House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Justice and Customs, Senator The Honourable Amanda Vanstone)

General outline, regulation impact statement and regulation impact on business

General outline

The Bill amends the Criminal Code Act 1995 by inserting part of a new Chapter 4 (The integrity and security of the international community and foreign governments) into the Criminal Code; the Bill inserts Division 70 of Chapter 4. Division 70 provides an offence of bribing a foreign public official.

The effect of the Bill is:

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to prohibit providing or offering a benefit which is not legitimately due 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;

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to apply the prohibition to conduct within and outside Australia, so long as, where the conduct occurs wholly outside Australia, the person is an Australian citizen or the company is a company incorporated in Australia;

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to ensure that the ancillary offences of attempt, complicity, incitement and conspiracy which occur within and outside Australia apply where they relate to conduct included in the primary offence (clause 70.2);

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to ensure Australia complies with the key feature of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions ('the OECD Convention').

In December 1996 the United Nations General Assembly adopted a Declaration Against Corruption and Bribery in International Business Transactions. Following this, in May 1997 the OECD Ministerial Council recommended that measures to combat bribery in international business transactions, including the criminalisation of bribery of foreign public officials, be introduced to the legislative process in each country.

The recommendation was endorsed by the Australian Government.

The OECD Convention was opened for signature in December 1997. Australia signed it on 7 December 1998 and it came into force on 15 February 1999.

Bribery of foreign public officials in the course of international trade is unacceptable. Although Australian business has high ethical standards, it is important that Australia maintains a good reputation by supporting the OECD in this initiative and therefore benefiting from the improvements it should bring to world trade. In particular, a reduction in the role played by bribery should result in more merit based commercial decisions. This will advantage Australia because as a rule its businesses are competitive.

The OECD Convention and its Commentaries provide details on the elements of the offence of bribery of a foreign public official.

Clause 3 of the Bill is a Schedule which contains amendments to the Criminal Code Act 1995. Item 2 of the Schedule inserts Division 70 of Chapter 4 into the Criminal Code. The following is a brief outline of the clauses in Division 70.

Clause 70.1 - Definitions

Clause 70.1 defines important terms which delineate the scope of the offence such as 'benefit', 'business advantage', 'control', 'duty', 'foreign country', 'foreign government body', 'foreign public enterprise', 'foreign public official', 'public international organisation' and 'share'.

Clause 70.2 - Bribing a foreign public official

Subclause 70.2(1) sets out the elements of what can be an offence under the Bill. The maximum penalty is 10 years imprisonment.

Subclauses 70.2(2) and 70.2(3) are both interpretation provisions in that they set out matters which must be disregarded in determining whether a benefit caught by the offence is not legitimately due (subclause 70.2(2)) to a person in a particular situation and whether a business advantage caught by the offence is not legitimately due to a person in a particular situation (subclause 70.2(3)).

Clauses 70.3 and 70.4

These clauses both provide defences. Clause 70.3 sets out the terms of the defence of conduct lawful in the foreign public official's country. The table in subclause 70.3(1) prescribes the method by which the applicable law is determined. The source of applicable law will differ according to the nature of the connection of the officer with the foreign government or public international organisation.

Clause 70.4 provides a defence where a payment is a facilitation payment made to expedite or secure the performance of a routine government action of a minor nature and the payment is of minor value.

Clause 70.5

Clause 70.5 sets out the territoriality and nationality requirements. Under section 11.6 of the Criminal Code the ancillary offences (attempt, aiding and abetting, incitement and conspiracy) will apply in the same terms as the principal offence at clause 70.2. The jurisdiction restrictions set out in clause 70.5 will thereby also apply to the ancillary offences.

Clause 70.6

Clause 70.6 is a savings clause in relation to other relevant Commonwealth, State or Territory laws.

Financial impact statement

The Bill is expected to have little impact on Commonwealth expenditure or revenue.

Regulation impact on business

There is the potential for impact on all Australian businesses operating internationally but it is not possible to be certain of the short term impact.

Key areas of impact

Key impacts of the proposals:

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impact on costs and benefits cannot be assessed because it is uncertain how much trade depends on payment of bribes to foreign officials,

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could either;

significant if competitors do not pass or enforce the proposed laws, or

savings could be made if distortion of free trade is prevented (to date there has been significant compliance by other OECD countries (and by 5 non-OECD countries)),

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significant long term advantages to Australian businesses if purchasing decisions are made on the merits of the product or service rather than on the size of the bribe,

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applies to conduct occurring outside Australia where the person is an Australian citizen or the company is a company incorporated in Australia,

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complies with the key features of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.