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Treasury Laws Amendment (2017 Measures No. 3) Bill 2017



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ISSN 1328-8091

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BILLS DIGEST NO. 117, 2016-17 20 JUNE 2017

Treasury Laws Amendment (2017 Measures No. 3) Bill 2017 Christina Raymond Law and Bills Digest Section

Contents

Purpose of the Bill ............................................................... 2

Background ......................................................................... 2

Structure of the Bill ............................................................. 2

Committee consideration .................................................... 2

Senate Standing Committee for the Scrutiny of Bills .............. 2

Policy position of non-government parties/independents ..... 3

Position of major interest groups ......................................... 3

Financial implications .......................................................... 3

Statement of Compatibility with Human Rights .................... 3

Parliamentary Joint Committee on Human Rights .................. 3

Key issues and provisions..................................................... 3

Amendments to the ASIC Act .................................................. 3

Key validation provisions ....................................................... 3

Effect of validation provisions on court proceedings ............ 3

Constitutional compensation provision ................................ 4

Amendments to the Corporations Act ..................................... 4

Retrospective commencement ............................................... 5

Concluding comments ......................................................... 5

Date introduced: 14 June 2017

House: House of Representatives

Portfolio: Treasury

Commencement: 15 July 2001, immediately after the commencement of the Australian Securities and Investments Commission Act 2001.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at

June 2017

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Purpose of the Bill The Bill proposes to amend the Australian Securities and Investments Commission Act 2001 (ASIC Act) to retrospectively validate certain agreements to employ or engage ASIC staff made before the end of 9 March 2017.

The Bill also proposes to validate the exercise of powers by staff whose agreements are validated, where the relevant powers were delegated under the ASIC Act or other Commonwealth laws administered by ASIC including the Corporations Act 2001.

Background The extrinsic materials to the Bill indicate that the proposed amendments are intended to ‘eliminate potential legal risks that have recently become apparent’ as a result of ‘administrative oversights’ in relation to the agreements under which staff of ASIC are engaged as employees or consultants, and the administrative instruments delegating regulatory powers to those persons.1 These include coercive information-gathering powers compelling the production of documents or information that may have been used in court proceedings, such as enforcement proceedings under the Corporations Act or ASIC Act.2

The extrinsic materials indicate that one source of the irregularity is that ASIC’s internal instruments of delegation were not updated to reflect some amendments to the employment-related provisions of the ASIC Act in 1999, which conferred power on the ASIC Chairperson to engage persons outside of the Public Service Act 1999 (whereas that power was previously conferred upon ASIC as a legal entity).3 The relevant legislation then governing ASIC was the Australian Securities and Investments Commission Act 1989 (‘old ASIC Act’) which was repealed and replaced by the ASIC Act in 2001 as a consequence of the enactment of the Corporations Act.4

In his second reading speech, the Minister for Small Business stated that the irregularities will ‘only potentially affect a small proportion of ASIC staff’ and will ensure that ‘actions taken by those ASIC staff will be effective’.5 He stated that this will, in turn, ‘remove any doubt about the validity of any sanctions that have otherwise been legitimately imposed on people; and any doubt about the effectiveness of the relief ASIC has provided’.6

To this end, the Minister stated that the proposed amendments are of a technical nature only and effectively maintain the status quo. That is, they ‘will have no impact on any current or former ASIC staff members beyond ensuring the validity of their employment and actions’.7

Structure of the Bill The Bill contains a single schedule of amendments to validate agreements to employ staff or engage consultants, which contains the relevant amendments to the ASIC Act and the Corporations Act.

Committee consideration On 15 June 2017, the Senate Standing Committee for the Selection of Bills deferred its consideration of the Bill to its next meeting.8

Senate Standing Committee for the Scrutiny of Bills At the time of writing, the Senate Standing Committee for the Scrutiny of Bills had not reported on its consideration of the Bill.

1. M McCormack (Minister for Small Business), ‘Second reading speech: Treasury Laws Amendment (2017 Measures No. 3) Bill 2017’, House of Representatives, Debates, 14 June 2017, p. 14. See also: Explanatory Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, pp. 5-6.

2. Explanatory Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, pp. 6-7. 3. McCormack, op. cit.; and Explanatory Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, p. 6. 4. Corporations (Repeals, Consequentials and Transitionals) Act 2001, Part 2 and Schedule 1, item 1. 5. McCormack, op. cit. 6. Ibid.

7. Ibid.

8. Senate Standing Committee for the Selection of Bills, Report, 6, 2017, The Senate, Canberra, 15 June 2017, p. 4.

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Policy position of non-government parties/independents At the time of writing, non-government parties and independent members of Parliament do not appear to have commented publicly on the Bill.

Position of major interest groups At the time of writing, major interest groups do not appear to have commented publicly on the Bill.

Financial implications The Explanatory Memorandum states that the Bill will have no financial impact and no compliance cost impact.9

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.10

In particular, the Explanatory Memorandum states that the Bill does not raise any human rights issues, by reason of its merely technical effect in validating existing arrangements for the employment of ASIC staff or consultants, and preserving the validity of their exercise of delegated powers (that would otherwise have been valid but for the irregularity in relation to these persons’ engagement).11

Parliamentary Joint Committee on Human Rights At the time of writing this Bills Digest, the Parliamentary Joint Committee on Human Rights had not reported on its consideration of the Bill.

Key issues and provisions Amendments to the ASIC Act Items 1-7 contain proposed amendments to the ASIC Act. The key proposed amendment is item 2, which inserts new sections 249 and 250.12

Key validation provisions New subsection 249(1) contains a validation provision in relation to agreements purportedly made under the employment provisions of the ASIC Act or the old ASIC Act before the end of 9 March 2017.13 The validation provision states that such agreements are, for all purposes, taken to be and always to have been valid agreements. Two notes are inserted to explain the technical legal effect of the validation provisions, with respect to the exercise of delegated functions and powers under the ASIC Act and Corporations Act.

New subsection 249(2) provides that the validation provision in subsection (1) applies to the relevant agreements specified in subsection (1) whether or not such an agreement was expressed to be made on behalf of the Commonwealth.

Effect of validation provisions on court proceedings New subsection 249(3) provides for the effect of the validation provisions in subsections (1) and (2) on court proceedings. It provides that the proposed amendments are generally of prospective effect, and will apply to proceedings (original or appellate) that commence on or after the day on which the Bill (if enacted) receives Royal Assent, or proceedings that were commenced prior to that date if they had not been finally determined.

9. Explanatory Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, p. 3. 10. The Statement of Compatibility with Human Rights can be found at page 12 of the Explanatory Memorandum to the Bill. 11. Ibid.

12. Note that items 1 and 3 are definitional and consequential (with respect to the meaning of the term ‘old ASIC Act’). Items 4-7 are validating provisions of similar effect to new section 249 (item 2) in relation to staff members who were engaged under agreements made pursuant to the old ASIC Act, and the affected staff members purported to exercise delegated functions and powers of ASIC prior to the commencement of the current ASIC Act. Items 4-7 amend existing transitional provisions in sections 276 and 277 of the ASIC Act. See further: Explanatory Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, pp. 8-10.

13. The relevant employment provisions in both the ASIC Act and old ASIC Act are sections 120 (staff) and 121 (consultants).

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The Explanatory Memorandum indicates that this application provision is designed to ensure that ‘court proceedings that have been finally determined are not to be re-opened to give effect to the substantive provisions’ of the Bill (if enacted).14

Constitutional compensation provision New section 250 is a type of constitutional compensation provision referred to colloquially as an ‘historic shipwrecks clause’. Clauses of this kind are commonly used to manage constitutional risk arising from section 51(xxxi) of the Constitution.15 Section 51(xxxi) provides that the Commonwealth Parliament may only legislate with respect to the acquisition of property by the Commonwealth upon ‘just terms’. Legislation that results in an acquisition of property other than on just terms will be invalid.

In the event that legislation is found to constitute an acquisition of property within the meaning of section 51(xxxi), so-called ‘historic shipwrecks’ clauses purport to satisfy the ‘just terms’ requirement by imposing liability upon the Commonwealth to pay ‘reasonable’ compensation, the quantum of which can be determined by a court. This may prevent the relevant law from being held to be unconstitutional.16

New section 250 provides that the Commonwealth is liable to pay ‘reasonable compensation’ in the event that the operation of a validation provision17 would result in an acquisition of property other than on just terms within the meaning of section 51(xxxi). (This is provided, however, that the relevant ‘acquisition’ did not already trigger an existing ‘historic shipwrecks’ clause in section 1350 of the Corporations Act.)

The Explanatory Memorandum states that the compensation clause ‘is expected to apply only where the acquisition of property resulting from a validation provision would not have occurred if the agreements validated by section 249 had been valid without that section’. In other words, the relevant ‘property’ that might be found to have been acquired would be, in effect, ‘loss of a right to rely on invalidity of the agreements’.18

The Explanatory Memorandum further states that ‘it could be expected that only nominal compensation would be payable’ in such cases because ‘the claimant would be seeking a windfall gain based on a technical defect in what was otherwise a valid exercise of a delegated ASIC function or power’.19

Amendments to the Corporations Act Items 8-11 contain proposed amendments to certain transitional provisions in sections 1400 and 1401 of the Corporations Act.20 These measures are largely complementary to the proposed amendments to the ASIC Act made by items 1-7 that validate the relevant engagement of ASIC personnel.

In particular, items 8-11 extend the operation of the existing transitional provisions in sections 1400 and 1401 of the Corporations Act, so as to effectively preserve rights or liabilities accrued as a result of the purported exercise of powers by ASIC personnel whose employment arrangements were validated by new section 249 of the ASIC Act.21

14. Explanatory Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, p.10. 15. Such clauses are sometimes referred to colloquially as ‘historic shipwrecks clauses’ reflecting their first use in the Historic Shipwrecks Act 1976, section 21. Contemporary Commonwealth drafting policy with respect to the use of these clauses is set out in: Office of Parliamentary Counsel, Drafting direction no. 3.1—constitutional law issues, reissued January 2017, pp. 2-3. A useful summary of these clauses is also

provided in: Australian Law Reform Commission (ALRC), Traditional rights and freedoms: encroachments by Commonwealth laws, Interim report, 127, ALRC, Sydney, July 2015, paragraph [7.33]. Importantly, these clauses do not concede that the legislation to which they apply amounts to an acquisition of property within the meaning of section 51(xxxi) of the Constitution, but rather impose an obligation upon the Commonwealth to provide just terms, in the event that a court held that the relevant legislation effected an acquisition of property. 16. The High Court has generally held that legislation that provides for the payment of ‘reasonable compensation’ as determined by a court is

legislation that provides for ‘just terms’ within the meaning of section 51(xxxi) of the Constitution. See, for example: Wurridjal v Commonwealth (2009) 237 CLR 309, [2009] HCA 2, 389 (Gummow and Hayne JJ) and 429 (Heydon J). 17. New subsection 250(4) defines a ‘validation provision’ to mean new section 249 (item 2) and the proposed amendments to provisions of sections 276 and 277 implemented by items 4-7. 18. Explanatory Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, p. 11. 19. Ibid.

20. Sections 1400 and 1401 of the Corporations Act effectively preserve the substance of rights and liabilities that existed under repealed or carried over provisions of the old corporations legislation, which was repealed and replaced by the Corporations Act. They do so by creating new, equivalent rights or liabilities.

21. New paragraphs 1400(1)(a) and (b) (item 8), new subsections 1400(5) (item 9), new paragraphs 1401(1)(a) and (b) (item 10), and new subsection 1401(5) (item 11). See further: Explanatory Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, pp. 9-10.

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Items 9 and 11 also deal with the effects of validation on court proceedings, by inserting into sections 1400 and 1401 of the Corporations Act provisions corresponding to new subsection 249(3) of the ASIC Act as inserted by item 2 (discussed above).22

Retrospective commencement Subclause 2(1) (table item 1) of the Bill provides that the proposed amendments to the ASIC Act and the Corporations Act in Schedule 1 (detailed above) will commence retrospectively, from 15 July 2001, immediately after the commencement of the ASIC Act. The Explanatory Memorandum states that retrospective commencement is necessary to ensure the validity of all affected agreements to engage staff of ASIC from the time of their making.23

Concluding comments The proposed amendments will ensure that previous engagements of ASIC staff, and the exercise of powers by those staff, have a valid legal foundation by retrospectively curing technical irregularities in those appointments that may cast doubt upon their validity.

While the extrinsic materials to the Bill do not identify any specific issues or cases of concern that led to the identification of the need for the proposed amendments, the proposed measures are fairly described as purely technical. They do not appear to substantively change the legal rights or liabilities of regulated entities—that is, either the ASIC personnel whose engagements are validated; or the entities that are the subject of any delegated regulatory powers exercised or functions performed by the relevant ASIC personnel.

As such, the Bill appears to be a sensible and prudent step to remediate a legal risk that otherwise valid exercises of regulatory powers (such as powers of enforcement) could be invalidated purely on the grounds of technical defects in the appointment of the person or persons to whom those powers were delegated.

The Bill also contains some safeguards in relation to its retrospective commencement that would appear to minimise the potential for arbitrary consequences for regulated entities. These include the exclusion from the scope of the validation provisions of court proceedings that are finally determined (such as decisions on proceedings at first instance where the appeal period has expired, or decisions on appeal in which the period for any further appeal has expired).24

Further, the ‘historic shipwrecks’ clause in item 2 (new section 250 of the ASIC Act) will ensure that the Commonwealth is liable to pay compensation on just terms, if a court were to decide that the amendments effected an acquisition of property (for example, by extinguishing the right of a regulated entity to rely on the invalidity of the agreements under which an ASIC officer was engaged, as the basis for challenging enforcement action).25

22. New subsection 1400(6) (item 9) and new subsection 1401(6) (item 11). See also: Explanatory Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, p. 10. (Note that items 9 and 11 also insert new subsections 1400(7) and 1401(7) (respectively) that provide that sections 1400 and 1401 (as amended) do not limit the operation of new section 249 of the ASIC Act. This appears to be an ‘avoidance of doubt’ styled clause to prevent unintended interpretive consequences.)

23. Explanatory Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, p. 11. 24. Schedule 1, items 2, 5, 7, 9 and 11. See also Explanatory Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, p. 10. 25. See also, Explanatory Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, pp. 10-11.

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