Maximum penalties set to rise as Australia's Anti-Corruption Landscape Continues to Sharpen: The Decision in The King v Jacobs Group (Australia) Pty Ltd

If you frequently work with the Commonwealth government or foreign governments, you should be aware of new developments in the calculation of maximum penalties under Australia’s anti-bribery laws. These come right after the commencement of Australia’s new National Anti-Corruption Commission (NACC) which has signalled a weather change in the Commonwealth government’s approach to those who engage in corrupt conduct with public officials.

The High Court’s recent decision in The King v Jacobs Group (Australia) Pty Ltd [2023] HCA 23 has added new emphasis to this shift in attitude. The decision has created the potential for much higher penalties for bribery of public officials by clarifying that where a maximum penalty is determined by the benefit obtained from the offending conduct, the Court will calculate penalty by reference to the gross amount received and not the ‘net benefit’ after costs.

For those industries that often engage with the Commonwealth and foreign governments (e.g. construction, as it was here), this serves as a timely reminder of the potential consequences of corrupt conduct. The decision has broader implications and may result in higher maximum penalties under other penalty regimes where penalties are calculated by reference to the value of the benefit obtained from contravening conduct.

 

The High Court’s Decision

In this case, the High Court was concerned with the construction of section 70.2(5) of the Commonwealth Criminal Code which prescribes the maximum monetary penalty if a company bribes, or conspires to bribe, a foreign public official. That provision provides that the maximum penalty will be the greatest of:

• 100,000 penalty units (USD31,300,000 as at the time of this article);
• if the court can determine the value of the benefit obtained that is reasonably attributable to the conduct constituting the offence – three times the value of that benefit;
• if the court cannot determine the value of the benefit obtained – 10% of the annual turnover of the company

Section 141.1 of the Criminal Code contains an identical provision that applies where a company bribes, or conspires to bribe, an Australian Commonwealth public official.

In interpreting the “value of the benefit obtained” in paragraph (b), the Court unanimously held that this should be understood as the gross amount in fact received by the offending company as a result of the bribery. Jacobs Group had submitted that the benefit should be calculated on a net basis, reducing the amount received by the costs incurred by the offender. The Court found that that construction would be inconsistent with the provision’s stated purpose of being “effective, proportionate and dissuasive”. A ‘net benefit’ approach would be prone to uncertainty flowing from differences in calculating the “costs” of a contract. That uncertainty is likely to give rise to inconsistency in the application of the provision and the undermine its effectiveness. The ‘gross amount’ approach avoids these shortfalls and ensures consistent application of the provision.

 

Crackdown on corruption

The Court’s interpretation creates the potential for much higher penalties for bribery of a public official. In this case the High Court’s decision increased the maximum penalty available from USD11 million to approximately USD30 million.

The decision comes at a time where there is an increased focus on corruption as Australia’s new national anti-corruption body, the NACC commences operations. Companies that frequently work with Commonwealth public officials should not only be cognisant of the potential for much higher penalties for bribery offences, they should also keep in mind the NACC’s investigative powers and functions.

The NACC can investigate the conduct of any person (whether or not a public official), if the conduct being investigated adversely affects, or could adversely affect, a public official carrying out their official role in a dishonest or biased manner. “Public official” is defined broadly in the NACC Act and includes contracted Commonwealth service providers, and their officers or employees. Meaning private sector companies, their directors, officers, and employees come within the NACC’s investigative purview.

(Read our earlier article on the NACC below)

Companies that frequently work with Commonwealth government should wisely take proactive steps to avoid falling foul of the NACC and anti-corruption laws. Those steps include understanding the NACC, reviewing your anti-bribery and corruption policies, ensuring their proper implementation so that your employees and third party business partners are aware of your organisation’s approach toward combatting bribery and corruption, and understand that they need to comply with these policies, considering whether current public reporting and any procurement concerns including those raised by internal audits concern your company and developing an NACC investigation response plan for your company and its people.

Also, be alert to the fact that legal professional privilege and privilege against self-incrimination cannot be used to avoid compliance with NACC notices.

 

Broader implications

The High Court’s decision has broader implications for the calculation of maximum penalties under other regulatory frameworks.

For example, the Australian Competition and Consumer Commission, the Australian Securities and Investment Commission and the Office of the Australian Information Commissioner each enforce penalty regimes where the maximum penalty available for contravening conduct may be calculated as three times the benefit derived from that conduct. It is now open to these regulators to seek to apply the High Court’s reasoning to their penalty regimes such that the value of the “benefit derived” is understood to be the total gross amount received from contravening conduct, raising the cap on maximum penalties.

The decision in The King v Jacobs Group (Australia) Pty Ltd underscores renewed focus on anti-bribery and corruption in Australia and may have far reaching consequences for the penalties imposed in other regulatory contexts, including under Australia’s competition, consumer protection, financial services and data protections laws.