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bribery

Bribery, Corruption and Directors’ Duties

The Australian Government, known to be a lenient jurisdiction on foreign bribery governance, is posed to implement various changes intended to combat foreign bribery and mitigate local corporate corruption. Among the many changes in the works, the government is suggesting the implementation and broadening of corporate offences with regards to prevention and intention, to give law enforcement agencies a wider reach for prosecutions.

Prevention

With the goal to create a corporate culture accustomed to bribery prevention, a new corporate offence is being proposed. This offence is intended to provide companies with incentive to implement and use a bribery prevention system, as the punishment for the absence of this system is automatic liability for bribery committed by their agents, employees, and contractors (both locally and overseas). A similar approach has already been put in place by the United Kingdom with their Bribery Act 2010. The effectiveness of this provision has been questioned by those criticizing the changes, but it has had success in creating awareness and encouraging companies to implement changes to their internal bribery prevention systems. Overall there is room for improvement, but this is a good first step in combating foreign bribery.

Intention

A key aim of these proposals is to create a broader definition of “intention” in relation to foreign bribery, as the current definition is very narrow. To assist in strengthening this definition, there has been an additional offence proposed that will include “acting with reckless conduct” in the scope of a criminal offence, as opposed to the current wording which only references “obtaining a business advantage”. There have also been multiple amendments to this current definition of “intention”, including the addition of “personal advantage” to the wording.  The article below provides an in-depth list of these changes, which could drastically affect the legal environment with regards to foreign bribery.

In addition to the above, the Australian government have also announced the introduction of a Deferred Prosecution Agreement (DPA) scheme, intended to motivate companies to self-report internal bribery and corporate crime, as well as providing the Government with further measures to enforce corporate crime laws. This scheme is similar to those already implemented in the USA (2000) and UK (2012). It will most likely have a direct effect on the D&O and Crime insurance market, as the costs for penalties imposed via the DPA may not be included in current wordings for D&O and Crime policies. This proposed DPA scheme is outlined in detail in the below article.

Insurance Repercussions: Based on the above amendments, there could be several implications for insurers with far-reaching effects on companies that hold or require Directors’ & Officers’ or Crime policies, including:

Increased number of investigations for foreign bribery offences, resulting in further prosecutions

More Directors and Officers involved in these investigations, resulting in more D&O claims

A subsequent hardening of the D&O market due to an increase in claims, circumstances, and notifications

If you would like to find out more, the below article from Clyde & Co provides an in-depth legal perspective on these announcements:

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