The laying of charges against two Reserve Bank of Australia subsidiaries and six of their former senior managers for alleged bribery of foreign officials represents a truly historic moment in Australian criminal law.
This is the first time Australia’s foreign bribery laws have been used since they were introduced 11 years ago, and signals that we may finally be serious about combating corruption in the global economy.
So far, the companies – Securency International and Note Printing Australia – and the former executives have been charged with using bribes to secure banknote-production contracts in Indonesia, Malaysia and Vietnam between 1999 and 2005.
The charges against the companies are based on allegations of wrongful conduct by the senior managers who represented the “mind and will” of those companies. If proven, this is a well-established basis upon which to impose criminal liability on the companies themselves.
The charges have been laid under Australian foreign bribery laws contained in the Commonwealth Criminal Code. Those laws criminalise the giving, or the offer to give, to a person a “benefit” that is not legitimately due to them for the purpose of securing a business advantage.
The laws apply to Australian companies and individuals in their business dealings abroad.
The Australian foreign bribery laws were introduced as part of Australia’s participation in the OECD Anti-Bribery Convention.
Until now, Australia hasn’t enforced its anti-bribery laws, but other OECD member states have. The United States, for example, has actively pursued prosecutions against its own nationals for foreign corrupt practices for many years.
Bribery in foreign business transactions is widespread and harmful. In submissions to the Joint Standing Committee on Treaties (JSCT), the World Bank estimated that bribes emanating from industrialised to developing countries amount to about US$80 billion per year. This is in the context of a total net flow of investment, trade and development assistance to developing countries of US$180 billion per year.
The JSCT notes that the harmful effects of bribery include reducing economic efficiency, distorting trade and investment by raising transaction costs, and potentially undermining the stability of government.
Corruption has also been linked to the exacerbation of poverty, environmental and resource mismanagement, and the misallocation of resources to projects that do not correspond to local needs.
A criticism of foreign bribery laws is that they create a competitive disadvantage to companies from those countries that enact them. This is seen as particularly true where the giving of bribes, or advantages, are commonplace in the foreign business environment the companies are attempting to operate in.
Putting aside the harmful effects of entrenched corruption to a society, there are a few responses that can be made to this kind of concern in the context of Australian regulation of foreign bribery.
First, the Australian laws allow a defence where a person can show that a foreign law positively allows or requires the giving of an advantage. This defence has been narrowed since the Australian Wheat Board scandal but it still provides scope to negate wrongdoing where a person is acting under pressure of local law.
Second, it must be remembered that Australia is not acting alone. The OECD, the UN and recently the G20 leaders all promote frameworks for multilateral action to combat bribery and other forms of corruption.
Such multilateralism serves to create a level playing field. In addition to OECD members, major international investors such as China, India and Russia have also taken steps to curb foreign bribery practices. The UN’s trade and development agency, UNCTAD, reports that OECD member states, together with China and Russia, continue to be the largest world’s source of foreign direct investments.
For this reason, coordinated action by these states is significant. With respect to the Australian charges, the Australian Federal Police has said that they coincided with related bribery charges against two individuals in Malaysia.
The Australian prosecutions are to be welcomed not only for their domestic benefits but also for their value to our international standing in the fight against bribery.
Domestically they offer an opportunity to test our foreign bribery laws in the courts. This should help to clarify the parameters of those laws to the benefit of business actors seeking to remain compliant.
Internationally, these prosecutions raise our standing as a country that takes seriously our responsibilities in the global effort against corruption.