2011 was an active year for law enforcers on the foreign bribery and corruption front.
Australian business found itself in a new era – where law enforcers around the world have been pursuing bribery and corruption issues with renewed vigour and increased cross-jurisdictional co-operation. If they weren’t before, Boards are now asking their managements teams whether their companies are doing enough to manage bribery risk and how it is being dealt with in commercial arrangements ranging from ongoing contractual arrangements to one-off acquisitions. 2011 also marked the commencement of the UK Bribery Act – with a number of far reaching consequences, including that many payments that in the past may not have been bribery will now certainly constitute bribery under the UK law. The end of 2011 also flagged that some payments, which in the past would not have been bribery under Australian law, soon may be.
Any Australian business that operates in countries where demands for small payments to lubricate regulatory and other public processes is common are now faced with a risk to the business, its employees and its directors, and a dilemma in how they deal with business transactions in these countries going forward. The dilemma is underscored by mind boggling penalties for getting it wrong.
Toward the end of 2011, the Attorney General’s Department released a Public Consultation Paper inviting comment on the Government’s review of Australian anti-bribery legislation, with particular focus on the treatment of facilitation payments under Australian law.
Presently, if a charge is brought in relation to a payment made to a foreign public official that would otherwise be classified as a bribe under Australian law, it will be a complete defence if the payment was a ‘facilitation payment’.
To be a facilitation payment, the value of the payment must be minor, it must have been paid for the dominant purpose of securing or expediting a routine government function which itself is of a minor nature, and as soon as practicable after the payment a record (which satisfies particular legal requirements) must be made – the most difficult of these being that the payor must effectively obtain a receipt from the foreign official.
In March 1999, the Howard Government amended the Commonwealth Criminal Code to include the offence of bribing a foreign public official. In relation to the facilitation payments, the Government said: “Small payments are something left for local officials to stamp out and it is not appropriate or practical for foreign governments to be concerning themselves with expensive international prosecutions. This approach reflects what is provided for in the Convention and is similar to legislation in the USA and Canada.” [Senate Hansard, 10 March 1999]
For the next 12 years not much happened under Australian anti-bribery laws. That was until the charges laid on 1 July 2011 in the Securency matter. Prior to then, Australian law makers and enforcers had been subject to polite but consistent criticism about a lack of action. In around October 2012 the UN Working Group on Bribery in International Transactions is due to release its ‘phase 3’ report on Australian bribery laws. In broad terms the report will comment on the degree to which Australian laws have been enforced since their introduction. It is likely that Australia will be in for further criticism about a lack of action.
It is against that background that the Federal Government’s ‘assessment of Australia’s anti-bribery laws’ can be better understood. That it will focus on a defence which has never been (and never had to be) invoked is curious. It can’t be that the prospect of potential defendants invoking the defence has scared off prosecutors. After-all, the recording keeping hurdles imposed in an Australian context mean that the defence will rarely be satisfied. Further, a similar defence is available in USA, and that country is by far the most active, and successful, in enforcing its bribery legislation. The defence is rarely raised by defendants in USA prosecutions for foreign bribery. More likely, the impetus for the Federal Government’s assessment is the renewed emphasis on bribery of foreign officials brought about by the commencement of the UK Bribery Act, and anticipated criticism in the form of the UN’s phase 3 report.
Just how this fits with the Federal Government’s encouragement of Australian business to move into new offshore markets, particularly Africa, is unclear. The World Bank estimates that half of the 10 fast growing economies over the next 5 years will be in Africa. Presently, Australian business reportedly has 665 projects in 42 African countries, with 220 of these being commenced in the passed 20 Months. Meanwhile, in October 2011 Foreign Minister Kevin Rudd launched a $30 million initiative to foster mining development in Africa. This can be contrasted with a public survey of conducted by Transparency International in 2010 – 2011 of more than 6,000 people across the Democratic Republic of Congo, Malawi, Mozambique, South Africa, Zambia and Zimbabwe, the results of which included that 62% of those surveyed considered that corruption had increased in their countries, and 56% actually admitted to having paid a bribe to one of 9 service providers (ie government services) in the previous 12 months. Alarmingly, the police were considered the most corrupt institution in each of the countries.
Regardless, Australian business finds itself in this new era. In the context of the Public Consultation Paper released last 2011, Australian business should now consider that, to the extent the facilitation payments defence ever had any life under Australian laws, it will soon be dead. In response to the UK Bribery Act and these latest developments, many of Freehills’ clients are updating their Codes of Conduct to explicitly outlaw such payments by their employees and others. Any Australian business operating in countries where demands for such payments are common, including fast emerging African economies, should certainly act to prohibit the making of such payments. Business impacts of refusing such demands will also need to be anticipated and planned for. To do otherwise risks the employee, the business and its directors committing criminal offences punishable in Australia (irrespective of where the facilitation payment is made).
23 February 2012
16 February 2012
Industrial unrest: coming to a mine-site near you!
Since the Federal Government's Fair Work Act came into effect in 2009, the mining industry has seen a steady increase in industrial activity. This is hardly surprising as the new legislation gives significant new rights to unions and compels mining companies to bargain with unions in most circumstances.
While much of the mining industry has relied on industrial agreements made under the old legislation, 2012 will see many of these agreements nearing their expiry date and a new round of industrial bargaining commence. Most of the major mining houses will be negotiating agreements with unions in 2012 under this new legislation. For this reason, mining companies will need to be well advanced in their planning and implementation of forward industrial strategies.
An example of the challenges of the new bargaining regime is the BMA negotiations which have been ongoing in the Bowen basin coal fields for more than 12 months. These negotiations will continue in to 2012 with a likely coordinated campaign of industrial action across all of the companies coal mines.
In addition to the increase in industrial bargaining throughout the mining industry, 2011 saw the announcement of a large number of new mining projects across all tiers of the sector. These developments are likely to exacerbate the labour shortages already being seen in the boom mining states of Western Australia and Queensland. Initial resourcing strategies have led to an increase in the number of employees commuting from other states and territories and an increase in the use of foreign labour.
Foreign labour will continue to be a contentious issue, with mining unions recently staging protests in Perth in relation to the use of foreign labour by major resources companies operating in Western Australia. The government’s new Enterprise Migration Agreement scheme will be available to larger players in the industry, however these agreements will require detailed consultation with relevant unions at an early stage in the planning process. The current consultation protocols include a requirement for project owners to provide manning plans and other detailed commercial information to unions as part of this initial consultation process. This, combined with the powers provided to industrial organisations under the Fair Work Act, will further feed the strength of mining unions in Australia during 2012.
Finally, the Federal Government has appointed a committee to review the operation of the Fair Work Act. The terms of the review have caused some concern among employers, including those in the mining industry. This review may lead to changes to the legislation—it will be important to monitor those changes and plan for their implementation.
14 February 2012
CEO Michelmore on dancing with the Dragon
Andrew Michelmore, CEO of Minmetals Resources Limited (MMR), treated those who attended Tuesday night’s AMPLA Twilight Seminar at Freehills to a thought-provoking presentation.
MMR is not your everyday company. Its management team is based in Melbourne, it is listed on the Hong Kong Stock Exchange and its major shareholder is the state-owned China Minmetals Corporation. MMR is a rare example of China investing in Australia’s human capital and it has strived to achieve a strong ‘east-west’ partnership that can stand the test of time.
Throughout his presentation, Michelmore spoke in detail about MMR’s explorations and operations, its journey since acquiring Minerals and Metals Group (MMG) at the end of 2010 and its ambitious strategies moving forward into 2012. However, it was Michelmore’s thoughts about Australia’s future relationship with China that really captivated his audience.
According to Michelmore, the centre of economic gravity is shifting from the West back to the East. Interestingly, he noted that apart from the 19th and 20th centuries, the Asian region has led the global economy since the beginning of the Common Era. Michelmore stated that he believes China is going to achieve huge economic growth in the coming years, but went on to emphasise that Australia has what China needs to help them grow. For that reason, a strong partnership with China is mutually beneficial and could be lucrative for Australia.
Michelmore’s message is simple. We can’t fight China. We need to work with Chinese companies, on equal terms, in what must be a win-win scenario for both parties. This is what MMR has tried to achieve and it appears to have reaped the benefits.
Significantly, Michelmore believes that it is important to fight the incorrect perception that Chinese companies collude with each other. He affirmed that, in reality, the exact opposite is true. Chinese companies fiercely compete with each other, in contrast to the collusion believed to be characteristic of Japanese companies back in the 1960s and 1970s.
Ultimately, Australia needs foreign investment and China is a crucial strategic partner moving forward. MMR is one of the leaders in fostering this relationship and tries to use it to create a competitive advantage over its competitors.
Michelmore’s presentation was not limited to China. He explained some of the obstacles that confront his company in Laos, where unexploded bombs from the Vietnam War need to be cleared. He also stressed the importance of building trust and keeping one’s promises in Africa, a region where many companies fall into the trap of painting all countries with the same brush.
Michelmore is an industry leader. His insights on how to avoid cultural clashes are alarmingly simple. All that is required, he suggests, is the ability to “step into the other person’s shoes,” to understand that others see the world through different eyes and to embrace diversity genuinely and wholeheartedly. One couldn’t help but leave Michelmore’s presentation feeling that this mantra could equally apply to many other areas of life outside the corporate world.
Freehills would like to thank Andrew Michelmore for his insightful presentation.
MMR is not your everyday company. Its management team is based in Melbourne, it is listed on the Hong Kong Stock Exchange and its major shareholder is the state-owned China Minmetals Corporation. MMR is a rare example of China investing in Australia’s human capital and it has strived to achieve a strong ‘east-west’ partnership that can stand the test of time.
Throughout his presentation, Michelmore spoke in detail about MMR’s explorations and operations, its journey since acquiring Minerals and Metals Group (MMG) at the end of 2010 and its ambitious strategies moving forward into 2012. However, it was Michelmore’s thoughts about Australia’s future relationship with China that really captivated his audience.
According to Michelmore, the centre of economic gravity is shifting from the West back to the East. Interestingly, he noted that apart from the 19th and 20th centuries, the Asian region has led the global economy since the beginning of the Common Era. Michelmore stated that he believes China is going to achieve huge economic growth in the coming years, but went on to emphasise that Australia has what China needs to help them grow. For that reason, a strong partnership with China is mutually beneficial and could be lucrative for Australia.
Michelmore’s message is simple. We can’t fight China. We need to work with Chinese companies, on equal terms, in what must be a win-win scenario for both parties. This is what MMR has tried to achieve and it appears to have reaped the benefits.
Significantly, Michelmore believes that it is important to fight the incorrect perception that Chinese companies collude with each other. He affirmed that, in reality, the exact opposite is true. Chinese companies fiercely compete with each other, in contrast to the collusion believed to be characteristic of Japanese companies back in the 1960s and 1970s.
Ultimately, Australia needs foreign investment and China is a crucial strategic partner moving forward. MMR is one of the leaders in fostering this relationship and tries to use it to create a competitive advantage over its competitors.
Michelmore’s presentation was not limited to China. He explained some of the obstacles that confront his company in Laos, where unexploded bombs from the Vietnam War need to be cleared. He also stressed the importance of building trust and keeping one’s promises in Africa, a region where many companies fall into the trap of painting all countries with the same brush.
Michelmore is an industry leader. His insights on how to avoid cultural clashes are alarmingly simple. All that is required, he suggests, is the ability to “step into the other person’s shoes,” to understand that others see the world through different eyes and to embrace diversity genuinely and wholeheartedly. One couldn’t help but leave Michelmore’s presentation feeling that this mantra could equally apply to many other areas of life outside the corporate world.
Freehills would like to thank Andrew Michelmore for his insightful presentation.
9 January 2012
National harmonisation of safety laws gathers momentum
The New Year is here. The year of harmonised national safety laws.
The harmonisation process is well underway with the goal of achieving balanced and nationally consistent safety laws becoming ever closer after five jurisdictions recently enacted the Model Work Health and Safety Act (Model Act).
New South Wales, Queensland, Northern Territory, Australian Capital Territory and the Commonwealth have all taken the final steps to ensure the commencement of the Model Act from 1 January 2012. While South Australia and Tasmania will likely take similar steps either later this year or early in 2013 to enact bills before their parliaments, Victoria or Western Australia are yet to release any bill. It is still unclear whether they will adopt the Model Act. But we are closer than ever to harmonisation.
For the mining industry, the Model Act will place the primary duties under the regulations on mine operators, and will endeavour to strike the right balance between providing the requirements that are necessary to maximise work health and safety outcomes without being too prescriptive.
The status of the Model Work Health and Safety Regulations is a little less certain. While the regulations have been have been finalised by Safe Work Australia, they are yet to be adopted in all of the five jurisdictions which have agreed to adopt the Model Act.
So 2012 has begun, and will be a year to watch the safety space – especially for those in mining industry where safety remains a high priority.
The harmonisation process is well underway with the goal of achieving balanced and nationally consistent safety laws becoming ever closer after five jurisdictions recently enacted the Model Work Health and Safety Act (Model Act).
New South Wales, Queensland, Northern Territory, Australian Capital Territory and the Commonwealth have all taken the final steps to ensure the commencement of the Model Act from 1 January 2012. While South Australia and Tasmania will likely take similar steps either later this year or early in 2013 to enact bills before their parliaments, Victoria or Western Australia are yet to release any bill. It is still unclear whether they will adopt the Model Act. But we are closer than ever to harmonisation.
For the mining industry, the Model Act will place the primary duties under the regulations on mine operators, and will endeavour to strike the right balance between providing the requirements that are necessary to maximise work health and safety outcomes without being too prescriptive.
The status of the Model Work Health and Safety Regulations is a little less certain. While the regulations have been have been finalised by Safe Work Australia, they are yet to be adopted in all of the five jurisdictions which have agreed to adopt the Model Act.
So 2012 has begun, and will be a year to watch the safety space – especially for those in mining industry where safety remains a high priority.
6 January 2012
The Big Freeze
A major part of risk management when operating across national boundaries involves a carefully constructed dispute resolution mechanism. Such mechanisms are intended to confine disputes to mutually agreed jurisdictions and procedures (usually international arbitration in an acceptably ‘safe’ country).
But how effective are such mechanisms? The reality is that parties to international contracts are at risk of foreign courts freezing their assets around the world, despite any dispute resolution clauses and despite there being no security over those assets.
Parties who fear that their counterparty might deal with its assets in a manner that would result in a judgment or arbitral award being wholly or partly unsatisfied may be able to approach courts other than the courts of the place where the dispute is being resolved to obtain orders freezing the counterparty’s assets in a jurisdiction where they may seek to enforce that judgment or award. These are known as ‘freezing orders’ or ‘Mareva orders’ (after the case in which they first came to prominence).
Freezing orders can have a major impact on businesses, their day-to-day operations, commercial negotiations and financing arrangements. They may be obtained even if:
Parties seeking certainty as to the courts that may make interim orders might provide in their contract that the parties submit to the exclusive jurisdiction of particular courts for the purposes of interim relief. But such clauses are untested in Australia, could cut both ways and may affect the conduct of any proceedings for final relief. Are your international contracts sufficiently insulated against the big freeze that might come your way?
But how effective are such mechanisms? The reality is that parties to international contracts are at risk of foreign courts freezing their assets around the world, despite any dispute resolution clauses and despite there being no security over those assets.
Parties who fear that their counterparty might deal with its assets in a manner that would result in a judgment or arbitral award being wholly or partly unsatisfied may be able to approach courts other than the courts of the place where the dispute is being resolved to obtain orders freezing the counterparty’s assets in a jurisdiction where they may seek to enforce that judgment or award. These are known as ‘freezing orders’ or ‘Mareva orders’ (after the case in which they first came to prominence).
Freezing orders can have a major impact on businesses, their day-to-day operations, commercial negotiations and financing arrangements. They may be obtained even if:
- there is no dispute about the venue and method of dispute resolution
- the assets are located in a jurisdiction that is otherwise unconnected to the dispute; and
- the moving party has given no security over those assets to the person with whom they are in dispute.
Parties seeking certainty as to the courts that may make interim orders might provide in their contract that the parties submit to the exclusive jurisdiction of particular courts for the purposes of interim relief. But such clauses are untested in Australia, could cut both ways and may affect the conduct of any proceedings for final relief. Are your international contracts sufficiently insulated against the big freeze that might come your way?
15 December 2011
Production targets should be backed up by competent persons
Market confusion the likely outcome if changes aren’t made regarding the disclosure of production targets says ASIC.
According to ASIC’s recent public submission paper responding to issues papers from the ASX and JORC, the reporting of production targets and financial information based solely on Inferred Mineral Resources or exploration targets could lead the market to be misinformed, inferring that the target or prospect will be achieved when in fact a high level of uncertainty actually surrounds the underlying resource.
Currently neither the JORC Code nor the ASX Listing rules explicitly address this issue other than requiring that companies have ‘reasonable grounds’ for making the statement – reasonable grounds being based on completion of sufficient work measured against various modifying factors.
Looking at international equivalents, ASIC noted that unlike ASX’s Option 5A, the South African and European codes don’t allow production targets or statements about future matters implying economic viability based only on Inferred Mineral Resources – at least some Ore Reserves are required.
It is, however, allowed in Canada. Companies are required to make full disclosure by way of technical reports written and consented to by qualified people who generally are independent.
Based on this, ASIC’s response is that production targets and other forward-looking statements should be consented to by a Competent Person under the JORC Code – an issue that neither the ASX or JORC issues paper addressed.
If these changes are implemented companies will have greater certainty over the requirements attached to production level disclosure. An eradication of future unsupported production assumptions will inherently bolster market integrity. However feasibility issues of engaging a competent person and completing sufficient work may increase the compliance burden on junior miners.
For a full copy of the ASIC submissions paper go to:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/ASIC-submission-asx-jorc-published-1-December-2011.pdf/$file/ASIC-submission-asx-jorc-published-1-December-2011.pdf
According to ASIC’s recent public submission paper responding to issues papers from the ASX and JORC, the reporting of production targets and financial information based solely on Inferred Mineral Resources or exploration targets could lead the market to be misinformed, inferring that the target or prospect will be achieved when in fact a high level of uncertainty actually surrounds the underlying resource.
Currently neither the JORC Code nor the ASX Listing rules explicitly address this issue other than requiring that companies have ‘reasonable grounds’ for making the statement – reasonable grounds being based on completion of sufficient work measured against various modifying factors.
Looking at international equivalents, ASIC noted that unlike ASX’s Option 5A, the South African and European codes don’t allow production targets or statements about future matters implying economic viability based only on Inferred Mineral Resources – at least some Ore Reserves are required.
It is, however, allowed in Canada. Companies are required to make full disclosure by way of technical reports written and consented to by qualified people who generally are independent.
Based on this, ASIC’s response is that production targets and other forward-looking statements should be consented to by a Competent Person under the JORC Code – an issue that neither the ASX or JORC issues paper addressed.
If these changes are implemented companies will have greater certainty over the requirements attached to production level disclosure. An eradication of future unsupported production assumptions will inherently bolster market integrity. However feasibility issues of engaging a competent person and completing sufficient work may increase the compliance burden on junior miners.
For a full copy of the ASIC submissions paper go to:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/ASIC-submission-asx-jorc-published-1-December-2011.pdf/$file/ASIC-submission-asx-jorc-published-1-December-2011.pdf
9 December 2011
Wiggins Island – something to be celebrated
As a person who spends a large amount of their time dealing with mining infrastructure, the rate of structural reform and progress in the area can be frustrating. The Wiggins Island port project is however something to be celebrated.
It should be celebrated for the hard work and persistence of all of those involved - the miners, WICET, the State and GPC. Most of all it should be celebrated by all of the mining industry in Queensland (and further afield).
Wiggins Island will provide a great platform for future infrastructure investment. It will be a platform irrespective of your chosen model. Wiggins established a successful consortium. It has proved to the industry and the lending fraternity that a large infrastructure project can be financed by a large divergent group – a group of large and small miners. The model holds hope for the start-up miner, as well as the established miner in expansion mode.
The financial close of Wiggins Island has come at the right time. The demand for thermal and metallurgical coal remains strong. The pipeline of new and expansion projects (particularly having regard to the Galillee) is huge. That pipeline of development has an equally large pipeline of rail and port developments.
The State of Queensland has recently announced proponents for 6 new terminals at Abbot Point. Each one of those terminals will be wholly funded by the using miners. At least one of the proponents is a consortium of mining companies (again large and small).
Such a scale of development comes with many challenges. There is of course the challenge of finding a skilled workforce to develop the infrastructure. Input costs are forever rising.
The largest challenge however is one of coordination. For infrastructure to be brought on line efficiently, each part of the coal chain needs to be developed in sync. There is no point in developing a mine and port, without a rail solution.
Without coordination the industry faces uncertainty and inevitable delay. To date the Queensland mining industry has suffered as a result of a lack of coordination. For coordination to be effective the only party that can impose it is the Government. We keep our fingers crossed.
This article was written by Freehills Partner Jay Leary.
It should be celebrated for the hard work and persistence of all of those involved - the miners, WICET, the State and GPC. Most of all it should be celebrated by all of the mining industry in Queensland (and further afield).
Wiggins Island will provide a great platform for future infrastructure investment. It will be a platform irrespective of your chosen model. Wiggins established a successful consortium. It has proved to the industry and the lending fraternity that a large infrastructure project can be financed by a large divergent group – a group of large and small miners. The model holds hope for the start-up miner, as well as the established miner in expansion mode.
The financial close of Wiggins Island has come at the right time. The demand for thermal and metallurgical coal remains strong. The pipeline of new and expansion projects (particularly having regard to the Galillee) is huge. That pipeline of development has an equally large pipeline of rail and port developments.
The State of Queensland has recently announced proponents for 6 new terminals at Abbot Point. Each one of those terminals will be wholly funded by the using miners. At least one of the proponents is a consortium of mining companies (again large and small).
Such a scale of development comes with many challenges. There is of course the challenge of finding a skilled workforce to develop the infrastructure. Input costs are forever rising.
The largest challenge however is one of coordination. For infrastructure to be brought on line efficiently, each part of the coal chain needs to be developed in sync. There is no point in developing a mine and port, without a rail solution.
Without coordination the industry faces uncertainty and inevitable delay. To date the Queensland mining industry has suffered as a result of a lack of coordination. For coordination to be effective the only party that can impose it is the Government. We keep our fingers crossed.
This article was written by Freehills Partner Jay Leary.
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