Additional Comments from Deputy Chair Senator Paul Scarr

Introduction

1.1Whilst supporting the majority of recommendations contained in the report, I am firmly of the view that the Government should reconsider its position with respect to Deferred Prosecution Agreements.

1.2Deferred Prosecution Agreements are used very effectively in comparable jurisdictions. There is a considerable amount of international jurisprudence and practical examples of the utility of Deferred Prosecution Agreements. They are an extremely useful tool in efforts to combat foreign bribery.

1.3If the Government persists in its position that the Bill should not provide for Deferred Prosecution Agreements, this will represent a missed opportunity in Australia’s efforts to combat foreign bribery.

1.4It would mean that Australia will continue to be out of step with our leading international partners, including the United States and the United Kingdom. Australia will be deprived of the opportunity to participate in the global resolution of major foreign bribery cases.

1.5The Government should reconsider before this opportunity is lost.

Government's reasons for not providing for Deferred Prosecution Agreements

1.6In introducing the Bill, the Attorney-General provided the Government’s reasons for not providing for Deferred Prosecution Agreements. In drawing a distinction between the Bill the subject of this Committee report and the Bill introduced by the previous Coalition Government, the Attorney-General said:

In addition to the measures contained in this bill, the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 would have introduced a deferred prosecution agreement scheme. This bill contains no such scheme.

The purpose of a deferred prosecution scheme is to strike a balance between encouraging companies to self-report serious offending and holding companies to account for serious corporate crime. However, given that there is universal agreement that the existing foreign bribery offences in the Criminal Code are grossly inadequate, it is premature to entertain the introduction of a deferred prosecution scheme.

The introduction of such a scheme should only be entertained after the measures in this bill have been enacted and given time to work.

When ordinary Australians commit crimes, they feel the full force of the law. However, under the deferred prosecution agreement scheme proposed by the former government, companies that engaged in serious corporate crime, including foreign bribery, would have been able to negotiate a fine, agree to a set of conditions and have their cases put on indefinite hold.[1]

1.7With due respect to the Attorney-General, in my view, his reasoning fails to give adequate weight to:

(a)the practical experience and developed jurisprudence around the use of Deferred Prosecution Agreements, including in the United Kingdom;

(b)the international cooperation promoted by the coordinated entry into Deferred Prosecution Agreements across multiple jurisdictions in order to deal with cross border foreign bribery offences committed in multiple countries;

(c)the efficient allocation of resources for law enforcement to achieve the best outcomes for all stakeholders;

(d)the utility of Deferred Prosecution Agreements being an issue totally separate from the effective operation (or otherwise) of the other amendments proposed in the Bill; and

(e)the views of a range of expert stakeholders who made submissions to this inquiry.

Positions of the OECD

1.8The Organisation for Economic Co-operation and Development (OECD) clearly supports the use of Deferred Prosecution Agreements in the fight against foreign bribery. This is reflected in the Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions which states as follows:

XVII. RECOMMENDS that member countries consider using a variety of forms of resolutions when resolving criminal, administrative, and civil cases with both legal and natural persons, including non-trial resolutions. Non‑trial resolutions refer to mechanisms developed and used to resolve matters without a full court or administrative proceeding, based on a negotiated agreement with a natural or legal person and a prosecuting or other authority.

XVIII. RECOMMENDS that member countries ensure that non-trial resolutions used to resolve cases related to offences under the OECD Anti-Bribery Convention follow the principles of due process, transparency, and accountability…, and in particular:

(i)adopt a clear and transparent framework regarding non-trial resolutions, including the authorities entitled to enter into non-trial resolutions, whether these resolutions are available to natural and/or legal persons, and the requirement for the alleged offender to admit facts and/or guilt, where applicable;

(ii)develop clear and transparent criteria regarding the use of non-trial resolutions including, where appropriate, voluntary self-disclosure of misconduct, cooperation with law enforcement authorities, and remediation measures;

(iii)provide clear and publicly accessible information on the advantages that an alleged offender may obtain by entering into a non-trial resolution;

(iv)where appropriate, and consistent with data protection rules and privacy rights, as applicable, make public elements of non-trial resolutions…[2]

Benefits of Deferred Prosecution Agreements

1.9The benefits of Deferred Prosecution Agreements were outlined in a speech given by Mr Ben Morgan, then Joint Head of Bribery and Corruption at the UK Serious Fraud Office on 7 March 2017.In that speech, Mr Morgan spoke about the utility of Deferred Prosecution Agreements in three cases. For ease of reference (and given the relevance of the speech), I provide extended excerpts below:

As I’m sure most of you know, Deferred Prosecution Agreements are a new kind of disposal of criminal risk in this jurisdiction, conceptually I suppose somewhere between a guilty plea and a civil recovery.

They involve the company and the [Serious Fraud Office] agreeing to suspend charges that would otherwise be prosecuted, provided that the company meets a series of terms.

Typically these would include:

a combination of financial sanctions;

some terms concerning enhancing compliance procedures including possibly a monitor; and

terms concerning ongoing cooperation, for example in the prosecution of individuals.

There is no set list of terms, and one of the attractions of DPAs is that bespoke terms can be created to suit a particular case…

It is important to note that the entire process is only effective if, after full scrutiny, it is approved by the court…

So far we have had three DPAs in the UK, each very different from the other, and each illustrating different ways this new tool can be used…

The first was the ICBC Standard Bank DPA. This involved a major financial institution and conduct arising from a particular transaction; a fund-raising exercise for the government of Tanzania…

The bank reacted to the discovery of that conduct responsibly, immediately looking to correct the error that had occurred and accepting that it brought with it consequences – compensation needed to be paid back to the Tanzanian state, profit earned on the contract in question had to be disgorged, and a penalty had to be paid…

I think many people would agree that the Standard Bank case is exactly the kind of situation DPAs were first intended to be used for. There was a very substantial but narrow, self-contained problem in a large and complex business. The bank did everything right when it became aware of what had happened. There is little, if anything, more that a prosecution could have achieved…

The second DPA was a different situation, and showed another aspect of the utility of the regime. One of the policy reasons Sir Edward Garnier – Solicitor General at the time – had in mind when the scheme was introduced was to limit the negative effects of corporate criminal behaviour on innocent people – employees, pensioners and others reliant on the future of a company – suppliers, manufacturers or customers, for example…

…In that case we were able to reach an agreement that provided for terms the company could just cope with and stay alive, and which the court considered to be in the interests of justice…

And finally, so far, there is the Rolls-Royce DPA from January [2017]. This is an altogether different case again. A major corporate, but this time with conduct spreading widely throughout its business, over several decades, and over multiple jurisdictions…

This was the biggest test yet of whether there was a limit to the circumstances in which a DPA could be appropriate…

To the extent that the Rolls DPA has attracted criticism, this seems to be one of the main concerns raised – if not this case, then when would the [Serious Fraud Office] prosecute?

The answer to that comes in understanding one of the most fundamental features of the DPA regime, which is the requirement that companies are frank about what has happened, and when it comes to putting it right, cooperate fully with the [Serious Fraud Office’s] investigation. This is a serious commitment, and one that instinctively companies find very difficult to do.

But in this case, to their credit, Rolls did exactly that…

And it was for that reason that the court was satisfied that notwithstanding the gravity of what had happened, on the right terms it could be in the interests of justice to resolve the conduct by way of a DPA rather than a trial...

…I do not agree at all with those who say we should nevertheless have prosecuted the company… – but what, in these particular circumstances, would that have achieved?

A different angle here is that this case is over far sooner than it otherwise would have been.

There is quite rightly an imperative on us – and all public bodies – to achieve value for money. One of the effects of the Rolls DPA is that without sacrificing the quality of the outcome, the SFO has been able to shift more work with its resources. I see that as a highly positive thing. Let’s not forget too, that the company paid the full costs of the SFO’s investigation back immediately – £13m of public money returned, meaning the case has cost the public purse nothing at all…

On the contrary, it has of course also yielded more than half a billion pounds to be paid to the Treasury over a number of years, although that is more a consequence of a principled approach to sentencing than an objective of our work…

So to the critics I ask again, what precisely is it that in this case a prosecution would have achieved that the DPA did not? And if you can think of anything, then how much more public money would it have taken to achieve that incremental difference? How much more time would it have taken? How many other cases would have remained un-done while we worked on that?[3]

International cooperation arising from coordinated use of Deferred Prosecution Agreements

1.10One consistent theme arising from the use of Deferred Prosecution Agreements is the ability to coordinate entry into agreements across a range of jurisdictions.By failing to provide for entry into such agreements, Australia is deprived of the opportunity to participate in such internationally coordinated efforts.

1.11For example, in 2020 Deferred Prosecution Agreements were entered into by relevant authorities in the United Kingdom, the United States and France and Airbus in relation to a failure by Airbus to prevent foreign bribery in Ghana, Taiwan, Indonesia, Malaysia and Sri Lanka.[4] The total amount paid by Airbus under the Deferred Prosecution Agreements was approximately A$5.96 billion. By not providing for Deferred Prosecution Agreements, Australia is deprived of the opportunity of being part of the resolution of such wide scale, complicated and internationally significant foreign bribery cases. Shouldn’t regulators/prosecutors have the option of being able to liaise with our international partners and be part of the resolution of such cases?

Views of stakeholders

1.12Stakeholders with particular expertise in the area made submissions to this inquiry calling upon Australia to adopt a Deferred Prosecution Agreement regime.

1.13Allens Linklaters submitted:

We consider that DPAs can provide an effective and efficient means of addressing corporate misconduct in suitable cases. By creating greater certainty of outcome for corporates, they also have the potential to increase self-reporting and therefore enforcement efforts.

…

We also consider that DPAs should be available for offences that were committed prior to the scheme's introduction, as was the case in the UK. This has the potential to expedite the existing caseload of the CDPP and investigative agencies.[5]

1.14The Law Council of Australia submitted:

The Law Council continues to support the adoption of a Deferred Prosecution Agreement (DPA) scheme as a means of addressing corporate criminal activity that may avoid some of the cost, delay and uncertainty of traditional criminal prosecutions… A Deferred Prosecution Agreement regime should accompany any legislative response to Combatting Foreign Bribery.[6]

1.15Transparency International submitted:

We note the proposed Bill does not include a Deferred Prosecution Agreement (DPA) scheme. This reduces the incentives for companies to self-report examples of foreign bribery involving their operations and will continue to undermine Australia’s foreign bribery laws. DPAs are used in jurisdictions including Canada, France, the UK, the US and Singapore.

…

Unless the use of settlements for foreign bribery can be seen to be delivering real deterrence and effective sanctions, public confidence across the world in the fight against corruption will be undermined. The experience of the US and UK is that a DPA scheme increases detection and results in more prosecutions of foreign bribery and other criminal offences.[7]

1.16Notably, in its submission on this Bill, Austrade called for measures to encourage self-reporting and cooperation.[8]

Relevance of other amendments to use of Deferred Prosecution Agreements

1.17The Attorney-General’s Department submission notes:

The previous 2019 Bill would have introduced a Deferred Prosecution Agreement (DPA) Scheme, whereas this Bill does not. As noted by the Attorney-General in his second reading speech, the introduction of such a Scheme should only be entertained after the measures in this Bill have been enacted and given time to work.[9]

1.18With due respect, the policy utility of Deferred Prosecution Agreements can be assessed independently of the other amendments being made under the Bill. There is no link. The experience in overseas jurisdictions (as supported by the stakeholders who made submissions to this enquiry) is that Deferred Prosecution Agreements are a powerful tool in the fight against foreign bribery.

Conclusion

1.19The Government should reconsider its position with respect to Deferred Prosecution Agreements. The expert views of stakeholders, most recent international experience and OECD guidance all support the adoption of a Deferred Prosecution Agreement scheme.

1.20A statutory review of a Deferred Prosecution Agreement scheme could occur a reasonable period of time after adoption to ensure that the scheme is working as intended.

1.21A failure by the Government to amend the Bill and to provide for Deferred Prosecution Agreements would represent a missed opportunity for Australia to participate in the resolution of significant cross-border foreign bribery cases.

Recommendation

1.22It is recommended that the Bill be amended to provide for a Deferred Prosecution Agreement scheme with a statutory review to occur a reasonable period of time after adoption.

Senator Paul Scarr

Deputy Chair

Liberal Senator for Queensland

Footnotes

[1]The Hon Mark Dreyfus KC, MP, Attorney-General, House of Representatives Hansard, 22 June 2023, p. 6.

[2]OECD Legal Instruments, Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions, 26 November 2021, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0378 (accessed 26 July 2023).

[3]United Kingdom Serious Fraud Office, The future of Deferred Prosecution Agreements after Rolls-Royce, 8 March 2017, https://www.sfo.gov.uk/2017/03/08/the-future-of-deferred-prosecution-agreements-after-rolls-royce/ (accessed 26 July 2023).

[4]United Kingdom Serious Fraud Office, SFO enters into €991m Deferred Prosecution Agreement with Airbus as part of a €3.6bn global resolution, 31 January 2020, https://www.sfo.gov.uk/2020/01/31/sfo-enters-into-e991m-deferred-prosecution-agreement-with-airbus-as-part-of-a-e3-6bn-global-resolution/ (accessed 26 July 2023).

[5]Allens, Submission 7, pp. 2–3.

[6]Law Council of Australia, Submission 5, p. 10.

[7]Transparency International Australia, Submission 8, pp. 6‑7.

[8]Austrade, Submission 3, p. 1.

[9]Attorney-General's Department, Submission 1, p. 9.