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High Court rules in favour of the Crown in foreign bribery appeal

Year
2023
Location
Australia

Summary:

Corporate offenders found to be engaged in foreign bribery are likely to face higher penalties after the High Court unanimously upheld an appeal in its August 2023 decision in The King v Jacobs Group (Australia) Pty Ltd . The decision is a win for the CDPP which presented arguments before the High Court.

The appeal focused on the Court’s interpretation of s70.2(5)(b) of the Criminal Code(Cth) and held that the maximum penalty must be set with reference to the gross value of the benefit obtained from the offending, as opposed to the net value after the expense of the offending was offset.

The ruling is also likely to affect calculating penalties under s70.2(5) of the Criminal Code in a range of cases pursuant to the Corporations Act and the Competition and Consumer Act, including cartel conduct, misleading or deceptive conduct, market manipulation and insider trading.

Background:

The CDPP commenced proceedings against Jacobs Group Pty Ltd (Jacobs Group) (formerly Sinclair Knight Merz) on foreign bribery charges following a referral from the AFP. On 30 September 2020, Jacobs Group pleaded guilty in local court to three offences contrary to ss11.5(1) and 70.2(1) of the Criminal Code, which took place between 2000 and 2012, involving conspiracies to bribe public officials in the Philippines and Vietnam to obtain construction contracts.

At first instance in the NSW Supreme Court, the parties agreed that the value of the benefit obtained by the defendant could be determined but they disagreed as to what that value was. The calculation of the value of the benefit obtained was critical to the determination of the maximum penalty relevant at sentence.

The defendant argued that the value of the benefit was the value of the contracts it received as a result of the bribes paid lessthe expenses it incurred in performing the contract, being a net sum of $2,680,816. The CDPP argued the value of the benefit was the gross amount paid to the defendant under the contracts without any deductions for performance, being $10,130,354.

Her Honour Adamson J held that the defendant’s net benefit approach was correct and imposed a fine of $1,350,000. The CDPP appealed but in July 2022 the NSW Criminal Court of Appeal upheld the net benefit approach.

The High Court appeal:

A long-standing' principle of interpretation is that statutory provisions should be interpreted, so far as possible, to be consistent with international law. This is particularly so regarding s70.2(5) which gives effect to matters of international law, notably determining the penalties for foreign bribery offences. Given the different interpretations of s70.2(5) causing a variation in the calculation of the value of the benefit, the CDPP was granted special leave to appeal to the High Court.

The sole question on appeal before the Court was therefore, whether the value of the benefit obtained is the total gross amount received in performance of the contracts or, whether it was the net amount less costs incurred in performing the contracts.

The CDPP’s appeal concerned only the third offence, owing to the time at which the maximum penalty provision of s70.2(5) came into force, which determined that the maximum penalty for the offence was to be not more than the greatest of the following:

  • (a) 100,000 penalty units;
  • (b) if the court can determine the value of the benefit that the body corporate, and any body corporate related to the body corporate, have obtained directly or indirectly and that is reasonably attributable to the conduct constituting the offence—3 times the value of that benefit;
  • (c) if the court cannot determine the value of that benefit—10% of the annual turnover of the body corporate during the period (the turnover period) 12 months ending at the end the month in which the conduct constituting the offence occurred.

Jacobs Group relied on s70.2(5)(a) to calculate the net benefit figure, the sum of which was less than the value of 100,000 penalty units. At the time, each penalty unit was $110 pursuant of s4AA of the Crimes Act 1914 (Cth) which amounted to a maximum penalty of $11 million. The CDPP’s calculation relied upon s70.2(5)(b), with the gross benefit amounting to a maximum penalty of $30,391,062, 3 times the value of the benefit.

The Judgment:

The High Court held that the CDPP’s position was consistent with international law and Australia’s obligations as a signatory to the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions . Further, the majority held that the net benefit would not achieve the purpose of implementing effective, proportionate and dissuasive penalties for bribery offences.

The High Court noted that the portion of the Criminal Code relating to bribery of foreign officials was enacted to implement the OECD Convention.

In 2010, following a review of the OECD Convention, the penalties in domestic legislation for the offence of bribing foreign officials were deemed inadequate. As a result, with reference to Article 3.1 of the Convention, “the bribery of a foreign public official shall be punishable by effective, proportionate and dissuasive criminal penalties”, s70.2(5) was introduced by the Crimes Legislation Amendment (Serious and Organised Crime) Act (No 2) 2010 (Cth), which significantly increased the applicable financial penalties available.

Consistent with the aims and objectives of the OECD Convention which s70.2(5) seeks to implement, the High Court found if an advantage was secured by a bribery offence, then the whole advantage is tainted by that illegality, including any costs incurred in its performance. The costs incurred do nothing to lessen the harm to the foreign country’s governance which has been corrupted, Australia’s reputation or the integrity of international commerce.

The High Court noted that the purpose of s70.2(5) is to set set the maximum penalty. Consideration was given to the history of the statutory scheme and close analysis was given in the context of applicable international law and secondary material. It found that ‘ proportionate’ in the OECD Convention was relative to the gravity of the infringement – and not to the benefit obtained by the offender – and that nothing justified imputing a different concept of ‘benefit’ to the benefit provided to a foreign public official by way of a bribe, and the benefit obtained by reason of that bribe. The offence of bribery was concerned with “providing one advantage to obtain another advantage”and “any advantage” therefore, did not invite a narrow interpretation to support the deduction of expenses.

Given the legal significance of the question before the High Court and the potential impact of the Court’s decision upon future courts’ determination in calculating the penalties involving corporate offending, in accordance with s35A of the Judiciary Act 1903 (Cth) the High Court granted the CDPP special leave to appeal. In doing so, the High Court set aside the earlier Criminal Court of Appeal order that dismissed the CDPP's appeal.

As a result, the High Court ruled in favour of the CDPP’s construction of s70.2(5), determining that the value of the benefit should be correctly calculated in accordance with the gross benefit.

This decision confirms the Court’s commitment to upholding Australia’s obligations as signatory to the OECD Convention and to interpret domestic legislation in a way that is in harmony with its principles.

The matter has been remitted back to the Criminal Court of Appeal for re-determination.

Useful links:

The King v Jacobs Group (Australia) Pty Ltd [2023] HCA 23; 97 ALJR 595

The King v Jacobs Group (Australia) Pty Ltd (summary)

OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions