Tag Archives: Australia

Guest Post: Australia Considers New Approaches to Corporate Criminal Liability

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Today’s guest post is from Matt Corrigan and Samuel Walpole, respectively General Counsel and Legal Officer at the Australian Law Reform Commission (ALRC).

The growth of multinational corporations in both size and number has raised concerns in many jurisdictions about the State’s capacity to hold corporations liable for crimes committed in the course of their business activities, including (but not limited to) bribery of foreign officials. One of the challenges of using the criminal law to address corporate misconduct is that the traditional criminal law evolved with “natural persons” (that is, real people) in mind. The law therefore typically focuses on the conduct and states of mind of individuals to determine whether a criminal offense has been committed. Corporations are comprised of, and act through, individuals, but corporations are greater than the sum of their parts. The law developed principles of attribution of responsibility—legal principles for ascribing conduct and states of mind of a particular person or persons to a corporation—in order to hold the corporation liable for ordinary criminal offenses. In practice, however, these do not produce a perfect fit, particularly in the case of large decentralized corporations.

The perceived inadequacy of traditional notions of criminal responsibility when applied to problems like corporate bribery has led some jurisdictions to introduce novel approaches to corporate criminal liability for such crimes. Perhaps most notably, in 2010, the United Kingdom enacted the Bribery Act, which introduced a novel criminal offense, specific to corporate defendants, of failing to prevent foreign bribery. Under this provision, corporations are liable if they fail to prevent their associates—including agents engaged to act on behalf of the corporation to win contracts and expand operations in foreign jurisdictions—from committing bribery, subject to an affirmative defense that the corporation had in place adequate procedures to prevent such bribery. The “failure to prevent bribery” offense, together with the deferred prosecution agreement (DPA) scheme introduced in 2014, have been important steps forward. As Professor Liz Campbell has explained, the “failure to prevent” model involves utilizing the criminal law “as leverage to effect change in corporate behaviour,” rather than an accountability framework that operates only after the fact. In reviewing the operation of the UK Bribery Act in 2019, the House of Lords Bribery Act Committee described the “failure to prevent” reforms as “remarkably successful” in promoting compliance.

Australia is now considering adopting a similar approach to the United Kingdom. In December 2019, the Australian government introduced the Crimes Legislation Amendment (Combating Corporate Crime) Bill. This Bill, which is currently before Australia’s federal Parliament, would introduce an offense of failure to prevent bribery of foreign public officials by a corporation into Australia’s federal Criminal Code, along with a DPA scheme for foreign bribery. More generally, Australia is considering more seriously the limitations of traditional notions of criminal responsibility when applied in the context of corporate crime. The Australian Law Reform Commission (ALRC), on which we serve, recently undertook an extensive inquiry into this issue and published a Final Report that made 20 recommendations for reform of Australia’s corporate criminal liability regime. Among these recommendations, a few seem especially pertinent to the debates over the Crimes Legislation Amendment, and the effective control of corporate bribery more generally: Continue reading →

Australian Lawyers and Real Estate Agents: Kleptocrats’ Best Friends?

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Government officials who steal “vast quantities” of their citizens’ money need help hiding the loot.  The first generation of kleptocrats — the Ferdinand Marcoses, Mobutu Sese Sekos, and Sani Abachas of the world – showed that the preferred way is to retain someone to surreptitiously move the money into a safe haven abroad and then invest it in assets that cannot be traced back to them.  The anticorruption community calls these accomplices to grand corruption “enablers,” for they enable corrupt officials to hide their money.

The international community has begun cracking down on this professional class of crooks.  The primary means has been through making them subject to domestic anti-money laws.  Just as the laws of virtually all countries require banks and other financial institutions to take particular care (“enhanced due diligence”) before accepting as a customer current or former senior government officials or their family members or close associates and to report any suspicious transaction these “politically exposed persons” conduct, the Financial Action Task Force recommendations 22, 23, and 28 require the same from lawyers, accountants, real estate agents and others with the professional skills required to hide stolen assets. FATF has no power to compel countries to transpose these recommendations into domestic law.  It relies instead on the peer pressure generated by regular, highly publicized reports on individual nation’s compliance with them.

That system has now ground to a halt. According to the Financial Review, the reason is fierce opposition from Australian lawyers and real estate agents to what a FATF review of Australian compliance with the anti-money laundering recommendations would reveal. For 13 years the two have blocked the extension of the Australian anti-money laundering rules to their activities; last November a scheduled FATF review was about to finally call them out.  It was then suddenly cancelled. The only explanation given was that FATF had decided “to temporarily pause the start of all scheduled follow-up assessments pending the outcomes of the strategic review of FATF currently underway.”  Although FATF acknowledged discussing the review at its February 2020 meeting, no details about what the review would cover or when it would be completed was provided.  In the meantime, professions in the United States, Canada, and other nations (here, here, and here) who oppose extending anti-money laundering rules to their activities can breathe easier.  So can kleptocrats wanting to tap their expertise in hiding money.

Possible Reforms to Australia’s Approach to Corporate Criminal Liability: “Failure to Prevent”, Strict Liability, or Something Else?

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Many of the most significant bribery offenses, both domestically and internationally, involve corporations. When, and under what conditions, should the corporation itself—as opposed to, or in addition to, the individual employees involved in the wrongdoing—be held criminally liable? The attribution of criminal liability is sometimes thought to be conceptually or philosophically problematic: As Baron Thurlow LC once observed, a corporation has “no soul to be damned and no body to be kicked.” Yet it is clear that corporations can do wrong, and the prospect, and extent, of corporate criminal liability can have significant impacts on corporate behavior. Various legal systems have developed different approaches, but in some jurisdictions there has been considerable dissatisfaction with the status quo, and agitation for reform.

Australia is one such jurisdiction. In response to concerns about the Australian legal system’s approach to corporate criminal liability (an issue that is important in, but not limited to, the corruption context), last April the Commonwealth Attorney General of Australia, Christian Porter, announced that the Australian Law Reform Commission (ALRC)—the Australian Federal Government’s highly influential law reform agency—would conduct an inquiry into this issue. The Terms of Reference required the ALRC to review, among other things, the policy rationale behind Australia’s current framework for imposing criminal liability on corporations, as well as the availability of alternate mechanisms for attributing corporate criminal liability. This past November, the ALRC released a 279-page Discussion Paper that thoroughly canvasses potential approaches to reforming Australia’s corporate criminal liability regime; the ALRC is currently receiving comments on that paper, which are due at the end of this month (January 31, 2020), and after considering these submissions, the ALRC will release its final report by April 30, 2020.

The ALRC paper covers many issues, but perhaps the most fundamental concerns the basic rules for attributing criminal responsibility to the corporation. The ALRC, and the Australian government, faces a choice among several plausible alternatives: Continue reading →

New South Wales Anticorruption Commission’s Excellent Guide to Conflict of Interest

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Conflict of interest is a critical element of any government ethics program.  It is also perhaps the most difficult to implement.  The challenge comes in determining when friendships, kinship ties, and other personal relationships affect, or appear to affect, a government employee’s duty to put the interest of the public above his personal interest.  Was the contract awarded because the bidder lived in the same neighborhood as the procurement official making the award or because the bidder offered the best value? Was the individual hired because the hiring manager came from the same tribe or because she was the most qualified? Even if there were no actual conflict in the two cases, is there an appearance of one?

Rules that produce sensible answers to such questions are not easy to write, and as I have suggested in earlier posts (here and here), much well-meaning advice on how to do so is either counterproductive or impossible to implement.  A recent publication by the New South Wales Independent Commission Against Corruption is thus a welcome addition to the literature. In 26 clear and crisply written pages, Managing Conflicts of Interest in the NSW Public Sector provides a road-map for writing and enforcing practical, workable conflict of interest rules.

It offers a short, easily understandable definition of conflict of interest followed by a commonsensical approach to applying it.  The touchstone for determining when there is a conflict or an appearance of a conflict” is not the disappointed bidder or applicant or the government’s political opposition.  It is instead a “fair-minded and informed observer,” otherwise known as “a reasonable person.”  How to apply the reasonable person standard and the other standards and rules that make for a sound conflict of interest regime is illustrated throughout with real-world examples.

Written for agencies of Australia’s most populous state, a much broader audience will find the guide a valuable resource.

The Australian Government Shows Us How Not To Create an Anticorruption Agency

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Two recent polls of the Australian public make two things quite clear: the Australian people have little trust in their federal politicians, and they want a federal anticorruption agency to investigate misuse of public office. This is perhaps not surprising given the string of scandals that have come to light in the past few years (see, for example, here, here, and here). And ordinary citizens are not alone: a survey of government workers found that thousands believed they had witnessed acts of corrupt behavior, particularly cronyism and nepotism. And a group of 34 former Australian Judges, including a former Chief Justice of the High Court, have published an open letter to Prime Minister Scott Morrison stating that Australian trust in federal politics is at an all-time low due to perceptions of corruption, and that a federal anticorruption agency is the necessary response. 

It is therefore unsurprising that the proposed creation of a federal anticorruption agency has emerged as a salient issue in the upcoming federal elections, to be held on May 18 (one week from tomorrow). The Morrison government initially dismissed the idea, but in December 2018 changed its tune and announced that, if the Liberal Party (Morrison’s party) wins the election, the government would create a Commonwealth Integrity Commission with two separate divisions: a law enforcement integrity division and a public sector integrity division. The former would have the power to investigate police officers and other law enforcement personnel, while the latter would have the power to investigate politicians.

Unfortunately, while a federal anticorruption agency is an idea whose time has come, the Morrison government’s proposal suffers from four key shortcomings: Continue reading →

What Chinese Cuisine and Deferred Prosecution Agreements Have in Common

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As Kees noted Monday, the use of American-style deferred prosecution agreements (DPAs) to resolve corporate corruption cases short of trial is on the rise.  The United Kingdom, France, Argentina, and most recently Singapore now permit prosecutors to suspend or even drop altogether the prosecution of a firm for a corruption offense in return for the accused firm paying a fine, adopting measures to prevent future offenses, and cooperating with ongoing investigations.  Australia and Canada are on the verge of approving DPAs, and influential voices in India and Indonesia are urging their adoption too.

Apostles say DPAs allow governments to realize the benefits of a criminal conviction without the need for a lengthy, expensive, arduous trial against a well-funded corporate defendant where defeat is always a risk.  Former U.K. Attorney General Lord Peter Goldsmith told a New Delhi audience last October that once India begins using DPAS, companies would start coming forward and admit wrongdoing.  During the recent debate in Singapore one commentator observed that DPAs “provide an incentive to corporate entities to confront criminal conduct within their ranks,” and a group of Indonesian professors claim DPAs will be particularly valuable in their country.   In Indonesia, conviction of a corporation provides no assurance the defendant will not commit the same offense again while, they write, a DPA does.

DPA evangelists are about to learn what DPAs have in common with Chinese cuisine.  The first-time visitor to China soon discovers that Chinese food in China is unlike Chinese food at home.  Beef broccoli tastes much different outside China than in. Connoisseurs of DPAs will shortly find that what American prosecutors are able to cook up looks much different when prepared abroad.     Continue reading →

The Role of Judicial Oversight in DPA Regimes: Rejecting a One-Size-Fits-All Approach

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In late March 2018, the Canadian government released a backgrounder entitled Remediation Agreements and Orders to Address Corporate Crime that outlines the contours of a proposed Canadian deferred prosecution agreement (DPA) regime. DPAs—also appearing in slightly different forms such as non-prosecution agreements (NPAs) or leniency agreements—are pre-indictment diversionary settlements in which offenders (almost exclusively corporations) agree to make certain factual admissions, pay fines or other penalties, and in some cases assume other obligations (such as reforming internal compliance systems or retaining an external corporate monitor), and in return the government assures the corporation that it will drop the case after a period of time (ordinarily a few years) if the conditions specified in the agreement are met. Such agreements inhabit a middle ground between declinations (where the government declines to file any charges, but where companies still might forfeit money) and plea agreements (which require guilty pleas to criminal charges filed in court).

While Canada has been flirting with the idea of introducing DPAs for over ten years, several other countries have recently adopted, or are actively considering, deferred prosecution programs. France formally added DPAs (known in France as “public interest judicial agreements”) in December 2016, and entered into its first agreement, with HSBC Private Bank Suisse SA, in November 2017. In March 2018, Singapore’s Parliament installed a DPA framework by amending its Criminal Procedure Code. And debate is underway in the Australian parliament on a bill that would introduce a DPA regime for offenses committed by corporations.

The effect of DPAs in the fight against corruption, pro and con, has been previously debated on this blog. One critical design component of any DPA regime is the degree of judicial involvement. On one end of the spectrum is the United States, where courts merely serve as repositories for agreements at the end of negotiations and have no role in weighing the terms of any deal. On the other end of the spectrum is the United Kingdom, where a judge must agree that negotiations are “in the interests of justice” while they are underway, and a judge must declare that the final terms of any DPA are “fair, reasonable, and proportionate.” British courts also play an ongoing supervisory role post-approval, with the ability to approve amendments to settlement terms, terminate agreements upon a determined breach, and close the prosecution once the term of the DPA expires.

Under Canada’s proposed system of Remediation Agreements, each agreement would require final approval from a judge, who would certify that 1) the agreement is “in the public interest” and 2) the “terms of the agreement are fair, reasonable and proportionate.” While the test used by Canadian judges appears to parallel the U.K. model—including using some identical language—the up-or-down judicial approval would occur only once negotiations have been concluded. This stands in contrast to the U.K. model mandating direct judicial involvement over the course of the negotiation process.

The decision by the Canadian government to chart a middle course on judicial oversight is all the more notable given that an initial report released by the Canadian government following a several-month public consultation regarding the introduction of DPAs appeared to endorse the U.K. approach, noting that the majority of commenters who submitted views “favoured the U.K. model, which provides for strong judicial oversight throughout the DPA process.” Moreover, commentators have generally praised the U.K. model’s greater role for judicial oversight of settlements, especially judicial scrutiny of the parties charged (or not) in any given case, the evidence (or lack thereof), and the “fairness” (or not) of any proposed deal.

Despite these positions, one should not reflexively view the judicial oversight regime outlined in Canada’s latest report as a half-measure. Perhaps the U.K. model would be better for Canada, or for many of the other countries considering the adoption or reform of the DPA mechanism. But the superiority of the U.K. approach can’t be assumed, as more judicial involvement is not categorically better. Rather than a one-size-fits-all approach favoring heightened judicial oversight, there are several factors that countries might consider when deciding on the appropriate form and degree of judicial involvement in DPA regimes: Continue reading →

State-Level Anticorruption Commissions: What the U.S. Can Learn from Australia’s Model

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Australia does not currently have a dedicated national-level anticorruption agency (ACA), though the question of whether to create one has been on the table since 2014 (see here, here, and here). Yet Australia has plenty of experience with ACAs—at the state level. Australia’s first, and still most prominent, state-level ACA was the Independent Commission Against Corruption (ICAC) in New South Wales (the state including financial capital Sydney), which will mark its thirtieth anniversary next year. The ICAC, led by an independent commissioner, has independent investigatory powers over almost all state-level government officials and is charged with both exposing public sector corruption and educating the public about corruption. Queensland and Western Australia followed suit with their Corruption and Crime Commissions, established in their current forms in 2001 and 2003 respectively. The states of Victoria, South Australia, and tiny Tasmania all instituted independent agencies in recent years as well. Even the 250,000-strong Northern Territory resolved to start its own ACA after several high-profile scandals, and the Australian Capital Territory (the Canberra-sized equivalent of Washington, DC) has discussed creating its own anticorruption body. The permeation of Australia with state-level agencies is essentially complete.

Thus, in true laboratories-of-democracy fashion, Australian states have tried, solidified, and publicized the model of creating an independent investigatory group focused on the issue of corruption. Could U.S. states do the same? Easily. Should they? Yes, for at least three reasons:

Continue reading →

London Anticorruption Summit–Country Commitment Scorecard, Part 1

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Well, between the ICIJ release of the searchable Panama Papers/Offshore Leaks database, the impeachment of President Rousseff in Brazil, and the London Anticorruption Summit, last week was quite a busy week in the world of anticorruption. There’s far too much to write about, and I’ve barely had time to process it all, but let me try to start off by focusing a bit more on the London Summit. I know a lot of our readers have been following it closely (and many participated), but quickly: The Summit was an initiative by David Cameron’s government, which brought together leaders and senior government representatives from over 40 countries to discuss how to move forward in the fight against global corruption. Some had very high hopes for the Summit, others dismissed it as a feel-good political symbolism, and others were somewhere in between.

Prime Minister Cameron stirred things up a bit right before the Summit started by referring to two of the countries in attendance – Afghanistan and Nigeria – as “fantastically corrupt,” but the kerfuffle surrounding that alleged gaffe has already received more than its fair share of media attention, so I won’t say more about it here, except that it calls to mind the American political commentator Michael Kinsley’s old chestnut about how the definition of a “gaffe” is when a politician accidentally tells the truth.) I’m going to instead focus on the main documents coming out of the Summit: The joint Communique issued by the Summit participants, and the individual country statements. There’s already been a lot of early reaction to the Communique—some fairly upbeat, some quite critical (see, for example, here, here, here, and here). A lot of the Communique employs fairly general language, and a lot of it focuses on things like strengthening enforcement of existing laws, improving international cooperation and information exchange, supporting existing institutions and conventions, and exploring the creation of new mechanisms. All that is fine, and some of it might actually turn out to be consequential, but to my mind the most interesting parts of the Communique are those that explicitly announce that intention of the participating governments to take pro-transparency measures in four specific areas:

  1. Gathering more information on the true beneficial owners of companies (and possibly other legal entities, like trusts), perhaps through a central public registry—which might be available only to law enforcement, or which might be made available to the general public (see Communique paragraph 4).
  2. Increasing transparency in public contracting, including making public procurement open by default, and providing usable and timely open data on public contracting activities (see Communique paragraph 9). (There’s actually a bit of an ambiguity here. When the Communique calls for public procurement to be “open by default,” it could be referring to greater transparency, or it could be calling for the use of open bidding processes to increase competition. Given the surrounding context, it appears that the former meaning was intended. The thrust of the recommendation seems to be increasing procurement transparency rather than increasing procurement competition.)
  3. Increasing budget transparency through the strengthening of genuinely independent supreme audit institutions, and the publication of these institutions’ findings (see Communique paragraph 10).
  4. Strengthening protections for whistleblowers and doing more to ensure that credible whistleblower reports prompt follow-up action from law enforcement (see Communique paragraph 13).

Again, that’s far from all that’s included in the Communique. But these four action areas struck me as (a) consequential, and (b) among the parts of the Communique that called for relatively concrete new substantive action at the domestic level. So, I thought it might be a useful (if somewhat tedious) exercise to go through each of the 41 country statements to see what each of the Summit participants had to say in each of these four areas. This is certainly not a complete “report card,” despite the title of this post, but perhaps it might be a helpful start for others out there who are interested in doing an assessment of the extent of actual country commitments on some of the main action items laid out in the Communique. So, here goes: a country-by-country, topic-by-topic, quick-and-dirty summary of what the Summit participants declared or promised with respect to each of these issues. (Because this is so long, I’m going to break the post into two parts. Today I’ll give the info for Afghanistan–Malta, and Thursday’s post will give the info for Mexico–United States). Continue reading →

Guest Post: “Global Cities–Joining Forces Against Corruption” Conference Recap, Part 1

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Jennifer Rodgers and Gabriel Kuris, the Executive Director and Deputy Director, respectively, of the Columbia University Center for the Advancement of Public Integrity (CAPI), have provided a two-part series of guest posts summarizing CAPI’s recent conference on “Global Cities–Joining Forces Against Corruption”, which we previously advertised on GAB. This is the first of the two posts.

CAPI’s “Global Cities” conference brought together delegations from 14 cities across six continents to discuss the corruption challenges in urban settings and new ideas for reform. Videos of each speech and panel, presentation slideshows, and other conference materials are now available online. The discussion will continue on an online forum launching soon on the CAPI website, and those interested in participating in these online exchanges should feel welcome to register now. CAPI plans to periodically reprise the conference, with a shifting roster of cities, to build a coalition of cities on the vanguard of fighting urban corruption.

The conference commenced with keynotes addresses by the mayors of two historic cities working to boost transparency and public trust: Miguel Ángel Mancera of Mexico City and Giorgos Kaminis of Athens. Both mayors emphasized the empowerment of everyday citizens through new oversight mechanisms, cooperation with civil society, and emerging technologies—like Athens’s online budget monitoring tool. Both cities are also working to streamline legal regulations and public procedures, whether through Athens’s one-stop shops for citizen services or Mexico City’s legal reforms in public procurement and property registration.

The first panel, “The Shifting Landscape of Urban Corruption: New Challenges, New Approaches” examined the corruption issues cities currently face worldwide. Leaders of Western Australia’s Corruption and Crime Commission discussed their development of a “Misconduct Intelligence Assessment” tool to track the dynamic corruption risks of the modern boomtown of Perth. Chicago’s Inspector General spoke about emerging challenges such as the increasing prominence of quasi-governmental entities, the changing role of money in politics, and the grey areas of “legalized corruption.” Leaders from the anticorruption agencies of Catalonia and Kenya discussed the intersection between corruption, civic ethics, and public procurement.

The second panel, “Comeback Cities: Restoring Integrity after a Corruption Scandal”, covered the efforts of Toronto, Philadelphia, and New Orleans to break out of ceaseless cycles of scandal and clean-up to build resilient structures of oversight and civic cultures of lawfulness. Toronto’s Accountability Framework pioneered a new integrity model in a city reeling from a procurement scandal. Philadelphia’s Inspector General helped the city recover from high-level corruption so rampant the FBI wire-tapped the mayor’s office. Federal oversight is helping New Orleans to finally overhaul its notoriously corrupt police department. At the end of the panel, Frank Anechiarico of Hamilton College brought in comparative experience from Amsterdam, Hong Kong, and New York City from the volume he co-edited about city-level anti-corruption structures, Local Integrity Systems.

The third panel, “Bridging Political Boundaries: Partnering with National and State Government”, provoked some of the conference’s most engaged discussions. An aide to the mayor of Lviv, Ukraine, discussed how local activists whose reforms were frustrated by corruption at the national level helped upend national politics. Delegates from Nairobi and Chicago discussed collaboration between federal, regional, and local levels of law enforcement. Finally, GAB Senior Contributor Rick Messick brought an international-level perspective, emphasizing the counter-intuitive benefits of competition, rather than cooperation, among overlapping levels of government.

In our next post, we will summaraize the conference’s other speeches and panels, on topics ranging from the fight against corruption in post-Maidan Ukraine to the risks posed by cybercrime rings when cities host major events.