsection 17C(1) requires a DPA to include:

• a statement of the facts relating to each offence specified in the DPA

• the last day for which the DPA will be in force

• the requirements to be fulfilled by the person under the DPA

• the amount of any financial penalty to be paid to the Commonwealth

• the circumstances which constitute a material contravention of the DPA and

• that the corporation consents to prosecution on indictment, without a prior examination or committal, for an offence specified in the DPA if the corporation:

- commits a material contravention of the DPA or - provided information under the DPA that it knew to be inaccurate, misleading or incomplete.

162. Ibid., pp. 15-16. 163. The Synod, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 15. 164. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 16-17.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 40

Proposed subsection 17C(2) identifies a non-exhaustive list of permissible content for a DPA including requiring the corporation to: compensate victims, make a donation to charity, consent to orders under the Proceeds of Crime Act 2002, implement a compliance program or policy, cooperate in any investigation or prosecution in a specified matter, or pay reasonable costs incurred by a Commonwealth entity in relation to negotiating the DPA.

Requirement for formal admissions There were differences between interest groups over whether a corporation should be required to make formal admissions in the DPA.

The LCA considered it important that a DPA not require admission to a contravention of law:

… to encourage self-reporting and use of DPAs, having regard to the implications of a formal admission in terms of civil class actions and other potential litigation (compare the impediments created by section 1317E of the Corporations Act 2001 (Cth) … to civil penalty settlements with ASIC in the Corporations Act context).

165

The LCA recommended that a new subsection should be inserted into proposed section 17C to make it clear that the terms in a DPA do not:

• affect a corporation’s entitlement to client legal privilege in respect of material to which the privilege applies or

• contain a formal admission of criminal liability.166

The AICD proposed that the Bill clarify that although a corporation will be required to admit to certain agreed facts detailing the nature and scope of their offending, there is no requirement for formal admissions of criminal liability in respect of offences.167

The Synod made the opposite recommendation: that a formal admission of criminal liability for specified offences, consistent with any relevant laws of evidence should be compulsory. It also recommended that details of any financial gain or loss, with supporting material, in the statement of facts relating to each offence specified in the DPA should be compulsory.168

Consequences of material breach of a DPA It is compulsory for a DPA to identify the circumstances which will constitute a material breach of the DPA (proposed paragraph 17C(1)(e)). It is not compulsory, however, for it to set out the consequences of a failure by the person to comply with the terms of the DPA (proposed paragraph 17C(2)(b)). The LCA submitted the latter point should be compulsory.169

Process for approval of a DPA An approving officer must be a former judicial officer with the requisite knowledge or experience to perform the role, and is appointed by the Attorney-General in accordance with proposed

165. Ibid., p. 15. 166. Ibid., p. 17. 167. AICD, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 2. 168. The Synod, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 13. 169. LCA, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 17.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 41

section 17G. Under proposed subsection 17D(4), the approving officer must approve the DPA where satisfied that:

• the terms of the DPA are in the interests of justice and

• the terms of the DPA are fair, reasonable and proportionate.

Professors Haines and Parker submitted that the judicial oversight embedded in the UK scheme should be adopted and noted that ‘[l]eading commentators of corporate criminal law in the US have also argued that limited court oversight is essential to ensure deferred prosecution agreements are neither too soft nor too harsh’.170

The LCA’s preferred approach to approval was that the CDPP be required to make a written application to an independent administrative panel seeking approval of the final terms of the DPA, with the panel empowered to compel the parties to comply with the terms of the DPA. However, the LCA agreed that a retired judge was an acceptable and practical alternative.171

Resolution of a dispute over a material contravention of a DPA The LCA observed:

The Bill seems to indicate that the only way for a resolution of a dispute as to whether a ‘material contravention’ has occurred is through litigation as proposed by paragraph 17E(2)(b) which refers to the court making a declaration that there has not been a material contravention of the agreement. 172

The LCA submitted that the Bill should require the DPA to specify a process for resolving disputes about whether there has been a ‘material contravention’ before the CDPP can commence a prosecution based on being satisfied there has been a contravention for purposes of proposed paragraph 17A(3)(a):

The Draft Code is silent on how a determination of a material contravention should be made by the CDPP. Perhaps the legislation could require that the company be given notice of the alleged contravention, have an opportunity to make submissions and provide that an approving officer review the circumstances and make a recommendation to the CDPP before the CDPP takes action based on proposed section 17A(3)(a).

173

The LCA also proposed that independent corporate monitors could play a useful role in ensuring compliance:

An independent monitor may assist the parties in reaching an agreement to seek a variation of the DPA in appropriate circumstances to address any issues which may be contributing to non-compliance with the terms of the DPA. 174

170. Haines and Parker, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 2. 171. LCA, Submission to L&C Committee, 2019 Bill inquiry, p. 19. 172. Ibid. 173. Ibid. 174. Ibid., pp. 19-20.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 42

Public oversight and non-publication of a DPA Professors Haines and Parker submitted that the proposed Bill contained a weakness in public oversight in that, when the DPP exercises the discretion not to publish the DPA (or to publish a redacted version) (proposed section 17D(8)), there appears to be no requirement for providing a meaningful statement of reasons to the public.175

They provide several reasons why public scrutiny is important:

• there has been ‘significant public anger directed at corporations in the wake of scandals and inquiries in the financial and banking sector’ and that justice must be seen to be done

• it may be a matter of injustice if there are members of the public who have suffered loss or harm as a result of the criminal conduct

• transparency fosters credibility and trust and

• DPAs are an innovation in Australia and learning from experience following their introduction is essential to ensure they make a genuine contribution in tackling corporate crime. Education cannot take place in an information vacuum.176

Professors Haines and Parker recommended:

• at a minimum, the CDPP publish on its website substantive reasons why a DPA is redacted or not made available and

• publication of the full DPA, where that has not already occurred, be required as a matter of course following the completion of the DPA.177

Senator Patrick expressed similar concerns in 2018 and recommended amendments to ensure a minimum level of disclosure.178

175. Haines and Parker, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 2. 176. Ibid., pp. 2-3. 177. Ibid., p. 2. 178. Patrick, Additional Comments, L&C Committee, 2017 Bill inquiry, op. cit., pp. 35-38.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 43

Schedule 3—Dishonesty definitions in the Criminal Code ‘Dishonest’ is currently defined identically several times in the Criminal Code rather than once in the Dictionary.

Items 1-5 will repeal the existing definitions in the following provisions: 73.9(3), 92A.1(2), 130.3, 470.2, 474.1, 480.1(1) and 480.2.

Item 6 of Schedule 3 will insert a single definition of dishonest into the dictionary of the Criminal Code to provide that dishonest means ‘dishonest according to the standards of ordinary people’. There will no longer be a ‘requirement to prove that the defendant was aware that their knowledge, belief or intent was dishonest according to the standards of ordinary people’.179

The new definition will not apply to all Commonwealth offences involving dishonesty. It will only apply to offences in the Criminal Code and other Commonwealth offences that explicitly apply the Criminal Code definition.

The Explanatory Memorandum states that the purpose of the amendment is to align the statutory definition with the common law test set out by the High Court of Australia in the 1998 case Peters v R (Peters).180 A similar amendment was made to the Corporations Act 2001 in 2019.181

The current Criminal Code definitions were enacted from 2000 onwards, more than two years after the decision in the Peters case,182 and after extensive consultation through the Model Criminal Code Officers Committee (MCCOC). Alternative tests were actively considered when policy and legislative choices were made.183

Commencement Schedule 3 will commence the day after Royal Assent.184 The proposed definition will apply where the conduct constituting the offence occurs wholly on or after commencement.185

Background The Criminal Code currently includes separate but identical definitions of dishonest for the purposes of various offences.186 Dishonest is defined to mean:

• dishonest according to the standards of ordinary people and

• known by the defendant to be dishonest according to the standards of ordinary people.

179. Explanatory Memorandum, p. 4. 180. Explanatory Memorandum, p. 4; Peters v R (1998) 192 CLR 493, [1998] HCA 7. 181. The amendments were made by the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019.

182. A contemporary case note analysing the unpublished Peters decision was published in 1998: P Priest, ‘The test for dishonesty’ The Law Institute Journal (Victoria), 72(2), 1998, p. 74. 183. The Model Criminal Code Officers Committee (MCCOC) issued its Final Report making recommendations in relation to the definition of dishonesty in December 1995: MCCOC, Theft, fraud, bribery and related offences: final report, Canberra, The

Committee, 1995. However, a single-stage test was considered as an alternative by MCCOC and the recommended offences were not enacted until 2000. 184. Clause 2 of the Bill. 185. Item 7 of Schedule 3. 186. Criminal Code, subsections 73.9, 92A.1(2), 474.1(1) and 480.2(1) and sections 130.3 and 470.2.

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Common law definitions have never applied to the Criminal Code offences. The current definitions are based on the two stage UK common law ‘Ghosh test’ of dishonesty from R v Ghosh in 1982.187

There has been extensive academic and judicial criticism of the second limb of the Ghosh definition of dishonesty (that the defendant knew that his or her conduct was dishonest according to the standards of ordinary people) since soon after the case was decided, including by such eminent criminal law scholars as Professor Glanville Williams.188

The Ghosh definition was overturned in the Supreme Court of Canada in 1993,189 by the High Court in Australia in Peters in 1998, and finally in the UK in a series of criminal cases culminating in Ivey v Genting Casinos in 2017.190

However, a two-stage definition was preferred by the Standing Committee of Attorneys-General for the Model Criminal Code,191 and introduced alongside the property offence provisions in the Criminal Code Amendment (Theft, Fraud, Bribery and Related Offences) Act 2000 (the 2000 Criminal Code Amendment). The Explanatory Memorandum to the 2000 Criminal Code Amendment expressly rejected the approach in the Peters case and said:

The approach in Peters is not favoured because it is necessary for offences like theft to retain a broad concept of dishonesty to reflect the characteristic of moral wrongdoing.

Paragraph (a) of the definition of ‘dishonest’ seeks to achieve this by linking the definition of dishonesty to community standards (this is not novel, whether a person is negligent is assessed by a jury on the basis of what the reasonable person would have done in the circumstances).

Paragraph (b) of the definition requires knowledge on the part of the defendant that he or she is being dishonest according to the standards of ordinary people. This is crucial if the Criminal Code is to be true to the principle that for serious offences a person should not be convicted without a guilty mind. It reflects a preference for the law which existed prior to the 1998 decision of the High Court in Peters and is particularly important to the Criminal Code because it has additional offences which rely on ‘dishonesty’ even more so than the Model Criminal Code offences (see proposed sections 132.8, 135.1 and 135.2).

192

The House of Representatives Former Standing Committee on Legal and Constitutional Affairs (the Standing Committee) inquired into and reported on the 2000 Criminal Code Amendment.193 The Standing Committee noted the Peters case and the differences between the Peters and Ghosh tests and concluded:

Despite Peters taking a different approach to defining dishonesty than Ghosh, in the absence of submissions expressing opposition to the way dishonesty is defined in the Bill and in light of the

187. R v Ghosh [1982] EWCA Crim 2, [1982] 2 All ER 689. 188. D Lusty, ‘The meaning of dishonesty in Australia: rejection and resurrection of the discredited Ghosh test’, Criminal Law Journal, 36, 2012, pp. 282, at 286. 189. R v Théroux [1993] 2 SCR 5. 190. Ivey v Genting Casinos (UK) Ltd t/a Crockfords [2017] UKSC 67. 191. Explanatory Memorandum, Criminal Code Amendment (Theft, Fraud, Bribery and Related Offences) Bill 1999, (1999

Explanatory Memorandum) p. 29 at [60]. 192. Ibid., pp. 28-29 at [57]-[60] [emphasis added]. 193. House of Representatives Standing Committee on Legal and Constitutional Affairs, Advisory Report on the Criminal Code

Amendment (Theft, Fraud, Bribery and Related Offences) Bill 1999, The Committee, Canberra, June 2000.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 45

Committee's own consideration of the matter, the Committee accepts the Bill's definition of dishonesty. 194

After the Standing Committee reported, the Government introduced amendments consistent with various Standing Committee recommendations and the definition of dishonesty was not amended.195

Four Australian jurisdictions (Northern Territory, Queensland, Tasmania and Western Australia) now apply the Peters test in various property offences.196 Queensland courts continued to apply the Ghosh test to state offences, only applying the Peters test to Commonwealth offences, until a Queensland Court of Appeal decision in 2015 confirmed that Peters was the only test that should be used in common law in Australia.197

Victoria retained its unique test in the Crimes Act 1958 (Vic), which emphasises claim of right, and uses neither Peters nor Ghosh.198

Three other Australian jurisdictions adopted a two stage test equivalent to the current Criminal Code after Peters. South Australia reformed its theft law in 2002, the ACT enacted a provision in 2004, and NSW in 2009.199

In 2003 the High Court in Macleod v R applied the Peters test to section 173 of the Crimes Act 1900 (NSW).200 That offence did not use the term dishonesty, the key term was ‘fraudulently’, which was explained by the trial judge as being interchangeable with dishonesty. The case therefore concerned the ordinary English meaning of the term ‘dishonesty’. The High Court in Macleod confirmed that the Peters definition is the correct definition in Australian common law for that purpose.

In 2009 the situation in NSW was changed when a two stage test was inserted in section 4B of the Crimes Act 1900 (NSW):

(1) In this Act—

dishonest means dishonest according to the standards of ordinary people and known by the defendant to be dishonest according to the standards of ordinary people.

(2) In a prosecution for an offence, dishonesty is a matter for the trier of fact.

194. Ibid., p. 7 at [2.10]. 195. Parliament of Australia, ‘Criminal Code Amendment (Theft, Fraud, Bribery and Related Offences) Bill 2000 homepage’, Australian Parliament website. 196. Gans, Submission to L&C Committee, 2019 Bill inquiry, pp. 11-12 197. R v Dillon; Ex parte Attorney-General (Qld) [2015] QCA 155. 198. Gans, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 11-12. Crimes Act 1958 (Vic), sections 72-73. 199. Criminal Law Consolidation Act 1935 (SA), section 131; Criminal Code 2002 (ACT), section 300; Crimes Act 1900 (NSW),

section 4B. 200. Macleod v R (2003) 214 CLR 230; [2003] HCA 24.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 46

In 2019 the two stage definition of dishonesty in the Corporations Act 2001 was amended to a single-stage definition by the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019.201 The Explanatory Memorandum to that Act stated:

There is no consistent definition of dishonesty in the Corporations Act. Dishonesty takes its ordinary meaning for the purposes of many provisions in the Corporations Act, while it has been defined as a two limbed test for the purposes of sections 1041F and 1041G.

More recent jurisprudence has suggested that a single limbed test is the preferred test for dishonesty in Australia. The High Court of Australia in Peters v R (1998) 192 CLR 493 (Peters) preferred an objective only test where whether an act was ‘dishonest’ should be decided by the standards of ordinary, decent people.

The amendments in this Bill address the lack of a consistent definition of ‘dishonest’ in the Corporations Act by introducing a specific definition that applies across the Act… As the definition is an objective only test, it is not necessary to prove that a defendant knew that the relevant conduct was dishonest. Instead, to establish dishonesty, it is only necessary to prove that the conduct is dishonest according to the standards of ordinary people. This will ensure consistency and certainty when prosecuting offences relating to dishonesty within the Corporations Act.

This test will differ to the tests for dishonesty in the Criminal Code. The tests in the Criminal Code contain both an objective and subjective limb. 202

The ‘ordinary meaning’ of dishonesty referred to in the quote above is the common law Peters test. Sections 1041F and 1041G were inserted into the Corporations Act in 2001,203 three years after Peters. The ‘more recent jurisprudence’ referred to was not cited.

The Attorney-General advised the Scrutiny of Bills Committee that the decision to revisit the issue of the definition of dishonesty was taken due to difficulties in proving dishonesty using the current definition and in light of the 2019 amendments applying the Peters test to all dishonesty offences under the Corporations Act:

I am advised that law enforcement and prosecutorial experience has shown that it can be difficult to obtain sufficient admissible evidence to establish that the defendant was aware or knew that they were dishonest according to the standards of ordinary people. This means that even if a person was aware their conduct fell short of community standards, practical difficulties in finding and adducing evidence means a person may too readily escape liability…

As the Criminal Code and the Corporations Act currently provide different definitions of dishonesty, I am concerned this has the potential to jeopardise prosecutions where offences under both the Corporations Act and the Criminal Code are brought together. 204

201. Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019, item 7 of Schedule 1. 202. Explanatory Memorandum, Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018, p. 56-57. 203. Financial Services Reform Act 2001, Schedule 1 Part 1. 204. Scrutiny of Bills Committee, Scrutiny digest, 3, 2020, The Senate, 26 February 2020, pp. 30-31.

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Committee consideration

Senate Standing Committee on Legal and Constitutional Affairs The L&C Committee discussed the submissions made in relation to Schedule 3 at paragraphs [2.50]-[2.64] of its report on the Bill and took the view:

Evidence from the department and the AFP demonstrate that the proposed amendments are important to ensuring that Australia's law enforcement agencies can effectively prosecute dishonest corporate conduct. 205

It recommended the Senate pass the Bill. Labor senators issued a dissenting report and recommended that Schedule 3 be removed from the Bill.206 The Greens Senator on the L&C Committee also dissented and recommended that the Senate suspend consideration of the Bill until after the Attorney-General has tabled the ALRC's report into Australia's corporate criminal responsibility.207

Scrutiny of Bills Committee The Scrutiny of Bills Committee noted:

It therefore appears that the proposed new definition will remove the subjective aspect of the definition of dishonesty. The committee considers that a significant shift in the framing of a number of offences in the Criminal Code, that has the potential to unduly trespass on personal rights and liberties, should be thoroughly justified in the explanatory memorandum.

208

The Scrutiny of Bills Committee requested advice from the Attorney-General as to why it was necessary and appropriate to amend the definition of dishonesty in Schedule 3.209 The Attorney-General advised:

The Government considers the Peters test to be the preferred test for determining dishonesty under the Criminal Code and that it is no longer appropriate or desirable to apply the Ghosh test when determining whether conduct is dishonest under the Criminal Code. The question of whether a defendant subjectively knew their conduct was dishonest according to the standards of ordinary people is an irrelevant consideration in determining whether behaviour was dishonest or in establishing the relevant intention…

There is a high risk of confusion where juries are required to apply two different tests of dishonesty, which can lead to severance of indictments or charges being dropped altogether. I consider this would be an unacceptable and unfortunate obstacle in holding white collar criminals to account. I am also advised that recent jurisprudence in the United Kingdom has seen a move away from the two-limb test in Ghosh.

210

205. L&C Committee, Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019, (2019 Bill inquiry), op cit., p. 25 at [2.69]. 206. Labor Senators, Dissenting Report, L&C Committee, 2019 Bill inquiry, pp. 27-29. 207. Australian Greens, Additional Comments, L&C Committee, 2019 Bill inquiry, pp. 31-33. 208. Scrutiny of Bills Committee, Scrutiny digest, 1, 2020, The Senate, 5 February 2020, pp. 15-16. 209. Ibid., p. 16. 210. Scrutiny of Bills Committee, Scrutiny digest, 3, 2020, The Senate, 26 February 2020, pp. 30-31.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 48

The Attorney-General further advised that there are currently 56 offences in the Criminal Code that rely on this definition of dishonesty.211

The Scrutiny of Bills Committee requested that the key information provided by the Attorney-General be included in the Explanatory Memorandum and made no further comment.212

Position of major interest groups

Law Council of Australia The Law Council of Australia (LCA) noted that no substantive reason was given for the why the existing definition was inadequate.213 The LCA opposed introduction of the single stage test and argued it was important the current test was retained:

Serious penalties and consequences follow for a person convicted of dishonest, criminal conduct because there is a principled and moral basis to engage the requirements for denunciation, retribution and the other purposes of sentencing.

For the application of the criminal law to be justified, there needs to be an assessment of the moral culpability of an offender that entails the offender knowingly engaging in dishonest conduct … [this] is a fundamental principle of the criminal law, namely that the actus reus is accompanied by the mens rea before an offence can be said to be committed.

214

The LCA recommended:

If the proposed definition of dishonesty is to be inserted into the dictionary of the Criminal Code, it should be framed as currently defined in section 130.3 of the Criminal Code, requiring both a subjective and objective limb to the test. 215

Attorney-General’s Department In a submission to the L&C Committee, the AGD argued that the current Criminal Code test is outdated:

This test is based on outdated English authority (R v Ghosh (1982) EWCA Crim 2) which the Australian High Court chose not to follow in Peters… Updating the test for dishonesty under the Criminal Code will achieve greater consistency in prosecutions of offences involving dishonest conduct, particularly where some offences rely on the Criminal Code statutory definition of dishonesty and other offences the common law definition of dishonesty.

216

211. Ibid., p. 31. 212. Ibid., p. 32. 213. LCA, Submission to L&C Committee, 2019 Bill inquiry, 14 January 2020, at p. 21, para [89]. 214. LCA, Ibid., pp. 24-25. 215. LCA, Ibid., p. 25. 216. AGD, Submission to L&C Committee, 2019 Bill inquiry, undated, p. 15.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 49

Professor Jeremy Gans Professor Jeremy Gans is an academic at Melbourne Law School, specialising in all aspects of criminal justice. He is also the author of Modern Criminal Law of Australia.217 Professor Gans was strongly critical of the rationale for amending the definition of dishonesty. He argued:

• the proposed amendments in Schedule 3 are too important to have been placed in an omnibus Bill

• claims that the amendments are ‘technical’ and an ‘update’ are incorrect

• the Explanatory Memorandum does not make a cogent case for change and

• the Bill leaves uncertain the interaction between the amended offences, the Code’s general principles and other Federal offences outside the Code.218

Australian Federal Police The Australian Federal Police (AFP) supported the Schedule 3 amendments and asserted that ‘the current test can be difficult to establish in the sophisticated and complex reality of corporate crime.’219

Key issues and provisions Items 1-5 of Schedule 3 will repeal the existing definition of dishonest in the following provisions of the Criminal Code:

• subsection 73.9(3) (in relation to providing or possessing a travel or identity document issued or altered dishonestly)

• subsection 92A.1(2) (in relation to theft of trade secrets involving foreign government principal)

• section 130.3 (in relation to offences relating to the proper administration of government)

• section 470.2 (in relation to offences relating to postal services)

• section 474.1(in relation to telecommunications offences) and

• subsections 480.1(1) and 480.2(1) (in relation to financial information offences).

Item 6 will insert a single definition of dishonest into the dictionary of the Criminal Code to provide that dishonest means ‘dishonest according to the standards of ordinary people’. There will no longer be a ‘requirement to prove that the defendant was aware that their knowledge, belief or intent was dishonest according to the standards of ordinary people’.220

Nature of the amendments Senator Duniam stated in his second reading speech:

217. J Gans, Modern criminal law of Australia, 2nd edn, Cambridge University Press, Cambridge, 2017. 218. Gans, Submission to L&C Committee, 2019 Bill inquiry, op. cit. 219. AFP, Submission to L&C Committee, 2019 Bill inquiry, p. 4. 220. Explanatory Memorandum, p. 4.

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Finally, the Bill also makes technical amendments to update the definitions of dishonesty under the Criminal Code to ensure these are aligned with the test endorsed by the High Court in Peters v The Queen (1998). 221

No other comment was made on the Schedule 3 amendments. The amendments could fairly be described as ‘technical’ in the sense of being rather difficult legal concepts; however, the effect of the proposed changes will be substantive. Professor Gans described the effect the change would have:

Schedule 3 expressly makes substantive changes to 58 federal dishonesty offences, including 56 indictable offences … For most of those offences, Schedule 3 redefines ‘dishonest’ to mean ‘dishonest according to the standards of ordinary people’ …

[The effect of the current definition] is to exempt people from criminal liability for dishonesty if they thought they were acting honestly (or where there is a reasonable doubt about that), specifically if they thought that they were acting according to the standards of ordinary people … 222

The effect [of the proposed amendment] is that someone who believed that he or she was acting according to ordinary people’s standards will still be able to be found to be criminally dishonest so long as he or she was wrong, even reasonably, about what those standards are. 223

When giving evidence to the L&C Committee, AGD officers clarified the change being proposed:

[The existing test] requires an investigating agency, a prosecuting agency, to either discover or lead evidence that a defendant actually knew that their conduct was not in line with the standards of ordinary, decent people, … [The Peters test] … still looks at the knowledge, the beliefs, the intent of the accused and then assesses that objectively against the standards of ordinary, decent people. What it doesn't then require the prosecution to lead evidence of is that that person also knew that their conduct was against those standards.

224

Simplifying prosecution of Commonwealth offences It would clearly simplify Commonwealth prosecutions if juries do not have to grapple with different definitions of dishonesty in the same trial. However, trials can also involve state and territory offences or Commonwealth offences of dishonesty not contained in either the Corporations Act or the Criminal Code, so the proposed amendment would not entirely remove the problem.

For example, if the amendments are passed, the Defence Force Discipline Act 1982 offences of theft and receiving (sections 47C and 47P) would no longer align with the same offences in the

221. J Duniam, ‘Second reading speech: Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019’, Senate, Debates, 2 December 2019, p. 4717. 222. In Ghosh, Lane LCJ was careful to explain that the subjective element of the test did not allow a defendant to escape conviction by arguing that their action was morally justified: ‘Robin Hood or those ardent anti-vivisectionists who remove

animals from vivisection laboratories are acting dishonestly, even though they consider themselves to be morally justified in doing what they do, because they know that ordinary people would consider these actions to be dishonest.’ R v Ghosh [1982] EWCA Crim 2, [1982] 2 All ER 689, at 696. 223. Gans, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 1 [emphasis added]. 224. B Ananijevski, AGD, Evidence to Senate Legal and Constitutional Affairs Legislation Committee, Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019, 12 February 2020, p. 20.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 51

Criminal Code (sections 131.1 and 132.1) even though they may be alternative charges in the same trial. Professor Gans provides other examples in his submission.225

Professor Gans identified three different approaches to the definition of dishonesty in federal statute law:

At present, out of the 93 current federal criminal offences that include an element of dishonesty:

• 73 current federal offences define ‘dishonest’ to require proof that the accused knew his or her conduct was dishonest according to the standards of ordinary people. These offences were introduced at various times over the past 19 years, from 24 May 2001 (Criminal Code Amendment (Theft, Fraud, Bribery and Related Offences) Act 2000 to 6 April 2019 (Treatment Benefits (Special Access) Act 2019.) …

• 13 current federal offences define ‘dishonest’ to mean ‘dishonest according to the standards of ordinary people’. The 13 offences are all in a single piece of legislation, the Corporations Act 2001. However, this definition of dishonesty has only applied since 13 March 2019, when it was introduced by the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019.

• 7 current federal offences leave the word ‘dishonest’ undefined. These offences were inserted (or the element of dishonesty inserted into them) between 2001 and 2006. Most are in the Corporations (Aboriginal and Torres Strait Islanders) Act 2006, but two are broader offences concerned with superannuation and migration.

226

Specific definitions of dishonesty appear in the following Commonwealth legislative schemes:

• the Criminal Code

• the Corporations Act 2001

• the Fair Work Act 2009

• the Defence Force Discipline Act 1982

• the Military Rehabilitation and Compensation Act 2004

• the Australian Participants in British Nuclear Tests and British Commonwealth Occupation Force (Treatment) Act 2006

• the Future Fund Act 2006

• the Treatment Benefits (Special Access) Act 2019 and

• the Australian Passports Act 2005.

All except the Corporations Act currently rely on a two-stage definition of dishonesty.227

If the amendments are passed, there will remain at least 15 federal offences that will continue to apply a two-step definition of dishonest.228 Professor Gans asserted that Schedule 3 will also create new inconsistencies between the affected offences and nearly 20 other unaffected offences (including multiple bribery offences).229 The Explanatory Memorandum does not reveal

225. Gans, Submission to L&C Committee, 2019 Bill inquiry. 226. Ibid., p. 2. 227. The two stage definition of dishonesty in the Corporations Act was amended to a single-stage definition in March 2019 by the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019, item 7 of Schedule 1. However,

dishonesty remains undefined in the related Corporations (Aboriginal and Torres Strait Islander) Act 2006. 228. Gans, Submission to L&C Committee, 2019 Bill inquiry, p. 6. 229. Ibid., pp. 5 and 7 [citation removed].

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 52

whether all the Commonwealth offences have been reviewed to examine how they may interact with Criminal Code offences.

In evidence to the L&C Committee, Professor Gans made the point that definitions of dishonesty also vary across Australian jurisdictions.

… Australia is currently split between three different methods of defining dishonesty. Here in Victoria, there's a unique method. In [Queensland, Western Australia, Tasmania and the Northern Territory], there's the method that is proposed in schedule 3. In the remaining jurisdictions, including New South Wales, the ACT and South Australia, there's the current method. So, the problem is that whichever way you shift you'll be moving into uniformity with some jurisdictions and out of uniformity with others…

The issue should be: what's the best method of defining 'dishonesty'? Have Queensland and Western Australia got it right? Or have New South Wales, the ACT and, for the past 20 years, the Commonwealth got it right? That's the issue that ought to be debated. 230

Dr Neal of the LSA then noted:

And perhaps I could add that, in the consultation we did [MCCOC in 1997-1999], the overwhelming submissions from all of the jurisdictions were for Feely/Ghosh, and in addition to that there was a fair amount of the case law in the code jurisdictions—Queensland, Tasmania and Western Australia— including from one of the judges of the Queensland District Court and from the Queensland DPP, all favouring the Feely/Ghosh test, which is in any event well evident in the case law from those jurisdictions.

231

NSW expressly adopted the Criminal Code approach in order to align its offences more closely with the Commonwealth offences and assist juries in hearings containing charges for both NSW and Commonwealth offences.232 There is no indication in the Explanatory Memorandum that these jurisdictions have been consulted on the proposed amendments.

The relative merits of alternative definitions of dishonesty There has been academic and judicial criticism of the Ghosh definition of dishonesty. The authors of Federal Criminal Law233commented:

The legislative decision to reintroduce the Ghosh test is difficult to understand. It was a test which proved difficult, if not impossible for juries to grasp. Intermediate courts were divided about its proper application. Its reintroduction is likely to confuse rather than simplify the criminal law. 234

In 2012, Special Counsel, Australian Securities and Investments Commission, David Lusty (writing in a personal capacity) strongly criticised the two stage definition in the Criminal Code. He did not, however, identify specific problems in the application of the definition to Criminal Code offences.

230. J Gans, Evidence to Senate Legal and Constitutional Affairs Legislation Committee, Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019, 12 February 2020, p. 7 [emphasis added]. 231. Dr Neal, Evidence to Senate Legal and Constitutional Affairs Legislation Committee, Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019, 12 February 2020, p. 7 [emphasis added]. 232. J Gans, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 12. 233. N Williams, A Payne and S McNaughton, Federal criminal law, LexisNexis Butterworths, Sydney, 2001. Ms McNaughton is now

the CDPP. 234. Williams, Payne and McNaughton, Federal criminal law, op. cit., para [5A-026], p. 42,008.5, August 2014.

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The Explanatory Memorandum does not point to academic or judicial criticism of the current Criminal Code definition in its application to any particular Criminal Code offences.

There has also been some academic criticism of the Peters test. Academic Alex Steel published a series of articles examining the concept of dishonesty between 2000 and 2010.235 In 2010, Steel examined the different approaches to dishonesty in Canada, the UK and Australia:

… ‘dishonesty’ can be conceived of either as a mental element or as a description or characteristic of a physical act. While in England [before Ivey v Genting Casinos] it has been interpreted to be a mental element, in Canada and Australia the highest courts have adopted an approach to common law dishonesty which sees it, at least in some offences, as descriptive of a physical act. However, Australian and Canadian jurisprudence differs over the role that the knowledge, belief and intent of the accused plays in determining whether an act is dishonest.

The Canadian Supreme Court views the characterisation of ‘dishonesty’ as an entirely objective assessment, and the knowledge, belief or intent of the accused, in relation to the act, constitutes the attached mens rea. By contrast, the Australian High Court combines both the act and mental attitude into the actus reus of the offence. In so doing, the High Court appears to have created an unfortunate hybrid concept of dishonesty.

236

Steel considers it important to grapple with the competing conceptions of dishonesty as either a fundamentally moral concept or as a failure to follow rules of behaviour:

If one approaches dishonesty as a fundamentally moral concept, it seems inescapable that the knowledge, beliefs and intentions of the accused are fundamental to the concept. It seems implausible that one can be unknowingly immoral. This is the approach that underlies the English version of dishonesty. The moral standard is set by the community, but one can only be immoral if one is aware that one is acting in breach of that standard.

By contrast, if one describes dishonesty as failure to follow rules of behaviour, then it is possible to see dishonesty as an observable behaviour, and an accused can unknowingly act dishonestly. This seems to be the Canadian approach. An accused acts dishonestly when he or she fails to follow the community-generated rules of appropriate behaviour. On this conception, dishonesty is similar to other morally based standards such as offensiveness and indecency.

Under the High Court’s approach to dishonesty in Peters, there is a failure to choose between these two conceptions. Instead, like the approach taken to define indecency in ambiguous circumstances, the Peters test for dishonest means combines both. In so doing, it creates an offence, the physical elements of which are only determined after the event, and which, in order to constitute the external physical elements of the crime, rely on inferences as to the offender’s state of mind. At the very least, this suggests that ‘dishonest means’ is an insufficiently inchoate concept on which to base the actus reus of an offence. It probably also indicates that the High Court was in error in combining the physical and mental elements.

237

235. A Steel, ‘The appropriate test for dishonesty’, Criminal Law Journal, 24(1), February 2000, pp. 46-59; A Steel, ‘The harms and wrongs of stealing: the harm principle and dishonesty in theft’, UNSW Law Journal, 31(3), 2008, pp. 712-737; A Steel, ‘The meanings of dishonesty in theft’, Common Law World Review, 38(2), 2009, pp. 103-106. A Steel, ‘Describing dishonest means: the implications of seeing “dishonesty” as a course of conduct or mental element and the parallels with indecency’, Adelaide Law Review, 31(1), 2010, pp. 7-45.

236. Steel, ‘Describing dishonest means’, op. cit., p. 44. 237. Ibid., pp. 44-45.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 54

Steel argues that the Peters definition of dishonesty is ‘inherently unstable’.

… a choice — probably legislative — needs to be made between seeing dishonesty as a moral standard or an objective rule-based breach. If it is a moral standard, then it is best reconceived as a mental element, or alternatively as a compound concept that contains both a physical act and a related mental attitude to the act — but which requires some awareness of the community’s judgment on the act. If it is seen as an objective rule-based breach, the tendency to incorporate moral judgments should be avoided by renaming the element as ‘unauthorised act’, or some other more clearly rule-based description.

In relation to defrauding offences, given the increasing legislative use of dishonesty as a state of mind element in offences, it is probably appropriate, and much simpler, to adopt the English approach to defrauding. That is, to concentrate on requiring the causing of a prejudice as the physical element, and a requirement of dishonesty as the mental element in so causing such a result. The means by which the result is caused are then reduced to evidentiary aspects of proving the causing of the result. Legislative reform of conspiracy to defraud remains a priority.

238

Steel’s analysis suggests that further work should be done to clarify the appropriate physical and fault elements in each offence where the concept of dishonesty is applied.

The precise legal effect of the amendments is uncertain The Attorney-General advised that while the new definition would define dishonesty by reference to a single objective standard, the application of the test by a court necessarily involves an assessment of the defendant’s subjective state of mind against this standard.239 However, the interaction of the physical and fault elements for each offence in the Criminal Code which uses the concept of dishonesty is not uniform.

Professor Gans argues that the impact of the proposed Schedule 3 amendments is far from clear and is ‘a matter of considerable technical complexity’.240 One problem is the interaction of the general principles of criminal responsibility in Chapter 2 of the Criminal Code with the proposed objective definition of dishonest.241 Subsection 5.6(2) of the Criminal Code provides:

If the law creating the offence does not specify a fault element for a physical element that consists of a circumstance or a result, recklessness is the fault element for that physical element. 242

Professor Gans suggested it is possible that, if Schedule 3 is passed, ‘dishonesty’ would be interpreted as a physical element consisting of a circumstance or result and a court will find that an additional subjective fault element of recklessness will be required for each Criminal Code offence that uses the term ‘dishonest’.243

It is possible that the courts will apply s. 5.6(2) to the new definition of dishonesty, meaning that the prosecution will have to prove that the defendant [was] reckless (aware of a substantial risk that cannot

238. Ibid., p. 45. 239. Ibid. 240. Gans, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 7. 241. Ibid., pp. 4-5. 242. The ‘circumstance’ would be whether or not the defendant’s conduct was contrary to the standards of ordinary people. Gans,

Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 5. 243. Gans, Submission to L&C Committee, 2019 Bill inquiry, op. cit., pp. 4-5.

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Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 55

be justified in the circumstances) about the ‘circumstance’ of whether or not his or her conduct was contrary to the standards of ordinary people.

Or maybe not. Perhaps the courts will treat ‘dishonest’ as a ‘fault element’, on the basis that ordinary people’s standards define whether the accused is at fault, or because ordinary people care about what the accused knows or believes or intends when they assess honesty. Or perhaps the courts will treat the ‘dishonesty’ as something that is neither a physical nor fault element and therefore is unaffected by Chapter 2. Or perhaps the courts will apply the defence of mistake of fact in s. 9.1, so that an accused will avoid liability if he or she has a belief that is inconsistent with dishonesty. Or perhaps the courts will treat offences that require intentional dishonesty differently to ones that don’t. Or perhaps different courts in Australia will take different approaches.

Who knows? But what is likely is that the issue of the interaction between the Schedule 3 definition of dishonesty and Chapter 2 of the Code will be a source of continuing uncertainty in criminal investigations and prosecutions until a court - perhaps the High Court - resolves it conclusively, with considerable costs for prosecutors, defendants and courts in the meantime.

244

Chapter 2 of the Criminal Code will not necessarily incorporate the recklessness fault element in a way that can be generalised. Particularisation of the way the physical and fault elements interact in every offence that uses the concept of ‘dishonesty’ would be prudent to provide certainty that there has been a proper expression of, as the LCA put it, ‘the moral culpability of an offender that entails the offender knowingly engaging in dishonest conduct’. 245

Special considerations for the ‘general dishonesty’ offences There are a series of Criminal Code offences which essentially criminalise dishonesty itself: subsections 135.1(1), 135.1(3), 135.1(5), 135.1(7), each punishable by a maximum of ten years imprisonment, and subsections 474.2(1), 474.2(2) and 474.2 (3), each punishable by a maximum of five years imprisonment.246 Professor Gans states:

These sets of offences’ terms (together) criminalise most interactions anyone has with the federal government or an internet service provider if the interaction is ‘dishonest’. They expose every taxpayer, social welfare recipient, user of a government service and user of the internet to hefty penalties of up to 10 years imprisonment if anything they do with respect to those things falls within the definition of dishonesty.

247

When the offences in sections 135.1 and 474.1 were introduced, the 1999 Explanatory Memorandum explained that a two stage definition recommended by MCCOC was particularly important for these offences because they rely on dishonesty more than the Model Criminal Code offences.248 It also recommended that a penalty of ten years imprisonment was not appropriate:

The general dishonesty offence does not require proof that the defendant deceived the victim and therefore does not warrant the severe maximum penalty which attaches to fraud (which is 10 years). 249

244. Ibid., pp. 5 and 7 [citations removed]. 245. LCA, Submission to L&C Committee, 2019 Bill inquiry, op cit., pp. 24-25. 246. Gans, Submission to L&C Committee, 2019 Bill inquiry, op. cit., p. 4. 247. Ibid., p. 4. 248. The 1999 Explanatory Memorandum, op cit., p. 29. 249. Ibid., p. 6.

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While the section 135.1 general dishonesty offences were enacted with a maximum penalty of five years imprisonment, they were amended in 2018 to 10 years imprisonment.250 The rationale for the increase was discussed in the Bills Digest for the amending Act251 and the policy choice to increase the penalty rather than enact a new, more serious offence was questioned. Parliament may wish to consider whether the increased penalties remain appropriate to the moral culpability of the offence if the fault elements of those offences are changed by the proposed definition.

250. Schedule 4 of the Crimes Legislation Amendment (Powers, Offences and Other Measures) Act 2018. 251. C Raymond, Crimes Legislation Amendment (Powers, Offences and Other Measures) Bill 2017, Bills digest, 94, 2016-17, Parliamentary Library, Canberra, 8 May 2017, pp. 22-26.

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