Fifty years ago the United States Supreme Court handed down its decision in Jacobellis v Ohio, holding that the state could not ban a French film, Les Amants, which it considered obscene.

Agreeing with the majority, Justice Potter Stewart secured his place in the canon with his discussion of ‘hard-core pornography’.

The judge was unable to provide an exhaustive definition of that term, he wrote. “But I know it when I see it.”

One might think that hard-core porn and corruption have something in common. But yesterday Australia’s High Court declined to take the Stewart approach to lexography, providing a detailed interpretation of “corrupt conduct” that will have serious implications for the kind of matters ICAC can investigate.

Before we get to that, let's all enjoy this pivotal scene from Les Amants.

So what does this French romance have to do with corrupt MPs in NSW?

Late last year, Deputy Senior Crown Prosecutor Margaret Cunneen received a summons requiring her to appear before Independent Comission Against Corruption to give evidence to an inquiry into her conduct. The allegation was that she and her son had advised her son’s girlfriend to fake chest pains at the scene of car accident in order to prevent her being breathalysed. This, supposedly, was done with the intentiontion of perverting the course of justice. Cunneen denies the allegation.

As lawyers are wont to do, Cunneen raced over to the Supreme Court, demanding that it put a stop to the investigation. She was unsuccessful, but a few weeks later found favour with a majority of the Court of Appeal.

Now, embarrassingly for the corruption watchdog, the High Court has dismissed ICAC’s appeal. It found that ICAC had no power to investigate the kind of conduct Cunneen has been accused of.

The Court’s task was, as it often is, to construe the meaning of words far removed from the human drama – in this case, the phrase “adversely affect”.

According to the ICAC Act, which created the body and gives it its powers, the comission's remit is to investigate “corrupt conduct”. But like hard-core porn, corruption is surprisingly difficult to define, and the ICAC Act doesn’t provide much help.

The Act specifies two broad categories of corrupt conduct. The first is conduct by a public official that is dishonest, partial, involves a breach of public trust, or involves the misuse of information, or conduct that adversely affects the honest or impartial exercise of a person’s official functions. That category is clear enough.

The High Court was concerned with the second category, which is the conduct of any person that adversely affects, or that could adversely affect, the exercise of official functions by public officials, when that conduct also involves malfeasance like election fraud, theft, or – importantly here – perverting the course of justice.

The question confronting the Court was the meaning of “adversely affect”.

ICAC argued that the phrase should mean exactly what it says: conduct would adversely affect the exercise of official functions if it impeded the efficacy of the exercise of those functions.

Cunneen countered that the conduct had to affect the probity of the exercise of those functions – that it had to lead to some dishonesty or immorality on the part of the public official.

The reason this mattered is that the public official whose conduct was supposedly adversely affected was not Cunneen in her role as a Crown Prosecutor, but the police investigating the crash.

ICAC argued that by perverting the course of justice, Cunneen had adversely affected the police’s exercise of their functions. Cunneen’s job was entirely irrelevant – she could have been anybody, and her conduct would have still constituted “corrupt conduct”, and ICAC could still have investigated it.

But after looking at the context of the Act and its purpose to promote the integrity of public administration, and doing a complicated statutory interpretive dance, the Court came down on the side of Cunneen’s interpretation.

It held that corrupt conduct must adversely affect the exercise of an official function in a way that leads to dishonesty, a breach of public trust, or the misuse of information in the exercise of that function.

Because the police officers acted honestly, Cunneen’s alleged conduct was not “corrupt conduct”, and ICAC is powerless to investigate it.

As the majority pointed out, ICAC’s interpretation would have allowed it to use its extraordinary powers to investigate matters which nobody would consider to be corruption – where a thief steals a council’s garbage truck, for example, or any occasion where a person lies to a police officer to deflect them from instituting a prosecution. The fact that ICAC decided to investigate the allegations against Cunneen, which hardly constituted corruption, seems to suggest the wisdom of reining in its powers.

But the majority neglected to mention the fact that now some conduct which most people would consider corruption is beyond ICAC’s reach.

The decision means that “corrupt conduct” now excludes a situation a person acts fraudulently, hoodwinking a public official, no matter the consequences.

As the dissenting judge Justice Gageler pointed out, ICAC will now have no power to “investigate, expose, prevent or educate about State-wide endemic collusion among tenderers in tendering for government contracts”, or to investigate serious and systemic fraud in the making of applications for licences under NSW laws.

This kind of corruption has been part of ICAC’s repertoire for years. Take, for example, Operation Credo, which has led to the downfall of Arthur Sinodinos and Barry O’Farell and made Nick Di Girolamo a household name, and which was put on hold for the Cunneen litigation to run its course.

The allegation is that members of Australian Water Holdings misspent money received from Sydney Water, a public body, and prevented Sydney Water from working out AWH’s true financial position, including how much it was paying its execs.

If Sydney Water did not act dishonestly but AWH wrongly got away with public funds, the High Court doesn’t consider that to be “corrupt conduct”, and ICAC can’t touch it.

So some “know it when I see it” corruption is now outside ICAC’s reach.

Of course, ICAC will still have power to investigate pollies. Central Coast ex-MP Chris Hartcher’s alleged slush fund could still fall within “corrupt conduct”. But, problematically for even those inquiries which will be left standing, ICAC may not be able to use evidence uncovered in the course of an inquiry that yesterday’s decision means was outside its powers.

It seems the only clear winner here is Margaret Cunneen.

Of course, it’s always open to the good folks of the NSW Parliament to change the Act to address these concerns. It’s just a pity that parliamentarians have a vested interest in neutering ICAC’s powers.