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This update covers a range of important developments in Australia and overseas in the area of foreign bribery policy, investigations and regulation to August 2014. These developments will impact on Australian businesses working offshore and only reinforce the need to have and to implement an ongoing, pro-active anti-corruption compliance framework within your business.
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:
The Australian Government has a significant opportunity to proactively shape the anti- corruption agenda at the forthcoming meeting of G20 countries in Brisbane in November 2014. Senior members of the Attorney General's Department (AGD) are leading the way, seeking to develop initiatives for consideration by all G20 countries.
The Action Plan of 2012 is due to expire in 2014. The AGD is focusing on three key priorities:
There is a broadly held view that corporate or other structures are regularly used to engage in economic crime, including corruption, and transparency is required to identity the beneficial ownership of a particular entity. Together with targeting foreign bribery and corruption, the G20 governments regard these topics as of high priority. Each G20 country is to prepare a detailed self-assessment of their performance as against the OECD Convention criteria. Once principles are agreed upon, they will be made public by the G20 leaders.
In terms of any National Anti-Corruption Plan, promoted by the former Labor Government, the Plan appears to have died due to government inactivity and it is not clear whether it will be resuscitated. The public perception from the media is that the current government is not interested in any over-arching Commonwealth anti-corruption body. This is disappointing as history tells us that wherever governments make decisions worth significant money, the existence of corruption rears its head.
The role of protections for whistleblowers is not going away despite the apparent lack of focus within ASIC to manage whistleblower complaints.
On 26 June 2014, the Australian Senate Economics Reference Committee released its report into the ongoing review of ASIC. The Committee made a number of key recommendations:
It will be interesting to see how this last point develops. In the past, the Chairman of ASIC has publicly started he does not favour a scheme that rewards whistleblowers, believing that a reward will in some way corrupt the value of the evidence and undermine a whistleblower's credibility (although that has not been a problem in the US to date).
On 1 June 2014, amendments came into effect to the Anti-Money Laundering and Counter Terrorism Financing Rules Instrument 2007 (No 1). The Rules impose new "know your customer" and customer due diligence obligations on relevant institutions. The impact of these changes can be summarised as follows:
There is no transition period for these Rules so they apply now. However, AUSTRAC has indicated it is unlikely to enforce non-compliance until 1 January 2016. All ATML processes should be carefully reviewed and updated.
In July 2014, the Government introduced the National Security Legislation Amendment Bill (No 1). The Bill is designed to update the powers of the Australian Security & Intelligence Organisation (ASIO) to access data on computer networks.
The Bill proposes a raft of changes to the manner in which Australia's intelligence organisations can search and access computer-related data. The Bill contains an expanded definition of what constitutes a "computer" so that it now captures all or part of one or more computers, computer systems or computer networks. This allows access to a network or series of computers under, for example, one warrant to enhance surveillance processes.
Other changes focus on responding to technological advances, for example, allowing ASIO to deal with encrypted computers and to disrupt technology designed to alert a target of any covert monitoring, to grant immunity to ASIO officers involved in special operations and punishing any publication about any facts concerning a terrorism investigation.
For private companies, Schedule 4 to the Bill provides a mandate for "cooperation" between ASIO and the private sector, said to reflect existing practices used by ASIO in gathering covert evidence.
This focus on the ubiquitous "war on terror" and national security has resulted in the Australian Government mandating that telecommunication companies retain metadata information on calls and internet use and reversing the onus of proof if persons travel to certain countries or regions declared by the Government to be "terror-related war zones".
In addition, the Government is seeking to implement three far-reaching regimes:
As the website Crikey noted (at www.crikey.com 12 August 2014), the retention of metadata is not new and indeed, a legislative scheme for its retention already exists. Chapter 3 of the Telecommunications (Interception and Access) Act 1979 (Cth) allows agencies to ask communications companies to preserve data and/or retain it on an ongoing basis without having to store data of every Australian. An agency does not even need a warrant to issue a preservation notice. We are left to assume that there may be practical difficulties as to why this mechanism is not good enough for our laws enforcement agencies. Perhaps the answer lies in the fact that crimes may go undetected for months, or years and agencies want the opportunity to trawl through historic electronic data.
These regimes were implemented nearly 10 years ago with automatic sunset clauses. The Government now wants to have them made permanent. The laws have been heavily criticised and Australia's Independent Monitor of Anti-terrorism laws, Bret Walker SC has recommended they be repealed. The Government has not accepted this advice. It remains to be seen however, how far the laws survive through an unpredictable Senate.
Australia is a signatory to the OECD Anti-Bribery Convention. Article 5 of the Convention reads as follows:
Investigation and prosecution of the bribery of a foreign public official shall be subject to the applicable rules and principles of each Party. They shall not be influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons involved.
This principle is reflected in the Prosecution Guidelines issued by the Commonwealth Director of Public Prosecutions (CDPP) where, in Annexure A to the Guidelines dealing with prosecutions for foreign bribery, it is made clear a prosecutor must not be influenced by the factors identified in Article 5 of the OECD Convention. It should be noted that the CDPP has issued Guidelines for Suppression Orders (as at May 2013). These Guidelines acknowledge that while the fundamental principle of open justice should prevail, circumstances involving "national security", "ensuring a fair trial" and the "protection of vulnerable witnesses" may justify suppression orders.
In June 2014, unbeknown to anyone outside a select group of litigants, the Victorian Supreme Court issued what is known as a "super injunction" in Australia's prominent foreign bribery case. This injunction prevents the media from reporting anything about the case, the terms of the order or the identity of various persons named in the order. These orders have now been published on the internet by WikiLeaks and have been republished across a range of Asian media. These types of orders, secured in secrecy and imposing draconian contempt penalties for any contravention, sit very uncomfortably with Australia's international obligations and the principle of open justice. Indeed, when the internet is free to publish such orders and they are republished across the regional media, one can only conclude that such orders are ineffective and are driven by unknown and unstated political or economic or other reasons. The only party that can explain the need for such orders is the Commonwealth Government, yet it remains conveniently silent, no doubt relying on that well-worn phrase "you may think that but I could not possibly comment".
The topics over the last few months in the Australian media have focused on the following:
The New Zealand Government has published the Organised Crime and Anti-Corruption Bill in Parliament to update its economic crime laws, to allow for a greater degree of international agency collaboration and to reflect the country's obligations under the OECD and United Nations Conventions.
The principal features of the Bill, in so far as anti-corruption laws are concerned, include the following:
These are important changes and while the maintenance of facilitation payments is still regrettable, the laws demonstrate the NZ Government's commitment to bringing its domestic laws into harmony with those of other OECD member countries.
The recent meeting of the APEC Network of Ant-Corruption Authorities and Law Enforcement Agencies, or ACT-NET in Beijing announced the commencement of a new channel or platform for regulatory agencies to exchange information targeting large scale corruption and bribery in the Asia Pacific region. The secretariat will by initially hosted by China, based in Beijing and the Chinese Ministry of Supervision will manage the information sharing in an institutional capacity.
As Fu Kui, Vice Minister of China's National Bureau of Corruption Prevention said:
As domestic anti-corruption efforts intensify, corrupt officials flee abroad and remain at large by taking advantage of legal differences between our jurisdictions…this is a serious challenge to each economy's rule of law. By building a multilateral platform to strengthen work-level exchange and case cooperation, and expand channels for anti-corruption and law enforcement partnership, we could cut off the escape route of corrupt fugitives.
The key trends emerging from the US over the first half of 2014 can be summarised as follows:
Miller & Chevalier has recently published its informative FCPA Summer Review 2014. The firm has a long-standing experience in FCPA matters. They have compiled an interesting table to reflect the patterns of FCPA investigations from 2004 to 2014.
The table (right) reflects a continuing trend of regulatory FCPA investigations, although not quite reaching the frenetic rates achieved around 2012. This should reinforce the importance, for all Australian companies with potential exposure to US laws, to ensure they have in place robust and reliable anti-corruption compliance regimes that work which are not mere statements of ideal intent while business gets down and dirty making money the old- fashioned, almost entrepreneurial way.
Table 1 Note: Updated through July 22, 2014. Note that the initiation date attributed to each investigation is based on public disclosures and may change as additional information becomes available.
Returns for whistleblowers are continuing. On 31 July 2014, the SEC announced an award of US$400,000 to a whistleblower who reported an internal fraud to the SEC in circumstances where the company had failed to address the issue internally.
Two recent appellate judgments have focused on whistleblowers - the extent of protection for non-US based employees under the US regime and the basis of a "reasonable belief" that an employee has in reporting conduct contravening the law.
Two recent appellate judgments in the context of internal investigation, improper commercial conduct and legal professional privilege, focus on how internal investigations are conducted, which directly impact how internal corruption investigations are established and conducted.
One notable development from north of the US border is the decision by the Ontario Superior Court of Justice in Chowdhury v H.M.Q that Canadian authorities did not have jurisdiction over a foreign national alleged to have breached Canada's Corruption of Foreign Public Officials Act. While the Ontario Court accepted that Canada had jurisdiction over the offence, in light of the conduct in Canada, the Court held there was no automatic jurisdiction over a person.
Thus, as Mr Chowdhury, as former Bangladesh minister, had never been to Canada and had not committed any specific act in Canada, the mere allegation that he allegedly exerted influence over a construction project in favour of a Canadian company was insufficient to give rise to any Canadian jurisdiction over him. Whether this gives rise to a sigh of relief by foreign nationals being investigated by Canadian authorities will depend upon any ongoing appeal.
In recent public speeches in May and June 2014, the heads of the US SEC and the UK SFO each made important statements concerning the directions of their respective agencies. In speeches by the Chair of the US SEC, Mary Jo White (to the Annual ASIC Forum in March 2014 and the NYC Bar Association's Annual White Collar Crime Institute in May 2014), she highlighted some key concerns for the SEC:
At the annual IBA Anti-Corruption conference held at the OECD in Paris in June 2014, the Director of the SFO, David Greene QC pointed to some critical issues for the SFO in responding to foreign bribery:
The latest developments out of the UK include the following:
On 16 July 2014, the UK Supreme Court delivered an important judgment in FHR European Ventures LLP v Cedar Capital Partners  UKSC 45. In 2004, FHR European Ventures purchased the issued share capital of Monte Carlo Grand Hotel SAM (which owned a long- term lease interest over the Monte Carlo Grand Hotel). The purchase was a joint venture between a number of claimants and FHR was the purchase vehicle. Cedar Capital acted as the claimants' agent in negotiating the purchase. Cedar Capital did not disclose the sum of €10m it received on the transaction. The appeal question before the Supreme Court was to determine on what basis FHR (as principal) could claim those monies (constituting a bribe or secret commission) from Cedar Capital (as agent).
The Supreme Court reviewed conflicting authorities and decided that bribes and secret commissions received by an agent should be treated as the property of the principal. The importance of this decision is that:
As an indication of the Supreme Court's view on bribery, the following passage is an important indication of how the UK courts might look on bribery issues in the future:
Wider policy considerations also support the respondents' case that bribes and secret commissions received by an agent should be treated as the property of his principal, rather than merely giving rise to a claim for equitable compensation. As Lord Templeman said, giving the decision of the Privy Council in Attorney General for Hong Kong v Reid  1 AC 324, 330H, "[b]ribery is an evil practice which threatens the foundations of any civilised society". Secret commissions are also objectionable as they inevitably tend to undermine trust in the commercial world. That has always been true, but concern about bribery and corruption generally has never been greater than it is now - see for instance, internationally, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions 1999 and the United Nations Convention against Corruption 2003, and, nationally, the Bribery Acts 2010 and 2012. Accordingly, one would expect the law to be particularly stringent in relation to a claim against an agent who has received a bribe or secret commission.
Lastly, in May 2014, in a warning to all lawyers that they can be held liable for their conduct in foreign bribery transactions, the UK Disciplinary Tribunal of the Solicitors Regulation Authority disbarred Jeffrey Tesler, a British lawyer convicted of FCPA violations for helping KBR and three other companies bribe Nigerian officials. Tesler was convicted in February 2012 of conspiracy to contravene the FCPA, with orders for the forfeiture of more than
$148m and a 21 month term of imprisonment.
The scheme was a classic example of foreign bribery - Kellogg Brown & Root and three other companies formed a joint venture to build natural-gas facilities in Nigeria and Tesler and a Japanese company were alleged to have been engaged to help bribe Nigerian government officials in order to obtain valuable construction contracts. During the decade- long scheme, Tesler paid millions of dollars in payments on behalf of the joint venture, and in return the Nigerian government awarded the consortium more than $6 billion in contracts.
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