Reform needed to stop multinational companies bribing their way into foreign markets

Photo: Jeremy Paige / Unsplash
Clancy Moore I 17 October 2022
As reported by Nine Media this week, two former Snowy Mountain Engineering Corporation (SMEC) executives have been charged under Australia’s foreign bribery laws. Allegedly lining the pockets of Sri Lankan officials to the tune of $300,000, the two men helped their company win over $14 million worth of contracts for two infrastructure projects.

Not a bad return of investment. The charges are a result of hours of painstaking work and dedication from the AFP and should be applauded. Though the fact that it took almost 10 years for charges to be laid, and other blind spots in Australia’s foreign bribery laws, must be addressed. 

Transparency International’s research out this week once again rated Australia’s enforcement efforts on foreign bribery as moderate. We’ve been stuck on this rating for a decade, there’s clearly room for improvement. It’s in our national interest to do better. Stonger action on foreign bribery will help drive poverty alleviation and sustainable development in our region. 

Twenty-five years after the adoption of the OECD Anti-Bribery Convention, most countries including Australia still fall far short of their obligations under the Convention. While the COVID-19 pandemic has undoubtedly posed a major hindrance to every stage of enforcement from investigation to prosecution, in many countries the downward trend predates the pandemic, and the current picture raises significant concerns.  

As Transparency International’s experience in more than 100 countries shows, bribery is one of the most direct and damaging forms of corruption worldwide. When multinational companies bribe government officials it can results in illicit profits, with huge costs and consequences across the globe. Foreign bribery diverts resources, undermines democracy and the rule of law, and distorts markets. It’s also a major reputational risk for companies, and Australian trade and investment. Australia has a poor track-record in prosecuting foreign bribery and our investigative and enforcement agencies could be better equipped to go after individuals.  

Foreign bribery is illegal in Australia, but our law makes an exception for bribes paid as facilitation payments. These are usually minor bribes made to foreign public officials in order to hasten minor routine government processes. However, in practice it can be difficult to differentiate between an exempt bribe paid as facilitation payment and an illegal bribe. A double standard exists. In Australia, bribes paid as facilitation payments are legal.  

As the SMEC case highlights, the infrastructure sector is an industry where corruption risks are high. These risks will only increase and there is massive need for infrastructure investment across the Asia Pacific, including for renewable energy projects. The Asian Development Bank estimates $30 billion USD needs to be invested in Pacific infrastructure by 2030 alone. We’re also seeing moves by China to invest in sometimes questionable infrastructure projects in the Solomon Islands and other Pacific nations.   

Australia’s resources sector, with over 700 ASX listed mining, oil and gas companies operating in more than 80 countries around the world, is particularly exposed. Many of these companies are operating in developing nations like Indonesia, PNG and South Africa. These countries are often blessed with natural resource wealth but are cursed by poor governance and corruption. Corruption risks and those of bribery are also increasing with the global demand for mineral such as copper, lithium, nickel and cobalt skyrocketing.  

In 2020, the AFP was also reportedly examining leaked documents alleging an 2011 payment by ASX-listed oil company Horizon Oil to a shell company in Papua New Guinea in relation to an oil deal. Horizon Oil itself claims that an unreleased internal report clears the company of breaching any foreign bribery laws. The AFP was also reported in 2016 to be conducting an investigation into allegations against Sundance Resources of possible bribery to win permits for an iron ore project in the Republic of Congo. 

But these examples are few and far between. 

For too long, foreign bribery has flown under the radar. Why? Because it’s very difficult to detect. Like finding a needle in a haystack, law enforcement often rely on whistleblowers, investigative journalists and companies to raise red flags. 

As a matter of urgency, we need to pass amendments to the Criminal Code Act, which have been gathering dust on the parliamentary shelf for way too long. The former government reintroduced the bill in December 2019 but left it withering on the vine. These changes must also ban ‘facilitation payments’ that can often act as bribes. Transparency International is also calling for the government to create a Deferred Prosecution Agreement (DPA) scheme to improve detection of bribery cases and increase the number of individuals prosecuted for paying bribes. Importantly it must not be allowed to become a ‘get-out-of-jail free’ card.  

The government has rightly prioritised the National Anti-Corruption Commission Bill since the May election. The latest global research is a timely reminder that we need to combat corruption on multiple fronts. Putting the amendments to the Criminal Code back on the table would be an excellent place to continue this important integrity reform agenda.