Explanatory Memorandum
(Circulated by authority of the Minister for Justice and Customs, Senator The Honourable Amanda Vanstone)Regulation impact statement
The following information is provided in accordance with Guidelines provided by the Office of Regulation Review, Industry Commission.
A. Problem identification and objective
This regulatory initiative seeks to prohibit under Australian law the bribery of foreign public officials by Australian companies or officials. The initiative is in response to the OECD Convention which came into effect on 15 February 1999 and to the 16 December 1996 UN Declaration Against Corruption and Bribery in International Commercial Transactions.
One of the OECD initiatives is to criminalise bribery of foreign public officials.
The available option which faced Australia was whether it would support this Recommendation.
As a member of the OECD and the UN, Australia is required to respond to the OECD Convention and UN Declaration.
The main argument in favour of not supporting the OECD Convention is that competitiveness of Australian business may be reduced if bribery of foreign public officials is criminalised, because many of our business competitors will not pass or enforce laws of this nature.
The main argument in favour of accepting the OECD Convention is that if countries take action on a multilateral basis to criminalise foreign bribery, serious distortion of trade could be prevented that could otherwise occur if purchasing decisions are made on the basis of the size of the bribe, rather than on the merits of a product or service.
Bribery is a serious international issue and it is in the interests of all countries to prevent the serious distortion of trade that could result if foreign bribery is not prevented.
C. Conclusion and Recommended Option
The recommended option is that Australia take appropriate steps to support the OECD Convention that bribery of foreign public officials be criminalised.
The proposed changes will potentially impact on all Australian businesses operating internationally.
Assessment of Costs and Benefits
The proposed provisions will criminalise the bribery of foreign officials. It is not possible to assess the costs and benefits as it is uncertain how much trade depends on the payment of bribes to foreign officials. For example, it has been suggested that the cost could be significant if our competitors will not pass or enforce the proposed laws. However, others take the longer term view and recognise that free trade is being undermined by the bribery of officials because purchasing decisions could be determined by the size of bribes rather than the merits of the product or service for sale.
The proposal is designed to free up competition by eliminating bribery as a hidden factor in world trade.
It is not possible to be certain of the short term impact. Some believe the proposed course of action is likely to compromise the capacity of Australian commerce and industry to compete in existing and emerging foreign markets, especially those outside the limited membership of the OECD, and against the aggressive exporters and investors from non-OECD countries. However, if countries move together on this issue, it should prevent serious distortion of trade that could result if purchasing decisions are not made on the merits of a product or service but on the size of the bribe.
On 19 February 1998 the Minister for Justice (now the Minister for Justice and Customs) released an Exposure Draft of the Bill.
The OECD Convention, together with its National Interest Analysis ("NIA"), was tabled in both Houses of the Parliament on 3 March 1998.
The States and Territories were consulted on the matter via the Commonwealth-State Standing Committee on Treaties' Schedule of Treaty Action and the Minister for Justice and Customs also contacted each of them separately on the matter.
Following the release by the Minister for Justice on 19 February 1998 of a Exposure Draft Bill the Minister forwarded a copy of the Exposure Draft to the Joint Standing Committee on Treaties. The Minister expressed the view that an inquiry by the Committee could be 'the focus of consultations on the legislation and the Convention'.
The Committee subsequently conducted an inquiry into the OECD Convention and the draft implementing legislation. For the purposes of the inquiry the Committee called for written submissions (35 were received) and conducted public hearings in Canberra on 9 and 30 March, 6 April and 11 May 1998, in Melbourne on 16 April 1998 and in Sydney on 17 April 1998. The Committee's reported was tabled on 2 July 1998.
The Committee recommended, inter alia, that Australia sign and ratify the OECD Convention and, subject to certain amendments which it recommended be made to the draft implementing legislation, that implementing legislation be introduced into Parliament as soon as practicable.
Consideration of the Bill also took place at a number of public seminars including seminars convened in Canberra and Sydney by Transparency International Australia.