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Please insert this Update behind the Updates tab in your copy of the JWS Foreign Bribery Guide.
The key issues that are covered in this Update include:
On 23 April 2018, the last gasp of the decade long battle by the Australian Securities & Investments Commission (ASIC) against various Australian Wheat Board (AWB) executives arising out of the ill-fated UN Oil-For-Food humanitarian program (OFF Program) passed into history with barely a ripple. The Victorian Court of Appeal dismissed ASIC’s appeal against the Trial Judge’s rulings that threw out ASIC’s case against Peter Geary for alleged breach of his statutory duties. The appeal judgment is at http://classic.austlii.edu.au/au/cases/vic/VSCA/2018/103.html.
The Court of Appeal, while not condoning the conduct of senior AWB officials, including the former Chairman, Managing Director and Chief Financial Officer (each found liable for various offences), who were “proved to have been at the centre of this entire sorry affair”, found that ASIC’s case against Geary failed because, in substance, ASIC could not displace the genuine and reasonable belief Geary had that the trucking and inland service fees (paid to the Iraq Government through inflated prices via intermediaries) were not approved by the United Nations or otherwise were genuine fees. While Geary might have been one of a long list of recipients to numerous emails concerning these fees, they were not specifically addressed to him and ASIC failed to identify how Geary, or a reasonable person in Geary’s position, would have acted upon such emails.
Thus, from June 1999, when the first wheat contracts contained an “inland trucking fee”, later enhanced in 2000 with the “10% after sales service fee”, the story unfolded thus:
At the end, it is worth recalling the words of Commissioner Cole when he pondered upon why AWB and its executives embarked on a course of conduct that would, in 18 years, result in the demise of the company (AWB lost its single desk wheat export monopoly powers and was ultimately acquired by a foreign competitor) and a stain upon all those involved and indeed, Australia’s international trading reputation. The Commissioner said this (at page xii, Introduction, Vol 1, Cole Royal Commission Report, 2006):
The conduct of AWB and its officers was due to a failure in corporate culture. The question posed within AWB was:
What must be done to maintain sales to Iraq?
The answer given was:
Do whatever is necessary to retain the trade. Pay the money required by Iraq. It would cost AWB nothing because the extra costs will be added into the wheat price and recovered from the UN escrow account [out of which approved humanitarian payments were made]. But hide the making of those payments for they are in breach of sanctions.
No one asked, ‘what is the right thing to do?’ Necessarily, one asks ‘Why?’
The answer is a closed culture of superiority and impregnability, of dominance and self-importance. Legislation cannot destroy such a culture or create a satisfactory one. That is the task of boards and the management of companies. The starting point is an ethical base. At AWB the Board and management failed to create, instil or maintain a culture of ethical dealing.
One wonders over the years, with the cultural and ethical problems apparently rampant throughout the Australian banking and financial services sector, whether Australian companies learn from the past. One can but hope.
On 20 April 2018, the Senate Economics Legislation Committee published its Report on the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 (the Corporate Crime Bill).
The Report is at https://www.aph.gov.au/sitecore/content/Home/Parliamentary_Business/Committees/Senate/Legal_and_Constitutional_Affairs/CombattingCrime/Report.
The proposed amendments supported by the Committee covered the following:
The Committee recommended the Whistleblower Protections Bill be passed. Given the relatively minor changes proposed by the Committee, it is hoped that once the publication and consultation process for the draft Ministerial Guidance and DPA Code of Practice has occurred, the Corporate Crime Bill will be reintroduced to Parliament and enacted.
On 22 March 2018, the Senate Economics Legislation Committee published its Report on the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 (the Whistleblower Protections Bill). The Report is at https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/WhistleblowerBill2017/Report.
The Committee recommended the Whistleblower Protections Bill be passed.
The Committee accepted that while the Whistleblowers Protections Bill did not include all of the recommendations made by the Joint Parliamentary Committee Report (covered in the December 2017 Update and at https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial_Services/WhistleblowerProtections), it was a move in the right direction as a valuable contribution to reform even though some submissions regarded the current Bill as inadequate and others said the Bill should be withdrawn and redrafted to “get it right”. This view has been reinforced by concerns expressed by Prof AJ Brown, the undisputed leader in integrity and whistleblower protections in Australia. He has been reported in The Australian (on 13 April 2018) as saying, due to the drafting flaws he sees in the Bill, that “the only logical conclusion you could reach is that it would be better not to have the bill go forward unless these things are fixed”.
The Committee did recommend that the Bill include an explicit requirement for review. This is encouraging as we need to assess how these reforms work in practice. In addition, while the Bill did not address the question of whistleblower rewards or an independent authority to represent and act on behalf of whistleblowers, it is hoped that these topics remain on the radar to be reviewed over time.
It is critical that all listed and large proprietary companies review their existing whistleblower policies and how they interact with other policies and any external hotline. While the laws are likely to commence from 1 July 2018, all listed and large proprietary companies must have compliant whistleblower policies in place by 1 January 2019. Some important things to consider are the following1:
In late March 2018, the Senate Economics Reference Committee published its much-anticipated Foreign Bribery Report. This Report has been over three years in the making and has covered two parliaments due to a general election intervening and causing the initial review to lapse with a new referral by the current parliament. The Report is at https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Foreignbribery45th/Report.
The Senate Committee undertook a substantial and wide ranging review of the state of Australia’s foreign bribery laws, their investigation and enforcement and the reasons for the popular perception, and indeed criticism, of Australia’s position that it appears to have laws that, while complying with the OECD Anti-Bribery Convention and its obligations as a signatory, appear otherwise untested and little used. Overall, the Committee considered that “more needs to be done to enhance the effectiveness of Australia’s implementation” of the OECD Convention and the United Nations Convention against Corruption.
The Senate Committee made 22 recommendations. While the substance of the recommendations were not always accepted by Government members of the Committee and indeed, the reservations in respect of certain recommendations are set out by the Government members in an appendix, in broad terms the Senate Committee recommendations repeat many of the substantive submissions made to it; namely, that there needed to be substantial and significant reform to Australia’s foreign bribery laws and practices in relation to successfully and proactively targeting foreign bribery and corruption.
The key recommendations included the following:
The committee believes Australia’s position on this issue is increasingly isolated, and the committee is concerned about the inconsistencies between international standards and Australia’s domestic bribery laws and the domestic laws of comparative countries (of which some are Australia’s major trading partners)…the committee is deeply concerned and disappointed about the lack of legislative action that the government has taken in this area and wishes to recognise the initiatives of Australian businesses who have taken matters into their own hands by implementing internal policies prohibiting facilitation payments…a facilitation payment is not materially different from a small bribe and therefore should not be recognised as a defence to a foreign bribery offence in Australia…abolition of the facilitation payment defence should proceed with a transition period to allow business time to implement the changes to their internal processes and to inculcate a culture of compliance amongst its employees.
While the Senate Committee Report was not unanimous, there are a number of important messages to take out of this review. The review is the culmination of significant work undertaken by the Senate over a 2-3 year period. Almost all submissions made to the enquiry supported substantial reform. The current Australian Government is in the process of enacting legislation, currently the subject of review by Parliamentary committees, which focuses on, in particular, foreign bribery offences, a Commonwealth deferred prosecution agreement scheme and private sector whistleblower protection reforms.
However, as we have so often seen in Australia, while these reports and recommendations for substantial change have been made in the past, they have rarely been followed through. It is encouraging that the current Australian Government has substantial bills before the Australian parliament to address a number of these issues. While they may not be perfect, and there is room to criticise the approach by the Government and indeed in some areas where it seems to ignore calls for reform and change, it is a positive start. It appears the Australian approach is for small steps to be made over a long period of time. That in itself has some merit, but it does create a public perception that, overall, the question of foreign bribery, complex commercial crime and opaque offshore business opportunities are simply too hard and too complicated and should be left for investigators and prosecutors to do their best with the limited resources that are provided to them without, from a philosophical perspective, imposing more regulations on over-regulated business.
Australia is currently experiencing a royal commission examining past misconduct practices in the Australian banking and financial services sector. Chaired by a retired High Court Judge, Kenneth Hayne AC, QC, the Commission is dissecting the inner workings of and the apparently ethically moribund commercial practices of banks, finance companies, life insurers and superannuation businesses. The Terms of Reference set out in the Letters Patent issued by the Governor General to the Commissioner are at https://financialservices.royalcommission.gov.au/Pages/Terms-of-reference.aspx. Whether it is charging for services never provided, billing deceased customers for ongoing services for years after death or just plain, old fashioned misleading or lying to the regulator, no one, even the regulators, come out of the sorry saga with any credit.
What emerges out of the demolished corporate reputations of institutions and leading executives exposed by the Royal Commission is an almost startling proposition – that an exclusive, and many would now say, myopic dedication to “shareholder return” needs to be carefully examined. Simon Longstaff, Executive Director of The Ethics Centre in Sydney, put his thoughts thus (in The Australian Financial Review, 25 April 2018, at http://www.afr.com/opinion/columnists/royal-commissions-are-the-result-of-shareholders-ruling-the-roost-20180425-h0z7g7):
For too long, company directors have claimed that their principal (in some opinions, sole) responsibility has been to increase shareholder wealth. The claim was never true – at least not in Australia. However, this false belief has gained currency because it offers a simple focus – making life relatively easy for those charged with the governance of corporations.
The trouble with the theory of shareholder primacy is that it drives a company and its employees to subordinate all other considerations to the overarching aim of maximising shareholder returns. So, treating customers fairly is not something to be done out of respect for their interests. Honesty and integrity are not held to be of intrinsic value. Instead, doing what is right is reduced to being a mere tactic – valued only as a means for increasing shareholder value.
Decent company directors, as decent people, would (and should) be appalled at the suggestion that employees, customers, suppliers and members of wider society are mere 'tools'. Yet, under the doctrine of shareholder primacy all relationships are 'instrumental' – and 'stakeholders' are reduced to the status of being mere means to be exploited for the ultimate benefit of shareholders.
While the Australian Government long resisted to the end the holding of such an inquiry, it has been moved with alacrity rarely seen in politics to implement a suite of reforms (covered in past Updates) to enhance the penalties available to the Australian Securities and Investments Commission (ASIC) to target corporate misconduct.
On 20 April 2018, the Government announced a range of reforms, the most important features of which are set out below. While these reforms are to be commended, they will be, at least in the eyes of the public, of little value unless and until ASIC takes up the challenge (popularly believed to have been misplaced) to target corporate misconduct with meaningful, public sanctions and hold individuals to account. This can often be time-consuming, costly and unpredictable, but without any real, perceived risk of a regulator taking strong, public action and relying instead on confidential self-regulated resolutions and negotiated “undertakings”, financially driven misconduct will continue apace in spite of the public scrutiny now increasingly commonplace across the public and social media.
The reforms are as follows:
1 Comments gratefully acknowledged from Yoness Blackmore, Associate in the JWS Employment Group.
On 27 March 27, 2018, Canada announced that it has introduced amendments to its Integrity Regime to establish a Remediation Agreement Regime to, in the words of the Government, “help to advance compliance measures, hold eligible organisations accountable for misconduct, while protecting innocent parties such as employees and shareholders from the negative consequences of a criminal conviction of the organisation." The Regime adds incentives for companies to self-disclose to authorities and enhance their compliance programs and any resolution will be subject to judicial approval and oversight, as well as to prosecutorial discretion.
The structure of the Regime will be reflected in an updated Ineligibility and Suspension Policy that will be released by 15 November 2018, and will come into effect on 1 January 2019. The Regime is expected to come into force 90 days after the Budget Implementation Act receives Royal Assent.
The Chinese Government has been in a constant anti-corruption drive for some years, perhaps putting many countries to shame. As from 1 January 2018, substantial amendments came into force under the Anti-Unfair Competition Law (the AUC Law). The AUC Law seeks to maintain fair market competition in China and covers civil bribery offences. It needs to be considered with the Criminal Law, which prohibits active and passive bribery in the public and private sectors.
The most significant changes that Australian business operating in China or dealing with Chinese suppliers, distributors or customers need to appreciate are that the AUC Law:
The Chinese Government has also focused on bribes paid through third parties. There is now a presumption of liability on a company for the bribery conducted by its employees unless the company can demonstrate the employee’s conduct was unrelated to seeking a competitive advantage. There has been some suggestion that if a company can establish it has reasonable, or adequate, measures in place, it may displace the vicarious liability it otherwise will have imposed on it.
In early 2018, the French anti-corruption agency published its Guidelines (in English) for the public and private sector to prevent and detect bribery and corruption. An English version of the Guidelines is at https://www.economie.gouv.fr/files/files/directions_services/afa/French_Anticorruption_Agency_Guidelines.pdf.
It is a comprehensive set of guidelines picking up on existing publications by other Governments. The Guidelines are published pursuant to the Sapin II Law. It is to apply to all companies, including subsidiaries of foreign groups, if any entity is established in the French Republic and regardless of where the entities do business. However, the extent of the Guidelines are more prescriptive than guidelines published in the US and the UK with some precise recommendations (for example, the Guidelines list ten separate recommended requirements for a company’s internal whistleblowing systems).
While it is still unclear the extent to which the French authorities will adopt a prescriptive view, it is hoped they will look favourably on global companies that take a proactive approach to managing bribery and corruption risks consistent with the prevailing US and UK benchmarks rather than requiring companies to reinvent their internal policies in France. Companies should however, review their existing policies and procedures where any of their business operations have a French connection to ensure where possible that standards recommended in the Guidelines exist in some form in their internal policies and procedures.
During February 2018, Transparency International (TI) published is 2017 Corruption Perception Index (the colourful map we all so enjoy reading, using and judging others but less so ourselves).
For the Asia Pacific region, the report card was a little depressing. TI summarised its conclusions this way:
This year’s results of the Corruption Perceptions Index continue to show a high variance in public sector corruption across the Asia Pacific region. From top scorers like New Zealand and Singapore, to some of the worst scorers like Cambodia, North Korea and Afghanistan, more than half of the countries in the Asia Pacific score less than 50 on the index. In fact, on average, the region scores just 44. With a scale of 0 to 100, where 100 means very clean and 0 reflects a deep-rooted, systemic corruption problem, the Asia Pacific countries, on average, are failing.
For Australia, while it remains at No 13, and seems to believe in its anti-corruption credentials, the overall score has dropped. In 2014, Australia was ranked No 11 with a score of 80. In 2017, the ranking is 13 with a score of 77. While credit must be given to the Australian Government for the current legislative reforms, nothing is likely to seriously shift the perception about Australia’s weak anti-corruption standing until the public see public prosecutions and sentences being imposed by court for corporate misconduct and those in power or exercising influence (in business or elsewhere) being held accountable for corporate misconduct.
During April 2018, the annual Global Fraud Survey 2018 was published by Ernst & Young. The Survey is at https://fraudsurveys.ey.com/ey-global-fraud-survey-2018/. There are a number of findings that are cause for reflection in relation to fraud and corruption:
In terms of the prevalence of fraud and corruption, the Survey results from Australia and New Zealand, Brazil, Saudi Arabia and the UK show increases in the percentage of respondents who believe corruption to be widespread. In these countries it is notable that there has been significant enforcement in 2017. This should be considered alongside the perception of the extent to which employees see compliance policies and zero tolerance standards being enforced – the Survey found that while management had often set clear intent regarding penalising non-ethical conduct with more than three in four respondents stating that there are clear penalties for breaking their policies, only 57% are aware of people actually being penalised.
The message that comes from this Survey as indeed with many others, is that the standards to engage in ethical and sustainable business practices remain a fundamental challenge for many businesses across different sectors. It often requires hard business decisions to say “no” to a transaction or commercial deal that, at one level might be attractive in the short term, but in the longer term, might give rise to serious reputational and legal liability issues for the company and individuals concerned.
During late March 2018, the Malaysian Parliament started the process of amending the Anti-Corruption Commission Act 2009 by the Malaysian Anti-Corruption Commission (Amendment) Bill 2018.
The most important change was to introduce a form of commercial corruption offence similar to section 7 in the UK Bribery Act 2010.
A commercial organisation will commit an offence if:
A person will be deemed to be associated with a commercial organisation if he or she is a director, a partner, an employee or a person who performs services for or on behalf of the commercial organisation, determined by all the circumstances and not simply the formal contractual relationship.
The penalty on conviction is a fine not less than 10 times the sum or value of the gratification or RM1 million, whichever is higher, or imprisonment for a term not exceeding 20 years or both.
The only defence available to the commercial organisation is that it had in place “adequate procedures designed to prevent persons associated with the commercial organisation from undertaking such conduct”.
In addition, the amendments focus on individual liability. A person who is the director, controller, officer, partner or is concerned in the management of the commercial organisation’s affairs must prove that the offence was committed without his or her consent and that he or she exercised due diligence to prevent the conduct occurring having regard to the “nature of his function in that capacity and to the circumstances”.
In December 2017, the OECD published a Discussion Draft, Mandatory Disclosure Rules for Addressing CRS Avoidance Arrangements and Offshore Structures (the OECD Disclosure Draft). The publication of the OECD Disclosure Draft followed on from the European Parliament publishing, in late 2017, its Recommendation following the inquiry on money laundering, tax avoidance and tax evasion (at European Parliament P8_TA-PROV (2017) 0491). The European Commission took a particularly strong position against those who “violate against the spirit of the law”. In relation to lawyers, the Commission expressed the view that lawyers should be held legally co-responsible when “designing tax evasion and aggressive tax plans punishable by law; and money laundering schemes…when they take part in fraud, they must systematically be liable for both penal sanctions and disciplinary measures”.
The OECD Disclosure Draft states that information published in the Panama and Paradise Papers “demonstrates that certain professional advisers continue to design, market or assist in the implementation of offshore structure and arrangements than can be used by non-compliant taxpayers to circumvent the correct reporting of relevant information to the tax administration of their jurisdiction of residence.”
A number of features emerge from the OECD Disclosure Draft, as set out below.
Lawyers invariably play a role in offshore structures designed and/or created by or on behalf of taxpayers in order that the taxpayer can structure its tax affairs in an appropriate (perhaps aggressive) manner, yet consistent with its legal obligations and the prevailing laws applicable to the taxpayer. What that role is or may be for a lawyer in fact is not always clear. If however, that structure involves tax evasion, then the taxpayer should be held accountable. Any reporting or disclosure obligations should however, be primarily imposed on the relevant taxpayer. Any reporting obligations on a lawyer should continue to be subject to pre-existing professional and legal responsibilities, including domestic rules of secrecy or confidence and legal professional privilege. This point was made in a number of submissions to the OCED on its disclosure model rules.
There is generally no offence in any country for “violating the spirit of the law” (despite what the European Parliament may seek), no doubt due to the inherent difficulty of defining the necessary “spirit” to be violated. A lawyer’s responsibility, in many countries, involves making certain inquiries and to, in general terms, know the client’s business and the persons who might be the ultimate beneficiary of a transaction. If the lawyer receives unsatisfactory instructions from a client or information which is incomplete, then in most jurisdictions the lawyer should cease to act if he or she believes the client may be seeking to act illegally. If the lawyer transgresses these responsibilities, he or she can be sanctioned. The right of any client to receive frank legal advice without fear of its disclosure and the duty of a lawyer to keep his client’s information confidential is a corner-stone of the role of the legal profession, the rule of law and the administration of justice.
Yet these long-standing rules and obligations are increasingly under attack from various governments and have triggered serious reviews of the responsibilities of lawyers and the extent to which the duty of client-lawyer secrecy and confidentiality should be pierced. The legal profession needs to be aware of these developments and to promote integrity and ethical conduct by all lawyers. If the profession does not recognise this as a serious issue, then governments are increasingly likely to consider enhanced reporting or disclosure obligations on lawyers in a manner that cuts through the secrecy and confidential relationship traditionally enjoyed between a lawyer and a client, to the potential detriment of the rule of law and the due and fair administration of justice.
On 19 March 2018, the Singapore Parliament passed the Criminal Justice Reform Bill (the Criminal Justice Bill), which amongst other reforms, granted a power to the Singapore prosecutor to negotiate and enter into a DPA with corporate offenders to resolve misconduct claims.
Singapore has traditionally focused on the conduct by and the prosecution of individuals even though the Prevention of Corruption Act (by the Interpretation Act) allowed for corruption offences to be prosecuted against a company, which rarely occurred. Rather, there developed a culture of the issuing of a “stern warning” or a “conditional warning” which on at least one High Court judgment, amounted to “no more than an expression of the relevant authority that the recipient has committed an offence… it does not and cannot amount to a legally binding pronouncement of guilt or finding of fact.’
Times move on and the Singapore Government has moved with the alacrity so often missing in Australia. The Singapore DPA regime introduced by the Criminal Justice Bill is broadly similar to the UK approach in that:
The one significant difference is that unlike the UK, and what is proposed in Australia, the Singapore Prosecutor is not required to publish any prosecutorial guidelines. The Singapore Attorney General’s Chambers expressed its view, against prosecutorial guidelines, in this way (at https://www.agc.gov.sg/legal-processes/publication-of-prosecution-guidelines):
In our view, in current circumstances, the call for the publication of guidelines is misguided: we remain to be convinced that publication will bring benefit. We will, as we have on other issues, review our position in the light of new facts when they arise. We will act not by way of an impressionistic reaction based on incomplete information, but with full and deliberate consideration of all the relevant factors. But we do understand that there may be a desire to understand in some detail our decisions in certain cases. As we have noted before, we may issue statements to explain our position in a specific case, and to address misconceptions that may arise in such a case about the law and the legal process.
This development, in one of the two leading financial centres in the Asia Pacific region, make it that much more important, for international consistency, that the Australian reforms, mooted, reviewed and consulted on for over 2 years, are enacted without further delay. Companies undertaking business in the region will then have a much more even playing field in terms of the options to report corporate misconduct than currently exists.
A number of recent cases have considered the application of litigation privilege over documents created during an internal investigation. These decisions have followed the judgment in SFO v Eurasian Natural Resources Corporation Ltd  EWHC 1017 (QB) which is currently the subject of an appeal.
The ENRC case concerned interview notes prepared by outside counsel in an internal investigation of fraud and corruption allegations in two foreign countries. The investigation was conducted in parallel with the company's communications with the Serious Fraud Office (SFO) regarding self-reporting past misconduct. The court regarded the imminence of litigation between the ENRC and SFO was closer to a "mere possibility" than a "real likelihood," falling short of the "reasonably in contemplation" requirement of the litigation privilege under the prevailing test in the UK in the House of Lords decision in Three Rivers DC v Bank of England (No 6)  UKHL 48,  1 AC 610. For litigation privilege to apply to a communication, the following conditions must be satisfied:
The Court held that a criminal investigation by the SFO did not constitute adversarial litigation for the purpose of litigation privilege. The Court found that the dominant purpose of the interviews conducted by external counsel was to avoid a criminal investigation (and, therefore, any subsequent litigation), rather than to defend a criminal prosecution. The interview memoranda were not subject to litigation privilege and had to be produced to the SFO.
In Bilta (UK) Ltd v Royal Bank of Scotland PLC  EWHC 3535, the internal interviews occurred after the UK tax regulator wrote to the Bank setting out the legal basis for reclaiming more than £86 million in tax refunds. The court found that the letter, sent after a 2 year investigation, was a "watershed moment at which HMRC had decided to make an assessment”. The court accepted that as the bank was "gearing up to defend" a tax claim, litigation was at least the dominant, if not the sole, purpose of its activities at that time. The interview documents were therefore subject to proper claims for privilege.
In January 2018, in Health and Safety Executive, R. v Jukes  EWCA176 the Court of Appeal, Criminal Division held that an employee's witness statement prepared in the course of an internal corporate investigation was not privileged. The Court ruled that an earlier statement made by an employee to the Health & Safely Executive (the regulator) was not privileged because it preceded any investigations or proceedings. The court considered than an investigation “is not adversarial litigation" and applied the Three Rivers and ENRC cases in concluding that there was no reasonable contemplation of criminal prosecution when the employee made his statement. The Court held that litigation privilege did not apply.
In April 2018, in R (on the Application of AL) v Serious Fraud Office  EWHC 856, the UK High Court made findings critical of the SFO in connection with its failure (as prosecutor) to press for access to interview notes prepared for and held by external counsel (for a company) in order that such notes could be provided to an individual defendant facing criminal charges of conspiracy to corrupt and conspiracy to bribe. The prosecution was against one of the executives of XYZ Pty Ltd, which was granted a DPA by the High Court in July 2016.
The Court, while dismissing the claim on the basis that the Crown Court (not the High Court) was the appropriate forum for judicial review of the conduct of the SFO, went on to examine in some detail the conduct of the SFO, holding that it had failed to address relevant considerations, had taken into account irrelevant matters, had provided inconsistent and inadequate reasons for its decisions and applied an incorrect approach to the law.
The Court made a number of findings relevant to privilege issues.
It is clear that following this case, the SFO is likely to take a much more rigorous view on requiring companies to produce records from internal investigations in circumstances where, under UK law, the Three Rivers test of privilege cannot be satisfied.
In Australia, for companies and lawyers with our privilege principles well-settled by the High Court of Australia (see Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission  HCA 49 at -; 213 CLR 543) each case will be determined on its facts. There are various authorities that have considered when litigation is in the reasonable contemplation of a party as a “real prospect” (see Mitsubishi Electric Pty Ltd v Vic WorkCover Authority  VSCA 59 at  per Batt JA; Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 2)  FCA 444 at  to  per Heerey J; ACCC v Prysmian Cavi e Sistemi Energia SLR (No 2) FCA 44).
Nevertheless, these cases make it clear that if careful steps are not taken when interviews are conducted, in any internal investigation, documents produced as a result of the investigation may or may not be properly privileged. Much will depend upon at what time an internal investigation occurs, what a company knew or thought likely from the conduct it suspected might have occurred and the role that ongoing cooperation is likely to play under DPAs in the UK (and potentially elsewhere). No doubt the AFP and the CDPP will be following these developments closely.
On 21 February 2018, the US Supreme Court handed down a judgment which made it clear that a whistleblower must report concerns or make a disclosure to the US Securities & Exchange Commission (SEC) in order to be protected by the statutory anti-retaliation provisions in the Dodd-Frank Wall St Reform and Consumer Protection Act 2010.
In Digital Realty Trust, Inc v Somers, 538 U.S.__(2018) (slip op at 9), the Court made it clear that the statutory framework was motivated by a desire to ensure that complainants report securities law violations to the SEC. Whether this means the SEC will be inundated with reports remains to be seen. What is likely however, is that while internal reporting might still occur and be preferred by companies, well-advised individuals will need to think, in the US, of a prompt report to the SEC at the same time as any internal report to ensure they are properly protected.
Australia – ASIC and Australian Wheat Board UN Oil-For-Food Cases
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