Address to International Commercial Law and Arbitration Conference
Austrade’s role in promoting trade and investment in compliance with the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions
Speech by Bruce Gosper, CEO Austrade
22-23 August 2013
Sydney
Corruption distorts the market mechanism. It is, in essence, a market failure where free reign of unethical practices undermines the most efficient operation of markets, retarding their capacity to deliver sustainable wealth-creation and growth.
Where Australian companies face corrupt behaviour in an overseas market, our first duty is to bring that behaviour to the attention of local authorities and seek to have it addressed.
While the effects of corruption are felt by everyone, and economic development is undermined, the impact is perhaps greatest on the poorest people in the poorest countries – another reason why we must continue to work to defeat these corrosive practices.
This means working with governments, multi-lateral organisations such as the OECD and G20, and other partners to raise awareness of legal obligations and to work toward sound governance systems and practices around the world.
By way of opening today, I want to set the scene by taking a few moments to outline what my organisation, Austrade, does and what’s expected of us. I will then talk about how Austrade advises Australian companies doing business in some challenging markets and how we train our own staff to identify and deal with corrupt practices.
Introduction
The Australian Trade Commission – Austrade – is the Australian government’s trade, investment and education promotion agency. We have a long and proud history of promoting Australia’s trading interests overseas, with the first trade commissioner, Mr Edward Little posted to Shanghai in 1921. Austrade was established in its current form as a Commission in 1986.
Austrade’s aim is simple – to contribute to Australia’s economic prosperity by helping Australian business, education institutions, and governments as they develop international markets, win foreign direct investment, and promote international education.
Austrade helps companies understand the opportunities available in different markets by generating market information and insight – and by linking businesses to those opportunities through our global network of contacts. We also promote Australian capabilities offshore and leverage the badge of government.
Austrade is a large, dispersed network. We operate in 86 locations in around 50 markets, and we provide consular and passport services in 16 of those locations. Our people have broad experience. In fact, about two-thirds of our senior people – our SES officers and trade commissioners – have previous experience in the private sector, bringing first-hand knowledge of the issues faced by commercial organisations.
We create value for the Australian business sector, and do it in a way that represents a good spend of the taxpayer dollar. With that in mind, we have sharpened our focus on Asia in recent years, given the opportunities for Australian business in that region, and we now have 44 offices in 15 different markets there.
However, Australia’s business interests remain global, and Austrade has people in the Middle East, Europe, Central Asia, Africa, and South America, seeking commercial opportunities and promoting Australian education. We are also stationed in places like New York, London, and other developed markets, working mostly on investment attraction and education promotion.
While Austrade’s role might sound straightforward, it is worth remembering that our work occurs in complex environments. As you would appreciate, the regulatory regimes and issues encountered by our staff differ markedly across our global operations, similar to any large multi-national company.
Our role is also a relatively unique one. To succeed, our people need to work closely with business, governments, industry associations, and other organisations. A critical part of that role is enhancing the reputation of Australia, and of Australian business and industry, in terms of quality, service and, importantly, business practice and ethical behaviour. And, of course Austrade must always act in a way that meets or exceeds legal obligations as well as all appropriate standards of ethical behaviour.
In the increasingly globalised and interconnected world of international trade, Austrade is acutely aware of its obligations under the law and its role in helping Australian companies to be aware of theirs. In doing that, we do not underestimate the problem or its complexities. Today, I want to explore some of those complexities and how we at Austrade deal with them.
The environment
Australian firms are becoming more and more integrated with our near neighbours and with the rest of the world. They are not only dealing with extended production chains and rapidly changing market environments, but also with a broad spectrum of cultural and economic practices.
They must achieve commercial objectives while, at the same time, upholding ethical and legal standards. And they are required to do that while working in countries without robust regulatory regimes, or where business practices operate according to different ethical standards.
Where companies face such behaviour and practices, we bring that to the attention of local authorities and seek fair competition.
It is critical Australian firms understand their obligations in the jurisdictions where they operate. They must also exercise sophisticated judgement and understanding of the broader economic and political scene. Companies are regularly highlighted in the media nowadays for potential breaches of legal and ethical codes where the conduct involved has been far more subtle and elaborate than the traditional forms of corrupt behaviour we might be used to.
In an age of increasing scrutiny, we see more and more cases brought to our attention which require analysis and thought to identify which side of the ethical or regulatory fence they fall on and where the relevant responsibility lies. While overt bribery using cash is the ‘blunt instrument’ of corruption, there are much more complex practices relating to facilitation payments, gifts and excessive hospitality, third-party transactions, and the exercise of influence, where conduct can breach Australian or foreign laws or compromise ethical standards.
Take for example, the recent media story of a well-known investment bank and its alleged hiring of the children of well-placed politicians in a key market. Some people might say this is good business strategy, others that it is an attempt to exert unfair and dishonest advantage. Legally, that’s still to be tested in this country.
To take another example, should a CEO of a company offer to provide accommodation for the daughter of a senior foreign government minister while she undertakes research on a suitable university?
Whether that CEO offers accommodation for a week or a month demonstrates a subtle difference: a goodwill gesture on the one hand, or a possible attempt to win favour on the other. This is made far more difficult where there is no decided Australian case law on these points.
The inclusion of ‘out-of-country training programs’ in contracts is another example. Under those programs, the employees of a local partner company may visit Australia for training. That seems simple enough, especially if that training meets a business need. However, it may present difficulties for Australian companies where the training could be interpreted as an incentive to gain or retain a business advantage, particularly if coupled with other social events organised for the visiting employees.
Companies need to understand how they may be at risk by engaging in activities that seek to gain advantage, even if that activity is not a considered a ‘bribe’ in the traditional sense.
Austrade policy, training, and advice
We have re-shaped Austrade’s international network towards the more difficult and less well-understood but higher growth markets of Asia, Africa and Latin America. As a result, we find ourselves operating in locations that are rated by Transparency International as high on their Corruption Perception Index. It is a challenge to provide trade facilitation services in such countries where companies feel that, in order to compete for business, the only option is to break the law. But breaking the law is not tolerated by Austrade.
There is an expectation from our clients that Austrade will know the practical ‘ins and outs’ of business in any particular country – and sometimes there is the misperception that working with Austrade will guarantee protection from unclear local laws. We actively guard against this perception. Austrade works closely with Australian business but – and this is a critical point – Austrade stays out of our clients’ commercial dealings, decision-making and disputes.
However, despite Austrade’s advice, the companies we assist may choose to break the law in the face of a competitive and corrupt market. They may assume it is alright to break the law as that seems to be the accepted practice and ‘everyone is doing it’.
As you well know, that is not a defence that will stand up in a criminal prosecution, and it’s a perception Austrade takes a strong stand against. If confronted with situations where the only option seems to be to bribe or engage in some other form of corrupt conduct, Austrade’s advice to clients is clear and unambiguous – ‘don’t do it’ and don’t expect us to assist or advise you how to break the law. Austrade will report any credible evidence of bribery to the Australian Federal Police should we become aware of it.
We acknowledge this can be a difficult position to take, with short-term disadvantages for business, particularly smaller businesses that may feel they lack the necessary bargaining power to compete without getting down in the mud with competitors.
Of course, when Australian companies tell us they face corrupt behaviour, our first duty is to bring that behaviour to the attention of local authorities to seek to have it addressed.
Our challenge is to uphold the law, and to be useful and practical within the scope legitimately provided by the law.
A recent example provided by one of our Posts illustrates my point. An Australian firm keen to access a government-coordinated project invited government representatives to a neighbouring country – an attractive tourist destination with six star resorts – to inspect one of the company’s projects firsthand. Our Trade Commissioner rightly drew the firm’s attention to the potential bribery risks and, importantly, to the perception that the venue and hospitality could be considered an inducement to buy influence. Our strong recommendation was that the company make sure the trip didn’t include lavish hospitality and that all expenses be correctly documented.
Identifying ethical local agents to work with Australian companies is another area where Austrade needs to exercise considerable care. In some countries, agents are an essential means of contracting with government. However, the use of agents creates an inherent risk, as confirmed in the last OECD Working Group’s report.
Austrade has developed guidelines for Australian businesses to help them identify and use foreign agents in a way that will help reduce that risk. In some cases, in some markets, Austrade may play a role in identifying potential agents for Australian exporters. However, in those cases Austrade will identify a range of agents for an exporter to select from, and it is made clear that the exporter – not Austrade – must conduct the necessary due diligence. Austrade is also working with business groups, chambers of commerce, and other organisations on anti-bribery outreach programs.
Within Austrade there are challenges as well. Many of Austrade’s overseas Posts are supported by Australian-based staff who understand the obligations imposed by Australian law. However, much of the assistance is provided by locally engaged personnel who are usually foreign nationals.
Austrade has to ensure all our personnel have a robust understand of the standards required of their work for the Australian Government and with Australian companies. They must comply with and the standards required under Australian law, despite the fact their personal, day-to-day experiences may not be consistent with those standards.
Austrade has taken strong steps to ensure compliance with law and with Austrade policy through staff-wide training, refresher courses, and through a review of our governance structures. We provide training to all staff on ethical standards and their legal obligations. That training is provided on commencement with Austrade, before overseas postings, and in regular face-to-face anti-bribery workshops.
Our Anti-Bribery Policy sets out the elements of Australia’s anti-bribery legislation and the mechanisms in place for reporting and responding to allegations. The policy helps employees understand what is considered a bribe and provides advice as to what to do if they come across activities they suspect may involve bribery. This provides an important mechanism for staff to protect Austrade and protect themselves. The policy also encourages employees to make clients aware of their anti-bribery obligations under the law and also make it clear to clients that Austrade staff will not assist, carry out, condone or ignore any act of bribery.
The Australian Public Service Values also require the highest standards of ethical behaviour from public sector staff and this is reinforced in the Code of Conduct and in every public sector agency’s management policies.
We have very good people who are passionate about helping business get results but our role is very clear: Austrade assists Australian firms which operate internationally, but only in compliance with Australian law and the laws imposed by other jurisdictions.
Conclusion
I hope today I’ve managed to give you sense of how Austrade helps Australian companies to do business in markets around the world in a way which meets legal obligations and ethical standards.
I also hope I’ve given you a flavour of the types of challenging situations on the ground that Australian companies can find themselves in – and how Austrade helps guide them through those challenges.
As an organisation made up of committed professionals, Austrade remains ever vigilant in the fight against corrupt practices. We actively support the work of international organisations like the OECD and Transparency International and we will keep working – through the G20 and through Australia’s aid program – on improved governance and on helping other countries tackle bribery and corruption. It’s not just about the OECD convention, but about using all the mechanisms available to us. It is also crucial that we continue to implement and re-shape policies as required, and ensure our people are highly trained and skilled and able to identify and minimise this business risk.
Thank you.
ENDS
For further news and information from the Australian Trade Commission (Austrade) visit www.austrade.gov.au/mediacentre.
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