AFP gives insight on Australian anti-bribery laws

In a climate of aggressive enforcement of foreign bribery, both in Australia and overseas, many companies are questioning the precise scope and application of foreign bribery laws and what kinds of actions they should be taking to minimise their risk of exposure. In a joint panel discussion held at Freehills’ Sydney offices on 15 June 2012 and co-hosted by Deloitte, AFP Assistant Commissioner Ramzi Jabbour provided a rare insight into the AFP’s approach to the enforcement of Australia’s foreign bribery laws.

In particular, the AFP Assistant Commissioner provided guidance on how the AFP assesses payments for hospitality, gifts and charitable donations, or payments which may fall within the facilitation payments defence. He highlighted the AFP’s interest in working with industries such as the resources industry to raise awareness and encourage self-reporting.

While many Australian companies are well aware of corruption risks, they may struggle with the precise scope and application of Australia’s foreign bribery laws as well as overseas laws that may now apply to Australian companies, for example, in the US and the UK. Of particular concern are the scope of the facilitation payments defence and the grey areas of corporate hospitality, travel, charitable donations and gifts.

In total the AFP has conducted 29 bribery investigations to date. The Assistant Commissioner commented that the AFP has not targeted particular industries. It is keen to work with industry groups to raise awareness, particularly those industries at higher risk because of the nature of the industry, or the regions in which they operate. One example is the resources industry. The AFP is currently in the process of preparing a ‘fact sheet’ to assist companies to identify and navigate the risks.

Matters to date have generally come from whistleblowers or self-reporting by companies. The AFP sees self-reporting as important but has no power to negotiate outcomes with companies that self-report. 

While each matter will turn on its own facts, key considerations for the AFP when assessing hospitality, travel payments or charitable donations, or facilitation payments are whether these are:

• reasonable in the circumstances
• for a business purpose, and
• clearly documented. 

Transparency will be key. The AFP does not have a specific threshold value when assessing payments, and the cumulative value will be relevant. What may be reasonable on one occasion may become questionable if it is occurring on a regular basis. Payments for close personal protection in dangerous regions may also be legitimate but again should be fully documented.

A key takeaway from the panel was that awareness is critical. Companies need to be aware of how they may be exposed to risks because of the culture and environment in which they operate, the contracts they have in place and the business partners they are working with. Implementing appropriate policies and procedures, continually monitoring risks and clearly documenting payments will stand companies in good stead.

This post is written by Freehills Partner Caroline Cox.

Freehills would like to thank AFP Assistant Commissioner Ramzi Jabbour and Frank O’Toole, Partner Deloitte for participating in the panel discussion. 

A global contract law? What is in store for Australia?

Some utopian visions of the world foresee that, in a globalising economy, we will be ruled by a ‘global law’ – a law that is not connected to any particular nation state. But the concept of a universal law, applying across nation states, regardless of the nationality of market participants is in fact very old. It is found in the medieval concept of the lex mercatoria – the law merchant – which applied to all merchants in the vibrant medieval international economy. Now, in response to the internationalisation of markets, we are seeing a resurgence of that vision, especially by nations such as Australia which stand outside any of the major trading blocs and seek to be relevant.

The Australian Government has recently released a discussion paper, Improving Australia’s Law and Justice Framework: A discussion paper to explore the scope for reforming Australian contract law: Discussion Paper. Such reforms are said to be necessary in light of the lack of uniformity of contract law across Australian jurisdictions, the lack of clarity as to the applicable law in particular contract disputes and international developments in contract law. The discussion paper is a broad-ranging one and covers many issues including the possible codification and ‘harmonisation’ of contract law.

Of particular interest and importance are the aspects of the paper relating to Australia’s contract law in the context of international commerce. The paper notes that a key potential obstacle to greater economic integration with Australia’s main trading partners are the differences between their systems of contract law and Australia’s and acknowledges the potential benefits in Australia being an early adopter of the developing “international law of commerce”. The paper makes reference to a number of important international approaches to contract law including the United Nations Convention on Contracts for the International Sale of Goods (Vienna Convention) and the UNIDROIT Principles of International Commercial Contracts. Each of these have been attempts at codifying parts of the law merchant. They are important sources of restatement of the fundamental rules that apply to any international transaction.

The challenge for Australia is how it best integrates its economy into the international world economy, especially in this ‘Asian Century’. The discussion paper on the reform of Australian contract law should be seen in the context of two other projects already underway or about to proceed. The first is the Prime Minister’s forthcoming White Paper on Australia in the Asian Century: Australia in the Asia Century. The second is the possible project to be approved in April by the Standing Council on Law and Justice (previously known as the Standing Committee of Attorneys-General) on the private international law aspects of commerce: Standing Council on Law and Justice.

All three projects sharpen our focus on the international dimensions of our economy and legal system.

This is an exciting time for those concerned about the international dimensions of commerce – these projects bring many opportunities for reform but also great risks. As the projects proceed we will bring you insights into the issues and thinking that stand behind them.

This post is written by Freehills Partner Don Robertson.

Carbon price passed: Now what?

After many years, 2 Prime Ministers and 3 opposition leaders to name a few, the Federal Parliament passed carbon price legislation yesterday. The price will apply from 1 July 2012 at $23/t Carbon Dioxide equivalent in the first year.

Many will be unhappy about this, but our focus must now turn to what do we do about it. We can’t ‘wait and see’ anymore.

The Opposition has committed to ‘roll back’ the carbon price if it wins government in the future. However, a roll back would be very difficult and appears unlikely, or at least not for some time (meaning we must still prepare for the carbon price).

So there are 2 key questions:

1. What does it mean for the mining industry?
2. What should the mining industry do about it?

What does it mean for the mining industry?

A carbon price will increase the cost of activities that directly or indirectly (ie through their inputs) emit greenhouse gas emissions. For mining the key carbon costs will attach to gas, coal, diesel and electricity use. Coal mines will also face direct costs for their direct methane emissions.

Whether carbon costs are directly paid to government by the mining company or its suppliers will depend on where the emissions arise and who has operational control of them.

Notably, the default position for liquid fuels is they will not be subject to the carbon price regime (with an obligation to obtain and surrender permits). Instead some liquid fuels, including off-road mining and power generation fuel, will face an equivalent carbon price through the fuel tax/rebate system. Mining diesel use will have a reduced diesel fuel rebate, initially at 6.21c/L in 2012/2013. Large fuel users will have the opportunity to ‘opt in’ to the carbon price regime and then need to obtain and surrender permits instead of paying through the fuel tax system. The ‘opt in’ regime is yet to be finalised, but this opportunity is expected to be available for users of fuel that produce more than 25,000t CO2e pa (about 9.1mL of diesel).

This generally means mining companies will pay for their fuel use, any power generation they undertake and coal methane emissions. Suppliers will most likely have any other direct liability. Those suppliers will in turn look to pass their costs through to the mining company.

The end result is the mining company will pay for their carbon footprints, directly or indirectly. Therefore the mining company’s commercial exposure is best calculated on the basis of its total emissions profile. 

Some compensation is being made available for ‘emissions-intensive, trade-exposed’ industries. However, it appears to be of limited availability for the mining industry. It will give some compensation to some minerals refining. Gassy coal miners will be able to access separate compensation.

What should the mining industry do about it?

Key steps include:

1. Review and design contracts: It is important to review and design your contractual arrangements to best manage carbon costs. This is generally achieved where all parties accept appropriate pass through. You should always consider where emissions (and therefore costs and risks) are likely to arise and how they can be best managed.
2. Offsets: Carbon offsets may be one key way to manage carbon costs. The ‘Carbon Farming Initiative’ voluntary scheme will present positive emissions reduction opportunities.
3. Disclosure: Be careful what statements you are making publicly and in your financial documents.
4. Approvals: If you are going through an approval process, any carbon offset proposals or negotiations should be revisited.
5. Compensation: Review what compensation may be available.
6. Opt in?: Large fuel users should consider whether to opt in to the carbon price regime or not. Main reasons to do so are to more effectively manage the carbon price exposure, including through the use of offsets.