2022-2023

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

WATER AMENDMENT (Restoring our Rivers) BILL 2023

EXPLANATORY MEMORANDUM

(Circulated by authority of the Minister for Environment and Water, the Hon. Tanya Plibersek MP )

 

WATER AMENDMENT (Restoring our Rivers) BILL 2023

GENERAL OUTLINE

The Murray-Darling Basin is the largest and most complex river system in Australia. It covers 1 million square kilometres of south-eastern Australia, across New South Wales, Queensland, South Australia, Victoria and the Australian Capital Territory.

A healthy and sustainable river system is important for Basin communities, agriculture, industry and First Nations. It sustains irrigation, tourism, recreation, cultural use and provides critical drinking water.

Many years of over-allocation of water, exacerbated by the Millennium drought, has resulted in major social and environmental impacts to the Murray-Darling system and its communities. This is why in 2007, the Australian Parliament passed the Water Act 2007 (Cth) (the Water Act) with bipartisan support. This established the Murray Darling Basin Authority and the Commonwealth Environmental Water Holder and laid the foundations for the Basin Plan. The Basin Plan was then adopted by the Australian Government and all Basin States in 2012 as there was widespread agreement that the Basin needed to be protected for future generations.

The Basin Plan sets the amount of water that can be taken from the Basin each year, leaving an environmentally sustainable level for the rivers, lakes and wetlands and plants and animals. In addition to managing water allocation, the Basin Plan ensures water quality and salinity levels are actively managed through state Water Resource Plans.

Key elements of the Basin Plan are due to be completed by 30 June 2024. The Murray-Darling Basin Authority (the Authority) has advised that full implementation of the Basin Plan will not be possible by this date.

In addition, water markets in the Basin have outgrown their current regulatory settings. This has led to concern in Basin communities that water trading lacks transparency, integrity and accountability. 

The purpose of the Water Amendment (Restoring Our Rivers) Bill 2023 (the Bill) is to amend the Water Act and the Basin Plan to implement the:

·          Basin Plan in full, including recovering 450 gigalitres (GL) of additional environmental water; and

·          recommendations from the Water Market Reform: Final Roadmap [1] (Roadmap) to restore transparency, integrity and confidence in water markets and water management in the Basin.

Implementation of the Basin Plan Overview

 

Key elements of the Basin Plan are due to be completed by 30 June 2024. Full implementation of the Basin Plan will not be possible by 30 June 2024, under the current settings.

 

The Water Act and Basin Plan set two water recovery targets (‘the targets’):

·          a target of 2,750 GL to ‘Bridge the Gap’ to long-term average sustainable diversion limits (SDLs). This reflects the difference between the amount of water that had previously been taken from the Basin for consumptive use prior to 2012 and the SDLs set by the Basin Plan to reduce that take to environmentally sustainable levels.

·          a target to recover 450 GL of additional environmental water (‘the 450 GL target’).

Schedules 1 and 2 to the Bill would amend the Water Act and Basin Plan to enable the delivery of the Basin Plan by:

·          ensuring all options are available to deliver the 450 GL target, including purchasing water entitlements.

·          removing all impediments to enable the delivery of the Basin Plan including by repealing the statutory 1,500 GL cap on Commonwealth water purchases and enabling funds from the Water for the Environment Special Account (WESA) to be used more flexibly to enhance environmental outcomes in the Basin.

·          providing additional time for Basin States to deliver their Sustainable Diversion Limit Adjustment Mechanism (SDLAM) projects that would contribute towards the Bridging the Gap target by December 2026.

 

·          ensuring the Basin States are held to account for meeting their SDL obligations.

·          improving the approach for delivering constraints relaxation projects across the Southern Basin.

·          delaying the Water Act review until 2027 to ensure the focus remains on Basin Plan delivery and the Authority’s review of the Basin Plan which is due in 2026.

Delivering 450 GL of additional environmental water

The WESA was established to fund projects to deliver the 450 GL target. The 2 ^nd independent statutory review of WESA (the review), conducted in 2021 by an independent review panel, confirmed that the 450 GL target would not be recovered by 30 June 2024. The review also found that it is not possible to reach the 450 GL target through the current efficiency measures program.

For this reason, it is necessary to expand the type of projects that can deliver the 450 GL target. This would allow a range of new measures to be used to deliver the target including, but not limited to, water purchases, land and water purchase packages, transferring over-recoveries (if applicable) and other projects. These new measures and projects would deliver water access entitlements to the Commonwealth to contribute towards the 450 GL target.

It is also necessary to extend the timeframes to deliver the 450 GL target. The new key timeframes are:

·          31 December 2026 - the date on which the Authority would undertake a reconciliation of the Commonwealth’s progress towards delivering the 450 GL of additional environmental water. This would occur alongside the reconciliation of what has been achieved by the SDLAM projects towards the Bridging the Gap Target.

·          31 December 2027 - the last date contracts can be entered into to achieve additional water for the environment towards the 450 GL target. This would provide sufficient time to deliver any additional water for the environment that may not have been recovered by reconciliation .

To ensure consistency, the current accounting method used to calculate progress towards the 450 GL target would apply to the new measures and projects available to meet the target. The new measures would not be subject to the socio-economic test set out in section 7.17 of the Basin Plan. The Australian Government would instead invest in Basin communities impacted by further water recovery to support social and economic outcomes while also delivering progress toward the target.

Removing unnecessary impediments to achieving water delivery targets

To ensure the Basin Plan can be fully implemented it is necessary to remove impediments from the Basin Plan and Water Act that restrict the Government’s ability to deliver on the two water recovery targets. This includes repealing the 1,500 GL limit on water purchases (Part 2, Division 5 of the Water Act) and amending the WESA. Currently, 1,228.3 GL has been purchased.

The Bill would ensure that funds would only be spent on projects with the substantial aim of enhancing environmental outcomes by protecting and restoring environmental assets of the Basin as well as protecting biodiversity dependent on Basin water resources. Importantly the amendments will ensure that WESA funds can be spent on water purchase programs for the 450 GL target, if they achieve those outcomes.

Without these amendments the $1.3 billion that is currently in WESA cannot be spent on projects that would substantially enhance environmental outcomes in the Basin.

While the Government is committed to delivering the 450 GL target by 31 December 2027, if there are uncommitted funds in WESA by that date, the Water Minister would have the discretion to return the funds to the Commonwealth’s Consolidated Revenue Fund.

Sustainable Diversion Limit Adjustment Mechanism projects

The Government remains committed to achieving the Bridging the Gap recovery target. This Bill would provide Basin States with an additional two and a half years to deliver projects that would reduce the need to buy water to Bridge the Gap.  If Basin States can deliver new projects that would be operational by 31 December 2026, they would be able to do so. These amendments are necessary to provide viable projects with an opportunity to Bridge the Gap without resorting to water buy backs.

Sustainable Diversion Limit compliance

At present, the SDL compliance framework lacks clarity. These amendments would provide the Inspector-General of Water Compliance with the responsibility to determine whether a Basin State has:

·          failed to meet the relevant SDLs.

·          has a reasonable excuse for any such failure to meet the SDL.

The amendments would also enable the Inspector-General of Water Compliance to:

·          issue guidelines for Basin States to follow in developing an action plan to address their failure to meet the SDLs.

·          require an action plan to be submitted by a Basin State that has been non-compliant, which demonstrates how that non-compliance would be rectified.

These amendments are necessary to clearly delineate the functions of the Authority from the Inspector-General of Water Compliance. They also increase the transparency and accountability of Basin States if they fail to meet an SDL.

Delivery of water for the environment (‘constraints’)

There are impediments (‘constraints’) to delivering environmental water to high value floodplain forests and wetlands across the Basin. The Basin Plan recognises the importance of getting water to these floodplain assets and establishes a framework to remove these constraints.

There are a number of projects funded through the SDLAM to remove these impediments. What has been delivered so far has provided a better picture of what needs to be done further and revealed that more time is required to complete these projects.

The amendments propose a pathway for the Authority to develop, in consultation with the Commonwealth and the Basin States, an implementation roadmap complementary to the existing Constraints Management Strategy. The roadmap will support delivery of priority on-ground actions to remove constraints by December 2026 and enable improved planning and co-ordination across jurisdictions.

 

Water Act Review

These amendments would delay the Water Act review from 2024 until 2027 to ensure that:

·          the focus remains on the delivery of the Basin Plan in full. If the Water Act review remains in 2024, it would be a distraction from the delivery of the Basin Plan.

·          it is informed by the outcomes of the Basin Plan review which is due to be completed in 2026.

This would provide a better basis for the Water Act review to consider the best framework to deliver these outcomes.

Water markets reform

Australia’s water markets have become increasingly valuable over the last two decades, reflecting a trend of rising demand for water and investment in agricultural systems requiring continuity of supply. Murray-Darling Basin water markets are critical to Australian agriculture and the many communities that live and work in the Basin. In 2020-21 it was estimated that the value of water traded in the Basin was the equivalent of $4.6 billion and this value continues to rise. The current regulatory settings are not fit for purpose given the size and complexity of today’s water markets.

There is no single water market within the Basin. Rather there are independent and related markets that are based on the connection of natural water systems across a wide variety of product types and geographic areas. These markets have allowed water trading between users (who are mainly irrigators) in response to fluctuations in irrigator needs, water availability, commodity prices and local conditions. Trading water can include a range of activities including buying or selling tradeable water rights, which are generally separate from land ownership rights.

In August 2019, the Treasurer directed the ACCC to review the operation of these markets and recommend reforms. In February 2021, the ACCC delivered its comprehensive report - with 29 recommendations for water market reform, and 70 proposed actions (Final Report for the Murray-Darling Basin Water Markets inquiry [2] ). Throughout the inquiry, the ACCC heard various concerns from irrigators and other market participants about Basin water markets and trading behaviours that can undermine the integrity of markets.

The ACCC inquiry concluded that these water markets lacked some of the basic protections that existed in comparable markets of this size and that necessary regulatory safeguards don’t apply to water markets intermediaries. The ACCC also found there was a lack of quality, timely and accessible information on which water market participants could rely when making trading and investment decisions. The inadequate record keeping requirements also impaired the detection and enforcement of misconduct in water markets.

To address these concerns, the Australian Government appointed Mr Daryl Quinlivan AO as the Independent Principal Adviser to develop a roadmap for implementing the water market reforms recommended in the ACCC’s report. On 11 October 2022, the Water market reform: final roadmap (the Roadmap) was published, following extensive consultation with water market participants, including Basin State governments, irrigation infrastructure operators, water market intermediaries and other market participants. It was supported in principle by all Basin State governments in the Murray-Darling Basin Ministerial Council meeting of 12 October 2022.

The Roadmap outlines 23 recommendations that aim to restore transparency, integrity and confidence in water markets and water management in the Basin. These recommendations were all accepted in principle by the Australian Government.

The key recommended reforms require new legislation to provide improved integrity and conduct measures, supported by new data collection and reporting requirements (and planned new digital infrastructure).

Schedule 3 to the Bill would amend the Water Act to introduce the following water markets reform measures aimed at improving the transparency and integrity of water markets in accordance with key recommendations from the Roadmap:

·          new water markets functions and powers for the ACCC, the Bureau of Meteorology (Bureau) and the Inspector-General of Water Compliance, including compliance and enforcement powers and information sharing powers. This includes consequential amendments to the Competition and Consumer Act 2010 and the Basin Plan.

·          ­provisions prohibiting insider trading and market manipulation in water markets.

·          a new enabling framework for the establishment of mandatory Commonwealth Water Markets Intermediaries Code (the Code), including a new power to make regulations to provide for the Code and provisions for the monitoring and enforcement of the Code.

·          a new framework for statutory trust accounting requirements for water market intermediaries who handle client monies.

·          revised water announcement requirements and expanded price reporting requirements.

·          a new framework to enable a broader set of water markets and trade information to be collected in accordance with new data standards, for publication (de-identified information only) by the Bureau.

·          civil penalty provisions that would apply to breaches of certain provisions of the Water Act and the Code. As such water market authorities, water market intermediaries, water market participants and other persons would be required to comply with provisions that regulate their conduct.

·          removal of an exemption in the Basin Plan that applies to grandfathered tagged water entitlements. Grandfathered tagged water entitlements are a small number of water access entitlements that are exempt under the Basin Plan Water Trading Rule 12.23(2) from restrictions on the trade of water allocations within or between two regulated systems.

CONSULTATION

Basin Plan Implementation

At the February 2023 Murray-Darling Basin Ministerial Council meeting, ministers tasked officials to develop a package, including accountability measures and work programs, to deliver the Basin Plan in full.  Many aspects of the package, which was negotiated over several months by Basin Governments and announced on 22 August 2023, are reflected in the Bill.

In addition, the Department ran a 5-week public consultation process from 29 May to 3 July 2023 seeking ideas to deliver the Basin Plan in full. 131 submissions were collected during the consultation process.

These submissions captured a range of ideas and views, including support for, extending the Basin Plan deadlines, allowing a wider range of options to achieve water recovery targets, and the improved use of science, data, information, and technology.

Key concerns raised in the submissions included the need for greater community involvement including with First Nations in decision-making and program design, addressing socio-economic impacts of water recovery. These are expected to be addressed through consultation when these measures are developed and implemented.

 

Water Markets Reform

An exposure draft of the water market reform measures in the Bill was released for limited consultation with Basin States and peak bodies of affected stakeholders (including irrigation infrastructure operators and water market intermediaries), in July 2023.

The water market reforms are broadly supported by stakeholders, recognising the regulatory gap that currently exists for water markets. Further consultation will be undertaken in the development of the related regulations and legislative instruments to assess the regulatory impact on impacted groups. This will allow stakeholder feedback to be appropriately factored into the associated policy and law design processes.

Consultation also occurred with appropriate Commonwealth agencies including: the ACCC, the Inspector-General of Water Compliance, the Bureau, the Murray-Darling Basin Authority, the Commonwealth Environmental Water Holder, the Department of Finance, the Treasury, the Attorney-General’s Department, and the Department of the Prime Minister and Cabinet.

FINANCIAL IMPACT STATEMENT

An undisclosed sum, which cannot be publicly released due to commercial sensitivities, was secured in October 2022 and May 2023 to deliver the Basin Plan.

A budget of $64.3 million was announced in November 2022 and May 2023 to restore confidence in Murray - Darling Basin water markets. This included $30.5 million over four years for the ACCC, the Inspector-General of Water Compliance and the Department of Climate Change, Energy, the Environment and Water, and $32.7 million for the Bureau.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

The full Statement of Compatibility with Human Rights is attached to this explanatory memorandum ( Attachment A ).

 

GLOSSARY

The following abbreviations and terms are used in this Explanatory Memorandum:

Abbreviation	Definition
ACCC	Australian Competition and Consumer Commission
Acts Interpretation Act	Acts Interpretation Act 1901
Authority	Murray Darling Basin Authority
Basin Plan	Basin Plan 2012 adopted by the Minister under section 44 of the Water Act (as amended from time to time)
Basin State	New South Wales; Victoria; Queensland; South Australia; The Australian Capital Territory
Bill	Water Amendment (Restoring Our Rivers) Bill 2023
Bureau	Bureau of Meteorology
CC Act	Competition and Consumer Act 2010
CEWH	Commonwealth Environmental Water Holder
Code	The Water Market Intermediaries Code prescribed under section 100G of the Water Act
Commonwealth Guide	Attorney-General’s Department’s A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers , September 2011 edition
Corporations Act	Corporations Act 2001
FFSP Act	Financial Framework (Supplementary Powers) Act 1997
GL	Gigalitre
IIO	Irrigator Infrastructure Operator
Inquiry	ACCC (Australian Competition and Consumer Commission), Murray-Darling Basin water markets inquiry - Final report , February 2021 [3]
Inspector-General	Inspector-General of Water Compliance
Legislation Act	Legislation Act 2003
MDB	Murray-Darling Basin
OAIC	Office of the Australian Information Commissioner
Personal information	As defined in subsection 6(1) of the Privacy Act
Privacy Act	Privacy Act 1988
Regulations	The Water Regulations 2008
Regulatory Powers Act	Regulatory Powers (Standard Provisions) Act 2014
Roadmap	Water Market Reform: Final Roadmap [4]
SDL	Long-term average sustainable diversion limit
Water Act	Water Act 2007
WESA	Water for the Environment Special Account

NOTES ON CLAUSES

Clause 1              Short Title

1.              Clause 1 would provide for the Water Amendment (Restoring Our Rivers) Bill 2023 (the Bill), when enacted, to be cited as the Water Amendment (Restoring Our Rivers) Act 2023 .

Clause 2              Commencement

2.              The table at clause 2 sets out the times at which the various provisions of the Bill would commence. Table item 1 provides that sections 1 to 3 and anything in the Bill not elsewhere covered by the table would commence the day the Bill receives the Royal Assent.

3.              Subclause 2(2) provides that any information in column 3 of the table is not part of the Bill. Information may be inserted in this column, or information in it may be edited, in any published version of the Bill.

4.              Schedules 1 and 2 would commence the day after the Bill receives the Royal Assent. These are the schedules relating to water recovery and basin plan delivery. 

5.              Part 1, Schedule 4 would commence on 1 July 2024. This relates to the removal of the exemption for grandfathered tagged entitlements from the Basin Plan. The commencement would align with the start of the water year.

6.              Part 4, Schedule 3, Part 2, Schedule 4, and Part 3, Schedule 6 would commence on 1 July 2024. These schedules include provisions and consequential amendments relevant to the data and systems reforms. Division 6 of Part 7A, in Part 4, Schedule 3 would not require regulations or the Water Market Data Standards to operate and would come into effect on 1 July 2024. The commencement date of 1 July 2024 is to provide sufficient time to educate water markets participants on the new requirements under Division 6 of Part 7A. The remaining obligations under Part 7A would be effective only after regulations and the Water Market Data Standards are made.

7.              Part 1, Schedule 3 and Part 1, Schedule 6 would commence on a day to be fixed by proclamation, or on 1 July 2025 if not commenced by that date. These schedules include provisions and consequential amendments relevant to reforms for water markets intermediaries, which include statutory trust accounting obligations and a framework for the Code. The Code will be made in regulations and will include details relevant to the statutory trust accounting obligations. The statutory trust accounting obligations in Part 5 would not commence until the commencement of the Code in regulations. This commencement date will provide a reasonable timeframe for consultation with water markets intermediaries in developing the Code, and education for the industry on Code and statutory trust accounting obligations but would allow these schedules to come into effect before 1 July 2025 by proclamation. If a day is fixed by Proclamation, stakeholders will be provided with appropriate notice before the amendments commence.

8.              Part 1, Schedule 3 and Part 1, Schedule 6 would commence on a day to be fixed by proclamation, or on 1 July 2025 if not commenced by that date. These schedules include provisions and consequential amendments relevant to reforms for water markets intermediaries, which include statutory trust accounting obligations and a framework for the Code. The Code will be made in regulations and will include details relevant to the statutory trust accounting obligations. The statutory trust accounting obligations in Part 5 would not commence until the commencement of the Code in regulations. This commencement date will provide a reasonable timeframe for consultation with water markets intermediaries in developing the Code, and education for the industry on Code and statutory trust accounting obligations but would allow these schedules to come into effect before 1 July 2025 by proclamation. If a day is fixed by Proclamation, stakeholders will be provided with appropriate notice before the amendments commence.

9.              Part 2, Schedule 3, Part 3, Schedule 4, and Part 2, Schedule 6 would commence on a day to be fixed by proclamation, or on 1 July 2026 if not commenced by that date. These schedules include provisions and consequential amendments relevant to water announcement obligations and the insider trading prohibition related to water announcements. This approach is required to provide for the ACCC to build the capability required to enforce these provisions and is dependent on access to improved water markets data as a result of the data and systems reforms. The commencement will be dependent on the Bureau’s development of their new data and systems framework, together with the Water Markets Data Standards and further regulations for the data and systems reforms being in place. These schedules have been separated from the schedule with the remaining integrity and conduct measures, to allow for a staged introduction of the integrity and conduct measures. If a day is fixed by Proclamation, stakeholders will be provided with appropriate notice before the amendments commence.

10.          Part 3, Schedule 3 would commence on a day to be fixed by proclamation, or on 1 July 2026 if not commenced by that date, but must commence after the water announcement obligations and insider trading prohibition related to water announcements. This schedule includes the insider trading prohibition related to non-water announcement information, and market manipulation prohibitions. This approach is considered appropriate to ensure new requirements are not enforced until the ACCC has built the capability and has the relevant data to exercise their new powers effectively and accurately. If a day is fixed by Proclamation, stakeholders will be provided with appropriate notice before the amendments commence.

Clause 3              Schedules

11.          Clause 3 would provide that legislation that is specified to be amended or repealed as set out in a Schedule to the Bill has effect according to the terms of the relevant Schedule.

12.          A note would provide that provisions of the Basin Plan amended or inserted by this Act, and any other provisions of that instrument, may be amended or repealed by a legislative instrument prepared and adopted under Division 1 of Part 2 of the Water Act, due to the operation of subsection 13(5) of the Legislation Act.

Schedule 1—Water recovery and Basin Plan Delivery

PART 1—Review dates

Overview

13.          Part 1 of Schedule 1 to the Bill would amend the date of the review of the Water Act from 2024 to 2027. 

The Water Act review will consider the operation of the Water Act and the extent to which the objects of the Water Act have been achieved. This change would enable the Commonwealth to prioritise achieving its water recovery targets by the new reconciliation date of 31 December 2026. It will also allow the Water Act review to be informed by the outcomes of any Basin Plan review conducted before or during 2026.

Water Act 2007

Item 1

14.          Item 1 would change the completion date for the Water Act review in subsection 253(1) from 2024 to 2027.

PART 2— Water for the Environment Special Account

Overview

15.          Part 2 of Schedule 1 to the Bill would amend the WESA provisions in Part 2AA of the Water Act to allow for more flexibility to utilise the funds in the special account to meet environmental outcomes.

16.          The current WESA provisions contain limitations that makes it difficult to fund projects that would achieve environmental outcomes while also having regard for the operations of water managers. These limitations include providing an exhaustive list of the types of projects and measures that can be funded from WESA and a requirement that the funding of such projects and measures be related to an SDL adjustment under section 23A of the Water Act.

17.          For example, under the existing WESA framework, if the Commonwealth was investing in channel lining to prevent seepage losses to achieve a water saving, the full share of the water savings must be transferred to the Commonwealth. This removes flexibility to negotiate commercial-style arrangements that would allow for shared water savings to be achieved on an agreed basis. The proposed amendments would enable commercial-style arrangements to be entered into which may also have an associated socio-economic benefit.

18.          WESA funding will still be able to be used for projects that address any detrimental social or economic impact on the wellbeing of any community in the Murray Darling Basin.

19.          This part will also provide for a third WESA review to be undertaken by 30 September 2025.

Water Act 2007

Item 2

20.          Item 2 would amend paragraph 86AD(2)(a) to allow WESA funds to be spent on projects that contribute to the integrated management of the Basin water resources in a way that promotes the objects of the Water Act and has a substantial aim of furthering the object of Part 2AA of the Water Act.

21.          The subparagraphs under paragraph 86AD(2)(a) will continue to list non-exhaustive examples of projects that could be funded under WESA.

22.          The projects funded under the WESA will still need to be fit for purpose in achieving the objects of the Water Act and the Part 2AA objects outlined under section 86AA of the Water Act. Item 2 would allow for a broader range of projects to be funded.

Item 3

23.          Item 3 would amend paragraph 86AD(2)(b) to include that purchasing water access rights can be funded by WESA if they are for the purpose of increasing the volume of the Basin water resources that is available for environmental use by 450 GL.

24.          This would make it clear that water purchases funded from WESA will contribute to the 450 GL target.

Item 4

25.          Item 4 would substitute a new paragraph 86AD(2)(c). New paragraph 86AD(2)(c) provides that payments made from the WESA can include payments that address any detrimental social or economic impact on the wellbeing of any community in the Murray Darling-Basin that is associated with a project or purchase. Given the amendments to paragraph 86AD(2)(a), subparagraph 86AD(2)(c)(i) is no longer necessary.

Item 5

26.          Item 5 would remove the notes under subsection 86AD(2) as they are no longer relevant.

27.          Note 1 is no longer relevant as the changes above to subsection 86AD(2) supersede the note.

28.          Note 2 is no longer accurate as the Commonwealth may conduct open tender rounds to purchase water access rights, for the purposes of Part 2AA of the Water Act.

Item 6

29.          Item 6 would insert new subsection 86AD(2A) which explains that a project under subsection 86AD(2) may contribute to the integrated management of the Basin water resources in a way that promotes the objects of the Water Act and has a substantial aim of furthering the object of Part 2AA, but it is not necessary to satisfy both limbs of subsection 86AA(3).

30.          This subsection would clarify the amendments to subsection 86AD(2) in the above items and the operation of paragraphs 86AA(3)(a) and (b) of the Water Act. New subsection 86AD(2A) clarifies that any projects funded from WESA must promote the objects of the Water Act and have a substantial aim of furthering the objects of Part 2AA.

31.          This intention is already in Part 2AA of the Water Act, with this amendment expressly stating and clarifying this intention.

Item 7

32.          Item 7 would repeal subsection 86AD(4). Subsection 86AD(4) required that funding of certain projects and measures from WESA must relate to an SDL adjustment under section 23A.

33.          Projects were not able to meet the strict requirements of subsection 86AD(4).

34.          This amendment is necessary to remove funding restrictions and ensure that money from WESA can be effectively used in the way that Part 2AA was intended for. Subsection 86AD(4) was unnecessarily restrictive.

 

Item 8

 

35.          Item 8 would insert new section 86AH to enable the Minister, by notifiable instrument, to return money from WESA to consolidated revenue after 31 December 2027.

 

36.          The provision would enable unspent or uncommitted funds to be debited from WESA.

37.          Subsection 86AH(3) would provide that the Minister must not give a direction under subsection (1) unless:

a)       the Minister has estimated that the balance of WESA as at the end of the specified day is likely to include a surplus amount; and

b)       the amount specified in the direction is equal to, or less than, the surplus amount.

38.          Subsection 86AH(4) would provide for the meaning of ‘surplus amount’. An amount would be a surplus amount if:

a)       it is an amou nt that does not exceed the amount that stood to the credit of WESA as at the end of the specified day; and

b)       it is an amount that is not required for the purposes of meeting obligations or commitments entered into, or arising, on or before the specified day.

39.          Under new subsection 86AH(5), the Minister would be able to give more than one direction to debit a specified amount from WESA. This is to allow for changes in the amount in WESA due to unforeseen circumstances in project delivery.

40.          The decision of the Minister under subsection 86AH(1) would be subject to judicial review under the Administrative Decisions (Judicial Review) Act 1977 .

Item 9

41.          Item 9 would insert new section 86ADA to clarify that the Commonwealth’s power to make, vary or administer a payment, arrangement or grant of financial assistance under Part 2AA of the Water Act must be disregarded for the purposes of paragraph 32B(1)(a) of the FFSP Act.

42.          This section would clarify that the Minister’s existing legislative authority under subsection 86AF(1) of the Water Act, to enter into arrangements and make payments for the purposes of new subsection 86AD(2), does not limit the operation of section 32B of the FFSP Act .

43.          This provision clarifies that WESA funding is not the only source of funding for the projects contemplated by WESA. There may be other sources of legislative authority for funding projects, including for example, item 590 in Part 4 of Schedule 1AB of the Financial Framework (Supplementary Powers) Regulations 1997 .

 

Items 10 - 13  

 

44.          Items 10 and 11 would provide that the Minister must cause a third independent review of WESA to be conducted by 31 December 2027.

 

45.          As WESA will continue to be used to fund projects at least until the end of 2027, a third independent review is necessary to provide oversight of money spent under the special account, particularly towards the delivery of the 450 GL target. The third review provides accountability and transparency for how money from WESA is being spent.

 

46.          Item 12 would provide that the third review must be provided to the Minister by 30 September 2025.

 

47.          Item 13 would provide that the Minister must table the Government’s response to the third review at the time the Treasurer tables the budget for the 2026-2027 financial year.

 

PART 3— Purchase Cap

 

Overview

 

48.          Part 3 of Schedule 1 to the Bill would remove the 1,500 GL limit on Commonwealth water purchases under the Water Act.

 

 

Water Act 2007

Item 14              

49.          Item 14 would repeal the whole of Division 5 of Part 2 of the Water Act to remove the limit on Commonwealth water purchases that is currently set at 1,500 GL.

50.          Section 85C of the Water Act places a cap of 1,500 GL on the purchase of surface water entitlements. The cap impedes the Commonwealth’s ability to meet water recovery targets. The cap is required to be repealed so that the water recovery targets are able to be met.

PART 4— SDL changes and action plans

Overview

51.          Part 4 of Schedule 1 to the Bill would amend the Water Act to ensure that SDL adjustments resulting from the amendments in this Bill will be implemented through water resource plans and have practical effect.

52.          Amendments would also be made to clarify what the relevant ‘reduction’ is when specifying the ‘Commonwealth’s share of the reduction’ to the SDLs, for the purposes of the allocation of risk in relation to reductions in water availability and determining the amount of an entitlement holder’s payment under the risk assignment framework.

53.          The transitional or interim limits that applied to the long-term average amount of water that could be taken from each SDL resource unit, prior to the SDLs imposed by the Basin Plan taking effect, is the relevant baseline from which the relevant SDL reduction should be measured. These amendments would also be reflected in the Basin Plan.

54.          Amendments would be made to formalise and expand the existing reporting requirements for Basin States that rely on a reasonable excuse claim or where non-compliance is reported.

55.          These amendments would require that where:

a)       the cumulative balance for an SDL resource unit exceeds the annual permitted take by 20% or more and a Basin State claims a reasonable excuse; or

b)       a Basin State identifies that there has been a non-compliance for the purposes of annual reporting;

c)       the State must provide the Authority and the Inspector-General with a proposed set of actions (referred to as an action plan) that the State will take to ensure the limit is complied with in the future, and additional annual reporting detailing progress in taking the actions in that plan.

56.          These amendments would enable the Basin Plan to specify the requirements for the action plans and the details that must be provided to document Basin State progress during the relevant water accounting period. Noting that in each case the Inspector-General may publish guidelines in relation to the content of action plans and associated reporting.

 

Water Act 2007

Item 15

57.          Item 15 would insert new subsection 23B(8) to the Water Act to enable any SDL adjustments resulting from the amendments in this Bill, to be taken to be as a result of an amendment under section 23B for the purposes of the Water Act and the Basin Plan.

58.          This change would allow the changes to the SDLs resulting from Schedule 2 of this Bill to be incorporated into the methods for determining the annual permitted take under accredited water resource plans in accordance with the requirements of Chapter 10 of the Basin Plan.

Item 16

59.          Item 16 would amend paragraph 71(1)(h) of the Water Act to substitute ‘the actions’ with ‘a proposed set of actions (an action plan )’.

60.          This change reflects the amendments to the Basin Plan under this Bill, that formalise and expand on the existing reporting requirements for Basin States that rely on a reasonable excuse claim for any non-compliance with SDLs in a given water accounting period.

61.          The action plan will be provided as part of the reporting requirements under section 71 of the Water Act.

Item 17

62.          Item 17 would insert new paragraph 71(1)(i) to require Basin States to provide details of the progress made in taking the proposed set of actions outlined in the action plan during, and relating to, the relevant water accounting period.

Item 18

63.          Item 18 would insert new subsections 71(1A) and 71(1B) to empower the Basin Plan to specify requirements relating to the content of action plans under paragraph71(1)(h) and reports on progress of action plans under new subparagraph71(1)(i).

64.          Subsection 71(1A) would enable the Basin Plan to specify the requirements that an action plan must satisfy.

65.          Subsection 71(1B) would enable the Basin Plan to specify the requirements for the details that must be provided in relation to a Basin State’s progress during a water accounting period, in taking the proposed set of actions identified in an action plan.

Item 19

 

66.          Item 19 would insert new subsection 75(1AA) to enable the Basin Plan to specify amounts in relation to:

a)       cumulative reductions to the SDLs within a water resource plan area (which may include a reduction taken to have occurred under subsection 78(3) of the Water Act) from the amount specified for the purposes of subsection 78(2)); or

b)       reductions resulting from changes to those SDLs over time.

67.          Subsection 75(1) of the Water Act provides that the Basin Plan must, in addition to the requirements in paragraphs 75(1)(b) and (c), specify the amount of any SDL reduction that is attributable to the Commonwealth’s share. The Commonwealth’s share is determined using the method described in subsection 75(2) and identified in section 6.13 of the Basin Plan.

68.          Subsection 75(1AA) is intended to clarify the operation of section 75 of the Water Act. The change would, for example, allow the difference between the SDLs set by the Basin Plan from time to time and the baseline specified for subsection 78(2) of the Water Act, to be specified as the reduction for the purposes of section 75 of the Water Act.

69.          This intent would also be reflected in section 6.13 of the Basin Plan as outlined at items 8 and 9 of Schedule 2 below.

70.          This item does not alter the ‘Commonwealth’s share of the reduction’ to the SDLs for the purposes of determining the amount of an entitlement holder’s payment under the risk assignment framework. The change enables the Basin Plan to clarify that the Commonwealth’s existing share will continue to apply to any reduction to the SDLs.

Item 20

71.          Item 20 would insert new section 77A to enable the Commonwealth to request information from Basin States for the purposes of Division 4 of the Water Act. This would include, but not be limited to, information about:

a)       the particulars and history of a water access entitlement;

b)       decisions about how the Basin States are making changes to water access entitlements, including the date of effect of changes, the manner in which changes come into operation and how certainty is achieved ;

c)       such other information as is relevant to payments of water access entitlement holders.

72.          The purpose of this section is to assist the Commonwealth to obtain information necessary to determine whether a water access entitlement holder is eligible for a payment under sections 77 or 83 of the Water Act.

Schedule 2—Amendment of the Basin Plan 2012

Overview

73.          Schedule 2 of the Bill would amend the Basin Plan to enable the Commonwealth to flexibly deliver its water recovery commitments within extended timeframes, enabling viable notified measures, additional efficiency measures and additional supply measures to be completed, together with improving the existing SDL compliance framework.

Role of the Inspector-General

74.          Schedule 2 would clarify that the Inspector-General is responsible for determining reasonable excuse claims which may be brought forward by Basin States under the Basin Plan.

75.          Schedule 2 would also formalise and expand existing reporting requirements for Basin States that rely on a reasonable excuse claim or otherwise report non-compliance, in circumstances where there is a relevant excess of the cumulative balance for an SDL resource unit on the register of take.

76.          The Inspector-General would be given the discretion to publish guidelines in relation to the content of the actions plans and Basin State progress reports. If such guidelines are published, Basin States must have regard to them.

77.          Schedule 2 would also provide for the Inspector-General to appoint or establish an independent auditor to audit the calculations of the Authority when proposing SDL adjustments. This complements the existing power of the Authority to do so.

The Commonwealth’s share of SDL reductions

78.          Schedule 2 would clarify what the relevant ‘reduction’ is when specifying the ‘Commonwealth’s share of the reduction’ to the SDLs, for the purposes of determining the amount of an entitlement holder’s payment under the risk assignment framework.

79.          The transitional or interim limits that applied to the long-term average amount of water that could be taken from each SDL resource unit, prior to the SDLs imposed by the Basin Plan taking effect, is the relevant baseline from which the relevant SDL reduction should be measured.

Constraints relaxation implementation roadmap

80.          Schedule 2 would provide for a new constraints relaxation implementation roadmap to be prepared by the Authority in consultation with Basin States, the Commonwealth and the public by 31 December 2024.

81.          The constraints roadmap would build on the work of the constraints management strategy with a view to supporting the collective resolution of cross-jurisdictional matters. It would be prepared to maximise the benefits of constraints measures to deliver environmental outcomes, in a consistent and prioritised way.

82.          The constraints roadmap would seek to establish a common approach on a range of issues, including reporting, transparency, implementation and governance, and identifying opportunities for acceleration of measures towards program implementation by 31 December 2026.

 

 

Additional HEW entitlements for the delivery of 450GL of additional environment water

83.          Schedule 2 would introduce a new mechanism for accounting for water access entitlements that contribute to the delivery of 450 GL of additional environmental water.

84.          The new mechanism would provide the Minister with the discretion to specify these water access entitlements as ‘additional HEW entitlements’. The ‘HEW’ in ‘additional HEW entitlements’ is a reference to the fact that such water access entitlements would be a type of ‘water access right’ that could be classified as ‘held environmental water’ as defined under section 4(1) of the Water Act.

85.          Additional HEW entitlements would be comprised of entitlements acquired independently from any notified efficiency measures or additional efficiency measures. These additional HEW entitlements would need to be contracted before 31 December 2027.

86.          If a new additional HEW entitlement is specified, it will decrease the SDLs in the relevant SDL resource unit. The SDL formulas in Schedule 6A would be amended to incorporate additional HEW entitlements. This is similar to how efficiency entitlements work under Schedule 6A.

87.          When specifying the additional HEW entitlements, the Minister must be satisfied that the additional HEW entitlements would decrease the amount of water taken for consumptive use relative to the benchmark conditions of development and increase the volume of Basin water resources available for environmental use. The Minister must also be satisfied that the entitlements will contribute to enhancing environmental outcomes as mentioned in subsection 86AA(1), including but not limited to, outcomes set out in Schedule 5 of the Basin Plan.

Reconciliation Process

88.          Schedule 2 would amend the reconciliation process so that reconciliation occurs by 31 December 2026.

89.           As a consequence of this change:

a)       s upply and efficiency measures would need to be operational by 31 December 2026.

b)       a dditional supply and efficiency measures may be notified if they will be in operation by 31 December 2026 (with additional supply measures to be notified by 30 June 2025).

c)       any notified supply or efficiency measure must be withdrawn by 30 June 2026 if it will not be operational by 31 December 2026; and

d)       the Authority will undertake its final reconciliation determination and propose new SDL adjustments by 31 December 2026.

90.          Reconciliation would be required if, compared to the existing SDLs, a different SDL would be produced from the expected contributions resulting from notified supply and efficiency measures, additional supply and efficiency measures and additional HEW entitlements.

91.          The Authority would be required to determine the overall adjustments that would be appropriate to reflect those contributions as if no adjustment had been made to the SDLs as previously adjusted in 2017.

92.          In making the reconciliation determination, the Authority must be satisfied the requirement for equivalent environmental outcomes for supply contributions and the requirement for neutral or improved environmental outcomes for efficiency contributions. The Authority may only propose an adjustment if the total Basin adjustment percentage is no more than 5%.

93.          The Authority would be required to calculate, for each affected unit, the difference between the overall adjustments and the current SDLs as they would be amended by this Bill.

94.          The Authority would be required to determine the amounts of the proposed adjustment for each affected unit and for the SDL of the Basin water resources as a whole. In doing so, the Authority must express the proposed adjustment to include a fixed element reflecting the expected contributions up to 31 December 2026, and a varying element reflecting the varying HEW contribution after 31 December 2026. This varying element must be in the form of a formula as a function of time, resulting from any additional HEW entitlements specified by the Minister after 31 December 2026.

95.          Following the Authority’s reconciliation determination, the Minister would be able to specify any water access entitlement resulting from notified efficiency measures or additional efficiency measures, that were not included in the Authority’s reconciliation determination, as additional HEW entitlements.

96.          The Minister would only be able to specify additional HEW entitlements as long as those entitlements have been contracted by 31 December 2027 to be acquired.

97.          The Basin Plan would also be amended under this schedule to ensure the methods used in water resource plans to determine annual permitted take continue to apply SDL adjustments made after 2024.

Basin Plan 2012

Chapter 6 - Water that can be taken

Item 1

98.          Item 1 of the Bill would substitute ‘Register of take’ in the heading of Division 1 of Part 4 in Chapter 6 with ‘Preliminary’.

99.          Item 1 is an administrative amendment to reflect the inclusion of new sections 6.08A, 6.08B and 6.08C into Division 1.

Item 2

100.      Item 2 would insert new sections 6.08A, 6.08B and 6.08C into the Basin Plan.

 

Section 6.08A Content of action plan

101.      New section 6.08A would enable the Inspector-General to publish guidelines relating to the content of action plans to be prepared by a Basin State for the purposes of new subsection 71(1A) of the Water Act and subsections 6.12(5) and 6.12C(5) of the Basin Plan. When preparing these action plans, Basin States must have regard to any published guidelines.

  Section 6.08B Reporting on action plan under the Basin Plan

102.      New section 6.08B would require Basin States to provide a report to the Authority and Inspector-General that details the progress made against actions identified in a relevant action plan. This reporting must be provided at the same time that the Basin State provides the Authority with a report under section 71 of the Water Act (that is, 4 months after the end of a water accounting period, as may be extended).

103.      This amendment would ensure that Basin States remain accountable for implementing their action plans and that the Authority and Inspector-General have relevant and up-to-date information to assist with the fulfilment of their respective roles.

Section 6.08C Content of report

104.      New section 6.08C would enable the Inspector-General to publish guidelines relating to the content of action plans prepared by a Basin State for the purposes of new subsection 71(1B) of the Water Act and section 6.08B of the Basin Plan. When preparing these progress reports, the Basin State must have regard to any published guidelines.

Item 3

105.      Item 3 would make an administrative amendment to add a space in the word ‘unitin’ in the chapeau of subsection 6.12(1) of the Basin Plan.

Item 4 

106.      Item 4 would repeal and substitute subsection 6.12(3). New subsection 6.12(3) would provide that when a Basin State may not rely on a claim that there is a reasonable excuse for an excess in a surface water SDL resource unit in a water accounting period unless the Basin State has provided a report setting out the reasons and evidence for the claim to the Inspector-General and the Authority, and the Inspector-General is satisfied that the Basin State has a reasonable excuse.

107.      If the Inspector-General is not satisfied that there is a reasonable excuse, the Basin State would be non-compliant with the SDLs in the relevant SDL resource unit.

108.      New subsection 6.12(3) would clarify that the Inspector-General is the Commonwealth agency responsible for determining compliance with the long-term annual diversion limits for SDL resource units and assessing reasonable excuse claims.

109.      The notes to subsection 6.12(3) would provide further explanation about the consequences that follow if the Inspector-General is not satisfied that there is a reasonable excuse and matters relating to consultation on the report by the Inspector-General.

Item 5

110.      Item 5 would substitute ‘the steps’ with ‘a proposed set of actions (an action plan) that’. This would insert ‘action plan’ as a defined term in subsection 6.12(5) of the Basin Plan.

111.      Item 5 would require a Basin State wishing to rely on a reasonable excuse to provide an action plan, setting out the steps the Basin State will take to reduce the cumulative balance of the register to zero or less.

112.      This change will enable the Inspector-General to assess the effectiveness of the steps the State proposes to take to reduce the cumulative balance of the register to zero or less.

Item 6

113.      Item 6 would repeal and substitute subsection 6.12C(3). New subsection 6.12C(3) would provide that when a Basin State may not rely on a claim that there is a reasonable excuse for an excess in a groundwater SDL resource unit in a water accounting period unless the Basin State has provided a report setting out the reasons and evidence for the claim to the Inspector-General and the Authority, and the Inspector-General is satisfied that the Basin State has a reasonable excuse.

114.      If the Inspector-General is not satisfied that there is a reasonable excuse, the Basin State would be non-compliant with the SDLs in the relevant SDL resource unit.

115.      New subsection 6.12C(3) would clarify that the Inspector-General is the Commonwealth agency responsible for determining compliance with the long-term annual diversion limits for SDL resource units and assessing reasonable excuse claims.

116.      The notes to subsection 6.12C(3) would provide further explanation about the consequences that follow if the Inspector-General is not satisfied that there is a reasonable excuse and matters relating to consultation on the report by the Inspector-General.

Item 7

117.      Item 7 would substitute ‘the steps’ with ‘a proposed set of actions (an action plan) that’. This would also insert ‘action plan’ as a defined term in subsection 6.12(5) of the Basin Plan.

118.      Item 7 would require a Basin State wishing to rely on a reasonable excuse to provide an action plan, setting out the steps the State will take to reach the point where there is no excess.

119.      By adding in the requirement that the Basin States must prepare an action plan, the amendment will enable the Inspector-General to assess the effectiveness of the steps the State proposes in the action plan to reach the point where there is no relevant excess.

Item 8

120.      Item 8 would insert a new note at the beginning of section 6.13 to explain the operation of sections 75 and 78 of the Water Act.

121.      This amendment is intended to assist with the interpretation of section 6.13 to reflect the changes to section 75 of the Water Act detailed above and the insertion of new subsection 6.13(2A) at item 19 below.

Item 9

122.      Item 9 would insert new subsection 6.13(2A) to clarify that the relevant SDL reduction for the purposes of section 75(1), is any reduction to the SDL for an SDL resource unit from time to time, compared with the limit specified for subsection 6.13(2).

123.      This change, along with the amendments to section 75 detailed above, would ensure that the Commonwealth’s share of the reduction will be 100%, as the SDLs in an SDL resource unit are reduced from time to time.

Item 10

124.      Item 10 would repeal the note at the end of subsection 6.13(6).

Chapter 7 - Adjustment of SDLs

Items 11 - 12  

125.      Item 11 would repeal the third paragraph from the notes under the heading of Chapter 7 and substitute it with a new paragraph explaining that under Part 2, the Authority can propose adjustments to surface water SDLs to take account of:

a)       s upply measures and efficiency measures that are notified by a process set out in section 7.12 and will come into operation by 31 December 2026; and

b)       a dditional HEW entitlements that are acquired from time to time and specified by the Minister under section 7.08B.

126.      This change would reflect the extension of time for reconciliation to occur from 2024 to 2026, the amendments in Schedule 2 of the Bill and the amendments following this item, in the Basin Plan.

127.      Item 12 would also insert a new paragraph after the sixth paragraph, explaining the concept of an additional HEW entitlement that would be defined in section 7.02 of the Basin Plan.

128.      An additional HEW entitlement is water access entitlement that was previously used for consumptive purposes but will now be used for environmental purposes. SDL adjustments made because of additional HEW entitlements would result in the reduction of the relevant SDLs.

129.      Additional HEW entitlements will also form part of the Commonwealth program to deliver 450 GL of additional environmental water.

 

 

Item 13

130.      Item 13 would amend the simplified outline of Part 1 of Chapter 7 in section 7.01 to insert a new paragraph 7.01(2)(b) that references new acquisitions of held environmental water that was previously used for consumptive purposes.

131.      Item 13 would change the description of the basis on which the Authority may propose an SDL adjustment under section 23A of the Water Act.

132.      This would align with the amendments proposed by this Bill that enable the Authority to consider the contributions from additional HEW entitlements for the purposes of making its reconciliation adjustment determination under section 7.11 of the Basin Plan.

Item 14 - 19 7.02 definitions

133.      Items 14 to 19 would amend existing definitions and insert new definitions into section 7.02 of the Basin Plan.

Additional efficiency entitlement

134.      Item 14 would amend paragraph (c) in the definition of additional efficiency entitlements to require that those entitlements must have been acquired before 1 January 2027.

135.      This change would align with sections 7.08B and 7.21 which would enable the Minister to specify additional efficiency entitlements as additional HEW entitlements for the purposes of the varying HEW contribution that must be recorded following the determination made by the Authority under section 7.11.

136.      This would be permitted in circumstances where those additional efficiency entitlements were specified under section 7.08B after 31 December 2026 and were not included in the Authority’s reconciliation determination.

Additional efficiency measure

137.      Item 15 would amend the definition of additional efficiency measure in section 7.02 to refer to an efficiency measure that has been notified under new subsection 7.12(2).

Additional HEW contribution

138.      Item 16 would insert a definition for additional HEW contribution . Additional HEW contribution would be defined to have the meaning given by Division 4 of Part 2 (in particular new section 7.16A) of the Basin Plan.

139.      The additional HEW contribution will form part of the reconciliation adjustment that may be proposed by the Authority in 2026 in accordance with sections 7.11 and 7.21 of the Basin Plan. The additional HEW contribution will reflect the quantity of water, in GL per year, that is registered as being available under additional HEW entitlements for each affected SDL resource unit.

Additional HEW entitlement

140.      Item 16 would insert a definition for additional HEW entitlement . Additional HEW entitlement would be defined to mean a water access entitlement specified by the Minister under new section 7.08B to be an additional HEW entitlement.

Additional supply measure

141.      Item 17 would insert a definition for additional supply measure . Additional supply measure would be defined as meaning a supply measure that has been notified under subsection 7.12(2A).

Efficiency entitlement

142.      Item 18 would amend paragraph (c) of the definition of efficiency entitlement under section 7.02 to require that those entitlements must have been acquired before 1 January 2027.

143.      This change would align with sections 7.08B and 7.21 which would enable the Minister to specify efficiency entitlements as additional HEW entitlements for the purposes of the varying HEW contribution that must be recorded following determination made by the Authority under section 7.11.

144.      This would be permitted in circumstances where those efficiency entitlements were specified as additional HEW entitlements under section 7.08A after 31 December 2026 and were not included in the Authority’s reconciliation determination.

Varying HEW contribution

145.      Item 19 would insert a definition for varying HEW contribution . Varying HEW contribution would be defined to have the meaning given by section 7.21.

Item 20

146.      Item 20 would repeal subsection 7.08(3) to remove the requirement for the Authority to provide an annual report to the Murray-Darling Basin Ministerial Council about progress on the matters covered by the constraints management strategy.

147.      This change would align with item 21 which would introduce the requirement for a constraints relaxation implementation roadmap that will build on the outcomes identified in the strategy.

Item 21

148.      Item 21 would insert new sections 7.08A and 7.08B.

Section 7.08A - Constraints relaxation implementation roadmap

149.       New section 7.08A would require the Authority, by 31 December 2024, to prepare a constraints relaxation implementation roadmap consistent with the objects of the new section.

150.      The objects of new section 7.08A would be to assist the Commonwealth and Basin States identify measures to relax constraints, and develop and implement them in a way that:

a)       m aximises the benefits of constraints measures to deliver environmental outcomes, including enhanced environmental outcomes and the outcomes identified in the constraints management strategy made under section 7.08;

b)       p rovides, as far as practicable, a common constraints management approach across river systems and jurisdictions including, but not limited to, in relation to:

i.         r eporting, transparency and public accountability; and

ii.       p rogram implementation and governance, including regulatory approvals; and

iii.     s upporting the acceleration of constraint measures by 31 December 2026; and

iv.     m anaging the impacts to third parties.

151.      The constraints roadmap and any substantive amendments to the roadmap, would be required to be prepared in the Basin States, the Commonwealth and the public. The Authority would also be required to publish the roadmap on their website.

152.      It is intended that the development of the roadmap will facilitate the acceleration of viable constraints measures that will contribute to the Bridging the Gap target.

Section 7.08B Minister may specify additional HEW entitlements

153.      Section 7.08B would provide that the Minister may under subsection 7.08B(1), specify in a written instrument, that a water access entitlement is an additional HEW entitlement if the criteria outlined below is satisfied.

154.      A note would be inserted under subsection 7.08B(1) to indicate that section 33 of the Acts Interpretation Act would apply to allow a specification under section 7.08B to be revoked, amended or varied in the same way it was made.

155.      A decision of the Minister under subsection 7.08B(1) is subject to judicial review under the Administrative Decisions (Judicial Review) Act 1977 .

156.      A written instrument made by the Minister to specify a water access entitlement to be an additional HEW entitlement would be an administrative rather than a legislative instrument. As noted above, the decision to make the instrument would involve the Minister applying the criteria set out in section 7.08B to determine whether a particular water access entitlement is capable of meeting the requirements for that entitlement to be an additional HEW entitlement.

157.      Subsection 7.08B(2) would require the water access entitlement to be:

a)       sourced from the unit; and

b)       held environmental water; and

c)       if specified after 31 December 2027 - have become, or been contracted to become, held environmental water before that date; and

d)       not have become held environmental water as a result of notified efficiency measures or additional efficiency measures, except as provided in new subsection 7.08(4).

158.      Subsection 7.08B(3), would require the Minister to be satisfied that the water access entitlement:

a)       decreases the amount of water taken for consumptive use relative to the benchmark conditions of development; and

b)       increases the volume of the Basin water resources that is available for environmental use; and

c)       contribute s to enhancing environmental outcomes as mentioned in subsection 86AA(1) of the Water Act including the outcomes set out in Schedule 5 of the Basin Plan.

159.      Subsections 7.08B(2) and (3) would ensure that entitlements can contribute to the delivery of 450 GL of additional environmental water and affect SDLs in the same way that notified efficiency measures and additional efficiency measures do provided the entitlements align with the enhanced environmental outcomes mentioned in subsection 86AA(1) of the Water Act.

160.      Under subsection 7.08B(4), an exception would be established to the requirement in paragraph 7.08B(2)(d), if the water access entitlement:

a)       is specified after 31 December 2026; and

b)       it was not included in the Authority’s determination under paragraph 7.21(2)(a) (whether or not it was on the register mentioned in new section 7.13 on 31 December 2026).

161.      Under subsection 7.08B(5), if an entitlement specified in reliance on new subsection 7.08B(4) was an efficiency entitlement or additional efficiency entitlement, it would cease to be an entitlement of that kind.

162.      Subsections 7.08B(4) and (5) would enable contracted water access entitlements, including those originally contracted for the purposes of a notified efficiency measure or additional efficiency measure, to be specified as an additional HEW entitlement if they were:

a)       not specified by the Minister until after the Authority conducts reconciliation; and

b)       not accounted for in reconciliation.

163.      These changes align with new subsection 7.21 which enables additional HEW entitlements acquired by 31 December 2026, to be included in the Authority’s reconciliation determination. Any additional HEW entitlements specified after that date but before 31 December 2027, will adjust the relevant SDLs in accordance with the varying HEW contribution that would operate after reconciliation.

Item 22

164.      Item 22 would amend the heading of Part 2 of Chapter 7 by removing ‘for notified measures’.

165.      This change aligns with the amendments in this Bill which would expand the Commonwealth’s program to deliver 450 GL of additional environmental water to include additional HEW entitlements, which would not be notified under section 7.12.

Items 23 - 24   

166.      Item 23 would clarify that the objects for Part 2 of Chapter 7 are to allow the surface water SDLs to be adjusted to reflect the effects of:

a)       m easures that increase the supply of water or efficiency of water use, and are notified under Part 2 of the Basin Plan; and

b)       a dditional HEW entitlements specified under section 7.08B.

167.      This would align with the existing measures and outcomes described in paragraphs 7.09(a)-(e) and the Commonwealth’s expanded program referenced in new Note 2.

168.      Item 24 would change the explanation of the 450 GL target in Note 2 of section 7.09 so that the 450 GL target includes the program that is expected to spend $1.77 billion by 31 December 2027 under the Water for the Environment Special Account.

Items 25 - 26  

169.      Item 25 would substitute ‘2024’ in the heading of paragraph 7.11 in the Basin Plan with ‘2026’.

170.      This consequential amendment reflects the change in the timing of a reconciliation.

171.      Item 26 would be a consequential amendment to the existing text in section 7.11 to outline factors relevant to, and the process by which, the Authority may propose SDL adjustments by 31 December 2026. These amendments would incorporate into section 7.11 the concepts of the additional supply measures and additional HEW entitlements introduced as part of this Bill.

172.      A new determination made in accordance with section 23A of the Water Act and Division 4 of the Basin Plan, would be appropriate in circumstances where any of the following would produce adjusted SDLs different from those previously made for the purposes of section 7.10:

a)       notified measures,

b)       additional supply measures,

c)       additional efficiency measures,

d)       additional HEW entitlements.

Items 27 - 30

173.      Items 27 to 30 would make several consequential amendments to section 7.12 to reflect changes to the timelines for the notification, amendment and withdrawal of any measures notified under the section, as well as the date by which the measures must be in operation.

174.      Item 27 would substitute the ‘31 December 2023’ with ‘30 June 2025’ in subsection 7.12(2).

175.      New subsection 7.12(2A) would be inserted to enable the Basin Officials Committee to notify the Authority of one or more additional supply measures that the Committee considers should be taken into account by the Authority in proposing adjustments under section 7.11.

176.      Paragraph 7.12(3)(a) would be amended to substitute the reference to 30 June 2024 with 31 December 2026, which is the new date by which all measures notified under section 7.12 must enter operation. This creates extended timeframes for measures to meet their intended outcomes and is consistent with the amendments to the Basin Plan processes under this Bill.

177.      Subsection 7.12(5) would be amended to substitute ‘as soon as practicable after’ with ‘by 30 June 2026’. This amendment would mean that a measure notified under section 7.12 can be amended at any time up to 30 June 2026, and there is no longer any requirement for it to be amended as soon as practicable after it is known that the information in the notification under subsection 7.12(4) has changed.

178.      Subsection 7.12(6) would be amended to require notifications to be amended by 30 June 2026 to withdraw a measure if it appears that it will not enter into operation by 31 December 2026.

179.      Subsection 7.12(7) would be amended to substitute 31 December 2023 with 30 June 2026.

Item 31

180.      Item 31 would repeal the existing text of section 7.13 and substitute it with updated requirements relating to the maintenance of a register of measures which reflect the changed character of the reconciliation process. Under subsection 7.13(1), the register would be required to include:

a)       each measure of the following kinds, with the information mentioned in section 7.12:

i.               the notified efficiency measures,

ii.            the notified supply measures,

iii.          the additional efficiency measures,

iv.           the additional supply measures.

b)       for each surface water SDL resource unit—each entitlement of the following kinds as it applies from time to time:

i.               the efficiency entitlements,

ii.            the additional efficiency entitlements,

iii.          the additional HEW entitlements.

c)       for each kind of entitlement for a surface water SDL resource unit, the long-term average quantity of water, in gigalitre per year, that is available under it from time to time.

181.      Subsection 7.13(2) would, prior to an adjustment under section 7.11, require the register to include for each surface water SDL resource unit, estimates of the likely efficiency contribution, supply contribution and additional HEW contribution as at 31 December 2026. To the extent practicable, this would also be done for the likely SDL adjustment amount for the purposes of section 7.21.

182.      Subsection 7.13(3) would require the Authority to publish the register on its website.

183.      Subsection 7.13(4) would clarify that subparagraphs 7.13(1)(b)(i) and (ii) (which relate to efficiency entitlements and additional efficiency entitlements) apply to a water access entitlement whether it became held environmental water before or after the relevant measure was notified.

Item 32

184.      Item 32 would amend section 7.14 to remove ‘and additional’ efficiency measures’ and substitute it with ‘, the additional efficiency measures, the additional supply measures and the additional HEW entitlements’.

Item 33

185.      Item 33 would be a consequential amendment to the date in note 1 of subsection 7.14A(3) of the Basin Plan to reflect the changes set out in this Bill to reconciliation.

Items 34 -  37

186.      Item 34 would make several consequential amendments to section 7.15 to be consistent with the introduction of additional supply measures in the Bill.

187.      Subsection 7.15(1) would be amended to include a reference to additional supply measures being included in the meaning of total supply contribution.

188.      Subparagraph 7.15(1)(b)(i) would be amended to include a reference to additional supply measures.

189.      The note in section 7.15 would be amended to clarify that additional supply measures were not included in this provision as at the time that adjustments were proposed under section 7.10.

190.      Paragraph 7.15(1)(b) in the definition of ‘applicable method’ under subsection 7.15(2) would be repealed and substituted with ‘if the Authority, having consulted the Basin Officials Committee, decides that another method is preferable—that method.

191.      This change would provide the Authority with flexibility to incorporate the best available science and ensure the method used for reconciliation is fit-for-purpose. 

Items 38 - 39  

192.      Item 38 would amend the date in the heading before subsection 7.16(2) to reflect the changes set out in this Bill to the reconciliation process. It would change the date from 2024 to 2026.

193.      Item 39 would repeal subsection 7.16(2) and substitute a new subsection to clarify that the efficiency contribution of the notified efficiency measures and additional efficiency measures for each affected unit at a particular time, is a decrease in the SDL for the unit equal to the quantity of water registered as being available under the efficiency entitlements and additional efficiency entitlements for the unit.

194.      A new note would be added after subsection 7.16(2) to provide that efficiency contributions will end on 31 December 2026. The note would also provide a reference to new section 7.08B and additional HEW entitlements.

195.      This change would clarify the operation of this section for the purposes of applying new sections 7.19 and 7.21.

Item 40

196.      Item 40 would insert new section 7.16A into the Basin Plan to allow for adjustments to be made to the SDL as a result of the additional HEW contributions for the purposes of a determination made under section 7.11.

197.      Section 7.16A would also contain two notes to explain the operation of the provision.

a)       note 1 would outline that the additional HEW contributions are expected to vary over time as relevant water access entitlements are acquired,

b)       n ote 2 would outline that the Authority will use long-term diversion limit equivalent factors to convert water access entitlements into a common unit for the purposes of the determinations.

Items 41 - 42

198.      Items 41 and 42 would amend subsection 7.17(1) to clarify that the Authority must disregard the additional HEW entitlements mentioned in paragraph 7.11(1)(d) in circumstances where it reduces the total supply or efficiency contribution for affected units to a level it considers would satisfy the requirements in subsection 7.17(2) so that an adjustment determination could be made.

199.      This change would preclude section 7.17 from applying to additional HEW entitlements, which would instead be governed by new subsection 7.08B.

 

 

Item 43

200.      Item 73 would make a consequential amendment to section 7.18 by removing ‘notified measures’ and substituting it with ‘notified supply measures and additional supply measures.

201.      This change would be consistent with the introduction of additional supply measures in the Bill.

Items 44 - 47  

202.      Items 44 to 47 would amend section 7.19 to reduce the size of the supply contributions, the efficiency contributions and the additional HEW contributions, for each affected unit, in proportion to the net effect of those contributions under sections 7.15 to 7.17. This change would be consistent with the introduction of additional HEW contributions in the Bill.

203.      This would occur in circumstances where, at a particular time, those contributions would result in the total surface water SDL for the Basin water resources increasing or decreasing by more than 5%.

204.      This change would ensure that the 5% limitation to the overall size of adjustment amounts applies to the SDLs as adjusted by this Bill.

205.      The 5% limitation would also be built into new section 7.21 to ensure that it continues to apply to SDL adjustments made under that section, comprised of the fixed and varying elements required by subsection 7.21(4).

Item 48

206.      Item 48 would repeal the existing section and substitute a new section.

207.      New section 7.21 would  provide for a new process by which the Authority must determine the reconciliation adjustment for the purposes of section 7.11.

208.      First, the Authority would determine the efficiency contributions, the supply contributions and the additional HEW contributions, as they would be expected to be on 31 December 2026.

209.      Second, the Authority must then determine the ‘overall adjustments’ that would be appropriate to reflect the effect of notified measures, additional supply measures, additional efficiency measures and additional HEW entitlements as of 31 December 2026, and of the varying HEW contribution after 31 December 2026.

210.      In determining the ‘overall adjustments’ the Authority must ensure that:

a)       t he requirements of section 7.17 are satisfied with respect to the achievement of equivalent environmental outcomes for supply contributions and neutral or improved environmental outcomes for efficiency contributions against any approved process;

b)       t he total supply contribution is apportioned in accordance with section 7.18; and

c)       t he 5% limit on the size of the proposed adjustment is met in accordance with subsection 23A(4) of the Water Act.

211.      Third, the Authority must then calculate, for each affected unit, the difference between the 2017 SDLs (i.e. the SDLs that applied immediately before the adjustments made under section 7.10) as they would be if adjusted by the overall adjustments, and the current SDLs (i.e. the SDLs in the Basin Plan as amended by this Bill if enacted). The SDLs as they are expressed in the Basin Plan would be amended by this Bill.

212.      Fourth, the Authority must determine the amounts of the proposed adjustment for each affected unit and for the SDL of the Basin water resources as a whole.

213.      Fifth, the Authority must propose amendments to the Basin Plan to give effect to the proposed adjustment. The proposed amendments must be expressed as:

a)       a fixed element; and

b)       a ‘varying HEW contributions’ in the form of a formula as a function of time, either varying continuously or changing at specified times from 31 December 2026 onward.

214.      The fixed element is intended to reflect the notified measures, the additional supply measures, additional efficiency measures and the additional HEW entitlements as they are expected to be on 31 December 2026.

215.      The ‘varying HEW contribution’ for an SDL resource unit would be defined as being, at any time after 31 December 2026, the difference between the additional HEW contributions shown on the register as being available for the unit at that time, and the additional HEW contributions determined in the first step above.

Items 49 - 50

216.      Items 49 and 50 would amend section 7.27 to provide for the Authority or the Inspector-General to appoint or establish a person or body that is independent of the Authority or Inspector-General.

217.      The person or body would audit the calculations made by the Authority for the purposes of Parts 2 and 4 of Chapter 7 of the Basin Plan. The person or body would be required to provide the Authority, the Inspector-General and each Basin State an opportunity to comment on their findings before a report is finalised.

Chapter 10 - Water resource plan requirements

Item 51

218.      Item 51 would replace the existing paragraph 10.10(5)(c) to include a reference to the water accounting period beginning on or after 1 July 2024 - the SDL as it stood on the day before the beginning of the relevant water accounting period.

219.      This change would ensure clarity of application over time and that the methods used in water resource plans to determine annual permitted take continue to apply SDL adjustments made after 2024. This change is consistent with the amendments to extend reconciliation to 2026 and allow for a varying HEW contribution to form part of the SDLs.  

Schedule 6A - Calculation of SDL adjustment amounts

Items 52 - 59

220.      Items 52 to 59 would make consequential amendments to the simplified outline of Schedule 6A to ensure alignment with the amendments in this Bill that introduce additional HEW entitlements, additional supply measures and the new reconciliation process in Chapter 7 of the Basin Plan.

Items 60 - 65

221.      Item 60 would insert a definition of ‘current additional HEW contribution’ into section S6A.02 to mean, for a particular surface water SDL resource unit and for a particular water accounting period, the unit’s additional HEW contribution as at the end of the first day of the water accounting period.

222.      Item 61 would amend the definition of ‘current efficiency contribution’ in section S6A.02 to refer to subsection 7.16(2). This is to ensure that the definition of current efficiency contribution reflects additional efficiency entitlements.

223.      Item 62 would also omit from the definition of ‘current efficient contribution’ the words ‘disregarding any efficiency entitlement that might be registered on the register maintained under section 7.13 after 30 June 2024’.

224.      These changes would align with the amendments in this Bill that introduce the new reconciliation process in Chapter 7 of the Basin Plan.

225.      Items 63 and 64 would amend the notes under the definition of net effect in section S6A.02.

226.      Note 1 would be amended to substitute ‘and the total efficiency contribution’ with ‘on the one hand, and the total efficiency contribution and total current additional HEW contribution on the other hand’.

227.      Note 2 would be amended after ‘the total efficiency contribution’ to include ‘and total current additional HEW contribution’.

228.      These changes would align with the amendments in this Bill that introduce additional HEW entitlements, additional supply measures and the new reconciliation process in Chapter 7 of the Basin Plan.

229.      Item 65 would insert a reference in subsection 6A.02(4) to the definition of ‘total current additional HEW contribution’ in subsection 6A.02(1).

Items 66 - 67

230.      Item 66 would substitute the formula in subsection 6A.04(2) with:

231.      Item 67 would insert a reference in subsection 6A.05(2) to the definition of ‘current additional HEW contribution’ in subsection 6A.02(1).

Items 68 - 72

232.      Item 68 would amend the note under subsection 6A.05(1) to substitute ‘total current efficiency contribution’ with ‘sum of the total current efficiency contribution and the total current additional HEW contribution’.

233.      Item 69 would substitute the formula under subsection 6A.05(2) with:

234.      Item 70 would insert a reference in subsection S6A.05(2) to the definition of ‘current additional HEW contribution’ in subsection S6A.02(1).

235.      Item 71 would substitute the formula under subsection S6A.05(3) with:

236.      Item 72 would insert a reference in subsection S6A.05(3) to the definition of ‘total current additional HEW contribution’ in subsection S6A.02(1).

Items 73 - 74

237.      Item 73 would substitute the formula in subsection S6A.06(2) with:

238.      Item 74 would insert a reference in S6A.06(2) to the definition of ‘current additional HEW contribution’ in subsection S6A.02(1).

 

Schedule 3 - Water Market Measures

Part 1  - Water Markets Intermediaries Code

Outline of Part

239.      The purpose of Part 1 of Schedule 3 is to amend the Water Act to establish a framework that allows regulations to be made to prescribe the Code. The framework is similar to the Industry Codes framework prescribed under Part IVB of the CC Act, in that it establishes key concepts, rights and responsibilities.

240.      The Code, as prescribed, would provide a set of rules or standards of conduct for eligible water market intermediaries, including the relationship between eligible water market intermediaries and their customers. The purpose of the Code will be to develop a tailored and targeted regulation to raise the standard of eligible water markets intermediaries’ conduct in water markets. Part 1 of Schedule 3 would also include statutory trust accounting obligations on eligible water markets intermediaries and allow regulations to prescribe detailed requirements.

241.      The ACCC will be responsible for regulating the Code, monitoring compliance and taking enforcement action when necessary.

242.      The reforms in Part 1 of Schedule 3, implement recommendations in Chapter 3 of the Roadmap, and aim to:

a)       improve the integrity of, and trust in, water market intermediaries,

b)       give users of those services greater protection and confidence,

c)       help increase participation in water markets,

d)       subject water market intermediaries to broadly comparable regulatory safeguards that apply to intermediaries in other markets - such as stock and station agents, real estate agents and stockbrokers.

243.      Part 1 implements recommendations of the Roadmap relating to implementing an enforceable mandatory code for water market intermediaries across the Murray - Darling Basin (recommendation 3).

Water Act 2007

Item 1

244.      Item 1 of Schedule 3 of the Bill would insert the following new definitions into subsection 4(1) of the Water Act.

245.      The new term Water Markets Intermediaries Code would be defined to mean the code (if any) prescribed by the regulations made under Division 3 of Part 5 of the Water Act.

246.      The new term water markets intermediary services would be defined as services referred to in paragraph (a), (b), (c), (d), (e) or (f) of the definition of the new term eligible water markets intermediary (which will be inserted by item 13 of Part 4 of Schedule 3 of the Bill) .

Item 2

247.      Item 2 would insert a new Part 5, after Part 4A of the Water Act. Part 5 would establish the new Water Markets Intermediaries Code and trust accounting framework.

Part 5 - Water Markets Intermediaries Code and trust accounting framework

Division 1 - Simplified outline of Part 5

Section 100E Simplified Outline

248.      New section 100E would provide the simplified outline of new Part 5. The outline is not intended to be comprehensive and has been included to assist readers to understand the substantive provisions in Part 5. It is intended that readers will rely on the substantive clauses in Part 5.

Division 2 - Application of Part 5

Section 100F Constitutional operation

249.      New section 100F would provide for the Constitutional operation of Part 5. Subsection 100F(1) would provide that Part 5, and any other provision of this or any other Act that relates to Part 5, applies to the provision of services by an eligible water markets intermediary that is a constitutional corporation.

250.      New subsection 100F(2) would provide that new Part 5, and any other provision of this Act or any other Act that relates to this Part, applies to the provision of services by an eligible water markets intermediary if:

a)       the person to whom the service is provided is a constitutional corporation or is engaging in trade with a constitutional corporation; or

b)       the service is provided in the course of trade and commerce:

i.               between the States; or

ii.            between a State and a Territory or between 2 Territories;

iii.          between Australia and places outside Australia; or

iv.          the service is provided to a person in a Territory, or in relation to a water resource in a Territory.

Division 3 - Water Markets Intermediaries Code

Section 100G Regulations may prescribe Water Markets Intermediaries Code

251.      New subsection 100G(1) would provide that the regulations may prescribe the Code, for the purposes of regulating the conduct of eligible water markets intermediaries towards participants and potential participants in the water market.

252.      New subsection 100G(2), would provide that if regulations prescribe a Code, the Code may make provision for non-exhaustive requirements listed in paragraphs (a)-( f ) as follows:

a)       imposing an obligation upon eligible water markets intermediaries to act in the best interests of clients, and in accordance with clients’ instructions;

b)       provision of information to clients, including in relation to the interests of eligible water markets intermediaries;

c)       provide for the keeping and retention of records for the purposes of the Code or for the purposes of Division 5 relating to trust accounting including, but not limited to the following :

i.               the kind of records that must be kept ,

ii.            specific details that must be recorded including, but not limited to, client details, disclosures to clients, and written authorities and instructions given by clients ,

iii.           records relating to complaints and resolution of complaints ,

iv.            records relating to trades ,

v.             financial and accounting records ,

vi.           the period for which records must be retained, including any period after an entity ceases to be an eligible water markets intermediary ,

d)       holding clients’ eligible tradeable water rights ,

e)       holding professional indemnity insurance ,

f)        keeping client records.

253.      New subsection 100G(3) would provide that the Code may confer functions and powers on a person or body (as described below) in relation to the code, including the following matters:

a)       monitoring compliance with the Code,

b)       dealing with disputes or complaints arising under, or in relation to, the Code,

c)       conducting investigations under, or in relation to, the Code,

d)       providing exemptions from the code or specified provisions of the Code,

e)       reviewing, or reporting on, the operation of the code or activities under, or in relation to, the Code,

f)        any other matter relating to the operation, application or administration of the Code.

254.      New subsection 100G(4) would provide that for the purposes of subsection (3), the persons or bodies on whom an industry code may confer functions and powers are any person or body (whether or not a participant in the water market), including the Minister or ACCC. O nly the Minister or the ACCC can provide exemptions from the Code.

255.      New subsections 100G(5) and (6) would outline how the functions and powers are to be exercised under the Code. Functions or powers conferred under a code may be exercised by legislative instrument or other kind of written instrument. E xemption decisions must be made by notifiable instrument (when applying to an entity) or otherwise by legislative instrument (for example, when applying to a class), despite anything to the contrary in the Code. This approach provides legal certainty as to which entities are subject to the Code and ensures an appropriate level of transparency.

256.      Specifically, paragraph 100G(5)(b) distinguishes between legislative and non-legislative instruments. This is consistent with the definition of ‘legislative instrument’ in subsection 8(4) of the Legislation Act . The exemption instrument must be registered on the Federal Register of Legislation. Legislative instruments are subject to parliamentary disallowance and sunsetting. The exemption power is expected to be exercised reasonably and in accordance with criteria set out in the Code.

257.      Subsection 100G(7) would provide that the Code may also require a person or body to provide information or documents relevant to the operation, application or administration of the Code, whether or not the Code relates to the person, and may confer a function of imposing, or a power to impose, a requirement of the kind mentioned in paragraph (a).

258.      Subsection 100G(8) would provide that subsection 100G(7)(b) does not limit the functions or powers the Code may confer on a person in relation to the matters set out under subsection 100G (3) (described above).

Section 100H Incorporation of instruments, etc.

259.      New section 100H would allow the regulations to make provision in relation to a matter by applying, adopting or incorporating, with or without modification, any matter contained in an instrument or other writing as in force or existing from time to time. This provision is based on existing subsection 51AE(3) of the CC Act in relation to Industry Codes.

260.      Under subsection 100H(2), if this Act provides that the Code may include a provision of a certain kind, then:

a)              the Code may include a provision of that kind, whether or not the provision regulates conduct of a kind mentioned in subsection 100H(1); and

b)              if the Code does include a provision of that kind, the inclusion of the provision does not prevent the Code from being the Code.

261.      A fundamental principle of the rule of law is that individuals and entities should be able to easily understand their rights and obligations at law. Subsection 14(2) of the Legislation Act encapsulates this principle by preventing a legislative or notifiable instrument from applying, adopting or incorporating any other writing, as in force or existing from time to time, unless there is a contrary intention. Subsection 14(2) may be overridden by providing in another Act for the incorporation or adoption of ‘any matter contained in an instrument or other writing as in force or existing from time to time’, as stated in new section 100H.

262.      Consistent with subsection 12(2) of the Legislation Act the type of documents that may be incorporated under this section are auditing standards for audit reports required to be obtained under the statutory trust accounting obligations in the new Part 5A under new section 100V . The documents will be made freely available to all persons interested in the law at the website of the Auditing and Assurance Standards Board. It is necessary to apply the documents as in force or existing from time to time, rather than when the instrument is first made becaus e standards may be updated or new standards may be issued.

263.      This provision will help to alleviate the workload relating to the making of regulations. The regulations and legislative rules deal with highly technical matters, often requiring cross-references to Australian or international standards, industry databases, models and methodologies. Including the content of these documents in subordinate legislation would make those instruments unwieldy, by expanding their volume considerably and requiring frequent updating.

Section 100J Water Markets Intermediaries Code may prescribe pecuniary penalties

264.      Section 100J would allow the Code to prescribe pecuniary penalties not exceeding 600 penalty units, for contraventions of a civil penalty provision of the Code. This is consistent with the recommendations of the Roadmap that pecuniary penalties should be included in the Code.

265.      Deterrence is the primary objective of the civil penalties. Accordingly, the scope of the maximum pecuniary penalty is directed at preventing certain conduct and encouraging compliance with the Code. The proposed penalty amount is considered necessary and appropriate, to avoid industry factoring in penalties as a cost of doing business. A pecuniary penalty that deters conduct is an important sanction as a breach of the Code could result in commercial gains.

266.      Non-compliance with the Code will undermine the intent of the Code. In order for broader improvements in industry practice, and for the Code to be effective, there needs to be a culture of compliance across the sector. While a breach of the Code would not disqualify an intermediary from continuing to operate in the industry, the proposed penalties are considered appropriate to deter breaches.

267.      The maximum penalty amount of 600 penalty units would be consistent with similar penalties in other industry codes that regulate similar sized entities, including industry codes prescribed under section 51AE of the CC Act.

268.      Additionally, civil courts are experienced in making civil penalty orders at levels within the maximum amount specified in legislation to reflect the individual circumstances of a case.

269.      The ACCC inquiry recommended a Code for water market intermediaries. The Roadmap also noted that a Code is the only option that would reduce the duplication of administrative costs and provide a consistent level of protection to water market participants who use intermediary services.

270.      The Roadmap noted that there is widespread support for an enforceable mandatory code for water market intermediaries that would apply to all tradeable water rights, at least across the Basin. Water market intermediaries have expressed strong support for measures that would promote the professionalisation of their industry and more trust and confidence in their conduct.

271.      It is necessary for delegated legislation in the form of the Code to specify pecuniary penalties . It will promote transparency by allowing market participants to easily locate and identify penalties that apply to breaches of the Code. This is consistent with the industry code frameworks prescribed under section 51AE of the CC Act .

272.      The Commonwealth Guide provides that serious pecuniary penalties are most appropriately placed in primary Acts of Parliament rather than subordinate legislation. Accordingly, the primary law provides that the Code is limited to prescribing penalties up to a maximum of 600 penalty units. 

Section 100K Water Markets Intermediaries Code may provide for civil penalties

273.      Section 100K would provide that the Code may provide that a specified provision, or specified provisions, are civil penalties provisions.

274.      Recommendation 3 of the Roadmap recommended that appropriate compliance and enforcement mechanisms should be provided for in the Code to deter breaches of the Code .  It is necessary and appropriate to allow the Code to specify civil penalty provisions for the reasons outlined above under section 100J . 

Section 100L Functions and powers of ACCC under Water Markets Intermediaries Code

275.      Section 100L would provide that if regulations prescribe a Code, the functions and powers of the ACCC under the Water Act include any function or power conferred on the ACCC by the Code.

Division 4 - Contravention of the Water Markets Intermediaries Code

Section 100M Contravention of the Water Markets Intermediaries Code

276.      Section 100M would provide that an eligible water markets intermediary must not contravene the Code. This section ensures the enforceability of the Code which is necessary for its effectiveness and applicability.

Section 100N Ancillary contravention of the Water Markets Intermediaries Code - operation in addition to section 154A

277.      Existing section 154A of the Water Act titled ‘ Ancillary contravention of civil penalty provisions’, mirrors section 92 of the Regulatory Powers Act by providing that conduct ancillary to the contravention of a civil penalty provision is considered a contravention of the provision itself. It sets out the types of conduct that would be ancillary conduct contraventions of a civil penalty provision.

278.      New section 100N provides for additional types of ancillary conduct which constitute a contravention of the Water Markets Intermediaries Code, in addition to the types of conduct already prescribed in section 154A of the Water Act. Specifically, subsection 100N(1) provides that:

a)              an eligible water markets intermediary must not attempt to contravene a provision of the Code that is not a civil penalty provision, and

b)              a person must not do any of the following in relation to a provision of the Code that is not a civil penalty provision:

i)      aid, abet, counsel or procure a contravention of the provision,

ii)    induce (by threats, promises or otherwise) a contravention of the provision,

iii) be in any way, directly or indirectly, knowingly concerned in, or party to, a contravention of the provision,

iv) conspire with others to effect a contravention of the provision.

279.      Subsection 100N(1) would include a note to signpost section 154A of the Water Act which provides for ancillary contraventions of civil penalty provisions .

280.      Subsection 100N(2) provides that a person who contravenes subsection 100N(1) in relation to a provision of the Code is taken to have contravened the provision.

Division 5 - Statutory trust accounting framework for eligible water markets intermediaries

281.      Recommendation 3 of the Roadmap recommended new obligations for parties that provide water market intermediary services to comply with client funds management and accounting obligations such as annual auditing and accounting practices (under statutory trust accounting framework for client funds). Division 5 would insert the statutory trust accounting framework into the Water Act.

100P Application of this Division

282.      Section 100P would provide that the new Division 4 statutory trust accounting framework applies to an eligible water markets intermediary that receives money on behalf of another person in the course of providing water markets intermediary services.

100Q Exception to the application of this Division: State or Territory laws

283.      Section 100Q would provide an exception to the application of the statutory trust accounting framework established by this Division, during the period an eligible water markets intermediary maintains an equivalent statutory trust account in accordance with a law of a State or Territory prescribed by the regulations.

284.      Before a law of a State or Territory would be prescribed for the purposes of paragraph 100Q(1)(b), the Minister must be satisfied that the statutory trust accounting scheme is equivalent in substance to the statutory trust accounting framework established under this Division.

285.      The Minister would be required to have regard to matters prescribed by the regulations for the purposes of subsection 100Q(3) when considering whether a statutory trust accounting scheme of a law of a State or Territory is equivalent in substance. Subsection 100Q( 4 ) provides the matters that may be prescribed in the regulation, which include :

a)        audit requirements,

b)       external examination requirements,

c)        requirements in relation to accounting records and practices,

d)       obligations in relation to the deposit and receipt of trust funds,

e)        the capacity for the scheme to deal with the trade or transfer of eligible tradeable water rights including, but not limited to, a trade or transfer that is not part of the transfer of land,

f)        the adequacy of the protection of trust monies,

g)       any other matter that the Minister considers relevant.

100R Obligation for eligible water markets intermediaries to maintain trust account

Requirement to maintain trust account

286.      Section 100R would provide that an eligible water market intermediary must maintain one or more trust accounts (the trust account) in accordance with this section. The trust account must be maintained with an Australian ADI (within the meaning of section 9 of the Corporations Act). Section 9, currently, means an authorised deposit-taking institution (ADI) within the meaning of the Banking Act 1959 ; and a person who carries on State banking within the meaning of paragraph 51(xiii) of the Constitution.

287.      Subsection 100R(3) requires the trust account to be designated in the manner specified in the Code including, but not limited to, in relation to the following matters:

a)        naming of the trust account,

b)       the inclusion of the words ‘ trust account’ in the name,

c)        the inclusion of the name of the trustee in the name,

d)       specific naming requirements if the trust account is held by an entity of a particular kind.

288.      Subsection 100R(4) provides that a person is liable to a civil penalty if the person contravenes subsections (1), (2) or (3) . A maximum penalty for an individual of 600 civil penalty units applies. This penalty is necessary to act as a deterrent for contraventions to ensure that eligible water markets intermediaries maintain an appropriate account for handling client funds. 

100S Obligation to notify the ACCC of trust account and appoint an auditor

289.      Subsection 100S(1) would require that within three months of the first day on which the obligation for an eligible water markets intermediary to maintain a trust account in accordance with this Division arises, the eligible water markets intermediary must:

a)              appoint an auditor , and

b)              notify the ACCC that the eligible water markets intermediary is maintaining a trust account.

290.      Subsection 100S(2) provides that a person is liable to a civil penalty if the person contravenes subsection (1). A maximum penalty for an individual of 600 civil penalty units would apply.  This penalty is necessary to ensure active compliance with the trust accounting obligations from the start of the obligations arising. Notification to the ACCC enables the ACCC to be aware of those eligible water markets intermediaries with new statutory trust accounting obligations and is necessary for monitoring compliance with the remaining obligations. The appointment of an auditor within three months of the obligation arising would assist with ensuring that obligations for obtaining audit reports are complied with.

100T Obligations in relation to trust account money

291.      Section 100T provides that an eligible water markets intermediary to which Division 5 applies must:

a)              pay to the credit of the trust account any money received on behalf of another person in relation to the water markets intermediary services provided by the eligible water markets intermediary ( subsection 100T (1)),

b)              not pay to the credit of the trust account any money other than in accordance with subsection (1) (subsection 100T (2)),

c)              not withdraw any money paid into the trust account, other than for the purpose of paying the money in accordance with subsection 100T(4) ( subsection 100T (3)),

d)              pay any money withdrawn from the trust account to the person or persons lawfully entitled to receive that money ( subsection 100T (4)).

292.      Subsection 100T(5) provides that a person is liable to a civil penalty if the person contravenes subsections (1), (2), (3) or (4). A maximum penalty for an individual of 600 civil penalty units would apply.    This penalty is necessary to act as a deterrent for contraventions to ensure that eligible water markets intermediaries deal with client funds appropriately.   

100U Trust account money not available to pay debts etc.

293.      Subsection 100U(1) would provide that money paid into a trust account by an eligible water markets intermediary under section 100T:

a)              is not available for the payment of a debt of a creditor of the eligible water markets intermediary, and

b)              is not liable to be attached or taken in execution under the order or process of a court at the instance of any such creditors.

100V Requirement to prepare trust account statements

294.      Subsection 100V(1) would provide that an eligible water markets intermediary to Division 5 applies must, for each financial year of the eligible water markets intermediary:

a)              prepare a written statement in relation to the trust account (the trust account statement ) in accordance with this section, and

b)              obtain an auditor’s report (the trust account audit report) prepared in accordance with this section.

295.      Subsection 100V(2) would provide that the trust account statement and the trust account audit report must:

a)              be in the approved form, and

b)              contain the information and matters specified in the Code.

296.      Subsection 100V(3) would provide that the trust account audit report must:

a)              be prepared by a person who complies with any eligibility requirements specified by the Code; and

b)              be accompanied by any information or documents specified in the Code in relation to that person.

297.      Subsection 100V(4) would provide that the trust account statement must be prepared, and the trust account audit report must be obtained, within three months of the end of the financial year of the eligible water markets intermediary to which the statement and report relate.

298.      Subsection 100V(5) would provide that the eligible water markets intermediary must retain copies of the trust account statement and the trust account audit report in accordance with any requirements specified in the Water Markets Intermediaries Code.

299.      Subsection 100V(6) would provide that a financial year of the eligible water markets intermediary means:

a)              if the eligible water markets intermediary is a body corporate to which section 323D of the Corporations Act applies—a financial year of the body corporate (within the meaning of that section); and

b)              in any other case—a year ending on 30 June.

300.      Subsection 100V(7) would provide that a person is liable to a civil penalty if the person contravenes subsection (1), (2), (3) or (4). A maximum penalty for an individual of 600 civil penalty units would apply.  This penalty is necessary to ensure active compliance with obligations to prepare trust account statements and obtain trust account audit reports. The requirement to obtain a trust account audit report would promote appropriate handling of client money by an eligible water markets intermediary as this would be subject to external examination. The penalty must act as a sufficient deterrent against the cost of preparing the statement and obtaining the report.

100W Requirement to provide trust account statement

301.      Subsection 100W(1) would provide that ACCC may, by notice in writing given to an eligible water markets intermediary, require the eligible water markets intermediary to provide, for one or more financial years of the eligible water markets intermediary, one or more of the following:

a)              the trust account statement,

b)              the trust account audit report,

c)              any information or documents required to accompany the trust account audit report under paragraph 100V(3)(b).

302.      Subsection 100W(2) provides that if the ACCC gives a notice under subsection (1) to an eligible water markets intermediary, the eligible water markets intermediary must comply with the notice.

303.      Subsection 100W (3) provides that if a person is liable to a civil penalty of up 600 penalty units if they contravene subsection (2). This penalty is necessary to ensure compliance and enable the ACCC to effectively enforce the statutory trust accounting obligations.

100X Time of providing trust account statement or trust account audit report

304.      Subsection 100X (1) would provide that a trust account statement and trust account audit report must be lodged with the ACCC within 21 days on which the notice is given or of the relevant day, unless an extension is granted under subsection (3).

305.      Subsection 100X(2) would provide that the ACCC may, on application made by the eligible water markets intermediary or the auditor that is to prepare the trust account audit report, extend the period for complying with the notice. The extension may be of the period originally applicable or the period applicable under a previous extension.

306.      Subsection 100X (3) would provide that an extension may be given subject to any conditions imposed by the ACCC.

307.      Subsection 100X (4) would provide that a member of the ACCC may, in writing, delegate the member’s powers under subsection (2) to a member of the staff of the ACCC who is an SES employee or an acting SES employee.

308.      Notes at the end of subsection 100X(4) would refer to the definitions of SES employee and acting SES employee and provisions relating to delegations in the Acts Interpretation Act, to assist in interpreting the subsection.

309.      Subsection 100X (5) would provide that a delegate under subsection (4) must comply with any written directions of the member of the ACCC who delegate the member’s powers. This would allow the ACCC to institute a formal process to exercise control over delegates’ conduct, as required.

310.      The delegation of the ACCC’s powers to the SES or SES acting employees is necessary to ensure the efficiency and effectiveness of the ACCC’s operations. The powers and functions of the ACCC may need to be undertaken, without any undue delay or deferral. Delegating the powers to the SES level ensures that the power is exercised by people with the appropriate expertise and experience.

311.      Subsection 100X (6) would further provide that for the purposes of paragraphs 100X (1)(a) and (b), the relevant day means the day that is 3 months after the end of the most recent financial year of the eligible water markets intermediary to which the trust account statement or audit report relates .

312.      The intention is to ensure that eligible water markets intermediaries have sufficient time to prepare trust account statements and obtain trust account audit reports after the end of their financial year, before they may be required to provide these to the ACCC.

100Y Provision of false or misleading information

313.      Subsection 100Y(1) would provide that a person must not give false or misleading information in a trust account statement or a trust account audit report. If a person contravenes subsection 100Y(1) they would be liable to a civil penalty of up to 600 penalty units.

314.      Subsection 100Y(2) would have the effect that a person will not have contravened section 100Y(1) if the person could not have known the information was false or misleading or if the provision of a document containing false or misleading information is accompanied by a statement of the person that the information is false or misleading.

315.      This penalty is necessary to ensure active compliance with obligations to prepare trust account statements and obtain trust account audit reports and accurately reflect how client money has been handled. The penalty must act as a sufficient deterrent against any benefit from mishandling client money and falsifying how client money has been handled.

100Z Auditor’s right of access to records, information etc.

316.      Subsection 100Z (1) would provide that an auditor who prepares a trust account audit report in relation to an eligible water markets intermediary has a right of access at all reasonable times to the financial records of the eligible water markets intermediary for purposes relating to the trust account audit report.

317.      Subsection 100Z (2) would provide that the auditor is entitled to require any assistance and explanations that the auditor requires for purposes relating to the trust account audit report from the eligible water markets intermediary; or if the eligible water markets intermediary is a body corporate - from any director, secretary or senior manager.

318.      Subsection 100Z (3) would provide that the eligible water markets intermediary, director, secretary or senior manager must not:

a)              refuse or fail to allow the auditor access to financial records of the eligible water markets intermediary, or

b)               refuse or fail to give assistance, or an explanation to the auditor as and when required under 100Z(2), or

c)              otherwise hinder, obstruct or delay the auditor in the performance or exercise of the auditor’s duties or powers.

319.      New subsection 100Z(3 ) provides a maximum civil penalty of 600 penalty units for an individual.

320.      This penalty is necessary to ensure active compliance with obligations to obtain trust account audit reports and their preparation. External examination of complete financial records would promote appropriate handling of client money by an eligible water markets intermediary.

Division 6 - Public warning notices

Section 100ZA ACCC may issue a public warning notice

321.      Section 100ZA would give the ACCC power to issue a public warning notice about the conduct of a person if, the ACCC:

a)              has reasonable grounds to suspect that the conduct may constitute a contravention of the Code, and

b)              is satisfied that one or more persons has suffered, or is likely to suffer, detriment as a result of the conduct, and

c)              is satisfied that it is in the public interest to issue the notice.

322.      This provision is modelled on the industry code framework set out under Division 3 of Part IVB of the CC Act. The effect of this provision would be that the ACCC would be permitted to disseminate and circulate information about such persons and their conduct, to key stakeholders and the broader community. This is an appropriate regulatory tool to prevent or reduce harmful effects of prohibited conduct on the community by alerting the public to the alleged misconduct.

323.      Subsection 100ZA(2) would provide that a public warning notice given under this section is not a legislative instrument. This is in accordance with subsection 8(6) of the Legislation Act . This provision is declaratory of the law to assist the reader.

Division 7 - Orders to redress loss or damage suffered by non-parties, etc.

Section 100ZB Orders to redress loss or damage suffered by non-parties, etc.

Orders

324.      Recommendation 3 of the Roadmap notes that there is insufficient protection for participants and third parties in the Basin water markets. The proposed section 100ZB would provide an avenue for third parties to be redressed for losses or damage .

325.      On application from the ACCC, section 100ZB would allow a court to make such orders (other than an award of damages) as it thinks appropriate if a non-party has, or is likely to, suffer loss or damage as a result of a person contravening the Code or statutory trust accounting obligations.

326.      A non-party means a person (or persons) who are not, or have not been, parties to an enforcement proceeding instituted under Part 8 of the Water Act, in relation to the conduct contravening the Code.

327.      A court must not make an order unless the court considers that the order will:

a)              redress, in whole or in part, the loss or damage suffered by the non-parties in relation to the contravening conduct; or

b)              prevent or reduce the loss or damage suffered, or likely to be suffered, by the non-parties in relation to the contravening conduct.

Application for order

328.      The ACCC may apply for an order even if an enforcement proceeding in relation to the contravening conduct has not been instituted. 

329.      Such an application must be made within six years after the day on which the cause of action that relates to the contravening conduct accrued.

Section 100ZC - Determining whether to make an order

330.      In determining whether to make an order against a person to redress loss or damage , section 100ZC would provide that a court may have regard to the conduct of the person and the non-parties in relation to the contravening conduct, since the contravention occurred.

331.      Subsection 100ZC(2) would provide that a court need not make a finding about:

a)              which persons are non-parties in relation to the contravening conduct,

b)              the nature of the loss or damage suffered, or likely to be suffered, by such persons.

When a non-party is bound by an order etc.

332.      Subsection 100ZC(3) relates to circumstances in which a non-party is bound by a court order made under subsection 100ZB(1). If:

a)              an order is made under subsection 100ZB(1) against a person, and

b)              the loss or damage suffered, or likely to be suffered, by a non-party in relation to the contravening conduct to which the order relates has been redressed, prevented or reduced in accordance with the order, and

c)              the non-party has accepted the redress, prevention or reduction,

then:

d)              the non-party is bound by the order, and

e)              any other order made under subsection 100ZB(1) that relates to that loss or damage has no effect in relation to the non-party, and

f)               despite any other provision of this Act or any other law of the Commonwealth, or a State or Territory, no claim, action or demand may be made or taken against the person by the non-party in relation to that loss or damage.

333.      These provisions are modelled on the framework set out under Division 3 of Part IVB of the CC Act. They are replicated in the Water Act to provide for consistency across Industry Codes and for the ACCC’s enforcement powers as the regulator of the Code.

Division 8 - Power to require information, etc.

Section 100ZD ACCC may require eligible water markets intermediary to give information or produce documents

334.      Section 100ZD would apply if an eligible water markets intermediary is required to keep, to generate or to publish information or a document under the Code.

335.      Under this section, the ACCC may give the eligible water markets intermediary a written notice that requires the eligible water markets intermediary to give the information, or to produce the document, to the ACCC within 21 days after the notice is given to the eligible water markets intermediary.

336.      This power will assist in the administration of the Code by ensuring that the ACCC has the power to obtain information necessary to prepare and implement the Code and about matters relevant to performance of the ACCC’s functions.

337.      The requirements of the notice would be set out in subsection 100ZD(3) and would include that the notice must:

a)              name the eligible water markets intermediary to which it is given, and

b)              specify:

i.         the information or document to which it relates, and

ii.       the provisions of the Code which require the eligible water markets intermediary to keep, to generate or to publish the information or document, and

c)              specify that the eligible water markets intermediary must comply with the notice within the period specified in subsection (2), and

d)              explain the effect of sections 100ZE (extending the period for compliance), 100ZF (civil penalty) and 100ZG (false or misleading statements).

338.      The notice may relate to more than one piece of information or more than one document.

339.      Notices issued under this section would enable the ACCC to obtain necessary information to monitor eligible water markets intermediaries’ compliance with the Code.

340.      Information that is obtained by the ACCC under new section 100ZD would be subject to safeguards as ‘protected information’ under the CC Act. Item 5 of Part 1, Schedule 6 would amend subsection 155AAA (21) of the CC Act to include information obtained under new 100ZD.

Section 100ZE Extending periods for complying with notices

341.      Section 100ZE would provide that an eligible water markets intermediary that has been given a notice under section 100S can apply to the ACCC for an extension of the period for complying with the notice.

342.      Where a recipient considers there are genuine reasons why they may not be able to comply with the notice by the due date, the recipient may contact the ACCC to request a variation of the time to respond to the notice. The ACCC may also vary the timing set by the notice relying on subsection 33(3) of the Acts Interpretation Act.

343.      Subsection 100ZE(4) would provide that a member of the ACCC may, in writing, delegate the member’s powers under subsection (2) to a member of the staff of the ACCC who is an SES employee or an acting SES employee.

344.      Notes at the end of subsection 100ZE(4) would refer to the definitions of SES employee and acting SES employee and provisions relating to delegations in the Acts Interpretation Act , to assist in interpreting the subsection.

345.      Subsection 100ZE(5) would provide that a delegate under subsection (4) must comply with any written directions of the member of the ACCC who delegated the member’s powers. This would allow the ACCC to institute a formal process to exercise control over delegates’ conduct, as required.

346.      The delegation of the ACCC’s powers to the SES or SES acting employees is necessary to ensure the efficiency and effectiveness of government operations. The powers and functions of the ACCC may need to be undertaken, without any undue delay or deferral. Delegating the powers to the SES level ensures that the power is exercised by people with the appropriate expertise and experience.

Section 100ZF Compliance with notices

347.      Section 100ZF would provide that an eligible water markets intermediary that has been given a notice under section 100ZD must comply with it within:

a)              the period of 21 days specified in the notice; or

b)              the period as so extended under section 100ZE.

348.      If the notice is not complied with, the eligible water markets intermediary is liable to a civil penalty of 100 penalty units.

349.      This penalty is necessary and proportionate to the contravention as breaches of section 100ZD will undermine the ACCC’s ability to regulate compliance with the Code. It is necessary for the ACCC to be able to have access to relevant information and any contraventions of this should be treated seriously.

Section 100ZG False or misleading information etc.

350.      Section 100ZG would provide for a civil penalty provision if an eligible water markets intermediary gives information or produces documents that contain false or misleading information. The civil penalty amount is 120 penalty units.

351.      There is an exception to this provision in subsection 100ZG(2). An eligible water markets intermediary would not contravene subsection 100ZG(1) if they could not have known the information was false or misleading, or the document is accompanied by a statement of the eligible water markets intermediary that the information is false or misleading.

352.      A civil penalty for providing false or misleading information is necessary and proportionate to ensure the integrity of the information the ACCC receives and to deter repeated breaches of the provisions.

Division 9 Application of Part to partnerships, unincorporated associations and trusts

Section 100ZH Application to partnerships

353.      Section 100ZH would outline how the Code applies to partnerships. Subsection 100ZH (1) would provide that the Code applies to partnerships as if the partnership were a person. The obligations that would otherwise be imposed on the partnership are imposed instead on each partner but may be discharged by any of the partners.

354.      Subsection 100ZH(2) would provide that if, apart from this subsection, a partnership would contravene a civil penalty provision, the contravention is taken to have been committed by each partner.

355.      Subsection 100ZH(3) would provide that a partner does not contravene a civil penalty provision because of subsection 100ZH(2), if the partner:

a)              does not know of the circumstances that constitute the contravention of the provision concerned, or

b)              knows of those circumstances but takes all reasonable steps to correct the contravention as soon as possible after the partner becomes aware of those circumstances.

356.      The evidential burden of proof would be placed upon the partner wanting to rely on subsection 100ZH(3) due to the effect of section 154E of the Water Act. This is proportionate to the legitimate objective of the provision because the defendant will have the information or knowledge that is evidence of the exception.

357.      The ACCC will be able to use their enforcement powers against each partner in a partnership.

Section 100ZJ Application to unincorporated associations

358.      Section 100ZJ would outline how the Code applies to unincorporated associations. Subsection 100ZJ (1) would provide that the Code applies to unincorporated associations as if the unincorporated association were a person. The obligations that would otherwise be imposed on the unincorporated association:

a)              is imposed on each member of the association’s committee of management instead, and

b)              may be discharged by any of the members.

359.      Subsection 100ZJ(2) would provide that if, apart from this subsection, an unincorporated association would contravene a civil penalty provision, the contravention is taken to have been committed by each member of the association’s committee of management.

360.      Subsection 100ZJ(3) would provide that a member of an unincorporated association’s committee of management does not contravene a civil penalty provision because of subsection 100ZJ(2), if the member:

a)              does not know of the circumstances that constitute the contravention of the provision concerned, or

b)              knows of those circumstances but takes all reasonable steps to correct the contravention as soon as possible after the member becomes aware of those circumstances.

361.      The evidential burden of proof would be placed upon the member wanting to rely on subsection 100ZJ(3) due to the effect of section 154E of the Water Act. This is proportionate to the legitimate objective of the provision because the defendant will have the information or knowledge that is evidence of the exception.

362.      The ACCC will be able to use their enforcement powers against each member of the association’s committee of management.

Section 100ZK Application to trusts

363.      Section 100ZK would outline how the Code applies to trusts. Subsection 100ZK(1) would provide that the Code applies to trusts as if the trust were a person. The obligations that would otherwise be imposed on the trust:

a)              is imposed on each trustee of the trust instead, and

b)              may be discharged by any of the trustees.

364.      Subsection 100ZK(2) would provide that if, apart from this subsection, a  trust would contravene a civil penalty provision, the contravention is taken to have been committed by each trustee of the trust.

365.      Subsection 100ZK(3) would provide that a trustee of a trust does not contravene a civil penalty provision because of subsection 100ZK(2), if the trustee:

a)              does not know of the circumstances that constitute the contravention of the provision concerned, or

b)              knows of those circumstances but takes all reasonable steps to correct the contravention as soon as possible after the partner becomes aware of those circumstances.

366.      The evidential burden of proof would be placed upon the trustee wanting to rely on subsection 100ZK(3) due to the effect of section 154E of the Water Act. This is proportionate to the legitimate objective of the provision because the defendant will have the information or knowledge that is evidence of the exception.

367.      The ACCC will be able to use their enforcement powers against each trustee of the trust.

Part 2 - Water markets decisions and insider trading

Overview

368.      Recommendation 2 of the Roadmap recommended enacting legislation to prohibit price manipulation and insider trading for all tradeable water rights, including water delivery and irrigation rights.

369.      The Roadmap also recommended that the current mandatory water announcement requirements should largely remain and be extended to irrigation infrastructure operators, and that decisions should be provided to the Bureau in a timely way for publication (recommendation 2).

370.      Part 2 of Schedule 3 of the Bill would include in the Water Act expanded obligations relating to water announcements, including a prohibition on insider trading related to water announcements, to replace existing obligations in the Basin Plan.

Water Act 2007

Item 3

371.      Item 3 would insert new definitions into subsection 4(1) of the Water Act.

372.      The new term benefit derived and detriment avoided would be defined to mean, in relation to a contravention of a civil penalty provision, the sum of:

a)              the total value of all benefits obtained by one or more persons that are reasonably attributable to the contravention; and

b)              the total value of all detriments avoided by one or more persons that are reasonably attributable to the contravention.

373.      Information that is generally available would be defined to mean if it has been published in a manner that will, or will be likely to, bring it to the attention of interested members of the public.

374.      The new term material effect would be defined to mean a decision or information is taken to have a material effect on the price or value of an eligible tradeable water right , if the decision or information is reasonably likely to influence persons who commonly acquire eligible tradeable water rights in deciding whether or not to acquire or dispose of such rights.

375.      The new term water markets decisions would be defined to mean a decision that relates to actions that an agency of the Commonwealth or of a Basin State, or an irrigation infrastructure operator, is undertaking, or may or will undertake, that is prescribed by the regulations or is included in a class prescribed by the regulations.

376.      The new term water markets decisions would be relevant to water announcement obligations and insider trading related to water announcements. It is intended that water markets decisions are listed in regulations. The list of water markets decisions would be an exhaustive list to provide certainty and would include decisions which could reasonably be expected, if announced, to have a material effect on the price or value of eligible tradeable water rights.

Item 4

377.      Item 4 would insert new Part 5A - Water markets decisions and insider trading, into the Water Act, after new Part 5.

378.      New Part 5A would provide for water announcement obligations, and insider trading and market manipulation prohibitions in the Water Act.

Part 5A - Water markets decisions and insider trading

Division 1 - Simplified outline of Part

Section 101 Simplified outline

379.      Section 100Z would provide the simplified outline of new Part 5A.

Division 2 - Application of Part

Section 101A Constitutional operation

380.      Subsection 101A (1) would provide that Division 3 of Part 5A and any other provision of this Act or any other Act that relates to that Division, applies to an obligation imposed on a constitutional corporation or an employee of a constitutional corporation to provide information in relation to water markets decisions.

381.      Subsection 101A(2) would provide that Division 3 of Part 5A, and any other provision of this Act or any other Act that relates to that Division, applies to an obligation imposed on a person to provide information in relation to water markets decisions, if:

a)              the information is relevant to trade and commerce:

i.         between the States; or

ii.       between a State and a Territory or between 2 Territories;

iii.     between Australia and places outside Australia; or

b)              the person is located in a Territory, or the information relates to a water resource in a Territory.

382.      Subsection 101A(3) would provide that Divisions 4 and 5 of Part 5A, and any other provision of this Act or any other Act that relates to those Divisions, applies to a thing done in relation to the pre-trade, trade or transfer of an eligible tradeable water right by a constitutional corporation or an employee of a constitutional corporation.

383.      Subsection 101A(4 ) would provide that Divisions 4 and 5 of Part 5A, and any other provision of this Act or any other Act that relates to those Divisions, applies to things done in relation to the pre-trade, trade or transfer of an eligible tradeable water right, if:

a)              at least one of the parties to the pre-trade, trade or transfer is a constitutional corporation or the things done affect the activities of a constitutional corporation; or

b)              the pre - trade, trade or transfer takes place in the course of trade and commerce:

i.         between the States, or

ii.       between a State and a Territory or between 2 Territories, or

iii.     between Australia and places outside Australia, or

c)              at least one of the parties to the pre-trade, trade or transfer is located in a Territory, or the pre-trade, trade or transfer is in relation to a water resource in a Territory, or

d)              at least one element of the pre-trade, trade or transfer takes place using a postal, telegraphic, telephonic or other like service (within the meaning of paragraph 51(v) of the Constitution ).

384.      This section would provide that the regulatory ambit of Part 5A is within the Constitutional heads of power.

Division 3 - Water announcements

Section 101B Announcement of water markets decisions

385.      Section 101B would provide that a person who makes a water markets decision must ensure that:

a)              the water markets decision is provided to the Bureau for the purposes of the publication of the decision as the means by which the person first announces the decision, or

b)              the water markets decision is first announced in a manner prescribed by the regulations.

386.      The intention in paragraph 101B(1)(a) is that the announcement of the water markets decision is by the person who makes the water markets decision and is not an announcement by the Bureau.

387.      This section would place a requirement on all persons that make water markets decisions to ensure that decisions are announced by one of two methods. The person may announce the water markets decision by providing it to the Bureau for the Bureau to publish on its website. Alternatively, the person may announce the water markets decision in a manner prescribed in the regulations.

388.      It is the intention that regulations will specify permissible methods for persons who make water markets decisions to announce these decisions. This may include using existing channels, some of which are set in State legislation.

389.      Subsection 101B(2) would provide that a person who provides a water markets decision to the Bureau must provide to the Bureau the details about the water markets decision that are prescribed by the regulations.

390.      Subsection 101B(3) would provide that if a water markets decision is not provided to the Bureau under paragraph 101B(1)(a), the person who made the water markets decision must, within the period or periods prescribed by the regulations:

a)              report the announcement of the water markets decision under to the Bureau; and

b)              report the details (if any) in relation to the water markets decision or the announcement that are prescribed by the regulations.

391.      If a person does not provide the water markets decision under paragraph 101B(1)(a), information about the decision and how it was announced must also be provided to the Bureau after the announcement. The Bureau has functions and powers under Part 7A to publish water markets decisions and will make information about all water markets decisions made throughout the Basin available via a single website.

392.      If a person contravenes this section, they would be liable to a civil penalty of 120 penalty units. This penalty is necessary to act as a deterrent for contraventions to ensure that water markets decisions are announced in a manner that makes them visible to the market, so that all interested participants are able to make informed trading decisions. This penalty also ensures that reporting obligations will be complied with so that complete information about all water markets decisions announced throughout the Basin is available via a single website. This will lead to increased visibility and transparency of decisions which will affect the market.  

393.      Section 101B implements recommendation 2 of the Roadmap which provided that important information, including decisions by IIOs, are not adequately communicated and accessible to irrigators and traders to enable them to make informed business decisions.

394.      This section will replace the existing section 12. 51 of the Basin Plan which currently sets out a similar requirement to make water announcements generally available. The obligations under this new section 101B would provide clarity to persons who make water markets decisions about the methods they can use to make water announcements.

Section 101C Records to be kept about information reported

395.      Section 101C would provide that a person who makes a water markets decision must keep the following records, for at least 5 years, in relation to the decision:

a)              the fact that the water markets decision was made and the date on which it was made,

b)              if the water markets decision was provided to the Bureau under paragraph 101B(1)(a)— all the details provided, and the date and time on which the water markets decision was provided,

c)              if the water markets decision was announced under paragraph 101B(1)(a)—the date, time, manner and content of the announcement,

d)              such other information (if any) as is prescribed by the regulations.

396.      If a person contravenes this section, they would be liable to a civil penalty of 120 penalty units. This amount of penalty is necessary to ensure that complete records of water markets decisions and any announcement of these decisions are kept so that the ACCC is able to effectively enforce obligations related to the announcement of these decisions. These are decisions which may have an effect on the price or value of eligible tradeable water rights and compliance with announcement obligations is critical to maintain fair and equitable markets.

Section 101D ACCC may require person to give information or produce documents

397.      Section 101D would apply if a person is required to keep records under section 101C in relation to one or more water markets decisions.

398.      Under this section, the ACCC may give a person a written notice that requires the person to give information about the records, or to produce the records or other documents to the ACCC within 21 days after the notice is given to the person.

399.      This power would assist in the administration of the Water Act by ensuring that the ACCC has the power to obtain information necessary to enforce water markets decisions obligations.

400.      The requirements of the notice would be set out in subsection 101D(3) and would include that the notice must:

a)              name the person to which it is given; and

b)              specify the information or documents to which it relates; and

c)              specify that the person must comply with the notice within 21 days; and

d)              explain the effect of sections 101E (extending the period for compliance), 101F (requirement to comply) and 101G (false or misleading statements).

401.      The notice may relate to more than one piece of information or more than one document.

402.      Information that is obtained by the ACCC under new section 101D would be subject to safeguards as ‘protected information’ under the CC Act. Item 15 of Part 2, Schedule 6 would amend subsection 155AAA (21) of the CC Act to include information obtained under new 100ZD.

Section 101E Extending periods for complying with notices

403.      Section 101E would provide that where a person who has been given a notice under section 101D applies for an extension, a member of the ACCC may extend the period for complying with the notice.

404.      Where a person may not be able to comply with the notice by the due date, the person may contact the ACCC to request an extension of time to respond to the notice.

405.      The ACCC may also vary the period for complying with a notice in appropriate circumstances, relying on subsection 33(3) of the Acts Interpretation Act.

406.      Subsection 101E(4) would provide that a member of the ACCC may delegate their powers under subsection 101E(2) to a member of the staff of the ACCC who is an SES employee or acting SES employee. Notes at the end of this subsection would refer to the definitions of SES employee and acting SES employee and provisions relating to delegations in the Acts Interpretation Act, to assist in interpreting the subsection.

407.      Subsection 101E(5) provides that the delegate must comply with any written directions given by the member of the ACCC who delegated the member’s powers. This would allow the member to institute a formal process to exercise control over delegates’ conduct, as required.

408.      The delegation of powers to the SES or SES acting employees is necessary to ensure the efficiency and effectiveness of the ACCC’s operations. The powers and functions of the ACCC may need to be undertaken, without any undue delay or deferral. Delegating the powers to the SES level ensures that the power is exercised by people with the appropriate expertise and experience.

Section 101F Compliance with notices

409.      Section 101F would provide that a person who has been given a notice under section 101D must comply with it within:

a)              the period of 21 days specified in the notice, or

b)              the period as so extended under section 101E.

410.      If the notice is not complied with, the person is liable to a civil penalty of up to 100 penalty units.

411.      100 penalty units is necessary and proportionate to the contravention as breaches of section 101D will undermine the ACCC’s ability to seek information about water markets decisions and any water announcements. It is necessary for the ACCC to be able to have access to relevant information and any contraventions of this should be treated seriously.

Section 101G False or misleading information etc.

412.      Section 101G would provide for a civil penalty provision if a person gives information or produces documents that contain false or misleading information. The civil penalty amount is 120 penalty units.

413.      There is an exception to this provision in subsection 101G(2). A person would not contravene this section if they could not have known the information was false or misleading , or the document is accompanied by a statement of the person that the information is false or misleading.

414.      A civil penalty for providing false or misleading information is necessary and proportionate to ensure the integrity of the information the ACCC receives and to deter repeated breaches of the provisions.

Division 4 - Insider trading

Section 101H Person not to trade, etc. or communicate certain matters if aware of water announcement information

415.      Section 101H provides that a person (‘the insider’) must not take any of the actions specified in subsection 101H(2) of this section, if the person is aware, or ought to be aware, of water announcement information that is:

a)              a water markets decision that:

i.         has not been announced as mentioned in subsection 101B(1), or

ii.       has been announced as mentioned in subsection 101B(1), but has not been available for a reasonable period in order for it to be brought to the attention of interested members of the public, or

b)              information that:

i.         has not been generally available for a reasonable period, and

ii.       relates to a water markets decision of a kind mentioned in paragraph 101H(1)(a).

416.      If a person contravenes this section, they are liable for a civil penalty of 2,000 penalty units for an individual . For a body corporate, the penalty is set out in section 101K.

417.      The size of the maximum penalty in both circumstances is appropriate as a deterrent. While lower penalties for the existing prohibition on insider trading in the Basin Plan are currently specified in the Water Act, higher penalties are specified in section 1317G of the Corporations Act for insider trading in financial markets. These new maximum penalties reflect the seriousness of the contravening conduct and is a necessary deterrent to maintain integrity in water markets.

418.      Subsection 101H(2) provides that the actions the insider must not take are as follows:

a)              to enter into a contract or agreement to trade or transfer an eligible tradeable water right, if the price or value of the eligible tradeable water right could reasonably be expected to be materially affected if the water announcement information had been announced or had been generally available for a reasonable period, as the case requires;

b)              to decide not to enter into a contract or agreement to trade or transfer an eligible tradeable water right, being a contract or agreement that the insider would have entered into but for the fact that the person was aware of the water announcement information, if the price or value of the eligible tradeable water right could reasonably be expected to be materially affected if the water announcement information had been announced or had been generally available for a reasonable period, as the case requires;

c)              to apply to a water market authority in relation to the trade or transfer of an eligible tradeable water right, if the price or value of the eligible tradeable water right could reasonably be expected to be materially affected if the water announcement information had been announced or had been generally available for a reasonable period, as the case requires; or

d)              to directly or indirectly communicate, or cause to be communicated, the water announcement information to another person if the insider knows, or ought reasonably to know, that the other person would or would be likely to engage in conduct of a kind mentioned in the dot points above.

419.      The Inquiry and Roadmap found that existing insider trading prohibitions in the Basin Plan are not sufficient to protect against these kinds of behaviours. It was recommended that the existing prohibitions should be expanded and strengthened to ensure that the prohibitions are effective, enforceable and practical.

420.      This section is based on existing sections 12.49 to 12.51 of the Basin Plan (in relation to water announcements) , except the section expands upon the provisions in line with the recommendations by the Inquiry and the Roadmap , as explained above . This will extend the current coverage of the ‘insider trading rule’ to prohibit the trade of eligible tradeable water rights, not just water access rights.

421.      For clarity, the prohibition is on taking an action in relation to an eligible tradeable water right that could reasonably be expected to be materially affected by the water announcement information. Taking an action in relation to an eligible tradeable water right that would not be affected by the water announcement information would not be prohibited. That is, this prohibition is not intended to operate as a blanket ban on trading of all eligible tradeable water rights for a person who is aware of water announcement information.

422.      The inclusion of ‘reasonable period’ is included in the new 101H to allow market participants the opportunity to become aware of the water announcement information before any prohibited action can be taken by the person holding the information. Similarly, the Corporations Act provides that a reasonable period must have elapsed for information to be disseminated for that information to be considered generally available.

423.      For example, there could be a number of seconds between someone publishing information and that information being available for the market to view publicly on a website. It is not intended as a trading halt. It is to capture situations where a person may seek to take advantage of information that is technically announced or generally available, but where sufficient time has not passed in order for it to be brought to the attention of interested members of the public.

Section 101J Exceptions: approval of specific trades, etc. and information barriers in agencies

424.      Section 101J would provide for exceptions to section 101H (above) regarding the insider trading rule.

425.      Subsection 101J(1) would provide that subsection 101H(1) does not apply to an IIO to the extent that the IIO takes an action mentioned in paragraph s 101H(2)(a), (b), or (c) for the purposes of approving or facilitating a specific trade or transfer on behalf of a member or customer.

426.      Subsection 101J(2) would provide that a relevant agency does not contravene subsection 101H(1) by taking an action mentioned in paragraphs 101H(2)(a), (b) or (c) at any time merely because of water announcement information in the possession of an officer or a member of staff of the agency, if:

a)              the decision to take the action was taken on its behalf by a person or persons other than that officer or member of staff, and

b)              it had in operation at that time arrangements that could reasonably be expected to ensure:

i)        that the water announcement information was not communicated to the person or persons who made the decision referred to in paragraph (a), and

ii)      that no advice with respect to the decision was given to that person or any of those persons by a person in possession of the water announcement information, and

c)              the water announcement information was not so communicated, and no such advice was given.

427.      Subsection 101J(2) would be based on existing information wall arrangements in section 12.52 of the Basin Plan (‘Chinese wall arrangements for agencies’) and has been uplifted to the Water Act to apply to the new provisions under the Bill.

428.      These exceptions to the insider trading rule were recommended by the Roadmap in recognition of IIOs who undertake diverse functions. For example, an IIO who is aware of water announcement information may enter into a contract to trade, or apply for an approval of a trade, if it is for the purposes of facilitating the trade of a temporary irrigation right with a counterparty outside the network on behalf of a customer.

429.      It is expected that relevant agencies who make water markets decisions and trade eligible tradeable water rights should use ‘information barriers’ to manage the risk of insider trading and conflicts of interest, where possible. Information barriers enable one part of an organisation to trade freely by limiting its access to information held by another part of the organisation that could materially affect market prices.

Division 5—Penalty level

Section 101K Penalty level for contraventions of civil penalty provisions by bodies corporate

430.      Section 101K provides that the penalty applicable to a contravention of section 101H is whichever the following amounts is highest:

a)              20,000 penalty units;

b)              if the court can determine the benefit derived and detriment avoided because of the contravention—that amount multiplied by three;

c)              10% of the annual turnover of the body corporate (within the meaning of subsection 1317G(4) of the Corporations Act) for the 12-month period ending at the end of the month in which the body corporate contravened, or began contravening, the section concerned, up to a maximum amount equal to 2.5 million penalty units.

431.      The significant penalties for bodies corporate are consistent with paragraph 3.1.5 of the Commonwealth Guide. The Commonwealth Guide provides that it may be appropriate to express a maximum penalty as a multiple of the gain that was obtained through a wrongdoing. Subsection 101K(1) provides for a multiple of three of the benefit derived or detriment avoided, which is proportionate to the significance of contravening the insider trading rule. The penalty is also directly related to the improper gain received from the contravention.

432.      20,000 penalty units is a necessary and proportionate amount due to the amount a bodies corporate may receive or avoid through contravention of the insider trading rule. It is also consistent with other Industry Codes and insider trading rules. While lower penalties for the existing prohibition on insider trading in the Basin Plan are currently specified for bodies corporate in the Water Act under section 73H, higher penalties are specified in section 1317G of the Corporations Act for insider trading and market manipulation in financial markets. These new maximum penalties reflect the seriousness of the contravening conduct and is a necessary deterrent to maintain integrity in water markets.

433.      The higher penalties recognise that market misconduct can lead to large commercial gains, and the penalties need to be commensurately high to provide an effective deterrent. These penalties are necessary to provide an adequate deterrent to businesses engaging in this conduct as a cost of doing business. Higher penalties will also promote confidence in Basin water markets.

Division 6 - Orders to redress loss or damage

Section 101L Orders to redress loss or damage

434.      Section 101L would provide that if a person engages in conduct that contravenes Part 5A (other than Division 3) and the conduct causes, or is likely to cause, a person to suffer loss or damage, a court may, on application of the ACCC or the person who suffered loss or damage , make an order against the person who engaged in the conduct .

435.      Subsection 101L (2) would provide that a court must not make an order , unless the court considers that the order will:

a)              redress, in whole or in part, the loss or damage suffered by the person in relation to the contravening conduct, or

b)              prevent or reduce the loss or damage suffered, or likely to be suffered, by the person in relation to the contravening conduct.

436.      Subsections 101L (3) and (4) would provide that an application can be made at any time within 6 years after the day the cause of action accrues and can be made even if an enforcement proceeding in relation to the contravening conduct has not been instituted.

Division 7 - Application of Part to partnerships, unincorporated associations and trusts

Section 101M Application to partnerships

437.      Section 101M would outline how new Part 5A applies to partnerships. Subsection 101M(1) would provide that new Part 5A applies to partnerships as if the partnership were a person. The obligations that would otherwise be imposed on the partnership are imposed instead on each partner, but may be discharged by any of the partners.

438.      Subsection 101M(2) would provide that if, apart from this subsection, a partnership would contravene a civil penalty provision, the contravention is taken to have been committed by each partner.

439.      Subsection 101M(3) would provide that a partner does not contravene a civil penalty provision because of subsection 101M(2), if the partner:

a)              does not know of the circumstances that constitute the contravention of the provision concerned, or

b)              knows of those circumstances but takes all reasonable steps to correct the contravention as soon as possible after the partner becomes aware of those circumstances.

440.      The evidential burden of proof would be placed upon the partner wanting to rely on subsection 101M(3) due to the effect of section 154E of the Water Act. This is proportionate to the legitimate objective of the provision because the defendant will have the information or knowledge that is evidence of the exception.

Section 101N Application to unincorporated associations

441.      Section 101N would outline how Part 5A applies to unincorporated associations. Subsection 101N(1) would provide that Part 5A applies to unincorporated associations as if the unincorporated association were a person. The obligations that would otherwise be imposed on the unincorporated association:

a)              is imposed on each member of the association’s committee of management instead, and

b)              may be discharged by any of the members.

442.      Subsection 101N(2) would provide that if, apart from this subsection, an unincorporated association would contravene a civil penalty provision, the contravention is taken to have been committed by each member of the association’s committee of management.

443.      Subsection 101N(3) would provide that a member of an unincorporated association’s committee of management does not contravene a civil penalty provision because of subsection 101N(2), if the member:

a)              does not know of the circumstances that constitute the contravention of the provision concerned, or

b)              knows of those circumstances but takes all reasonable steps to correct the contravention as soon as possible after the member becomes aware of those circumstances.

444.      The evidential burden of proof would be placed upon the member wanting to rely on subsection 101N(3) due to the effect of section 154E of the Water Act. This is proportionate to the legitimate objective of the provision because the defendant will have the information or knowledge that is evidence of the exception.

Section 101P Application to trusts

445.      Section 101P would outline how new Part 5A applies to trusts. Subsection 101P(1) would provide that new Part 5A applies to trusts as if the trust were a person. The obligations that would otherwise be imposed on the trust:

a)              is imposed on each trustee of the trust instead, and

b)              may be discharged by any of the trustees.

446.      Subsection 101P(2) would provide that if, apart from this subsection, a trust would contravene a civil penalty provision, the contravention is taken to have been committed by each trustee of the trust.

447.      Subsection 101P(3) would provide that a trustee of a trust does not contravene a civil penalty provision because of subsection 101P(2), if the trustee:

a)              does not know of the circumstances that constitute the contravention of the provision concerned, or

b)              knows of those circumstances but takes all reasonable steps to correct the contravention as soon as possible after the trustee becomes aware of those circumstances.

448.      The evidential burden of proof would be placed upon the trustee wanting to rely on subsection 101P(3) due to the effect of section 154E of the Water Act. This is proportionate to the legitimate objective of the provision because the defendant will have the information or knowledge that is evidence of the exception.

Part 3 - Market manipulation and additional insider trading

Overview

449.      Recommendation 2 of the Roadmap recommended enacting legislation to prohibit price manipulation and insider trading for all tradeable water rights, including water delivery and irrigation rights.

450.      Part 3 of Schedule 3 of the Bill would inset into the new Part 5A prohibitions related to market manipulation, and insider trading related to non-water announcement information.

Water Act 2007

Item 5

451.      Item 5 would insert a new definition of ‘associate’ into subsection 4(1) of the Water Act.It would be defined to mean that a person is an associate of another person ( the other person ) if:

a)              the other person is a body corporate, the person is:

i)        a director or secretary of the body corporate, or

ii)      a related body corporate (within the meaning of the Corporations Act), or

iii)    a director or secretary of a related body corporate (within the meaning of the Corporations Act), or

b)              the person is acting, or proposes to act, in concert with the other person, or

c)              the person is or proposes to become associated with the other person, whether formally or informally, in any other way,

d)              but a person is not an associate of another person merely because of either or both of the following:

e)              one gives advice to the other, or acts on the other’s behalf, in the proper performance of the functions attaching to a professional capacity or a business relationship,

f)               one, a client, gives specific instructions to the other in the ordinary course of business.

452.      This definition would be inserted into the Water Act to clarify the use of the term in two of the new market manipulation prohibitions (see sections 101JH and 101JK below). Neither of these prohibitions are intended to place liability on the associate referred to in the prohibitions. Accessorial liability for contraventions of these prohibitions is conferred by section 154A of the Water Act.

Item 6

453.      Item 6 would insert new provisions after section 101J of the Water Act in Division 4 of new Part 5A (which deals with water markets decisions and prohibits insider trading).

Section 101JA Person not to trade or transfer if aware of non-water announcement information

454.      Subsection 101JA(1) would provide that a person (the insider ) must not take certain actions specified in subsection (2), if:

a)              the person is aware, or ought to be aware, of information ( non-water announcement information ) that is not water announcement information and that could reasonably be expected to have a material effect on the price or value of an eligible tradeable water right if the information were generally available, and

b)              the non-water announcement information has not been generally available for a reasonable period.

455.      Subsection 101JA(2) provides that the actions the insider must not take are as follows:

a)              enter into a contract or agreement to trade or transfer the eligible tradeable water right,

b)              to decide not to enter into a contract or agreement to trade or transfer the eligible tradeable water right, being a contact or agreement that the insider would have entered into but for the fact that the person was aware of the non-water announcement information,

c)              if no contract is involved—to apply to a water market authority in relation to the trade or transfer of the eligible tradeable water right,

d)              directly or indirectly communicate, or cause to be communicated, the non-water announcement information to another person if the insider knows, or ought reasonably to know, that the other person would or would be likely to engage in conduct of a kind mentioned in paragraph (a), (b) or (c).

456.      The item also inserts a note to confirm that s ections 101JB, 101JC, 101JD, 101JE and 101JF provide for certain exceptions to the rule in section 101JA.

457.      Where a person contravenes this section, the maximum civil penalty for an individual would be 2,000 penalty units (for a body corporate, see section 101K of the Water Act ) . Market manipulation is not currently prohibited in water markets. While lower penalties for the existing prohibition on insider trading in the Basin Plan are currently specified for individuals and bodies corporate in the Water Act under section 73H, higher penalties are specified in section 1317G of the Corporations Act for insider trading and market manipulation in financial markets. These new maximum penalties reflect the seriousness of the contravening conduct and  are a necessary deterrent to maintain integrity in water markets.

458.      The higher penalties recognise that market misconduct can lead to large commercial gains, and the penalties need to be commensurately high to provide an effective deterrent. These penalties are necessary to provide an adequate deterrent to businesses engaging in this conduct as a cost of doing business. Higher penalties will also promote confidence in Basin water markets.

459.      Recommendation 2 of the Roadmap recommended that a separate insider trading prohibition relating to the use of material information that does not constitute a water announcement should be included in the Water Act. This general prohibition would provide private businesses with greater confidence in their investment planning by preventing third parties from gaining an advantage in the market from their privileged access to private information.

460.      Section 101JA would include the term ‘reasonable period’, for the same reasons it would be included in 101H, the insider trading prohibition related to water announcements.

461.      This general prohibition on insider trading is more aligned with the insider trading prohibition under the Corporations Act in that it would apply to all market-sensitive information (apart from water announcement information) and prohibit those with the market-sensitive information from acting on, or communicating with others for them to act on, that information, but with an explicit carve out for a person acting on knowledge of their own intentions or activities.

462.        The following example would constitute insider trading under this provision:

a)              a person obtains information that an agribusiness intends to set up a new operation involving a large number of new permanent plantings in a particular trading zone. This information is not generally available and is non-water announcement information because it could reasonably be expected to have a material effect on the price or value of an eligible tradeable water right if it were generally available.

b)              to capitalise on anticipated future water demand leading to increased price of water entitlements in that trading zone, the person purchases those water entitlements before the agribusiness’s investment plans become generally available.

Section 101JB Exceptions for approval of specific trades, etc. and information barriers in agencies

463.      New section 101JB would provide for exceptions to section 101JA regarding the insider trading rule for non-water announcement information.

Approval of specific trades, etc .

464.      Subsection 101JB(1) would provide that subsection 101JA(1) does not apply to an IIO to the extent that they take an action mentioned in paragraphs 101JA(2)(a), ( b ) or ( c ), for the purposes of approving or facilitating a specific trade or transfer on behalf of a member or customer.

Information barrier arrangements for agencies

465.      Subsection 101JB(2) would provide that a relevant agency does not contravene subsection 101JA(1) by taking an action mentioned in paragraphs 101JA(2)(a), ( b ) or ( c ) at any time merely because of non-water announcement information in the possession of an officer or a member of staff of the agency, if all of the following are criteria are satisfied:

a)              the decision to take the action was taken on its behalf by a person(s) other than that officer or member of staff; and

b)              it had in operation at that time arrangements that could reasonably be expected to ensure that:

i)        the non-water announcement information was not communicated to the person(s) who made the decision referred to in paragraph (a), and

ii)      no advice with respect to the decision was given to that person or any of those persons by a person in possession of the non-water announcement information, and

iii)    the non-water announcement information was not so communicated, and no such advice was given.

466.      Subsection 101JB(2) is based on information wall arrangements in existing section 12.52 of the Basin Plan and has been uplifted to the Water Act to apply to the new provisions under the Bill.

467.      The term relevant agency would be defined under subsection 4(1 ) of the Water Act and item 17 of Schedule 6, Part 2 of the Bill to mean the Commonwealth, a Basin State, a person that is an agency of the Commonwealth or of a Basin State, or an IIO.

468.      These exceptions to the insider trading rule for non-water announcement information were recommended by the Roadmap in recognition of IIOs who undertake diverse functions. For example, an IIO who is aware of non-water announcement information may enter into a contract to trade, or apply for an approval of a trade if it is for the purposes of facilitating the trade of a temporary irrigation right with a counterparty outside the network on behalf of a customer.

It is expected that relevant agencies who may become aware of non-water announcement information and also trade eligible tradeable water rights should use ‘information barriers’ to manage the risk of insider trading and conflicts of interest, where possible. Information barriers enable one part of an organisation to trade freely by limiting its access to information held by another part of the organisation that could materially affect market prices.

Section 101JC Exception for a person using own trading or business information

469.      Section 101JC would provide that a person, other than a relevant agency, who is aware of non-water announcement information, does not contravene section 101JA, if:

a)              the person takes an action referred to in paragraphs 101JA(2)(a), (b) or (c), and

b)              the non-water announcement information is about the past, current or proposed trading or business activity of the person.

470.      The Roadmap recommended that entities not be required to make their own business information public for that entity to be able to trade water rights. There are similar exemptions under sections 1043H to 1043J of the Corporations Act.

471.      The section is intended to allow for the following situation to not be a contravention of the provision:

a)              a business trading when they are aware of their own past, current or proposed trading or business activity, if the trading or business activity might constitute material information and is not generally available.

472.      Subsection 101JC(2) would provide that if a person, other than an employee of a relevant agency, is aware of non-water announcement information in their capacity as an employee, the person does not contravene section 101JA if the person takes an action referred to in paragraphs 101JA(2)(a), (b) or (c) on behalf of the person’s employer, if the information relates to the past, current or proposed trading or business activity of the person’s employer. Subsection 101JC(2) is intended to clarify that this extends to employees who are trading on behalf of their employer. Any employees who are trading their personal water rights would not be exempted.

473.      Section 101JC would not apply to relevant agencies or employees of relevant agencies acting on the agency’s behalf. Relevant agencies would have specific obligations in relation to water markets decisions, including new requirements for announcing water markets decisions under section 101B. Relevant agencies would have an exception under section 101JE where an action is taken pursuant to a trading strategy announced under section 101B.

Section 101JD Exception for eligible water markets intermediary and clients

474.      New section 101JD would provide that an eligible water markets intermediary that is aware of non-water announcement information does not contravene section 101JA if they take an action referred to in paragraph 101JA(2)(a), (b) or (c) in accordance with a specific instruction from a client.

475.      Intermediaries are likely to become aware of market-sensitive information from their clients. This exception in subsection 101JD(1) would be necessary to allow an eligible water markets intermediary who is aware of non-water announcement information to take actions in accordance with specific instructions from a client.

476.      The following situations are not intended to be exempt:

a)              an eligible water markets intermediary trading their personal water rights when aware of a client’s past, current or proposed trading or business activity (if that activity might constitute material information and is not generally available),

b)              an eligible water markets intermediary communicating any non-water announcement information (including a client’s past, current or proposed trading or business activity) to someone who is likely to use that information.

477.      Subsection 101JD(2) would provide that a client of an eligible water markets intermediary who is aware of non-water announcement information does not contravene section 101JA if:

a)              the person takes an action referred to in paragraph 101JA(2)( d ), and

b)              the action is taken in the course of seeking water markets intermediary services, and

c)              the non-water announcement information is about the past, current or proposed trading or business activity of the client.

478.      The exception in subsection 101JD(2) would allow a client to communicate market-sensitive information to an intermediary when seeking intermediary services, only where the information relates to the past, current or proposed trading or business activity of the client. For example, an agribusiness’ intention to sell a large volume of water entitlements may be non-water announcement information and the agribusiness would be permitted to communicate this information to an eligible water markets intermediary only when they are seeking water markets intermediary services.

Section 101JE Exception for relevant agency acting pursuant to trading strategy

479.      Section 101JE would provide that a relevant agency that is aware of non-water announcement information does not contravene section 101JA if the relevant agency takes an action referred to in paragraphs 101JA(2)(a) or (c) that is consistent with, and conducted pursuant to, a trading strategy that has been announced under subsection 101B(1).

480.      The term relevant agency would be defined under subsection 4(1) of the Water Act (see item 17 of Part 2 of Schedule 6) to mean the Commonwealth, a Basin State, a person that is an agency of the Commonwealth or of a Basin State, or an IIO.

481.      There is an exception in the existing framework in the Basin Plan for water announcements and insider trading for a decision that relates to a particular trade of a water access right, if the trade is or will be consistent with, and conducted pursuant to, a trading strategy; and the trading strategy has been the subject of a water announcement that has become generally available (see paragraph 12.49(3)(b)).

Section 101JF Exception for actions required by law

482.      Section 101JF would provide that a person, eligible water markets intermediary or relevant agency that is aware of non-water announcement information does not contravene section 101JA if:

a)              the person, eligible water markets intermediary or relevant agency takes an action referred to in paragraphs 101JA(2)(a), (b) (c) or (d); and

b)              the person, eligible water markets intermediary or relevant agency is required to take the action by or under a law of the Commonwealth, a State or a Territory.

483.      This exception is appropriate to clarify that a person would not contravene the prohibition on insider trading relating to non-water announcement information if they are required to take an action by a law Commonwealth, a State or a Territory. Similar exceptions apply to prohibitions on insider trading for financial markets in sections 1043D and 1043E of the Corporations Act.

Item 7

484.      Item 7 would insert new Division 4A — Market manipulation after Division 4 of new Part 5A in the Water Act.

Division 4A - Market Manipulation

Section 101JG Market manipulation

485.      New section 101JG would provide that a person must not take part in, or carry out (whether directly or indirectly) a trade or transfer of an eligible tradeable water right that has, or is likely to have, the effect of:

a)              creating an artificial price for eligible tradeable water rights, or

b)              maintaining at a level that is artificial (whether or not it was previously artificial) a price for eligible tradeable water rights.

486.      A person who contravenes this section would be liable to a civil penalty for an individual of 2,000 penalty units or for a body corporate, see section 101K. Market manipulation is not currently prohibited in water markets. While lower penalties for the existing prohibition on insider trading in the Basin Plan are currently specified for individuals and bodies corporate in the Water Act under section 73H, higher penalties are specified in section 1317G of the Corporations Act for insider trading and market manipulation in financial markets. These new maximum penalties reflect the seriousness of the contravening conduct and are a necessary deterrent to maintain integrity in water markets.

487.      The higher penalties recognise that market misconduct can lead to large commercial gains, and the penalties need to be commensurately high to provide an effective deterrent. These penalties are necessary to provide an adequate deterrent to businesses engaging in this conduct as a cost of doing business. Higher penalties will also promote confidence in Basin water markets.

488.      Recommendation 2 of the Roadmap recommended prohibiting price manipulation and insider trading for all tradeable water rights, including water delivery and irrigation rights.

489.      The concept of “artificial price” is used and has been judicially considered in the context of section 1041A of the Corporations Act.

Section 101JH False trading and market rigging - creating a false or misleading appearance of active trading etc.

490.      New subsection 101JH (1) would provide that a person must not engage in conduct that has or is likely to have the effect of creating, or causing the creation of, a false or misleading appearance:

a)              of active trading in a market for eligible tradeable water rights, or

b)              with respect to the market for, or the price for trading in, eligible tradeable water rights.

491.      A person who contravenes this section would be liable to a civil penalty for an individual of 2,000 penalty units or for a body corporate, see section 101K. Market manipulation is not currently prohibited in Basin water markets. While lower penalties for the existing prohibition on insider trading in the Basin Plan are currently specified for individuals and bodies corporate in the Water Act under section 73H, higher penalties are specified in section 1317G of the Corporations Act for insider trading and market manipulation in financial markets. These new maximum penalties reflect the seriousness of the contravening conduct and are a necessary deterrent to maintain integrity in water markets.

492.      The higher penalties recognise that market misconduct can lead to large commercial gains, and the penalties need to be commensurately high to provide an effective deterrent. These penalties are necessary to provide an adequate deterrent to businesses engaging in this conduct as a cost of doing business. Higher penalties will also promote confidence in Basin water markets.

493.      To clarify the conduct that would be in breach of this provision, subsection 101JH(2) would provide that a person is taken to have created a false or misleading appearance of active trading in markets for eligible tradeable water rights if:

             a)        the person makes an offer (the regulated offer ) to acquire or dispose of eligible tradeable water rights, and

            b)        the regulated offer is to acquire or to dispose of eligible tradeable water rights at a specified price, and

             c)        the person has made or proposes to make, or knows that an associate of the person has made or proposes to make:

i)        if the regulated offer is an offer to acquire—an offer to dispose of, or

ii)      if the regulated offer is an offer to dispose of—an offer to acquire,

the same number, or substantially the same number, of those eligible tradeable water rights at a price that is substantially the same as the price referred to in paragraph 101JH(2)(a).

494.      The note in subsection 101JH(2) is to clarify that the list of circumstances in which a person creates a false or misleading appearance of active trading in a market for eligible tradeable water rights are not limited to the circumstances set out in this subsection.

495.      Subsection 101JH(3) would provide that in considering whether a person has created a false or misleading appearance of active trading in markets for eligible tradeable water rights, regard may be had to:

                  a)       whether a trade or transfer of eligible tradeable water rights involved, or did not involve, a change in the beneficial ownership of the eligible tradeable water rights, and

                  b)       if a trade or transfer did not involve a change in the beneficial ownership of the eligible tradeable water rights - whether there was a genuine purpose for the trade or transfer.

496.      Section 101JH would generally apply in circumstances where, for example, a person sells and buys the same volume of eligible tradeable water rights for the same price, which would create a false impression of active trading in the market for those eligible tradeable water rights. This is referred to in financial markets as wash trading.

497.      In Basin water markets, the trade or transfer of eligible tradeable water rights may occur without beneficial change in ownership. Often these may be listed as zero-dollar trades and do not give a false appearance of active trading. Subsection 101JH(3) would allow regard to be had to whether there was a genuine purpose for a trade or transfer in considering whether there is a contravention of subsection 101JH(1).

498.      While the financial services and markets regulation provisions of the Corporations Act provide a basis for the development of these new provisions, they are not fully adequate for the water markets. Water markets are extremely complex from a regulatory perspective, with various States at different levels of development and sophistication, including register capabilities, requiring a bespoke prohibition in the Water Act.

Section 101JJ False trading and market rigging - artificially maintaining etc. trading price

499.      Subsection 101JJ(1) would provide that a person must not make a fictitious or artificial offer for an eligible tradeable water right, or enter into, or engage in a fictitious or artificial trade or transfer for an eligible tradeable water right if that offer, trade or transfer results in:

             a)        the price for trading in eligible tradeable water rights being maintained, inflated or depressed, or

            b)        fluctuations in the price for trading in eligible tradeable water rights.

500.      Subsection 101JJ(2) would provide that in determining whether an offer, trade or transfer is fictitious or artificial for the purposes of considering whether a person has contravened subsection 101JJ(1), the fact that the offer, trade or transfer is, or was at any time, intended by the parties who made or received the offer, or who entered into the trade or transfer, to have effect according to its terms is not conclusive.

501.      A person who contravenes this section would be liable to a civil penalty of 2,000 penalty units or for a body corporate, see section 101K. Market manipulation is not currently prohibited in water markets. While lower penalties for the existing prohibition on insider trading in the Basin Plan are currently specified for individuals and bodies corporate in the Water Act under section 73H, higher penalties are specified in section 1317G of the Corporations Act for insider trading and market manipulation in financial markets. These new maximum penalties reflect the seriousness of the contravening conduct and is a necessary deterrent to maintain integrity in water markets.

502.      The higher penalties recognise that market misconduct can lead to large commercial gains, and the penalties need to be commensurately high to provide an effective deterrent. These penalties are necessary to provide an adequate deterrent to businesses engaging in this conduct as a cost of doing business. Higher penalties will also promote confidence in Basin water markets.

503.      Section 101JJ would apply in circumstances in which an offer or trade does not eventuate or is not genuine but where the price is impacted by the offer or trade.

Section 101JK Dissemination of information about illegal offers, trades or transfers, etc.

504.      Section 101JK would provide that a person must not circulate or disseminate any statement or information to the effect that the price for trading eligible tradeable water rights will, or is likely to, rise or fall, or be maintained, because of an offer, trade or transfer, or other act or thing done, in relation to the eligible tradeable water rights, if:

             a)        the offer, trade or transfer, or thing done, constitutes or would constitute a contravention of sections 101JG, 101JH or 101JJ, and

            b)        the person, or an associate of the person:

i)        has made such an offer, has entered into such a trade or transfer, or has done such an act or thing, or

ii)      has received, or may receive, directly or indirectly, a consideration or benefit for circulating or disseminating, or authorising the circulation or dissemination of, the statement or information.

505.      A person who contravenes this section would be liable to a civil penalty of 2,000 penalty units or for a body corporate, see section 101K. Market manipulation is not currently prohibited in water markets. While lower penalties for the existing prohibition on insider trading in the Basin Plan are currently specified for individuals and bodies corporate in the Water Act under section 73H, higher penalties are specified in section 1317G of the Corporations Act for insider trading and market manipulation in financial markets. These new maximum penalties reflect the seriousness of the contravening conduct and is a necessary deterrent to maintain integrity in water markets.

506.      The higher penalties recognise that market misconduct can lead to large commercial gains, and the penalties need to be commensurately high to provide an effective deterrent. These penalties are necessary to provide an adequate deterrent to businesses engaging in this conduct as a cost of doing business. Higher penalties will also promote confidence in Basin water markets.

507.      Section 101JK would limit the harm resulting from prohibited conduct, by also prohibiting the spreading of information that the price will rise or fall as a result of prohibited conduct. This information could be used to gain an advantage in the market.

Item 8

508.      Item 8 would amend the heading to Part 5A to include ‘and market manipulation’ in the heading.

509.      This is a consequential amendment to allow for Division 4 of Part 5A to commence later than the rest of Part 5A.

Item 9

510.      Item 9 would insert ‘and market manipulation’ to the simplified outline in new section 100Z for Part 5A.

511.      This is a consequential amendment to allow for Division 4 of Part 5A to commence later than the rest of Part 5A.

Item 10

512.      Item 10 would insert Division ‘4A’ into subsections 101A(1) and (2).

513.      This is a consequential amendment that would insert a reference to new Division 4A of Part 5A into subsections 101A(1) and (2) so that those provisions apply to things done in relation to the pre-trade, trade or transfer of an eligible tradeable water right in the circumstances outlined in each subsection.

Item 11

514.      Item 11 would insert ‘section 101H, 101JA, 101JG, 101JH, 101JJ or 101JK’ to new section 101K.

515.      This is a consequential amendment that would include the penalty provisions in sections 101H, 101JA, 101JG, 101JH, 101JJ and 101JK in Division 4 of Part 5A to section 101K so that the body corporate penalty level applies.

516.      The size of the maximum penalty for body corporates should apply to these provisions, as an appropriate deterrent and is also consistent with similar penalties in the Water Act. It reflects the seriousness of the conduct, which more broadly breaches the market manipulation and additional insider trading provisions in the Water Act, and is a necessary deterrent to maintain integrity in the water markets.

517.      This is necessary as Division 4 of Part 5A commences later than the rest of Part 5A.

 

Part 4 - Data and Systems Measures

Overview

518.      The data and systems measures set out in Part 4 of Schedule 3, implement the recommendations in Chapter 4 of the Roadmap, and address the following objectives:

a)       to enhance the transparency and availability of market data to improve knowledge and understanding of the market, prices, volumes, and other relevant developments,

b)       to enable the ACCC and the Inspector-General, to identify and enforce compliance with proposed water market conduct rules and data reporting requirements.

519.      Part 4 would implement recommendations of the Roadmap relating to:

a)       broadening and strengthening price reporting and reporting of pre-trade data for water markets in the Murray-Darling Basin; (recommendations 4 and 5),

b)       a new water market data and systems framework, including new Water Markets Data Standards, and powers for the Bureau, to share identified and data with the ACCC and the Inspector-General and publish de-identified data (recommendation 10),

c)       obligations for the reporting of trade approval processing times (recommendation 12).

520.      Part 7 of the Water Act deals with water information and the publication of water information by the Bureau. The new Part 7A would deal with water markets information, a subset of water information that is relevant to Murray-Darling Basin water markets. The new obligations to collect, generate and record data allow for a comprehensive set of trade and pre-trade data to be reported to the Bureau, in accordance with new Water Markets Data Standards.

521.      The new definition of water markets information would include information relating to the approval of a trade which allows trade approval processing times to be specified in regulations as information that must be generated and reported to the Bureau. 

522.      There is a new obligation on sellers, buyers and applicants who are eligible water market intermediaries to ensure all information requested by water market authorities is provided in applications for trade or transfer of eligible tradeable water rights. There are penalties for providing false or misleading information to water market authorities, to ensure that data is provided correctly from the start of the data reporting process. This obligation would replace the existing price reporting rule in 12.48 of the Basin Plan.

523.      Increased de-identified market data will be published by the Bureau, and identified data may be shared by the Bureau with the ACCC and the Inspector-General. The Inspector-General has new powers under Part 7A and existing powers under Part 8 to monitor compliance with and enforce the obligations on data providers under Part 7A.

Water Act 2007

Item 12

524.      Item 12 would update the objects of the Water Act, by inserting new paragraph (ga) to include that additional object of the Water Act being, to ensure that the governance of water markets and trading arrangements relating to Basin water resources is appropriate, and that governance measures promote integrity and transparency in water markets.

Item 13

525.      Item 13 would insert new definitions into subsection 4(1) of the Water Act.

526.      The new t erm eligible tradeable water right is a signpost definition, providing that the term would be defined as having the meaning given by new section 6A (described further below).  

527.      The new term eligible water market intermediary would be defined as a person who provides any of the following services:

a)              trading of eligible tradeable water rights on behalf of another person in exchange for a commission or fee,

b)              investigating eligible tradeable water rights trading possibilities on behalf of a water market participant or a potential water market participant in exchange for a commission or fee,

c)              preparing documents that are necessary for the trade or transfer of eligible tradeable water rights on behalf of a water market participant or a potential water market participant in exchange for a commission or fee,

d)              providing a trading platform or water exchange for eligible tradeable water rights,

e)              giving advice (whether or not for payment of any kind) in the course of providing services of a kind mentioned in paragraphs (a), (b), (c) or (d) to a water market participant or a potential water market participant about trading in eligible tradeable water rights, other than advice that is of a general nature and not provided to address the specific circumstances of the potential water market participant,

f)               making a representation that an eligible tradeable water right is available for sale or purchase, if the person will facilitate the trade or transfer of the eligible tradeable water right in exchange for a commission or fee.

528.      The term pre-trade would be defined to mean, in relation to the trade or transfer, or proposed trade or transfer, of any type of eligible tradeable water right includes, but is not limited to, offers to buy or sell occurring before an agreement or contract for the trade or transfer is entered into.

529.      The term w ater market authority would be defined to mean, in relation to the proposed trade or transfer of an eligible tradeable water right, means:

a)        a person authorised or required under a law of a State to approve, allow or register the trade or transfer, or

b)       an irrigation infrastructure operator that approves, allows or registers the trade or transfer.

530.      The term water markets information would be defined to mean the following information:

a)       any raw data, or any value-added information product (including information that is generated), that relates to:

i.         the pre trade, trade or transfer of any type of eligible tradeable water right, or

ii.       the allowance, approval or registration of a trade or transfer of any type of eligible tradeable water right, or

iii.     accounts relating to eligible tradeable water rights, or

iv.     the ownership of eligible tradeable water rights, and other entitlements on issue relation to Basin water resources,

b)       any metadata or contextual information relating to information of a kind referred to in paragraph (a),

c)       such other information (if any) as is prescribed by the regulations.

531.      The data and systems reforms in Part 4 of Schedule 3 would rely on the new definition of water markets information as the information that must be collected, generated, recorded and reported to the Bureau, and information in respect of which the Water Markets Data Standards can be made. The definition of water markets information is a subset of the current definition of water information in Part 7. A new definition of water markets information would be created for Part 7A to deal specifically with information relevant to Basin water markets and other information relevant to the enforcement of the new integrity and conduct measures.

532.      While the new definition of water markets information includes at subparagraph (a)(iii) ‘accounts relating to eligible tradeable water rights’, the Bureau would not collect account information, apart from account identity information, under their new data and systems framework. If, in the future, it is determined by the Government that this information is required - for example,  to support the enforcement of the new market manipulation and insider trading requirements, additional data infrastructure and stakeholder consultation will be required.

533.      The Roadmap noted that market regulators may require access  to water  account data (including water account balances, allocation volumes, carryover volumes or entitlement holdings) from water market authorities for compliance and enforcement purposes. The market regulators have compulsory information gathering powers under section 238 of the Act, and new section 239AJ in this Bill, but market regulators and data providers may also consider whether data sharing agreements could be an appropriate tool to ensure regulators have adequate access to relevant data to carry out their functions under the Bill.

Item 14

534.      Item 14 would insert new section 6A into the Water Act to provide that the meaning of the term eligible tradeable water right would be:

a)       a tradeable water right,

b)       any other right in relation to the taking or use of water that is able to be traded or transferred, other than a right prescribed by the regulations,

c)       a right prescribed by the regulations,

to the extent that the right relates to Basin water resources, or any other water resource prescribed by the regulations.

535.      For clarity, the expression ‘other than rights prescribed by regulations’ in paragraph (b) is intended to exclude what would otherwise be included by the definition, while the expression ‘a right prescribed by regulations’ in paragraph (c) is intended to capture rights that would otherwise be excluded by the definition. Any regulations prescribed for the purpose of paragraphs (b) and (c) would be distinct and separate from each other.

536.      This new definition would be intended to cover all forms of water rights, including future rights that are not yet contemplated.

537.      Subsection 6A(2) would clarify that for the purposes of Parts 5 and 5A, an eligible tradeable water right does not include a right that is a financial product within the meaning of section 761A of the Corporations Act .

Item 15

538.      Existing section 10 of the Water Act  provides the basis for the Basin water charge, water trading and water market rules regulating Basin water resources. Item 15 would update references to ‘tradeable water rights’ to ‘eligible tradeable water rights’. This change is in line with other changes in the Bill and makes section 10 of the Water Act consistent with the proposed amendments.

Item 16

539.      Existing subsection 10(2) lists the basis for dealing with topics listed in subsection 10(1) of the Water Act being matters that the Water Act deals with . Item 16 would insert a new paragraph 10(2)( ga ) to add ‘integrity and transparency in water markets relating to Basin water resources’ as a new basis .

Item 17

540.      Item 17 would insert new Part 7A - Water Markets Information, after section 135 of the Water Act.

 

Part 7A—Water markets information

Division 1—Simplified outline of the Part

Section 135A Simplified outline of Part

541.      This Part:

a)       provides for the giving of water markets information to the Bureau,

b)       gives the Bureau additional powers and functions in relation to water markets information,

c)       provides for the making of Water Markets Data Standards relating to water markets information and for compliance notices to be given by the Inspector-General in relation to contraventions of the Water Markets Data Standards.

Division 2—Application

Section 135B Constitutional operation

542.      New section 135B would provide for the Constitutional operation of Part 7A. Subsection 135B(1) provides that Part 7A, and any other provision of the Water Act or any other Act to the extent that it relates to this Part, applies to water markets information collected, generated or capable of being generated, recorded or held by:

a)       a constitutional corporation, or

b)       a person or body that is located in a Territory.

543.      Subsection 135B(2) provides that Part 7A, and any other provision of the Water Act or any other Act to the extent that it relates to this Part, applies to water markets information relating to the pre-trade, trade or transfer of any type of eligible tradeable water right if:

a)       at least one of the parties to the pre-trade, trade or transfer is a constitutional corporation,

b)       the pre-trade, trade or transfer takes place in the course of trade and commerce:

i.               between the States, or

ii.            between a State and a Territory or between two Territories,

iii.          trade or commerce between Australia and places outside Australia,

c)       the pre-trade, trade or transfer takes place in a Territory or relates to eligible tradeable water rights in relation to a water resource in a Territory; or

d)       at least one element of the pre-trade, trade or transfer takes place using a postal, telegraphic, telephonic or other like service (within the meaning of paragraph 51(v) of the Constitution ).

Division 3—Functions and powers of the Bureau and Director of Meteorology

Section 135C Additional functions of the Bureau

544.      Section 135C would confer new functions on the Bureau (additional to those conferred on the Bureau by the Meteorology Act 1955 ), specifically:

a)       collecting, holding, managing, interpreting and disseminating Australia’s water markets information,

b)       issuing Water Markets Data Standards,

c)       giving advice on matters relating to water markets information,

d)       any other matter, relating to water markets information, specified in the regulations.

545.      The Bureau has similar functions in respect of water information under Part 7. The Bureau will establish a new data and systems framework to support implementation of the reforms and will be the custodian for water markets information. The Bureau will have new functions and powers to collect water markets information, issue Water Markets Data Standards, publish de-identified water markets information and share identified information with the ACCC and the Inspector-General.  

Section 135D Publishing water markets information

546.      Section 135D would confer new powers on the Director of Meteorology to allow them at any time to publish, in a form readily accessible by the public, particular water markets information that the Bureau holds.

547.      The Director of Meteorology must not publish water markets information:

a)       if the Director believes it would not be in the public interest, or

b)       to the extent that the information identifies a particular individual by means of individual’s name, address, customer number or account number or other identifier , unless the information:

i.               is already published, or

ii.            is otherwise publicly available.

548.      Subsection 135D(3) would provide that information under subsection 135D(2)(b) does not identify a particular individual merely because the individual’s identity can be ascertained from the information, due to the nature or volume of a trade or transfer of an eligible tradeable water right; or in other circumstances prescribed by the regulations.

549.      While the Director is prevented from publishing information that expressly identifies an individual, the Director is not prevented from publishing water markets information that could enable the identification of a person . For example, by the nature or volume of a trade or transfer of an eligible tradeable water right. The publication of such information is necessary to enable the Bureau to provide comprehensive water trading data to meet the objectives of the Bill and increase transparency of trading in all Basin water markets. Regulations may prescribe other circumstances where an individual’s identity may be ascertained as a result of water markets information published by the Bureau, other than the as a result of circumstances already stated in subsection 135D(3) (the nature and volume of a trade or transfer). T hese regulations would not allow the publication of any expressly identifying information.  

Division 4—Water markets information

Section 135E Object of this Division

550.      Section 135E would provide that the object of this Division is to enable the Bureau to fulfill its functions relating to water markets information.

Section 135F Giving of water markets information to the Bureau

551.      Subsection 135F(1) would provide that person specified in the regulations, or a person included in a class of persons specified in the regulations, must give to the Bureau a copy of water markets information of a kind specified in the regulations that is in the person’s possession, custody or control (whether held electronically or in any other form).

552.      These persons specified in regulations will be persons who have obligations to collect, generate and record water markets information under section 135H. The obligations in section 135H will ensure that water markets information is in a person’s possession, custody or control, to enable the comprehensive reporting of data to the Bureau under section 135F .

553.      Subsection 135F(8) would provide that information referred to in subsection 135F(1) includes, but is not limited to, personal information within the meaning of the Privacy Act.

554.      Subsection 135F(2) would make it a requirement for a copy to be given to the Bureau within the time specified in the regulations.

555.      Subsection 135F(3) would provide that the water markets information contained in the copy must be given in the form or manner specified in the regulations; and must comply with any applicable Water Markets Data Standards.

556.      Subsection 135F(4) would introduces a civil penalty provision and provides that a person must not contravene an obligation imposed on the person under section 135F. A civil penalty of 100 penalty units applies to a contravention of this provision.

557.      Subsection 135F(5) would introduce a civil penalty provision so that a person must not, in purported compliance with a requirement under this section, give to the Bureau information that is false or misleading. A civil penalty of 120 penalty units applies to a contravention of this provision.

558.       The civil penalty amounts in section 135F are consistent with the penalty benchmarks in the Commonwealth Guide. These penalties are increased compared to the penalties for contravening obligations to provide water information under Part 7. This increase is appropriate to reflect the importance of accurate and complete data to increase transparency in Basin water markets and enable effective monitoring and enforcement of market misconduct.

559.      Subsection 135F ( 6 ) would provide that a person does not contravene a requirement of subsections 135F (4) or (5) if, in purportedly complying with the requirement, the person acted in good faith and exercised a reasonable degree of care and diligence.

560.      While the defence of reasonable excuse is contained within the Water Act under subsection 126(6) in relation to giving water information to the Bureau, a more specific defence would be applied in this section. A person who contravenes a requirement to give water markets information or gives false or misleading water markets information to the Bureau will not have contravened the requirement if they acted in good faith, and exercised a reasonable degree of care and diligence in purportedly complying with the requirement. Under section 154E of the Water Act, in proceedings for a pecuniary penalty order for a contravention of subsections 135F(4) or (5), a person who wishes to rely on the excuse in subsections 135F(6) would bear the evidentiary burden in relation to that defence .

561.      For persons who receive water markets information from third parties and pass that same information to the Bureau, and this information is false or misleading, it will not be enough to have acted in good faith. There must be a level of care and diligence taken that was reasonable in the circumstances. These circumstances will depend on whether information was clearly false or misleading, processes for identifying incorrect information and the level of automation in providing the information to the Bureau. This obligation is not intended to slow down the processing of trades or transfers, or the provision of information to the Bureau, but rather to encourage data providers to develop systems for increasing the quality of data provided to the Bureau.

562.      Subsection 135F(7) would provide that a person is not excused from complying with a requirement under this section merely because the water markets information in question is of a commercial nature; or subject to an obligation of confidentiality arising from a commercial relationship; or commercially sensitive.

563.      Commerciality of information does not qualify as an excuse for non-compliance. Where commercial interests are cited and found to be reasonable, the Bureau may discuss with the proponent approaches to publishing the information to protect commercial interests.

Section 135G Director of Meteorology may require water markets information

564.      Subsection 135G(1) provides that the Director of Meteorology may, in writing, require any person, or each person included in a class of persons, to give specified water markets information to the Bureau:

a)       within a specified period of time, and

b)        in a specified form or manner, and

c)        in accordance with any applicable Water Markets Data Standards.

565.      Subsection 135G(6) would provide that, for the avoidance of doubt, that the information referred to in subsection 135(1) includes, but is not limited to, personal information within the meaning of the Privacy Act.

566.      Subsection 135G(2) would provide that a person must not fail to comply with a requirement under section 135G. A civil penalty of 100 penalty units applies to a contravention of this provision.

567.      Subsection 135G(3) would provide that a person must not , in purported compliance with a requirement under section 135G, give to the Bureau information that is false or misleading. A civil penalty of 120 penalty units applies to a contravention of this provision.

568.      Civil penalties in this section are appropriate to reflect the importance of accurate and complete data to increase transparency in Basin water markets and enable effective monitoring and enforcement of market misconduct.

569.      Subsection 135G(4) would provide that person does not contravene a requirement of subsections 135G(2) or (3) if, in purportedly complying with the requirement, the person acted in good faith; and exercised a reasonable degree of care and diligence.

570.      While the defence of reasonable excuse is contained within the Water Act under the existing subsection 127(7) in relation to giving water information to the Bureau, a more specific defence has been used throughout these reforms. A person who contravenes a requirement to give water markets information or gives false or misleading water markets information to the Bureau will not have contravened the requirement if they acted in good faith and exercised a reasonable degree of care and diligence in purportedly complying with the requirement.

571.      Under section 154E of the Water Act, in proceedings for a pecuniary penalty order for a contravention of subsections 135G(2) or (3), a person who wishes to rely on the excuse in subsection 135G(4) would bear an evidential burden in relation to that matter . Subsection 135G(5) would provide that a person is not excused from complying with a requirement under this section merely because the water markets information in question is of a commercial nature; or subject to an obligation of confidentiality arising from a commercial relationship; or commercially sensitive .

572.        Commerciality provisions do not qualify as an excuse. Where commercial interests are cited and found to be reasonable, the Bureau may discuss with the proponent approaches to publishing the information to protect commercial interests.

Section 135H Collecting, generating or recording water markets information

573.      Subsection 135H(1) would provide that a person specified in the regulations or a person included in a class of persons, specified in the regulations, must collect, generate or record water markets information that is of a kind specified in the regulations.

574.      The persons to be specified in regulations would include water market authorities and water exchanges, and other water market intermediaries may be included in a later stage. These will be the same persons required to provide water markets information to the Bureau under s135F.

575.      Subsection 135H(6) would provide that for the avoidance of doubt, the information referred to in subsection 135H(1) includes, but is not limited to, personal information within the meaning of the Privacy Act.

576.      Subsection 135H(2) would provide that a person, or a person included in a class of persons, who is required by the regulations to collect, generate or record water markets information must:

a)       record the water markets information electronically, unless the regulations provide otherwise, and

b)       collect, generate or record the water markets information in accordance with any applicable Water Markets Data Standards.

577.      Subsection 135H(3) provides that a person must not fail to comply with a requirement under this section. A civil penalty of 100 penalty units applies. 100 penalty units is necessary and proportionate to provide an adequate deterrent for failing to comply with this provision, which could undermine the compliance and enforcement mechanisms in the Water Act.

578.      Subsection 135H(4) would provide that a person does not contravene subsection (3) if, in purportedly complying with a requirement under this section, the person acted in good faith; and exercised a reasonable degree of care and diligence.

579.      A person who contravenes a requirement to collect, generate or record water markets information will not have contravened the requirement if they acted in good faith, and exercised a reasonable degree of care and diligence in purportedly complying with the requirement. Under section 154E of the Water Act, in proceedings for a pecuniary penalty order for a contravention of subsection 135H(3), a person who wishes to rely on the excuse in subsection 135H(4) would bear an evidential burden in relation to that matter.

580.      Subsection 135H(5) would provide that a person is not excused from complying with a requirement under this section merely because the water markets information in question is of a commercial nature; or subject to an obligation of confidentiality arising from a commercial relationship; or commercially sensitive .

581.      Providing the details of recor d-keeping requirements in regulations rather than the Water Act would allow for flexibility for the requirements to be regularly updated and tailored to different water market participants. It is anticipated that most records required to be kept will be of the type that are likely to be made or retained in the normal course of business for those required to collect, generate or record water markets information, to minimise the imposition of additional regulatory obligations on industry.

Division 5—Water Markets Data Standards

Section 135J Water Markets Data Standards

582.      Subsection 135J(1) would provide that the Director of Meteorology may, by legislative instrument, issue Water Markets Data Standards relating to water markets information.

583.      Subsection 135J(2) would provide that without limiting subsection 135J(1), Water Markets Data Standards may deal with all or any of the following:

a)       the details for collecting, generating, recording or providing water markets information as required by Division 4,

b)       the details of the persons or bodies that will be required to collect, generate, record or provide water markets information as required by Division 4,

c)       any other matter relating to water markets information that is specified in the regulations .

584.      Subsection 135J(3) would provide that without limiting subsection 135J(1), Water Markets Data Standards may do one or more of the following:

a)       be expressed to apply to a specified water resource or area,

b)       provide for methods of identifying water market participants, eligible water markets intermediaries, water market authorities, other persons or individual trades or transfers,

c)       provide for metadata requirements,

d)       provide for time periods in respect of, or within which, the water markets information is required to be collected, generated, recorded or provided,

e)       provide for the manner in which the water markets information is to be collected, generated, recorded or provided.

585.      The Water Markets Data Standards are to be made by the Director of Meteorology as a legislative instrument to allow for the Standards to be updated efficiently by the Bureau as and when required. The Director of Meteorology may issue National Water Information Standards under section 130 of the Water Act. Standards made under section 135L will relate to water markets information and will be enforced by the Inspector-General.

 

Section 135K Adoption of other standards

586.      Subsection 135K(1) would provide that in issuing Water Markets Data Standards, the Director of Meteorology may make provision in relation to a matter by applying, adopting or incorporating, with or without modification, any matter contained in a standard, as in force or existing from time to time, that relates to water markets information and that any other person or body has made or issued.

587.      Subsection 135K(2) would confirm that subsection 135K(1) has effect despite anything in subsection 14(2) of the Legislation Act. Subsection 14(2) of the Legislation Act provides that unless a contrary intention appears, a legislative instrument may not make provision in relation to a matter by applying, adopting or incorporating any matter contained in an instrument or other writing as in force or existing from time to time. This section would provide a contrary intention.

588.      If the Director of Meteorology makes provision in relation to a matter by applying, adopting or incorporating a matter contained in a standard that another person or body has made or issued, the Director of Meteorology must ensure that:

a)       the text of the matter applied, adopted or incorporated is made publicly available on the Bureau’s website, unless that text is set out in the relevant Water Markets Data Standard, and

b)       if the text of the matter is applied, adopted or incorporated as in force or existing from time to time—any subsequent amendments of that text are made publicly available on that website.

Section 135L Consultations in preparing Water Markets Data Standards

589.      Subsection 135L(1) would provide that the Director of Meteorology must consult with the States in preparing Water Markets Data Standards. In preparing Water Markets Data Standards, the Director of Meteorology may undertake such other consultation as the Director considers appropriate (subsection 135L(2)).

Division 6—Information to be made available

Section 135M - Information about trades etc. to be reported

590.      Subsection 135M(1) would provide that if the trade or transfer of an eligible tradeable water right requires an application to a water market authority, each of the persons mentioned in subsection 135M(1A) must ensure that all of the following information is provided (whether by the person or by another person) to the authority concerned:

a)       all the information in relation to the application for the trade or transfer required by the authority,

b)       all the in formation in relation to the application for the trade or transfer required by the regulations (if any).

591.      Subsection 135M(2) would provide that the persons covered in subsection (1) are as follows:

a)       if the application is made by an eligible water markets intermediary, that eligible water markets intermediary,

b)       the owner of the eligible tradeable water right being traded or transferred,

c)       the person to whom the eligible tradeable water right is to be traded or transferred.

592.      Subsection 135M(7) would provide that for the avoidance of doubt that, the information referred to in subsection 135M(1) includes, but is not limited to, personal information within the meaning of the Privacy Act.

593.      Subsection 135M(3) would provide that the person must not contravene an obligation imposed on the person under this section. A civil penalty of 100 penalty units applies to a contravention of this provision.

594.      Under subsection 135M(4) a person must not, in purported compliance with a requirement under this section, give or cause to be given to a water market authority information that is false or misleading. A civil penalty of 120 penalty units applies to a contravention of this provision.

595.      Contravention of an obligation imposed by section 135M, or providing information that is false or misleading, would be subject to a civil penalty. The civil penalty amounts are 100 and 120 penalty units respectively. These penalties are appropriate to reflect the importance of accurate and complete data reporting from the beginning of the data reporting process, as this is the data which will be reported to the Bureau, and will be published to increase transparency in Basin water markets and enable effective monitoring and enforcement of market misconduct.

596.      Subsection 135M(5) would provide that a person does not contravene a requirement of subsections 135M(3) or (4) if, in purportedly complying with the requirement, the person acted in good faith, and exercised a reasonable degree of care and diligence.

597.      Subsection 135M(6) would provide that a person would not be excused from complying with a requirement under this section merely because the information in question is of a commercial nature; or subject to an obligation of confidentiality arising from a commercial relationship; or commercially sensitive.

598.      The proposed section 135M would replace the existing price reporting rule in Section 12.48 of the Basin Plan 2012.

Section 135N Records to be kept about information provided

599.      Subsection 135N(1) would provide that a person who is required to ensure that information about the trade or transfer of an eligible tradeable water right is provided  to a water market authority under section 135M (see subsection 135M(2)) must keep the following records in relation to the information that is provided:

a)       records of the reason for the trade or transfer, including records substantiating or supporting the reason,

b)       records of the price for which the eligible tradeable water right was traded or transferred, including records substantiating or supporting the price,

c)       such other information (if any) as is prescribed by the regulations.

600.      Subsection 135N(2) would provide that the person must keep the records for a period of at least five years beginning on the date on which the information was provided under section 135M.

601.      Subsection 135N(3) would provide that a person is liable to a civil penalty if the person contravenes subsection 135N(1) or (2). A civil penalty of 120 penalty units applies to a contravention of this provision.

602.      A civil penalty would be applicable for contravention of a record-keeping obligation under 135N.  The civil penalty amount is 120 penalty units. This penalty is appropriate to ensure that records substantiating data are kept which will enable the Inspector-General to effectively enforce data reporting obligations, to ensure accurate and complete data reporting from the beginning of the data reporting process.

Division 7—Miscellaneous

Section 135P Disclosure of information by the Bureau

603.      Subsection 135P(1) would provide that this section applies to information obtained in, or in connection with, the performance of the Bureau’s functions or the exercise of the Bureau’s powers under this Part.

604.      This information may include where a person has given the Bureau water markets information of a kind specified in the regulations (section 135F) or water markets information required by the Director of Meteorology (section 135G). It would also include information about water markets decisions provided to the Bureau under Part 5A, as the Bureau would have a function to collect this information under new section 135C (see Item 25 of Part 2 of Schedule 6).

605.      The Bureau may disclose the information to the ACCC or the Inspector-General if the Bureau reasonably believes it is reasonably necessary for, or directly related to, the performance of their functions, or the exercise of their powers under the Water Act.

606.      Notes to this section provide that subsection 135P(2) constitutes an authorisation for the purposes of the Privacy Act and other laws (including the common law). The Bureau may also disclose information to the Inspector-General for the purposes of facilitating the performance of the Inspector-General’s functions or the exercise of the Inspector-General’s powers (see section 215UC).

607.      . For example, section 135P allows the Bureau to disclose water markets information and information about water markets decisions it has a function to collect under section 135C with the ACCC and the Inspector-General.  This includes information it is prohibited from publishing under section 135D.. The Bureau may disclose the information if the Bureau reasonably believes it is reasonably necessary for, or directly related to, the performance of their functions, or the exercise of their powers under the Water Act. The ACCC will require this information for its integrity and conduct functions, and the Inspector-General will require this information to enforce data reporting obligations.

Section 135Q Compliance notices

608.      Subsection 135Q(1) would provide that if the Inspector-General considers that a person has contravened a requirement of the Water Markets Data Standards, the Inspector-General may give the person a notice requiring the person to rectify the contravention, and comply with that requirement, within the time specified in the notice. This section only applies to the extent that the contravention relates to water markets information under subsection 135Q(4).

609.      Subsection 135Q (2) would provide that if a person would have contravened a requirement of the Water Markets Data Standards , but does not contravene the requirement only because, in purportedly complying with the requirement, the person acted in good faith and exercised a reasonable degree of care and diligence, the Inspec tor-General may give the person a notice requiring the person to comply with the requirement within the time specified in the notice.

610.      Subsection 135Q(2) would ensure that requirements to provide data in accordance with the Water Markets Data Standards are complied with, even in situations where there is no contravention because a person has an excuse. This is to ensure that any mistakes or errors in data are able to be corrected.  

611.      Subsection 135Q(3) would provide that a person must not fail to comply with a notice given to the person under this section. A civil penalty of 60 penalty units applies to a contravention of this provision.

Section 135R Audits

612.      Subsection 135R(1) would provide that the Inspector-General may conduct or appoint or establish a person or body (an auditor ) to conduct, periodic audits to assess the performance of obligations under Part 7A.

613.      Subsection 135R(2) would provide that in conducting an audit, the auditor must have regard to the following:

a)       guidelines (if any) issued by the Inspector-General relating to the conduct of an audit,

b)       any applicable guidelines issued by the Inspector-General under section 215V,

c)       any applicable standards issued by the Inspector-General under section 215VA.

614.      Subsection 135R(3) would provide that the auditor must:

a)       prepare a report setting out the findings of the audit and any recommendations arising from the audit, and

b)       before the report is finalised, provide any person or body to which the audit relates with an opportunity to comment on the proposed findings and recommendations.

615.      Subsection 135R(4) would provide that after a report prepared under subsection (3) is finalised, the Inspector-General may publish a copy of the report on the Inspector-General’s website.

Section 135S Delegation by Director of Meteorology

616.      Subsection 135S(1) would provide that the Director of Meteorology may, in writing, delegate all or any of the Director’s functions and powers under this Part (other than sections 135J and 135K) to an SES employee or acting SES employee.

617.      Subsection 135S(2) would provide that the Director of Meteorology may, by writing, delegate any or all of the Director’s functions and powers under this Part to a person who holds, or acts in, an office or position:

a)       with a State or a Territory, or an authority of a State or a Territory, and

b)       at a level equivalent to that of an SES employee,

c)       if the State, Territory or authority agrees to the delegation.

618.      Subsection 135S(3) provides that a delegate under subsection (1) or (2) must comply with any written directions of the Director of Meteorology. This would allow the Bureau to institute a formal process to exercise control over delegates’ conduct, as required.

619.      The delegation of the Director of Meteorology’s powers to the SES or SES acting employees is necessary to ensure the efficiency and effectiveness of government operations. The powers and functions of the Director of Meteorology may need to be undertaken, without any undue delay or deferral. Delegating the powers to the SES level ensures that the power is exercised by people with the appropriate expertise and experience.

Section 135T Directions by Minister

620.      Subsection 135T(1) would provide that the Minister may, by notice in writing to the Director of Meteorology, give directions with respect to the performance of the Bureau’s functions or the exercise of its powers. The accompanying note would provide that the direction must not relate to powers under new Part 7A (see new paragraph 215D(2)(ba) described below).

621.      Subsection 135T(2) would provide that the Director of Meteorology must comply with any such direction.

622.      Subsection 135T(3) would provide that direction made under subsection (1) is a legislative instrument, but neither section 42 (disallowance) nor Part 4 of Chapter 3 (sunsetting) of the Legislation Act applies to the direction.

623.      A direction by a Minister to any person or body is not subject to disallowance or sunsetting under section 9, item 2 and section 11, item 3 of the Legislation (Exemptions and Other Matters) Regulation 2015.

 

Section 135U Part does not limit section 239AJ

624.      Section 135U would provide that Part 7A does not limit the ACCC’s powers under section 239AJ.

Section 135V Interaction between Part 7 and 7A

625.      Section 135V would provide that if, apart from this section. a person would be required to give information under both Part 7 and 7A to the Bureau, and they have given information under Part 7A, they are not required to give the information under Part 7.

626.      This is intended to avoid the duplication of information required to be given by persons to the Bureau and to assist industry in understanding what their obligations are.

Section 135W Prohibitions on disclosure of information do not apply

627.      Section 135W would provide that this Division has effect despite any law of the Commonwealth, a State or a Territory prohibiting disclosure of the information.

Section 135X Ownership etc. of information unaffected by its disclosure

628.      Subsection 135X (1) would provide that giving information under this Division does not affect a person’s property rights with respect to that information.

629.      Subsection 135X (2) would provide that this section does not prevent the use of the information by the Bureau for any purpose that is relevant to any of the Bureau’s functions under this Act or any other Act.

Schedule 4 - Amendment of the Basin Plan 2012 relating to various water markets measures

Part 1 - Amendments relating to tagged water entitlements

Overview

630.      Recommendation 14 of the Roadmap seeks to improve efficiency and access to intervalley trade opportunities in the Murray-Darling Basin (Basin) water markets.

631.      The recommendation was to remove the exemption for grandfathered tagged entitlements under section 12.23 of the Basin Plan to improve efficiency and access to intervalley trade opportunities. Grandfathered tagged water entitlements are a small number of water access entitlements that are exempt under the Basin Plan Water Trading Rule 12.23(2) from restrictions on the trade of water allocations within or between two regulated systems.

Basin Plan 2012

Item 1

632.      Item 1 would remove ‘established on or after 22 October 2010’ from the heading of section 12.23.

633.      This would be an administrative amendment in line with item 2 (below) to remove the grandfathered tagged water entitlements from the Basin Plan.

Item 2

634.      Section 12.23 in the Basin Plan provides that if there is a restriction on a trade between two locations, the restriction must also be placed on the delivery of water under a tagged water entitlement. Subsection 12.23(2) exempts water access entitlements that were established before 22 October 2010 from this restriction, creating ‘grandfathered’ tags.

635.      Item 2 would repeal subsection 12.23(2) and substitute it with a new provision that provides, ‘on and after the commencement of item 2 of Schedule 4 to the Bill, this section applies to a tagged water entitlement whenever established’.

636.      The effect of this item would be that grandfathered entitlements are subject to the same restrictions, if any, as all water allocation trade. The Roadmap concluded that it is more equitable if all market participants are subject to the same rules for moving water between valleys.

637.      The intended outcome is that the application of restrictions to orders under tagged water entitlements is fully implemented. In practice this would mean that a holder of  a tagged water access entitlement would be subject to restrictions applying to the transfer of water between valleys and when a restriction is in effect, an order of water under a tagged entitlement for delivery in the destination valley will be declined or refused.  

Item 3

638.      Item 3 would repeal the whole of subsection 12.23(3). Subsection 12.23(3) is no longer relevant to the Basin Plan as the Basin Plan has been in operation for over 5 years, making this provision redundant.

Part 2 - Amendments relating to water markets information

Item 4

639.      Item 4 would repeal Division 4 of Part 5 of Chapter 12 of the Basin Plan. Division 4 contains section 12.48 of the Basin Plan, which relates to the price of trade to be reported. This section is being replicated and expanded on in the Water Act, under new section 135M of the Bill.

Part 3 - Amendments of the Basin Plan 2012 relating to water announcements and insider trading

Item 5

640.      Item 5 would repeal the definition of ‘generally available’ from section 1.07 of the Basin Plan. This is a consequential amendment due to the definition of 'generally available’ being moved into the Water Act to apply to both the Water Act and the Basin Plan, under item 3 of Part 2 of Schedule 3 of the Bill.

 

Item 6

641.      Item 6 would repeal the definition of water announcement from subsection 1.07(1) of the Basin Plan.

642.      The definition of water announcement refers to the meaning given by section 12.49 of the Basin Plan. Section 12.49 of the Basin Plan is being repealed under item 7 of Part 3 of Schedule 4 of the Bill.

Item 7

643.      Item 7 would repeal sections 12.49 and 12.50 of the Basin Plan. These provisions are being moved into the Water Act to apply to the Water Act and the Basin Plan, under new section 101H in new Part 5A. This is a consequential amendment that is necessary to avoid the duplication of provisions under the Water Act and the Basin Plan.

Item 8

644.      Item 8 would repeal sections 12.51 and 12.52 of the Basin Plan. These provisions are being moved into the Water Act to apply to the Water Act and the Basin Plan, under Division 4 of new Part 5A. This is a consequential amendment that is necessary to avoid the duplication of provisions under the Water Act and the Basin Plan.

Schedule 5 - Technical amendments relating to First Ministers’ Council

Water Act 2007

645.      Schedule 5 of the Bill would amend references to the Council of Australian Governments (COAG) as a result of its cessation in 2020.

646.      Schedule 5 would align with other amendments in Commonwealth legislation to replace the outdated term of COAG with the term ‘First Ministers’ Council’.

Item 1

647.      Item 1 of Schedule 5 would insert a definition of First Ministers’ Council into section 4 of the Water Act. The definition would specify that First Ministers’ Council means a body (however described) that consists only of, or that includes, the following:

a)       the Prim e Minister,

b)       the Premiers of each State,

c)       the Chief Ministers of the Australian Capital Territory and Northern Territory.

Item 2

648.      Item 2 of Schedule 5 would substitute ‘Council of Australian Governments’ with ‘First Ministers’ Council’.

649.      This amendment would bring the Water Act in line with the cessation of COAG.

Schedule 6 - Consequential Amendments

Part 1 - Consequential amendments relating to the Water Markets Intermediaries Code

Overview

650.      Part 1 would amend existing legislation to give effect to the operation of the new framework for statutory trust accounting and the Code (to be made in regulations) under new Part 5.

651.      The amendments establish the ACCC as the regulator of Part 5 and the Code, and allow for existing enforcement tools under Part 8 to apply to Part 5 and the Code. These amendments also include new powers for the ACCC. The ACCC will be able to apply for a relinquishment order so that a benefit derived or detriment avoided because of a contravention of a civil penalty provision is not able to be retained.

652.      A new information gathering power is included as an investigative tool to provide the ACCC with the ability to seek information in relation to possible contraventions of the Water Act and the Code. Amendments to the CC Act are required to provide the ACCC with search and seizure powers and the power to apply for disqualification orders for Parts 5 and 5A of the Water Act.

Competition and Consumer Act 2010

Item 1

653.      Item 1 would insert after ‘instrument’, ‘, a civil penalty provision of Part 5 of the Water Act 2007 or of the Water Markets Intermediaries Code within the meaning of that Act’.

654.      This would allow the ACCC to apply to the Court to make an order disqualifying a person from managing corporations if the Court is satisfied the person has contravened, or attempted to contravene a civil penalty provision of Part 5 of the Water Act or the Code.

Item 2

655.      Item 2 would omit ‘ 1999 .’, substitute ‘ 1999 , or Part 5 of the Water Act 2007 or the Water Markets Intermediaries Code.’

656.      This is a consequential amendment to include the Code in the simplified outline of Part XID of the CC Act.

Item 3

657.      Item 3 would insert new subsection 154A(ca) of the CC Act to include Part 5 of the Water Act and the Code to the definition of ‘evidential material’.

658.      This is a consequential amendment that will allow the ACCC to effectively exercise their powers and functions under the Bill and new Part 5 and the Code.

Item 4

659.      Item 4 would insert new paragraph 154V(2)(ca) of the CC Act to allow a Magistrate to permit a thing to be retained in relation to a contravention of Part 5 of the Water Act or the Code, as set out in section 154V of the CC Act.

Item 5

660.      Item 5 would insert new paragraph 155AAA(21)(g) to provide that information that would be obtained by the Commission under sections 239AJ or 100ZD of the Water Act, disclosed to the Commission under subsection 215UB(2A) or section 135P of the Water Act, or that was obtained under Part XID of the CC Act and relates to a matter arising under Part 5 of the Water Act, or the Code, would be covered under the definition of protected information.

661.      This is a consequential amendment to allow for information under the provisions specified in this item to be included under the definition of protected information in the CC Act. 

Water Act 2007

Item 6

662.      Item 6 would insert new paragraph 137(ba) to provide that the ACCC would be the appropriate enforcement agency for contraventions of Part 5, regulations made for the purposes of Part 5 or the Code.

663.      Recommendation 21 of the roadmap recommended that the ACCC regulate integrity and conduct in water markets. The ACCC regulates competition and consumer protection, and has extensive experience in markets, compliance and enforcement. The ACCC has an existing role under the Water Act, including relating to the water market rules and water charge rules and these roles will continue.

Item 7

664.      Item 7 would insert new paragraph 146(1)(d) to provide that civil penalty provisions contained within the Code would be civil penalty provisions for the purpose of the Water Act. This would allow for proper enforcement of the Code by the relevant enforcement agencies.

Item 8

665.      Item 8 would insert new subparagraph 156(1)(a)(iii) to provide that an infringement notice may be given for designated civil penalty provisions contained in Part 5, regulations made for the purposes of Part 5 or the Code.

666.      This will allow the ACCC to effectively enforce Part 5 and the relevant regulations by being able to issue infringement notices.

Item 9

667.      Item 9 would insert new Division 6A - Relinquishment orders, after Division 6 of Part 8 of the Water Act.

Division 6A - Relinquishment orders

164A Relinquishing the benefit derived and detriment avoided from contravening a civil penalty provision

668.      Section 164A would provide that a Court may order a relinquishment order for a person to pay the Commonwealth an amount equal to the benefit derived and detriment avoided because of a contravention of a civil penalty provision of Part 5, the regulations made under Part 5 or the Code. This would only apply if a declaration of contravention by the person has been made under existing section 144 of the Water Act.

669.      Subsection 164A(2) would provide that a court may make a relinquishment order: on its own initiative, during proceedings before the Court; or on application by the ACCC, made within 6 years after the alleged contravention.

670.      Subsection 164A(3) would provide that, for avoidance of doubt, a relinquishment order may be made even if a pecuniary penalty order could be, or has been, made in relation to the contravention of the civil penalty provision.

Item 10

671.      Item 10 would insert new Part 10AC - Powers of the ACCC to require information, etc after Part 10AB of the Water Act. The powers in new section 239AJ would mirror the ACCC’s existing information gathering powers in section 155 of the CC Act to ensure consistency of powers and processes across the ACCC’s functions, including its water functions. It will enable the ACCC to utilise established practices and processes in performing its new functions and reduce operational complexity. This approach will also provide certainty for regulated persons where the limits of the existing power in section 155 of the CC Act are well established, including previous consideration by courts.   

672.      However, the powers in new Part 10AC may be exercised only in relation to matters that the ACCC is responsible for as a result of the amendments contained in the Bill, including market manipulation, insider trading and Code functions (noting the Code will be created in regulations at a subsequent time). It is intended that the two sets of legislative powers would exist independently, and the matters they relate to would not overlap. Nothing in this Part limits the powers of the ACCC in serving notices under section 155 of the CC Act in relation to the same conduct.  

673.      Consequential amendments in Part 1 of Schedule 6 to the Bill make clear that, in accordance with the current operation of section 155 of the CC Act, any information obtained by the ACCC under the Water Act’s compulsory information gathering powers will be treated as ‘protected information’ for the purposes of information sharing under the framework established by section 155AAA of the CC Act.

Part 10AC - Powers of the ACCC to require information, etc.

Section 239AJ Power to require information, documents, and evidence

674.      Section 239AJ gives the ACCC compulsory information-gathering powers to require a person to provide information, documents and/or give evidence under oath or by way of affirmation in investigations carried out by the ACCC under the provisions of this Act, regulations, or the Code. These powers are crucial to the ACCC’s ability to carry out its enforcement role and investigate possible contraventions of this Act in relation to water markets.

675.      Under subsection 239AJ(1), a notice cannot be issued unless the ACCC, the Chairperson of the ACCC or a Deputy Chairperson of the ACCC, has reason to believe on reasonable grounds that a person can give information, produce relevant documents or give relevant evidence that relates to the subject matter of the notice. The power to issue a notice must be used in good faith, not for a collateral purpose, and only to perform the ACCC’s functions conferred under this Act, the regulations or the Code or contraventions of certain specified provisions under this Act or the Code.

676.      Sufficient time must be allowed for the recipient to undertake the necessary documentary searches (including electronic searches), to make appropriate enquiries and to seek any legal advice or representation. Each notice will include specific details for compliance, including the time and manner for information to be provided, or time and place to appear to provide evidence. These details are set out in subsection 239AJ(2).

677.      Any written notice issued to a person under subsection 239AJ(1) may be to a person in Australia or outside Australia. This is necessary as some water market participants may be overseas but engage in water market conduct in Australia. The ACCC therefore needs to be able to issue information gathering notices overseas to be able to effectively enforce the water market provisions. It is important that overseas-based businesses operating in Australia are not able to avoid the ACCC’s enforcement powers.

678.      Subsection 239AJ(3) confers powers on the ACCC to obtain information, documents and evidence in relation to:

a)       matters that constitute or may constitute a contravention of:

i.               Part 5 of this Act or regulations under Part 5, or

ii.            the Code, or

iii.          an undertaking under section 163 of this Act.

b)       matters relevant to the ACCC’s performance of a function or exercise of a power conferred by this Act, regulations or the Code.

but only to the extent that matter relates to a function or power of the ACCC resulting from the enactment of the Bill.

679.      For clarity on the scope of powers under this provision (as distinct to the CC Act), subsection 239AJ(3) notes that the matters set out in this provision apply only to the extent that the matter relates to a function or power of the ACCC resulting from the enactment of this Act, including a matter relating to the Code.

680.      Subsection 239AJ(4) provides that the ACCC’s power to issue a notice expires on the ACCC commencing proceedings in relation to the matter the subject of the notice. This is likely to be the case in most circumstances. As an alternative, subsection 239AJ(4) provides that the ACCC may exercise or continue to exercise powers in relation to a matter until the ACCC commences proceedings in the matter (other than proceedings for an interim or final injunction) or until the close of pleadings in relation to an application by the ACCC for a final injunction in relation to the matter.

681.      Subsection 239AJ(5) provides that failure or refusal to comply or knowingly giving false or misleading information in response to a notice are criminal offences. The applicable maximum fine or terms of imprisonment upon conviction is 2 years imprisonment or 100 penalty units, or both.

682.      Under subsection 4B(3) of the Crimes Act 1914 , unless the contrary intention appears and if the court thinks fit, the penalties for corporations are five times that of individuals. Consequently, the maximum pecuniary penalty for a corporation under subsection 239AJ(5) is 500 penalty units. When applied to a corporation, this equates to a maximum fine of $156,500 (at current penalty rates). This aligns with the penalty under subsection 155(6A) of the CC Act and with the penalty for non-compliance with similar notice-based evidence-gathering powers of other regulators. Given the seriousness of this offence and that such conduct may undermine the integrity of the regulatory framework provided for by the Water Act, the size of the penalty is appropriate to act as a deterrent.

683.      The ACCC may refer any non-compliance to the Commonwealth Director of Public Prosecutions for consideration of whether the recipient should be prosecuted for an offence under subsection 239AJ(5). This includes where the recipient of a notice refuses or fails to comply with that notice (including refusing to answer questions in an examination) or knowingly furnishes information, produces documents, or gives evidence that is false or misleading. If a person refuses or fails to comply with a notice, the ACCC may also apply for a court order directing the person to comply with the notice (see section 239AN).

684.      Subsection 239AJ(6) provides that a refusal or failure to comply with a notice will not apply as an offence to the extent that the person is not capable of complying with the notice.

685.      A note appears at the end of subsection 239AJ(6). This note makes it clear that a recipient seeking to rely on not being capable of complying bears the evidential burden (as opposed to a legal or ‘persuasive’ burden) of establishing the exception. Accordingly, a recipient seeking to rely on the exception must adduce or provide evidence that suggests that there is a reasonable possibility that they were unable to comply with the notice. The facts amounting to whether that person is not capable of complying with the notice will be peculiarly within the knowledge of that person. This approach is consistent with section 13.4 of the Criminal Code.

686.      Subsection 239AJ(7) relevantly provides that a person does not refuse or fail to comply with a notice (a criminal offence) to the extent that the person provides that, after a reasonable search, the person is not aware of the documents required to be produced under the notice.

687.      A note appears at the end of subsection 239AJ(7). This note provides that a defendant bears the legal burden in relation to proving they undertook a reasonable search. 

688.      It is appropriate that a defendant bear the legal burden because:

a)       the facts amounting to a reasonable search are peculiarly within the knowledge of the defendant,

b)       the defendant could readily and cheaply provide evidence to establish, on the balance of probabilities, that they conducted a reasonable search,

c)       it would be extremely difficult and costly for the prosecution to gather the same evidence through its own investigations,

d)       it would be a significant hurdle for the prosecution to establish the defence did not conduct a reasonable search. This could allow the defence to undermine the integrity of section 239AJ particularly given the breadth of matters which may be relevant to determining whether the search conducted by the defendant constitutes a ‘reasonable search’, and

e)       the introduction of the defence under subsection 239AJ( 7) is therefore only possible and viable if the legal burden of proof is placed on the defendant.

689.      Once the defendant meets their legal burden, the prosecution must disprove the defence beyond a reasonable doubt to establish a contravention of subsection 239AJ(5). This is a higher standard of proof for the prosecution. 

690.      These matters were outlined in the Explanatory Memorandum to the Competition and Consumer Amendment (Competition Policy Review) Bill 2017 in support of the introduction of the equivalent subsection 155(5B) to the CC Act. [5]

691.      The Scrutiny of Bills Committee has also previously referred to these matters as being matters which can support a defendant bearing a legal burden. [6]

692.      Subsection 239AJ(8) provides a non-exhaustive list of factors that may be taken into account when determining whether a search is reasonable, such as: the nature and complexity of the matter to which the notice relates, the number of documents involved, the ease and cost of retrieving a document relative to the resources of the recipient, and any other relevant matter. This list does not limit the matters that may be taken into account in determining whether a search is reasonable. For example, ‘any other relevant matter’ may include the costs of document review relative to the resources of the recipient, or whether the ACCC and the recipient agreed to the scope of the search.

693.      Whether a person has made a reasonable search is an objective test. The defence will not be established where the recipient of a notice subjectively decides that it is not reasonable to conduct a search at all, or has only conducted a limited search, if this falls short of what would objectively be considered reasonable.

694.      Subsection 239AJ(9) makes it clear that a person is not required to provide information or give evidence that would disclose the contents of a document, or produce a document prepared for the purposes of a State or Territory Cabinet meeting or would disclose the deliberations of a State or Territory Cabinet.

695.      A note appears at the end of subsection 239AJ(9). This note makes it clear that a recipient seeking to rely on the cabinet document exception bears the evidential burden (as opposed to a legal or ‘persuasive’ burden) of establishing the exception. Accordingly, a recipient seeking to rely on the exception must adduce or provide evidence that suggests that the relevant documents were cabinet documents or evidence would disclose the contents of Cabinet documents or deliberations of Cabinet. The facts amounting to whether those documents or evidence are Cabinet documents or deliberations will be peculiarly within the knowledge of that person.

696.      Subsection 239AJ(10) provides that the section does not require a person to produce a document that would disclose information that is the subject of legal professional privilege. Preserving legal professional privilege is in the public interest, as it facilitates the obtaining of legal advice and promotes the observance of the law.

697.      A note appears at the end of subsection 239AJ(10). This note makes it clear that a defendant bears an evidential burden in relation to the matter in this subsection (see subsection 13.3(3) of the Criminal Code ). The reversal is justified in this instance, as the matter to be proved (that is, whether the document is subject to legal professional privilege) is a matter that would be peculiarly in the knowledge of the defendant. In the event of a proceeding, it would be significantly more difficult and costly for the prosecution to disprove all possible circumstances than it would be for the defendant to establish the existence of legal professional privilege. The reversal in these circumstances is consistent with the principles set out in the Commonwealth Guide.

698.      Where a privilege claim over a document or part of a document is not substantiated, in appropriate cases, action to enforce the notice may be pursued on the basis that the recipient has failed or refused to produce responsive documents because of illegitimate privilege claims. The notice recipient would bear the evidential burden in respect of any defence based on privilege in any such proceeding.  

Section 239AK Oaths and affirmations for the purposes of section 239AJ

699.      Subsection 239AK(1) allows the ACCC to require evidence under subsection 239AK(2) to be given under oath or affirmation, which may be administered by a member of the ACCC. This function is necessary for evidentiary purposes and accords with ACCC’s existing policy to administer an oath or affirmation as a matter of course in all examinations. This power is investigative and not judicial, as it does not involve the ACCC deciding the facts or applying the law to them in any way that is authoritative.

700.      Subsection 239AK(2) allows the function of conducting an examination of a person who has received a notice to appear before the ACCC to give evidence to be delegated to a member of staff assisting the ACCC who is an SES employee or an acting SES employee. This enables operational flexibility. Section 2B of the Acts Interpretation Act contains definitions of SES employee and acting SES employee.

Section 239AL Power to vary time for the purposes of section 239AJ

701.      Section 239AL would provide that where a recipient considers there are genuine reasons why it may not be able to comply with the notice by the due date, the recipient may contact the ACCC to request a variation of the time to respond to the notice. The ACCC may also vary the timing set by the notice on their own initiative. This could also involve a staged response, where some information is still able to be provided by the due date.

702.      Where the variation would be lengthy and/or complex, the ACCC may decide to revoke the original notice and issue a new one. The ACCC may also amend the scope and terms of a notice under the appropriate circumstances relying on subsection 33(3) of the Acts Interpretation Act.

703.      Subsection 239AL(3) allows the power to vary a timing set by a notice to be delegated to a member of staff assisting the ACCC who is an SES employee or an acting SES employee. This enables operational flexibility. Section 2B of the Acts Interpretation Act contains definitions of SES employee and acting SES employee.

Section 239AM Privilege against self-incrimination

704.      Article 14(3)(g) of the ICCPR protects the right of an individual to be free from self-in crimination in the determination of a criminal charge by providing that a person cannot be compelled to testify against him or herself or confess guilt. The common law also recognises the privilege against self-incrimination, which applies unless expressly or impliedly overridden by statute. The privilege against self-incrimination may be subject to permissible limits but any such limitations must be for a legitimate objective and be reasonable, necessary and proportionate to that objective.

705.      The legitimate objectives of the Bill include ensuring that water markets operate with integrity. Compliance is critical to the integrity of the scheme and the achievement of its objectives. Part 10AC of the of the Bill sets out the powers of the ACCC to require information. Section 239AJ sets out the power to require information, documentation and evidence, if the ACCC, the Chairperson of the ACCC or Deputy Commissioner of the ACCC has reason to believe that a person is capable of giving evidence, producing the documents or giving evidence relating to a matter referred in subsection 239AJ(3).

706.      Under subsection 239AM(1), a person is not excused from giving information or producing a document under 239AJ(2), on the ground that the information or document may tend to incriminate the person or expose the person to a penalty. However, that section also provides that where information is furnished by an individual, it is not admissible in evidence against the individual in any criminal proceedings, other than criminal proceedings for non-compliance with the notice (such as an offence against subsection 239AJ(5) or section 137.1, 137.2 or 149.1 of the Criminal Code ).

707.      The abrogation of the privilege against self-incrimination and of civil penalty privilege is reasonable, necessary and proportionate in the context of the ACCC’s proposed enforcement functions because:

a)       the privilege could seriously undermine the effectiveness of the regulatory scheme and prevent the collection of evidence. [7] The privilege could prevent the ACCC, e.g., obtaining information or documents relevant to an investigation into insider trading or market manipulation by a person or a corporate entity, because the information or documents may also incriminate or expose to a penalty the individual to whom the notice was issued or who responded to the notice on behalf of the corporate entity,

b)       the use of the information obtained will be constrained to some degree because answers given , or information provided in response to a notice cannot be used in subsequent criminal proceedings against the person (subject to limited exceptions). This provides an appropriate balance to the extent that the provisions abrogate the privilege against self-incrimination,

c)       by comparison the use of answers and information obtained should be permitted in respect of civil penalty proceedings against an individual because:

i.               civil penalty privilege is separate and distinct from the privilege against self-incrimination and the assessment of whether the appropriate balance has been struck in the relevant provision should be treated separately,

ii.            this would ensure consistency in the way evidence obtained by the ACCC can be used against individuals in respect of the different civil penalty provisions it is the relevant regulator for, including consistency across water functions (see below),

iii.          the ACCC’s primary investigative tool for contraventions by individuals may be subsection 239AJ( 1) of the Bill. If information or documents provided by individuals could not be used against them in civil proceedings, then that may unreasonably hinder the ACCC’s ability to investigate and enforce its proposed market regulatory functions,

iv.           any ‘use’ immunity in relation to civil penalty proceedings could unreasonably hinder the investigation and enforcement of the relevant contraventions. For example, it could prevent the tendering of evidence provided by one partner in proceedings commenced against the entire partnership for a contravention of a civil penalty of the Code, on the basis it could make the partner who provided the information liable to a civil penalty,

v.             to the extent conduct of a corporate entity is under investigation, the ACCC may require an individual officer or director of that entity to attend an examination or provide information. It is likely this step would occur prior to the ACCC having a detailed understanding of the conduct or the central participants, leading to risks that the individual sought to be examined or the individual who the company elects to have respond on its behalf would be a central participant in the conduct. A use immunity would preclude the ACCC relying on this information as against that individual in the event they are in fact the guiding mind behind the corporate entity’s contraventions, and

vi.           the ACCC, as the relevant enforcement body, is empowered to bring civil proceedings seeking a range of remedies outside of civil penalties. There is no preclusion on the ACCC’s ability to rely on such evidence for these other remedies. It may be appropriate in some instances that the ACCC seek both an injunction and civil penalties to ensure an appropriate regulatory response to conduct (i.e. to preclude further harm and to ensure general deterrence). If a limitation on the use of such evidence in a civil penalty proceeding was imposed, this would limit the evidence that ACCC could rely on to establish a contravention in proceedings where multiple remedies were sought, as compared to the remedies it could rely on in respect of a proceeding for an injunction alone. This may have an unintended chilling effect on the ACCC’s ability to seek civil penalties in these circumstances, 

d)       there being no ‘use’ immunity in relation to documents (civil or criminal proceedings) is consistent with the position in relation to the execution of warrant powers which allow the seizing of documentary evidence that is in existence without the application of any ‘use’ immunity: Part XID of the CC Act,

e)       any limitation on the derivative use of material obtained under compulsory notices would unreasonably hinder the investigation and enforcement of the relevant provisions. For example, it may prevent the tendering of documentary evidence showing insider trading by a person that only became known because of answers or information given by a person. The existence of such documentary evidence may only be known by a small number of individuals and concealed, and it cannot be assumed that such documentary evidence could be identifiable from others.  Derivative use immunity could also require the ACCC in any proceedings against a person to prove the provenance of every piece of evidence in the proceedings before it could be admitted.

708.      The proposed position in relation to immunities is consistent with sections 155 and 154R of the CC Act. Such consistency is appropriate because: 

a)       the ACCC uses, and will continue to use, its section 155 powers for its existing water functions, including some enforcement functions. It would lead to an absurd result if the ACCC was entitled to use evidence obtained under its compulsory information gathering powers for civil penalty proceedings relating to breaches arising under Part 4 or Part 4A of the Water Act but could not use evidence obtained under its compulsory information gathering powers for civil penalty proceedings relating to breaches of the new Part 5 and Part 5A, which include objectively more serious prohibitions,

b)       the ACCC has used the section 155 power for an extended period of time, including in respect of civil penalty proceedings against individuals. It has established procedures and evidentiary processes in place to ensure the appropriate use of such notices and the appropriate handling of evidence obtained thereunder. Imposing different evidentiary thresholds for evidence obtained under its section 239AJ powers would require significant adjustment to established evidence handling processes within the agency,

c)       it is possible that conduct identified by the ACCC in an investigation may contravene provisions of both the Water Act and the CC Act. The relevant information sharing provisions in section 155AAA of the CC Act preserve the ability of the ACCC to use information obtained under section 155 for its water functions,

d)       given this potential overlap of functions, a significant difference in how material obtained compulsorily can be used as evidence in proceedings would cause significant complexities for the ACCC and any Court hearing such a matter and potential unequal treatment of individuals. For example:

i.                the ACCC may gather evidence using its existing powers under section 155 of the CC Act which could be used as evidence against an individual in civil proceedings for breaches of both the CC Act and the Water Act, such as misleading and deceptive conduct in trade or commerce by a water market intermediary as well as a breach of the Code,

ii.            if the ACCC gathered that same evidence under this new Part’s powers, and it was subject to additional use limitations, it would be constrained for using that same evidence to pursue the same breaches. The ACCC may need to consider using section 155 notices to seek the same evidence, creating significant additional burden for both agency and recipient,

iii.          if the ACCC is required to use two different compulsory evidence gathering powers, with different evidentiary constraints, to investigate potentially overlapping conduct this would create significant additional complexity in both the investigation and litigation stages. This could lead to the outcome that evidence has to be quarantined (if that were possible) or alternatively it could lead to a court refusing to admit evidence that is otherwise admissible and relevant to the CC Act on the basis it is not admissible in relation to the contravention of the Code.

e)       the proposed position is consistent with subsection 154R(3)-(4) of the CC Act, which relevantly provides that a person is not excused from answering a question or producing evidential material on the ground of self-incrimination. An answer given is not admissible in evidence against the person in any criminal proceedings (subject to the same limited exceptions). Consistency is appropriate because where the Bill also extends Part XID to apply to contraventions of some of the integrity and conduct provisions under the Water Act:

i.               people will be in the same position irrespective of whether they provide answers/information under Part XID or new section 239AJ in relation to potential contraventions of this Act,

ii.            information/answers will be admissible for the same purposes, irrespective of whether it was obtained under Part XID or new section 239AJ in relation to potential contraventions of this Act.

Section 239AN Court may order a person to comply with a notice

709.      Section 239AN provides that the ACCC may apply to a court to make an order directing a person to comply with a notice under subsection 239AJ(2), where they have either refused or failed to comply with the notice.

710.      This provision would ensure the ACCC has a mechanism to obtain the relevant information or documents in the notice in a timely and efficient way, as compared to referral of the non-compliance for criminal prosecution.

Part 2 - Consequential amendments relating to water announcements and insider trading

Overview

711.      Part 2 of Schedule 6 includes amendments to existing sections of the Water Act and the CC Act that are required to give effect to the operation of the new obligations for water announcements and insider trading in new Part 5A.

712.      These amendments also repeal provisions relating to water announcements and insider trading in the Basin Plan, as new and revised provisions are included in Part 5A. Part 2 establishes the ACCC as the regulator of Part 5A, and allows for existing enforcement tools under Part 8, and new relinquishment order and information gathering powers to apply to Part 5A.

713.      The ACCC would be the regulator of information provided to the Bureau relating to water markets decisions.

714.      Amendments to the CC Act are required to provide the ACCC with search and seizure powers and the power to apply for disqualification orders for Part 5A (other than Division 3 water announcements).  

Competition and Consumer Act 2010

Item 11

715.      Item 11 would insert new paragraph 86E(1)(a) after ‘Part 5’, to insert ‘or 5A (other than for the purposes of Division 3 of that Part)’.

716.      This would allow the ACCC to apply to the Court to make an order disqualifying a person from managing corporations if the Court is satisfied the person has contravened, or attempted to contravene a civil penalty provision of Part 5A of the Water Act (other than for the purposes of Division 3 of that Part).

Item 12

717.      Item 12 would after ‘Part 5’, insert ‘or 5A’.

718.      This is a consequential amendment to include Part 5A of the Water Act in the simplified outline of Part XID of the CC Act.

 

 

Item 13

719.      Item 13 would insert new paragraph (cb) in section 154A of the CC Act to list ‘a contravention of Part 5A of the Water Act 2007 , other than Division 3 of that Part.’

720.      This is a consequential amendment that will allow the ACCC to effectively exercise their powers and functions under the Bill and new Part 5A (other than under Division 3 of that Part).

Item 14

721.      Item 14 would insert new subsection 154V(2)(ca) to allow an inspector to apply to a magistrate for an order that the person may retain the thing where there has been a contravention of Part 5A (apart from Division 3 of that Part).

Item 15

722.      Item 15 would add section 101D to subsection 155AAA(21) of the CC Act to expand the definition of protected information to include, if a person is required to keep records under section 101C in relation to one or more water markets decisions, the information obtained by the ACCC under that section.

Item 16

723.      Item 16 would add new Part 5A to subsection 155AAA(21) of the CC Act to include in the definition of protected information matters arising under Part 5A.

724.      This is a consequential amendment to allow for the protected information under Part 5A specified in this item to be included under the definition of protected information in the CC Act.

Water Act 2007

Item 17

725.      Item 17 would insert a definition of relevant agency into subsection 4(1) of the Water Act.

726.      The term relevant agency would be defined to mean:

a)       the Commonwealth, or

b)       a Basin State, or

c)       a person that is:

i.               an agency of the Commonwealth, or

ii.            an agency of a Basin State, or

d)       an IIO .

Item 18

727.      Item 18 would omit ‘sections 73J and 73K, which clarify the constitutional basis for sections 73F to 73H’, and substitute ‘sections 73J, which clarifies the constitutional basis for section 73F’.

728.      This is a consequential amendment due to the repeal of various sections under this part.

Item 19

729.      Item 19 would repeal section 73H.

730.      This is a consequential amendment which repeals section 73H as it provides for a civil penalty provision for contraventions of subsection 12.52(2) of the Basin Plan. Section 12.52 of the Basin Plan would be repealed by item 8 of Part 3 of Schedule 4 of the Bill.

Item 20

731.      Item 20 would amend the heading to omit ‘sections 73F to 73H’, substitute ‘section 73F’.

732.      This is a consequential amendment to remove references to sections 73G and 73H as they are to be repealed under items 35 and 19 of Part 2 of Schedule 6 of the Bill respectively.

Item 21

733.      Item 21 would amend the subsection to omit ‘Sections 73F to 73H apply’, substitute ‘Section 73F applies’.

734.      This is a consequential amendment to remove references to sections 73G and 73H as they are to be repealed under items 35 and 19 of Part 2 of Schedule 6 of the Bill respectively.

Item 22

735.      Item 22 would omit ‘, 73G or 73H’.

736.      This is a consequential amendment to remove references to sections 73G and 73H as they are to be repealed under items 35 and 19 of Part 2 of Schedule 6 of the Bill respectively.

Item 23

737.      Item 23 would repeal section 73K.

738.      Section 73K provides for additional application of section 73H. As section 73H is to be repealed under item 19, section 73K is no longer necessary.

Item 24

739.      Item 24 would insert ‘and information about water markets decisions’ into new section 135A in new Part 7A inserted in Schedule 3 of the Bill. Section 135A provides for the simplified outline of new Part 7A this item would allow for the inclusion of water markets decisions in Part 7A.

Item 25

740.      Item 25 would insert new paragraph 135C(ab) into section 135C of new Part 7A inserted in Schedule 3 of the Bill.

741.      This item would broaden the additional functions of the Bureau to include collecting, holding, managing, interpreting and disseminating information about water markets decisions.

Item 26

742.      Item 26 would insert ‘information about water markets decisions’ into subsections 135D(1) and (2) to enable the Director of Meteorology to publish information about water markets decisions.

743.      This would align with item 25 that inserts information about water markets decisions as part of their additional functions.

Item 27

744.      Item 27 would insert new Part 5A to subsection 135P to allow the Bureau to disclose information obtained in, or in connection with, the performance of their functions or exercise of their powers under Part 5A.

Item 28

745.      Item 28 would insert new subsection 137(bb) to provide that the ACCC is the appropriate enforcement agency for a contravention if the contravention is a contravention of a provision of Part 5A or regulations made for the purposes of Part 5A.

746.      This is a consequential amendment to give the ACCC the appropriate powers under the Water Act to enforce and regulate the integrity and conduct measures in Part 5A.

Item 29

747.      Item 29 would insert new subparagraph 156(1)(A)(ib) listing ‘Part 5A; or’.

748.      This is a consequential amendment to include new Part 5A in section 156 of the Water Act so that infringement notices can be given to persons who have contravened a civil penalty provision of Part 5A.

Item 30

749.      Item 30 would insert ‘or Part 5A’ to subsection 164A(1) to allow the ACCC to seek a relinquishment order for contraventions of Part 5A of the Water Act.

Item 31

750.      Item 31 would insert Division 3 of Part 5A to subsection 256(3) of the Water Act to allow for regulations to be made for in relation to a matter by applying, adopting or incorporating, with or without modification omission, addition or substitution), any matter contained in a written instrument or other document.

751.      An amendment to section 256 of the Water Act would allow regulations made under section 256 for the purposes of Part 5A to make provision in relation to a matter by applying, adopting or incorporating any matter contained in an instrument or other writing as it is in force from time to time (rather than only as in force at a particular point in time). This is contrary to the general presumption in subsection 14(2) of the Legislation Act  as noted by subsection 256(4). The Regulations currently incorporate documents relevant to Part 7 Water information.

752.      The capacity to apply, adopt or incorporate matters contained in an instrument or other writing as it is in force from time to time is particularly necessary under Part 5A. Section 101B of the Bill would require information to be provided to the Bureau relevant to the announcement of water markets decisions. The regulations would set out what details are required to be provided to the Bureau. This would need to include a list of data elements or metadata. It is necessary to be able to refer in the regulations to an up-to-date list of metadata.

 

753.      Any regulations seeking to make provision in relation to a matter by applying, adopting or incorporating any matter contained in an instrument or other writing as it is in force from time to time will be subject to Parliamentary scrutiny. This provides a capacity for Parliament to consider any proposal to apply, adopt or incorporate a particular matter as it is in force from time to time and object should it have concerns.

Item 32

754.      Item 32 would insert Division 3 of Part 5A to subsection 256(5) of the Water Act to provide that when making regulations under Part 5A in relation to a matter by applying, adopting or incorporating a matter contained in a written instrument or other document, the Director of Meteorology must ensure that it, and any subsequent amendments are publicly available.

755.      This amendment would ensure that any instrument or other writing applied, adopted or incorporated by regulation for the purposes of Part 5A will be made publicly available on the Bureau's website.

Item 33

756.      Item 33 would insert new subparagraph 239AJ(3)(a)(iia) listing ‘Part 5A of this Act or regulations made under Part 5A of this Act;’.

757.      This is a consequential amendment to the amendments proposed by section 239AJ (3)(a) of Part 1 of Schedule 6 which would insert new Part 10AC into the Water Act. This item would allow the ACCC to have the power to require information, documents and evidence (as set out in 239AJ) for matters under Part 5A of the Water Act and regulations made under Part 5A.

Part 3 - Consequential amendments relating to water markets information

Overview

758.      Part 3 would provide for consequential amendments to the Water Act to support the operation of Schedule 3 of the Bill.

759.      These amendments are necessary to ensure that the Inspector-General has the functions and powers needed to regulate new Part 7A. As the regulator of Part 7A, Part 3 would provide the Inspector-General to be able to exercise their powers under Parts 8, 9A and 10AA of the Water Act in relation to conduct under Part 7A.

Water Act 2007

Item 34

760.      Item 34 would insert new paragraph (ba) of the definition of designated compliance provision to list ‘a provision of Part 7A or regulations made for the purposes of that Part; or’.

761.      This is a consequential amendment to include provisions of Part 7A as designated compliance provisions to allow the Inspector-General to be able to enforce compliance as the appropriate enforcement agency. Existing section 137(a)(i) of the Water Act provides that the Inspector-General is the appropriate enforcement agency for designated compliance provisions.

762.      While the Inspector-General would be the appropriate enforcement agency for Part 7A (water markets information), the Minister would remain the appropriate enforcement agency for a contravention of a provision of Part 7 (water information) or regulations made for the purposes of Part 7 of the Water Act.

Item 35

763.      Item 35 would repeal section 73G of the Water Act.

764.      Section 73G of the Water Act provided that a contravention of Section 12.48 of the Basin Plan was a civil penalty provision. Section 12.48 of the Basin Plan required the reporting of the price for trade of water access rights.

765.      New section 135M would insert broader reporting requirements on trading of eligible tradeable water rights which makes section 73G no longer relevant.

Item 36

766.      Item 36 would after paragraph 156(1)(a)(ii), insert a new paragraph (iii) to list ‘Part 7A; or’.

 

767.      This consequential amendment would provide the Inspector-General, as the appropriate enforcement agency, with the power to issue infringement notices where the Inspector-General has reasonable grounds to believe that a person has contravened a civil penalty provision in the new Part 7A.

 

768.      This will give the Inspector-General the ability to effectively enforce compliance with new Part 7A.

Item 37

769.      Item 37 would after paragraph 215D(2)(b) insert a new paragraph (ba) to list ‘the exercise of a power under Part 7A (water markets information);’.

770.      This consequential amendment would provide that the Inspector-General is not subject to direction from the Minister about the performance of the Inspector-General’s functions in relation to the exercise of a power under Part 7A.

771.      For example , if the Minister were to issue a direction to the Inspector-General regarding an audit being conducted by the Inspector-General pursuant to new section 135T, the Inspector-General would not be required to follow it because the content of the direction would fall within a category of subject matter that is exempt from the operation of subsection 215D(1) of the Water Act by new paragraph 215D(2)(ba).

Item 38

772.      Item 38 would, new subsection 215UB(2A) titled ‘Disclosure to Bureau and ACCC’ which would provide the Inspector-General may disclose the information to the Bureau and the ACCC if the Inspector-General reasonably believes that the disclosure is reasonably necessary for, or directly related to, one or the performance of the functions or the exercise of the powers of the Bureau or the ACCC under the Water Act.

773.      Item 38 also inserts a note to the section which provides that this subsection constitutes an authorisation for the purposes of the Privacy Act and other laws (including the common law).

774.      This is a consequential amendment to allow the Inspector-General to disclose information for purposes of enforcement or administration of Commonwealth or State laws to the ACCC or the Bureau. The information will only be disclosed if it is information obtained in, or in connection with, the performance of the Inspector-General’s functions or the exercise of the Inspector-General’s powers.

775.      The power is necessary for the Inspector-General to be able to share information which would assist the ACCC and Bureau to effectively carry out their duties and functions under the Water Act.

Item 39

776.      Item 39 would rename section 215VA of the Water Act to be ‘Inspector-General may issue standards relating to measuring water taken from Basin water resources’. This reflects the change that the Inspector-General is no longer required to make data standards relating to water market data.

777.      Under new Part 7A of the Water Act (inserted by the Bill), the Bureau would have the responsibility to make Water Markets Data Standards.

Item 40

778.      Item 40 would substitute existing subsection 215VA(1), including the note, with a new subsection 215VA(1).

779.      The new subsection 215VA(1) would provide that the Inspector-General may, by legislative instrument, issue standards relating to measuring water taken from Basin water resources in water resource plan areas.

780.      This amendment is reflective of the change to give the Bureau power to issue new Water Markets Data Standards and remove overlap of a similar power lying with the Inspector-General.

 

Item 41

781.      Item 41 would insert new paragraph 215W(1)(4)(ba) to include subsection 215UB(2A) (disclosure of information).

782.      This consequential amendment would allow the Inspector-General to delegate the Inspector-General’s functions or powers to disclose information under the new subsection 215UB(2A) only to an SES employee or an acting SES employee, or an APS employee who holds, or performs the duties of, an Executive Level 2, or equivalent, position in the Department.

Item 42

783.      Item 42 would amend paragraph 238(1)(b), after ‘73L’ to insert ‘or 135R’.

784.      This is a consequential amendment to update section 238 of the Water Act to reflect the audit power in new section 135R. It is necessary for the Inspector-General to have the power to require information to effectively enforce the data reporting obligations under new Part 7A.

Item 43

785.      Item 43 wou ld insert Part 7A to subsection 256(3) of the Water Act to allow for regulations to be made for in relation to a matter by applying, adopting or incorporating, with or without modification omission, addition or substitution), any matter contained in a written instrument or other document.

786.      The amendment to section 256 of the Water Act would allow regulations made under section 256 for the purposes of Part 7A to make provision in relation to a matter by applying, adopting or incorporating any matter contained in an instrument or other writing as it is in force from time to time (rather than only as in force at a particular point in time). This is contrary to the general presumption in subsection 14(2) of the Legislation Act as noted by subsection 256(4). The Regulations currently incorporate documents relevant to Part 7 - Water information.

787.      A capacity to apply, adopt or incorporate matters contained in an instrument or other writing as it is in force from time to time is particularly necessary under Part 7A. The data and systems measures include new reporting obligations for water markets information and Bureau would have the power to publish this information. For example, in order to do this the Bureau needs to obtain information from a wide range of persons. New section 135F provides that it may specify persons or a class of persons required to give water markets related information to the Bureau in regulations. One such class of persons are government agencies. The range of government bodies and their responsibilities change from time to time. It is necessary to be able to refer in the regulations to an up-to-date list of such bodies.

788.      A ny regulations seeking to make provision in relation to a matter by applying, adopting or incorporating any matter contained in an instrument or other writing as it is in force from time to time will be subject to Parliamentary scrutiny. This provides a capacity for Parliament to consider any proposal to apply, adopt or incorporate a particular matter as it is in force from time to time and object should it have concerns.

Item 44

789.      Item 44 would insert Part 7A to subsection 256(5) of the Water Act to provide that when making regulations under Part 7A in relation to a matter by applying, adopting or incorporating a matter contained in a written instrument or other document, the Director of Meteorology must ensure that it, and any subsequent amendments are publicly available.

790.      This amendment would ensure that any instrument or other writing applied, adopted or incorporated by regulation for the purposes of Part 7A will be made publicly available on the Bureau's website.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Water Amendment (Restoring Our Rivers) Bill 2023

This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Bill

The Murray-Darling Basin is the largest and most complex river system in Australia. It covers 1 million square kilometres of south-eastern Australia, across New South Wales, Queensland, South Australia, Victoria and the Australian Capital Territory.

A healthy and sustainable river system is important for Basin communities, agriculture, industry and First Nations. It sustains irrigation, tourism, recreation, cultural use and provides critical drinking water.

Many years of over allocation of water, exacerbated by the Millennium drought, has resulted in major social and environmental impacts to the Murray-Darling system and its communities. This is why in 2007, the Australian Parliament passed the Water Act 2007 (Cth) (the Water Act) with bipartisan support. This established the Murray Darling Basin Authority and laid the foundations for the Basin Plan. The Basin Plan was then adopted by the Australian Government and all Basin States in 2012 as there was widespread agreement that the Basin needed to be protected for future generations.

The Basin Plan sets the amount of water that can be taken from the Basin each year, leaving an environmentally sustainable level for the rivers, lakes and wetlands and plants and animals. In addition to managing water allocation, the Basin Plan ensures water quality and salinity levels are actively managed through state Water Resource Plans.

Key elements of the Basin Plan are due to be completed by 30 June 2024. The Murray-Darling Basin Authority (the Authority) has advised that full implementation of the Basin Plan will not be possible by this date.

In addition, water markets in the Basin have outgrown their current regulatory settings. This has led to concern in Basin communities that water trading lacks transparency, integrity and accountability. 

The purpose of the Water Amendment (Restoring Our Rivers) Bill 2023 (the Bill) is to amend the Water Act and the Basin Plan to implement the:

·          Basin Plan in full, including recovering 450 gigalitres (GL) of additional environmental water; and

·          recommendations from the Water Market Reform: Final Roadmap (Roadmap) (accessible at: https://www.dcceew.gov.au/sites/default/files/documents/water-market-reform-final-roadmap-report.pdf ) to restore transparency, integrity and confidence in water markets and water management in the Basin.

Implementation of the Basin Plan Overview

Key elements of the Basin Plan are due to be completed by 30 June 2024. Full implementation of the Basin Plan will not be possible by 30 June 2024, under the current settings.

The Water Act and Basin Plan set two water recovery targets (‘the targets’):

·          a target of 2,750 GL to ‘Bridge the Gap’ to long-term average sustainable diversion limits (SDLs). This reflects the difference between the amount of water that had previously been taken from the Basin for consumptive use prior to 2012 and the SDLs set by the Basin Plan to reduce that take to environmentally sustainable levels.

·          a target to recover 450 GL of additional environmental water (‘the 450 GL target’).

Schedules 1 and 2 to the Bill would amend the Water Act and Basin Plan to enable the delivery of the Basin Plan by:

·          ensuring all options are available to deliver the 450 GL target, including purchasing water entitlements.

·          removing all impediments to enable the delivery of the Basin Plan including by repealing the statutory 1,500 GL cap on Commonwealth water purchases and enabling funds from the Water for the Environment Special Account (WESA) to be used more flexibly to enhance environmental outcomes in the Basin.

·          providing additional time for Basin States to deliver their Sustainable Diversion Limit Adjustment Mechanism (SDLAM) projects that would contribute towards the Bridging the Gap target by December 2026.

·          ensuring the Basin States are held to account for meeting their SDL obligations.

·          improving the approach for delivering constraints relaxation projects across the Southern Basin.

·          delaying the Water Act review until 2027 to ensure the focus remains on Basin Plan delivery and the Authority’s review of the Basin Plan which is due in 2026.

Schedule 3 to the Bill would amend the Water Act to introduce the following water markets reform measures aimed at improving the transparency and integrity of water markets in accordance with key recommendations from the Roadmap:

·          new water markets functions and powers for the ACCC, the Bureau of Meteorology (Bureau) and the Inspector-General of Water Compliance, including compliance and enforcement powers and information sharing powers. This includes consequential amendments to the Competition and Consumer Act 2010 and the Basin Plan.

·          ­provisions prohibiting insider trading and market manipulation in water markets.

·          a new enabling framework for the establishment of mandatory Commonwealth Water Markets Intermediaries Code (the Code), including a new power to make regulations to provide for the Code and provisions for the monitoring and enforcement of the Code.

·          a new framework for statutory trust accounting requirements for water market intermediaries who handle client monies.

·          revised water announcement requirements and expanded price reporting requirements.

·          a new framework to enable a broader set of water markets and trade information to be collected in accordance with new data standards, for publication (de-identified information only) by the Bureau.

·          civil penalty provisions that would apply to breaches of certain provisions of the Water Act and the Code. As such water market authorities, water market intermediaries, water market participants and other persons would be required to comply with provisions that regulate their conduct.

·          removal of an exemption in the Basin Plan that applies to grandfathered tagged water entitlements. Grandfathered tagged water entitlements are a small number of water access entitlements that are exempt under the Basin Plan Water Trading Rule 12.23(2) from restrictions on the trade of water allocations within or between two regulated systems.

Assessment of Compatibility of Human rights

The Bill engages the following rights:

·          presumption of innocence - Article 14(2) International Covenant on Civil and Political Rights (the ICCPR).

·          freedom from self-incrimination - Article 14(3) of the ICCPR

·          protection against unlawful and arbitrary interference with privacy - Article 17 of the ICCPR.

·          adequate standard of living and the right to health (together interpreted to include ‘the right to water’) - Article 11(1) of the International Covenant on Economic, Social and Cultural Rights (the ICESCR) and Article 12(1) of the ICESR.

Criminal process rights (Article 14 of the ICCPR)

Article 14 of the ICCPR contains criminal process rights, including the right to the presumption of innocence (Article 14(2)) and minimum guarantees in criminal proceedings (Articles 14(3) and (5) to (7)). Relevantly, this includes the right to communicate with legal counsel (Article 14(3)(b)), the right to be free from self-incrimination (Article 14(3)(g)), and the right not to be tried or punished again for an offence for which a person has already been finally acquitted or convicted (prohibition on double jeopardy) (Article 14(7)).

Articles 14 and 15 apply only in relation to the rights of natural persons, not legal persons, such as companies.

Civil penalty provisions

The Bill provides that the Code can prescribe following new pecuniary and civil penalty provisions, and the following maximum civil penalty amounts:

·          Section 100J - provides that the Code may prescribe a pecuniary penalty not exceeding 600 penalty units for a contravention of a civil penalty provision of the Code.

·          Section 100K - provides that the Code may provide that a specified provision, or specified provisions, of the Code are civil penalty provisions.

The Bill provides for the following new civil penalty provisions and the following maximum civil penalty amounts for individuals:

·          Subsection 135Q(3)  is a maximum of 60 penalty units,

·          Subsections 100ZF(2), 101F(2),  135F(4),  135G(2), 135H(3) and 135M(3) - each have a maximum of 100 penalty units,

·          Subsections 100ZG(1), 101B(4) , 101C(3), 101G(1), 135F(5), 135G(3), 135M(4) and 135N(3) - each have a maximum of 120 penalty units,

·          Subsections 100R(4), 100S(2), 100T(5), 100V(7), 100W(3), 100Y(1) and 100Z(3) - each have a maximum of 600 penalty units, and

·          Subsections 101H(1), 101JA(1), 101JG(1), 101JH(1), 101JJ(1) and 101JK  - each have a maximum of 2,000 penalty units.

As discussed in the  Guidance Note 2: Offence provisions, civil penalties and human rights  published by the Parliamentary Joint Committee on Human Rights, civil penalty provisions may engage criminal process rights under Article 14 of the ICCPR, regardless of the distinction between criminal and civil penalties in domestic law. When a provision imposes a civil penalty, an assessment is required as to whether it amounts to a criminal penalty for the purposes of Article 14 of the ICCPR.

Determining whether penalties could be considered as criminal penalties under international human rights law requires consideration of the classification of the penalty provisions under Australian domestic law, the nature and purpose of the penalties, and the severity of the penalties.

The civil penalty provisions in the Bill expressly classify the penalties as civil penalties. Those provisions create solely pecuniary penalties in the form of a debt payable to the Commonwealth. The purpose of these penalties is to encourage compliance with the requirements under the Bill to provide for the effective operation of the new framework. The civil penalty provisions would not impose criminal liability and a finding by a court that they have been contravened would not lead to the creation of a criminal record. The civil penalties would only apply to persons and entities (such as water market authorities, water market intermediaries, water market participants) participating in the water market and related activities, rather than the public in general. Such persons will be reasonably expected to be aware of their obligations under the Bill and or Water Market Intermediaries Code and will be regulated under clear conditions.

The maximum penalties that may be imposed under the Bill as a civil penalty are generally between 60 and 2,000 penalty units, for an individual. Where the penalties are higher, this reflects the more serious implications or results of the contravention . For example: The penalty applicable to a contravention of a range of sections (see subsections 101H(1), 101JA(1), 101JG(1), 101JG(1), 101JH(1), 101JJ(1), 101JK) for an individual is 2,000 penalty units.

The pecuniary penalties for the civil penalty provisions in the Bill have been set by reference to the Attorney-General’s Department’s A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers , September 2011 edition (Commonwealth Guide). They seek to reflect the seriousness of the contravening conduct to the operation and integrity of the scheme, as well as the threat that is posed to environmental and integrity outcomes. Higher penalties are proposed for contraventions involving aggravated circumstances. For instance, the pecuniary penalty in subsection 100J provides for a maximum penalty not exceeding 600 penalty units. This is necessary as substantial penalties are required to provide an adequate deterrent against non-compliance with Water Markets Intermediaries Code. There are significant financial gains that could be made from contravening requirements under the scheme and without such strong deterrence the scheme could be undermined.

Summary

The above factors indicate that the civil penalties imposed by the Bill are civil rather than criminal in nature.   Accordingly, the criminal process rights provided for by Article 14 of the ICCPR are not engaged by the proposed civil penalty provisions in the Bill.

Right to the presumption of innocence (Article 14(2) of the ICCPR)

As stated above, Article 14(2) of the ICCPR provides that everyone charged with a criminal offence shall have the right to be presumed innocent until proven guilty according to law. The right to the presumption of innocence is also a fundamental common law principle.

Laws which shift the burden of proof to a defendant, commonly known as ‘reverse burden provisions’, can be considered a limitation of the presumption of innocence. This is because a defendant’s failure to discharge a burden of proof or prove an absence of fault may permit their conviction despite reasonable doubt as to their guilt. This includes where an evidential or legal burden of proof is placed on a defendant.

When a defendant bears an evidential burden in relation to an exception it means the defendant bears the burden of adducing or pointing to evidence that suggests a reasonable possibility that the exception has been met. It is then up to the prosecution to establish this exception does not apply. This can be justified in circumstances where the facts in question are peculiarly within the knowledge of the defendant.

Reverse burden offences will not necessarily be inconsistent with the presumption of innocence provided that the reverse burden pursues a legitimate objective and is reasonable, necessary and proportionate to achieving that objective. Whether a reverse burden provision impermissibly limits the right to the presumption of innocence will depend on the circumstances of the case and the justification for the reverse burden.

The Commonwealth Guide notes that placing the burden on the defendant should be limited to circumstances where the matter is peculiarly within the knowledge of the defendant and where it is significantly more difficult and costly for the prosecution to disprove than for the defendant to establish the matter. An additional factor to consider is whether the offences only impose an evidential burden (that is, where the prosecution must still disprove the matters beyond reasonable doubt if the defendant discharges the evidential burden). 

The Commonwealth Guide also notes that a reverse burden provision is more readily justified if the matter in question is not central to the question of culpability for the offence, the penalties are at the lower end of the scale, and the conduct proscribed by the offence poses a grave danger to public health or safety. Laws which shift the burden of proof to a defendant can be considered a limitation of the presumption of innocence because a defendant’s failure to discharge a burden of proof or prove an absence of fault may permit their conviction. When a defendant bears an evidential burden in relation to an exception it means that the defendant bears the burden of adducing or pointing to evidence that suggests a reasonable possibility that the exception has been met. It is then up to the prosecution to establish that this exception does not apply. 

The Bill may operate to limit the right to be presumed innocent through imposing an evidential burden on the defendant in relation to a range of matters. Sections in which an evidential burden is imposed on the defendant are outlined below.

Section 154E of the Water Act operates so that if a person wishes to rely on an exception, exemption, excuse, qualification or justification, that person bears an evidential burden in relation to that matter.

Subsections 100Y(2), 101G(2) and 100ZG(2) of the Bill include excuses where a person could not have known that information provided was false or misleading. Subsections 135F(6), 135G(4), 135H(4) and 135M(5) of the Bill include an excuse for contraventions relevant to those sections. Persons would be able to rely on the excuse that, in purportedly complying with a requirement, the person acted in good faith and exercised a reasonable degree of care and diligence.

Subsections 100ZH(3), 100ZJ(3), 100ZK(3), 101M(3), 101N(3) and 101P(3) provide excuses where a trustee, partner or a member of an unincorporated association’s committee of management (as relevant) does not know of the circumstances that constitute the contravention of the provision concerned or knows of those circumstances but takes all reasonable steps to correct the contravention as soon as possible after the trustee, partner or member becomes aware of those circumstances.

Sections 101H and 101JA include contraventions for persons who must not take certain actions if aware of water or non-water announcement information. There are exceptions for IIOs when approving or facilitating specific trades for a customer (in subsections 101J(1) and 101JB(1)). An exception applies (in subsections 101J(2) and 101JB(2)) that provides that a relevant agency does not contravene the section if there were information barrier arrangements in place. There are other exceptions (only to section 101JA) in sections 101JC (exception for a person using own trading or business information), 101JD (exception for eligible water market intermediary and clients), 101JE (exception for relevant agency acting pursuant to trading strategy) and 101JF (exception for actions required by law).

Section 154E of the Water Act applies to all the exception provisions outlined above. The reversal is justified in these instances as the elements of the offences are necessary to achieve the legitimate objective of ensuring the objects of the Water Act are met and because the evidence of the exceptions would be peculiarly in the knowledge or possession of the defendant.

These provisions are proportionate to the legitimate objective because the defendant will have the information or knowledge that is evidence of the exceptions. 

 

Right to communicate with legal counsel (Article 14(3)(b) of the ICCPR)

Article 14(3)(b) of the ICCPR provides for the right of a person, in the determination of a criminal charge, to have adequate time and facilities to communicate with counsel of his own choosing. This means that the person should have the opportunity to be represented by a lawyer and to communicate with the lawyer in an unrestricted way in conditions that allow for confidentiality. The Bill does not limit the right to communicate with legal counsel under Article 14(3)(b).

Right to freedom from self-incrimination (Article 14(3)(g) of the ICCPR)

Article 14(3)(g) of the ICCPR protects the right of an individual to be free from self-incrimination in the determination of a criminal charge by providing that a person cannot be compelled to testify against him or herself or confess guilt. The common law also recognises the privilege against self-incrimination, which applies unless expressly or impliedly overridden by statute. The privilege against self-incrimination may be subject to permissible limits but any such limitations must be for a legitimate objective and be reasonable, necessary and proportionate to that objective.

This Bill limits the right for an individual to be free from self-incrimination where the exercise of this right could seriously undermine the effectiveness of the regulatory scheme and prevent the collection of evidence.

Subsection 239AM(1) provides that a person is not excused from giving information or producing a document under subsection 239AJ(2), on the ground that the information or document may tend to incriminate the person or expose the person to a penalty. That section also provides that where information is furnished by an individual, it is not admissible in evidence against the individual in any criminal proceedings, other than criminal proceedings for non-compliance with the notice (such as an offence against section 239AJ or section 137.1, 137.2 or 149.1 of the Criminal Code ).

The abrogation of the privilege against self-incrimination is appropriate because the use of the information obtained will be constrained to some degree because answers given, or information provided in response to a notice, cannot be used in subsequent criminal proceedings against the person (subject to limited exceptions). This provides an appropriate balance to the extent that the provisions abrogate the privilege against self-incrimination.

The proposed position in relation immunities is appropriate because it is consistent with section 155 and section 154R of the CC Act.

Summary

The Bill is compatible with the privilege against self-incrimination provided for by Article 14 (3)(g) of the ICCPR because, to the extent that it would engage the privilege against self-incrimination, it does so in a limited and proportionate manner. Without the limited abrogation of the right to be free from self-incrimination, the regulatory scheme could be seriously compromised. The public benefit of its removal outweighs the loss of personal liberty. Further, these limitations of the right to be free from self-incrimination are permissible as protections apply to ensure the exercise of these powers is reasonable and proportionate to achieving the legitimate objective of the Bill, and adequate safeguards apply to prevent the risk of abuse or arbitrary exercise of the power.

Right not to be tried or punished again for an offence for which a person has already been finally acquitted or convicted (prohibition on double jeopardy) (Article 14(7) of the ICCPR)

Article 14(7) of the ICCPR prohibits an individual from being liable to be tried or punished again for an offence for which they have already been finally convicted or acquitted in accordance with the law and penal procedure of each country. This prohibition on double jeopardy is also a fundamental safeguard in the common law of Australia. It means that a person who has been convicted or acquitted of a criminal charge is not to be re-tried for the same or substantially the same offence.

Conduct engaged in under the Bill could potentially be used as the basis for criminal proceedings under the Criminal Code. Section 239AJ is specific to the Federal Water Markets regime and the offence outlined is specific to the ACCC’s investigative powers such that a person would not be subject to multiple proceedings for the same conduct, as there are not replica provisions across the various jurisdictions. Article 14(7) of the ICCPR is not infringed. Accordingly, these provisions engage, but do not limit, the prohibition on double jeopardy in Article 14(7) of the ICCPR.

Prohibition on the arbitrary interference with privacy (Article 17 ICCPR)

Article 17 of the ICCPR contains the right to protection from arbitrary or unlawful interference with privacy. The UN Human Rights Committee has not defined ‘privacy’, but it is generally understood to comprise of a freedom from unwanted and unreasonable intrusions into activities that society recognises as falling within the sphere of individual autonomy. The collection and sharing of information (public or otherwise) may be considered to engage and offend the right to privacy.

The right in Article 17 may be subject to permissible limitations, where these limitations are authorised by law and are not arbitrary. For an interference with the right to privacy to be permissible, the interference must be authorised by law, be for a reason consistent with the provisions, aims and objectives of the ICCPR and be reasonable in the particular circumstances. The UN Human Rights Committee has interpreted the requirement of ‘reasonableness’ to imply that any interference with privacy must be proportional to the end sought and be necessary in the circumstances of any given case.

The Bill seeks to implement new water markets functions and powers for the Bureau, as the data repository, and the ACCC and Inspector-General of Water Compliance (Inspector-General) as the regulators, to achieve an uplift in water markets information in the Murray-Darling Basin and improve transparency and confidence in the water markets. This includes new compliance and enforcement powers and information sharing powers for Water Markets Information (WMI), complemented by new statutory data reporting requirements for water market participants.

The new data collection and reporting responsibilities will improve transparency over the operation of Australia’s water markets. The proposed provisions concerning WMI in the Bill include the handling of personal information within the meaning of the Privacy Act 1988 (Privacy Act).

Authorisation for disclosure of personal information

The Bill would include requirements for the provision of WMI from individuals to the Bureau including related trade information (sections 135F and 135G) and would enable disclosure of this information by the Bureau to the ACCC and Inspector-General (section 135P). Generally, personal information collected for one purpose must not be used or disclosed for a secondary purpose without the individual’s consent, unless an exception applies. We note the Bill engages the exemption in Australian Privacy Principle (APP) 6.2(b), which allows for use and disclosure of personal information where required or authorised by law.  

The legislation engages this exception and is reasonable, necessary and proportionate to achieving a legitimate aim, paying due regard to the nature of the relevant information and the particular public policy objective.  

It is standard industry practice to provide the types of personal information contemplated by the Bill to a water market authority in relation to buying and selling eligible tradeable water rights. This information would be provided to the Bureau and then shared with the ACCC and the Inspector-General where it is necessary for or directly related to their functions and powers under the Water Act, including the enforcement of new obligations that would be created by the Bill to increase integrity, confidence and transparency in Basin water markets. The Bill includes amendments to protect the information disclosed to the ACCC. The Water Act has existing protections for confidential information obtained by the Inspector-General.

Provisions for delegated legislation

Under the Bill, the regulations are able to prescribe a number of matters concerning WMI, including specifying who must disclose it to the Bureau (section 135F) and the method for collection and storage (section 135H). Furthermore, the Director of Meteorology is empowered to require any person to provide WMI to the Bureau (section 135G) and to issue standards by legislative instrument around the collection, storage and disclosure of WMI, the individuals covered, as well as any other matter specified in the regulations (section 135L).

Publication of WMI

The proposed section 135D permits the Director of Meteorology to publish WMI, subject to the safeguards in subsection 135D(2). The Privacy Act defines personal information as ‘information or an opinion about an identified individual, or an individual who is reasonably identifiable’. Although determining whether a person is ‘reasonably’ identifiable requires contextual consideration of the particular circumstances, it would include situations where the identity of an individual can be ascertained.

Subsection 135D(2) provides that the Director of Meteorology must not publish water markets information:

·          if the Director believes it would not be in the public interest; or

·          to the extent that the information identifies a particular individual by means of the individual’s name, address, customer number or account number or other identifier, unless the water markets information is already published or is otherwise publicly available.

Subsection 135D(3) provides that for the purposes of paragraph (2)(b), ‘information does not identify a particular individual merely because the individual’s identity can be ascertained from the information, due to the nature or volume of a trade or transfer of an eligible tradeable water right or in other circumstances prescribed by the regulations.’

The intent of subsections 135D(2) and (3) is to prevent the publication of personal information by the Bureau. We note that these provisions take a narrower approach to defining personal information than the Privacy Act. Under section 6 of the Privacy Act, the definition of personal information includes any information about an individual ‘who is reasonably identifiable’, which would ordinarily capture the circumstances contemplated by subsection 135D(3). The Bill as currently drafted may therefore authorise the publication of personal information (as defined under the Privacy Act) in certain circumstances.

The policy intention of subsection 135D(3) is to provide an exception that ensures an individual can be identified by information such as the volume of a trade or transfer of an eligible tradeable water right. This exception is to enable publishing of information about an individual who is reasonably identifiable. It is reasonable, necessary and proportionate to achieving the legitimate aim of allowing the Bureau to publish comprehensive water market data to meet the objectives of the Bill and increase transparency of trading in all Basin water markets.

Furthermore, paragraph 135D(3)(b) proposes for further circumstances to be prescribed in the regulations that would permit publication of WMI that may identify an individual.

Regulations may prescribe other circumstances where an individual’s identity may be ascertained as a result of water markets information published by the Bureau, other than the as a result of circumstances already stated in subsection 135D(3) (the nature and volume of a trade or transfer). These regulations would not allow the publication of any expressly identifying information.

Record keeping

Under section 135N a person who is required to ensure that information about the trade or transfer of an eligible tradeable water right is provided to a water market authority under section 135M must keep certain records in relation to the information that is provided. Subsection 135N(2) requires records to be kept for a period of at least five years. This obligation would apply notwithstanding that APP 11 generally requires entities, subject to the Privacy Act, take reasonable steps to destroy or de-identify personal information it holds once the information is no longer needed for any purpose for which it may be used or disclosed under the APPs.

These records must be held by the buyer, seller and an eligible water market intermediary if that intermediary is the applicant. The records that must be kept relate to information provided to a water market authority. The retention period is required because there are obligations under section 135M to provide all requested information and not to provide false or misleading information to a water market authority. To ensure effective enforcement, records must be kept which verify compliance with these obligations. It supplements existing arrangements for record keeping (including requirements to keep Commonwealth records under the Archives Act 1983 ).

 

Summary

The Bill is compatible with the Prohibition on the arbitrary interference with privacy (Article 17 of the ICCPR) because, to the extent that it would engage the right, it does so in a limited and proportionate manner. The privacy safeguards are reasonable and proportionate in response to the privacy risks the scheme presents and legitimate objectives of the Bill.

DCCEEW consulted with stakeholders, the Attorney-General’s Department and the Office of the Australian Information Commissioner to inform the identification of potential privacy issues and ways to address them and assess the adequacy of the privacy protections.

Right to an adequate standard of living and the right to health in the International Covenant on Economic, Social and Cultural Rights

This Bill positively engages the right to an adequate standard of living and the right to health in the International Covenant on Economic, Social and Cultural Rights (ICESCR). The right to an adequate standard of living is protected in Article 11 of the ICESCR and the right to enjoyment of the highest attainable standard of physical and mental health is protected in Article 12 of the ICESCR.

The Committee on Economic, Social and Cultural Rights, established to oversee the implementation of the ICESCR, has interpreted these articles as including a human right to water which encompasses an entitlement to ‘sufficient, safe, acceptable, physically accessible and affordable water for personal and domestic uses’.

The Committee on Economic, Social and Cultural Rights’ definition is relevant to this Bill, because while the Bill does not explicitly relate to the right of a person to enjoy the highest attainable standard of physical and mental health, the amendments to the regulatory scheme being established in the Bill provide a system of checks and balances necessary to protect human health. The water amendments are directed towards achieving several objectives including protecting the health or safety of individuals from any adverse effect likely to be attributable to water allocations resulting from a reasonably foreseeable use (including a misuse) of Australia’s water resources.

The overall framework of the Bill supports access to sufficient, safe, acceptable and physically available water for personal and domestic uses, as reflected in the objects of the Bill at section 3. Parts 1 and 2 of Schedule 3 introduce a new framework of laws relating to taking water from a water resource and contraventions of the Basin Plan, through avenues such as the Water Market Intermediaries Code. As such, the Bill promotes long-term sustainable access to water.

Further, to ensure strong and effective compliance of the management of the Basin’s water resources, the new contraventions throughout the Bill, in particular in Parts 2 and 3 of Schedule 3, create new civil penalties for certain conduct relating to the take of water from a water resource where such conduct is not permitted by the Bill.

The Committee on Economic, Social and Cultural Rights has noted the importance of ensuring sustainable access to water resources for agriculture to realise the right to adequate food. To ensure that there is sufficient and safe water for present and future generations, depletion of water resources through unsustainable extraction, diversion and damming should be reduced. The Bill contributes to these objectives by strengthening compliance and enforcement of the Water Act to reduce unsustainable and illegal extraction of water resources to improve equitable access to water for current farmers and future generations.

Conclusion

The Bill is compatible with the human rights because it promotes an essential human right though sustainable water use and to the extent that it may also limit human rights, those limitations are reasonable, necessary and proportionate.

 

(Circulated by authority of the Minister for the Environment and Water, the Hon. Tanya Plibersek, MP)