Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014



Download PDFDownload PDF

ISSN 1328-8091

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest.

BILLS DIGEST NO. 71, 2014-15 10 FEBRUARY 2015

Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 Jaan Murphy Law and Bills Digest Section

Contents

Purpose of the Bill ............................................................... 3

Structure of the Bill ............................................................. 3

Background ......................................................................... 3

Policy basis for the Bill ............................................................. 3

Overview of the history and role of the Corporations and Markets Advisory Committee .................................................. 3

Requirement to consult with the referring states and territories .............................................................................. 4

Requirement to obtain approval in certain circumstances ........................................................................ 4

Examples of work produced by CAMAC .................................. 5

Committee consideration .................................................... 7

Senate Standing Committee for the Selection of Bills ............. 7

Senate Standing Committee for the Scrutiny of Bills .............. 7

Parliamentary Joint Committee on Human Rights .................. 7

Policy position of non-government parties/independents ..... 7

Position of major interest groups ......................................... 7

Australian Institute of Company Directors .............................. 7

Australian Restructuring Insolvency and Turnaround Association .............................................................................. 8

Governance Institute of Australia ........................................... 9

Law Society of New South Wales ............................................ 9

The Law Society of Western Australia ..................................... 9

Law Council of Australia, Business Law Section .................... 11

Date introduced: 4 December 2014

House: House of Representatives

Portfolio: Treasury

Commencement: Sections 1 to 3 commence on Royal Assent. Schedule 1 commences on the 28th day after Royal Assent.

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

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

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 2

June 2014 letter................................................................... 11

October 22 submission ........................................................ 12

Reduction in duplication argument ..................................... 12

Cost reduction argument 1 ................................................. 13

Cost reduction argument 2 ................................................. 13

Alternative advice sourcing model argument ..................... 13

Industry engagement argument ......................................... 13

Legacy argument ................................................................. 14

Final position ....................................................................... 14

Financial Services Council ...................................................... 14

Duplicative role and function of CAMAC ............................. 14

Deficiencies in recent inquiries ........................................... 15

Financial implications ........................................................ 15

Statement of Compatibility with Human Rights .................. 16

Key issues and provisions................................................... 16

Current position ..................................................................... 16

Establishment ...................................................................... 16

Functions ............................................................................. 16

Members ............................................................................. 16

Independence ...................................................................... 17

Summary of the role and functions of ASIC and CAMAC .... 17

Changes proposed by the Bill ................................................ 18

Does the Bill actually remove duplication? ........................... 18

Will the abolition of CAMAC actually result in savings? ........ 19

CAMAC is required .............................................................. 20

Can Treasury, ASIC and other bodies perform the work of CAMAC? .......................................................................... 20

Can the work performed by CAMAC be performed by the private sector at a lower cost? ...................................... 21

What are the consequences arising from a failure to pass the Bill? .......................................................................... 22

Other provisions ................................................................ 22

Concluding comments ....................................................... 22

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 3

Purpose of the Bill The purpose of the Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 (the Bill) is to amend the Australian Securities and Investments Commission Act 2001 (the Act) to:

• abolish the Corporations and Markets Advisory Committee (CAMAC) by repealing Part 9 of the Act and

• provide transitional and savings arrangements reflecting the cessation of CAMAC, including transferring CAMAC’s records to the Treasury.

Structure of the Bill The Bill contains one Schedule, divided into two Parts. Part 1 of Schedule 1 contains the provisions necessary to abolish CAMAC. Part 2 of Schedule 1 contains the transitional and savings provisions.

Background Policy basis for the Bill The policy basis for the Bill is the Coalition’s 2013 election commitment to build a more efficient government, reducing government debt and delivering ‘sustainable Budget surpluses into the future’ by:

• establishing a National Commission of Audit to ‘… identify saving and efficiencies in all areas of government so we can reduce government debt and start delivering better value for money…’1 and

• ‘get spending down by… reducing the size of the bloated Commonwealth payroll…’2

The National Commission of Audit (NCOA) suggested in February 2014 that CAMAC’s functions could be undertaken by Treasury.3 Cessation of CAMAC was then announced in both the 2014-2015 Budget and in the Smaller and more rational Government Ministerial Paper.4 Following this announcement, the Treasury released, for a short period of consultation, an exposure draft Bill and explanatory material to give effect to the decision to abolish CAMAC.5 The Bill and its Explanatory Memorandum are effectively identical to the exposure drafts.

Overview of the history and role of the Corporations and Markets Advisory Committee Since 1984, the Commonwealth has had an independent research-based reform body focused on corporations and financial markets, starting with the Companies and Securities Law Review Committee (1978) and followed by the Corporations and Securities Advisory Committee (1989), which became CAMAC in 2002 following the referral of corporations powers from the states.6 The referral of corporations powers from the states to the Commonwealth was necessitated by a series of High Court cases that interpreted the Constitution in a manner that limited the Commonwealth’s constitutional powers in this area.7 For example, in New South Wales v

1. Liberal Party of Australia and the Nationals, Our plan, real solutions for all Australians: the direction, values and priorities of the next Coalition Government, Coalition policy document, Election 2013, pp. 4-5, 16-17, accessed 12 January 2015. 2. Ibid.

3. National Commission of Audit (NCOA), Towards responsible government, ‘Appendix to the report of the National Commission of Audit: Volume 2’, NCAO, February 2014, p. 168, accessed 12 January 2015: ‘… CAMAC’s functions could be undertaken by the Treasury. It has a small number of staff and maintenance of FMA status could impose a significant overhead.’

4. Australian Government, ‘Part 2: expense measures’, Budget measures: budget paper no. 2: 2014-2015, Commonwealth of Australia, Canberra, pp. 70; M Cormann (Minister for Finance), Smaller and more rational government 2014-15, Ministerial paper, Department of Finance (DoF) website, May 2014, accessed 27 January 2015.

5. The Treasury, ‘Cessation of the Corporations and Markets Advisory Committee (CAMAC)’, The Treasury website, 24 September 2014, accessed 12 January 2015. 6. N Andrews, ‘Hail and farewell, Companies and Markets Advisory Committee’, Australian Journal of Corporate Law, September 2014, 29(3), p. 225: ‘CAMAC was born in 1978 to the Commonwealth and the states as the Corporations and Securities Law Review Committee [CSLRC]

under the formal agreement which established the co-operative scheme. It was an advisory body to the Ministerial Council which oversaw the scheme. It was first convened by Professor Harold Ford. He established the presence of academic lawyers in the mix of representatives of the professions and public servants from regulatory bodies who since have been its part time members.’ The Companies and Securities Advisory Committee (CASAC) was established by the Australian Companies and Securities Commission Act 1989. Compared to the CSLRC it was noted that: ‘…the new Committee will be more independent. It will be separately constituted with separate funding and an independent discretion to prepare recommendations and to publish them.’: Legislative Research Service, Australian Companies and Securities Commission Bill 1988, Bills digest, 67, 1988, Parliamentary Library, Canberra, 1988, p. 3, accessed 12 January 2015. CASAC was subsequently replaced CAMAC in 2001 following the commencement of the Financial Services Reform Act 2001. 7. New South Wales v Commonwealth [1990] HCA 2; (1990) 169 CLR 482, Re Wakim; Ex parte McNally [1999] HCA 27; 198 CLR 511, and R v

Hughes [2000] HCA 22; 202 CLR 535, accessed 5 February 2015.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 4

Commonwealth the High Court held that the Commonwealth lacked power to make laws about the incorporation of companies generally.8 Therefore in order for Australia to have a unified national system of corporations law and administration, it is necessary for the states to continue to regularly refer their powers in those areas to the Commonwealth (as they have not permanently referred their corporations powers).

As a result, the legal basis for CAMAC’s existence is not purely statutory. As noted by the Law Council of Australia (LCA), the existence of uniform national legislation and administration of corporations and financial markets is possible only because of an agreement between the Commonwealth and the states.9 Both the Act and the Corporations Act 2001 were enacted in 2001 following a referral of power by each of the state parliaments in accordance with section 51(xxxvii) of the Constitution. Under the current arrangements, the states periodically extend the referral of their corporations powers. The most recent extension was on 24 August 2011. It expires in 2016.10

The current referrals by the states of their corporations powers must be considered in the context of the Intergovernmental Corporations Agreement (Agreement), which provides the legal basis of the referrals. The succeeding iterations of the Agreement have all operated on the assumption of CAMAC’s continued existence (and state representation on it) as part of arrangements for reviewing and suggesting reforms to corporations and market law.11

A notable feature of the Agreement is that it constrains the ability of the Commonwealth to amend or repeal parts of the Act without first consulting with the states and territories, and in certain circumstances, then obtaining their approval.

Requirement to consult with the referring states and territories Subclause 506(1) of the Agreement provides that:

The Commonwealth will not introduce a Bill that would repeal or amend the national law, or make a regulation under the national law unless, before its introduction or making, the Ministerial Council has been consulted about it and, except as provided by this Part, has approved it. 12

(emphasis added)

The effect of subclause 506(1) is to impose a two-step requirement on proposed reforms to the national law (defined as including the Act). First, the Commonwealth must consult with the Ministerial Council about any Bill that would repeal or amend the Act before its introduction.13 Second, Ministerial Council must approve the Bill (via a majority vote) unless the Bill deals with matters captured by clause 507.14

Requirement to obtain approval in certain circumstances Clause 507 deals with when a Bill amending or repealing the Act (or parts of it):

• does not require Ministerial Council approval prior to its introduction or

• requires approval by three state or territory Ministers prior to being introduced.

8. New South Wales v Commonwealth [1990] HCA 2; (1990) 169 CLR 482, accessed 5 February 2015. 9. LCA, Letter to Minister for Finance, Commonwealth budget proposal to abolish corporations and markets law reform body, 11 June 2014, p. 3, accessed 3 February 2015; LCA, Submission to Treasury, ‘Exposure Draft of the Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee) Bill 2014’, 22 October 2014, p. 1, accessed 3 February 2015.

10. M Bradbury (Parliamentary Secretary to the Treasurer), Extension of the referral of corporations powers, media release, 24 August 2011, accessed 23 January 2015. 11. Corporations Agreement 2002 as amended, clause 605. As noted by the LCA: ‘The proposed abolition of CAMAC would leave a vacuum in terms of formal state and territory input into the process of formulation of reforms to corporations and financial markets law.’: ‘Exposure

Draft of the Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee) Bill 2014’, LCA website, 22 October 2014, p. 6, accessed 6 February 2015. 12. Corporations Agreement 2002 as amended, subclause 506(1). The term ‘national law’ includes the Act, and the term Ministerial Council refers to the Ministerial Council for Corporations (now known as the Legislative and Governance Forum for Corporations): Corporations Agreement

2002 as amended, clause 102 (definition); Department of Finance (DoF), ‘Legislative and Governance Forum for Corporations’, DoF website, n.d, accessed 27 January 2015. 13. The key phrase in subclause 506(1) of the Agreement is ‘will not introduce a Bill’ unless the Ministerial Council has been consulted ‘before its introduction or making’. Whilst somewhat circular, it appears that the intent of subclause 506(1) is to prohibit a Bill from being introduced

into the Commonwealth Parliament prior to the Ministerial Council being consulted. 14. See clauses 410, 506 and 507 of the Agreement.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 5

Subclauses 507(1) and 507(4) set out the areas of law that can be repealed or amended without the approval of the Ministerial Council. Importantly, this includes some dealing with CAMAC (sections 149-155 and Division 2 of Part 9) that will be repealed by item 11 of the Bill.

Subclause 507(2) then provides that any Bill that deals with ‘any other subject matter’ requires the approval of three state or territory Ministers (two of whom must be state Ministers). Although not without ambiguity, subclause 507(2) appears to refer to amendments to the national law that are not covered by subclause 507(1). If that is correct, the amendments to sections 146-148 and 159 of the Act (which would be repealed by item 11 of the Bill) require the approval of three state or territory Ministers. If these amendments are not covered by subclause 507(2), they would require approval by a majority of votes cast on a resolution of the Ministerial Council, as set out in clause 410 of the Agreement. 15 The key issue being that on either interpretation, a requirement to obtain approval from at least three state and territory Ministers exists under the Agreement.

It is not apparent from the Explanatory Memorandum, second reading speech or from a diligent search whether either the consultation or approval conditions imposed by the Agreement have been fulfilled.

Examples of work produced by CAMAC CAMAC has a long-standing reputation within industry for providing ‘sound, balanced and well-researched law reform proposals’ which are distinguished by being ‘market-orientated’ and emphasising efficiency considerations (as did its predecessors).16 The quality of CAMAC’s work has also been acknowledged by both the current Government and its predecessors.17 Various industry associations value the work produced by CAMAC. For example, the Australian Restructuring Insolvency and Turnaround Association (ARITA) highlighted a number of ‘valuable reports CAMAC have produced’ as including those dealing with:

• Managed Investment Schemes

• members’ schemes of arrangement

• shareholder claims against insolvent companies: implications of the Sons of Gwalia decision

• issues in external administration

• rehabilitating large and complex enterprises in financial difficulties and

• corporate voluntary administration.18

The Table on the following page provides examples of the reputation enjoyed by CAMAC amongst key interest groups and commentators, and their perceptions of the quality of its work.

15. Clause 410 sets out the usual requirement for a resolution to be carried by the Ministerial Council - that is, if the majority of votes cast on a resolution are in favour of it. Clause 410 provides that subclause 507(2) sets out an exception to the usual requirement. 16. Law Council of Australia, Business Law Section (LCA), Submission to Treasury, Consultation on Exposure Draft of Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014, ‘Commonwealth budget proposal

to abolish corporations and markets law reform body’, 11 June 2014, accessed 12 January 2015, pp. 3, 6 and 9; Australian Institute of Company Directors (AICD), Submission to Treasury, Consultation on Exposure Draft of Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014, ‘Corporations and Markets Advisory Committee’, 24 October 2014, AICD website, 24 October 2014, accessed 12 January 2015, pp. 2-3; N Andrews, ‘Hail and farewell, Companies and Markets Advisory Committee’, op. cit., p. 226; Australian Restructuring Insolvency and Turnaround Association (ARITA), ‘Response to consultation draft legislation to abolish the Corporations and Markets Advisory Committee’, ARITA website, 13 October 2014, p. 1; G Durbridge (Consultant, Herbert Smith Freehills), ‘CAMAC to be abolished’, Herbert Smith Freehills website, 29 May 2014, accessed 12 January 2015; Governance Institute of Australia (GIA), Governance Institute says ‘bring back CAMAC’, media release, 1 October 2014; GIA, Submission to Treasury, Consultation on Exposure Draft of Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014, GIA website, 24 October 2014, accessed 6 February 2015. 17. See: Australian Government, ‘Industry innovation and competitiveness agenda, an action plan for a stronger Australia’, Department of Prime

Minister and Cabinet (DPMC) website, 14 October 2014, accessed 12 January 2015, p. 81, where CAMAC was referred to as ‘A government advisory body with strong financial market experience’. N Sherry (Minister for Superannuation and Corporate Law), CAMAC report on issues in external administration, media release, 11 December 2008, accessed 12 January 2015: ‘CAMAC is a valuable source of expert advice to the Government on corporations and markets issues’. 18. ARITA, Submission to Treasury, Consultation on Exposure Draft of Australian Securities and Investments Commission Amendment

(Corporations and Markets Advisory Committee Abolition) Bill 2014, ‘Response to consultation draft legislation to abolish the Corporations and Markets Advisory Committee’, op. cit., pp. 1-2. CAMAC, Managed investment schemes, report, CAMAC, July 2012; CAMAC, Members' schemes of arrangement, report, CAMAC, December 2009 and CASAC, Collective investments: other people’s money, report, CASAC, September 1993; CAMAC, Shareholder claims against insolvent companies: implications of the Sons of Gwalia decision, report, CAMAC, December 2008; CAMAC, Issues in external administration, report, CAMAC, November 2008; CAMAC, Rehabilitating large and complex enterprises in financial difficulties, report, CAMAC, October 2004, CASAC, Corporate voluntary administration, report, CASAC, June 1998, all accessed 6 February 2015.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 6

Interest group / Commentator

View of CAMAC’s reputation and quality of work

Law Council of Australia, Business Law Section

‘CAMAC has delivered a substantial quantity of first-class reports and discussion papers very economically.’

‘CAMAC has established an enviable reputation for sound, market-oriented recommendations in which efficiency considerations are at the forefront and the reduction of red tape is a happy consequence of implementation.’

‘CASAC and CAMAC have carried forward and enhanced the reputation of the CSLRC for sound, balanced and well-researched law reform proposals. A review of their reports from 1991 to date demonstrates that they have tackled, with distinction, many of the most difficult and challenging problems in the corporations and markets law reform areas.’

Australian Institute of Company Directors ‘Regardless of one's views as to the recommendations proposed by CAMAC on particular issues, it has played a critical role in identifying, explaining and

analysing corporate law and market related problems. CAMAC has also played an important educational role by preparing high quality and well researched reports which effectively set out technical issues in a clear and highly readable manner. The level of consultation conducted by CAMAC with stakeholders is also noteworthy. CAMAC's expertise in the corporations and markets area has ensured a deep understanding within CAMAC of the issues and laws being canvassed by stakeholders when consultation occurs. This has ensured excellent communication and sophisticated debate on matters being considered by CAMAC.’

Professor Neil Andrews (Editor, Australian Journal of Corporate Law)

‘Its expertise was unmatched in the technical details of corporate and securities law and in sustaining the manners gentle style of Australian business regulation.’

Australian Restructuring Insolvency and Turnaround Association

'… CAMAC has delivered sophisticated and important advice and reports to policy makers and industry. Indeed, CAMAC’s work continues to be instructive for much of the work we do.’

George Durbridge, Consultant, Herbert Smith Freehills

‘CAMAC has issued at least one substantial report in every year of its existence, often two or three. Those reports invariably addressed difficult technical or policy issues, sometimes both. They have been a model of clear analysis and level-headed, practical reform. CAMAC has mostly worked on issues referred to it by Ministers, though it has undertaken valuable work on its own initiative.’

Governance Institute of Australia ‘CAMAC has distinguished itself for developing practical policy and regulation on a wide range of issues… The body has also been at the forefront of cutting-edge

policy… CAMAC is a lean, efficient and highly-regarded organisation that has improved our corporate institutions over the past two decades and continues to have a vital role to play in the decades ahead.’

‘In the quarter century that it has operated, Governance Institute members have heard consistent praise for the expertise represented by CAMAC and the quality of its research and reports. We note that even those reports that are not enacted into law by the government remain a valuable resource for business, as the depth of research and examination of corporate law issues ensures they are a first point of reference when business is considering how to deal with particular matters that remain challenging.’

Sources: as per footnote 16.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 7

In addition to the enviable reputation held by CAMAC and the value of CAMAC’s work to industry, it has also proven a valuable resource to successive government’s consideration of corporate and market law reform issues. Whilst not all of CAMAC’s work has been directly adopted by previous governments, some of it has ‘led fairly directly to legislation or implementation in other ways’.19 The Business Law Section of the Law Council of Australia (LCA) highlighted CAMAC’s work on personal liability for corporate fault, diversity on boards of directors, netting in financial markets, anomalies in takeover law and compulsory acquisition of minority interests as instances where this was the case.20

Committee consideration Senate Standing Committee for the Selection of Bills The Senate Standing Committee for the Selection of Bills deferred consideration of the Bill until its next meeting.21

Senate Standing Committee for the Scrutiny of Bills The Senate Standing Committee for the Scrutiny of Bills had not considered the Bill at the time of writing.

Parliamentary Joint Committee on Human Rights The Parliamentary Joint Committee on Human Rights had not considered the Bill at the time of writing.

Policy position of non-government parties/independents At the time of writing, the policy positions of the cross bench parties and independents in relation to the proposed abolition of CAMAC had not been released. From media comments it appears the ALP is opposed to the abolition of CAMAC, and may seek to reinstate or replace it if the Bill passes.22

Position of major interest groups Treasury conducted a consultation in relation to the exposure draft Bill and explanatory material.23 The submissions are not available on Treasury’s website but a number of interest groups have made theirs publically available. From these submissions, it appears that, with one exception—the Financial Services Council—all major interest groups oppose the abolition of CAMAC, and question whether its abolition will actually save the Government money.

Australian Institute of Company Directors The Australian Institute of Company Directors (AICD) ‘strongly opposes’ the abolition of CAMAC.24 Its submission to Treasury said that abolition of CAMAC is likely to:

• increase red tape in the long term because ‘there will no longer be a cost effective, highly experienced and independent body considering improvements to the corporate law in Australia’

• ‘significantly undermine Australia's ability’ to review the advantages or disadvantages of its regulatory regime and the operation of corporations and markets ‘today and into the future’ and

• would result in a lack of expertise to the government as the expertise possessed by CAMAC ‘is not able to be matched’ by other government bodies or departments.25

19. LCA, Letter to Minister for Finance, Commonwealth budget proposal to abolish corporations and markets law reform body, op. cit., p. 9. 20. Ibid., pp. 9-10; Corporations and Markets Advisory Committee (CAMAC), Personal liability for corporate fault , report, CAMAC, September 2006; CAMAC, Diversity on boards of Directors, report, CAMAC, March 2009; Netting Sub-Committee of the Legal Committee of the Companies and Securities Advisory Committee (CASAC), Netting in financial markets transactions, Final report, CASAC, June 1997; Legal

Committee of the Companies and Securities Advisory Committee (CASAC), Anomalies in the takeovers provisions of the corporations law, report, CASAC, March 1994, all accessed 6 February 2015. 21. Senate Standing Committee for the Selection of Bills, Report No. 16 of 2014, The Senate, Canberra, 4 December 2014, accessed 6 February 2015. 22. See: G Wilkins, ‘Reforms a casualty in drive to cut 'red tape'’, The Sydney Morning Herald, 14 June 2014, p. 5, accessed 12 January 2015:

‘Mr Bowen said the business community would notice the loss of CAMAC and predicted that in time, it would need to be reinstated or replaced with a similar body.’ 23. The Treasury, ‘Cessation of the Corporations and Markets Advisory Committee (CAMAC)’, The Treasury website, op. cit. 24. AICD, Submission to Treasury, Consultation on Exposure Draft of Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014, ‘Corporations and Markets Advisory Committee’, 24 October 2014, p. 1.; AICD, ‘CAMAC Abolition’, AICD website, 24 October 2014, accessed 14 January 2015.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 8

The AICD also noted that:

Regardless of one's views as to the recommendations proposed by CAMAC on particular issues, has played a critical role in identifying, explaining and analysing corporate law and market related problems. CAMAC has also played an important educational role by preparing high quality and well researched reports which effectively set out technical issues in a clear and highly readable manner.

26

The AICD concluded that ‘given the valuable role it has played in the corporations and markets arena over the past 25 years, we strongly recommend that the Government re-consider its decision to abolish CAMAC’.27

Australian Restructuring Insolvency and Turnaround Association ARITA opposes the abolition of CAMAC.28 In its submission to Treasury it says that:

‘It is the view of ARITA that the abolition of CAMAC is a retrograde move and we urge the Government to reconsider its Budget position. We therefore oppose the move to repeal Part 9 of [the Act].

For an operating cost of less than $1 million per annum since 1998, CAMAC has delivered sophisticated and important advice and reports to policy makers and industry. Indeed, CAMAC’s work continues to be instructive for much of the work we do’. 29

ARITA lists a number of ‘valuable reports’ that CAMAC has produced and suggests that:

It is ARITA’s view that, without CAMAC, important, authoritative studies like these would not have been completed and reform processes likely to have been less-well informed.

We are understanding and supportive of the Government’s objectives around Smaller and More Rational Government, however, it is our view that CAMAC was very much focussed on delivering more rational government by informing good industry and legal policy. 30

ARITA also expressed the view that abolishing CAMAC is unlikely to result in real costs-savings as:

Further, we believe that, without CAMAC, to bring in the required resources for the types of reviews that CAMAC delivered (and were needed by Government and industry) is likely to cost the Government far more in third party provider studies and reports.

CAMAC has delivered real value to the efficient and robust operation of corporations, financial markets and the economy as a whole and we urge the Government to reconsider its position’. 31

This point was also made by a number of other submissions and commentators and is examined in detail under the heading ‘Will the abolition of CAMAC actually result in savings?’, below. ARITA concluded that ‘we think it is counter-intuitive for the Government to pursue the abolition of CAMAC in the name of more efficient government’.32

25. AICD, Submission to Treasury, ‘Corporations and Markets Advisory Committee’, op. cit., pp. 2-3. 26. Ibid., p. 2. 27. Ibid., p. 3. 28. ARITA, Submission to Treasury, ‘Response to consultation draft legislation to abolish the Corporations and Markets Advisory Committee’,

op. cit., p. 1. 29. Ibid., p. 1. 30. Ibid., p. 2. 31. Ibid., p. 2. 32. Ibid., p. 2 .

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 9

Governance Institute of Australia The Governance Institute of Australia (GIA) opposes the abolition of CAMAC.33 In its submission to Treasury it said that:

• ‘if the functions of a particular body are still required and cannot be replicated or delivered equally efficiently by a government department… the body should be retained’

• ‘CAMAC is not subject to the constraints of the political and electoral cycle’

• ‘Treasury cannot replicate the independent research and stakeholder consultation undertaken by CAMAC due to its charter of responding to government policy’

• ‘Treasury will not be able to secure access to the calibre of expertise represented by the members of CAMAC in any ongoing and timely fashion or at comparable cost’

• ‘the functions of CAMAC cannot be replicated by Treasury. Rather the work of CAMAC supplements the work of Treasury’

• ‘the financial savings generated by abolishing it are insignificant, particularly in light of the loss of the rigour in research and advice generated by CAMAC and its reach in ensuring the proper functioning of our markets’, and

• CAMAC should ‘be retained and that a stocktake and implementation of its recommendations be undertaken as part of the government’s drive to reduce red tape’.34

The GIA also stated that the existence of CAMAC has helped governments avoid ‘knee-jerk, politically-motivated regulation that can be very damaging to the economy’ and recommended that if the Government proceeds with the abolition of CAMAC, it should engage with stakeholders ‘such as Governance Institute and other professional associations’ to ‘discuss how best to facilitate future independent, transparent, research-based corporate and markets law reform’ and hence ensure ‘appropriate input into the development of corporate law is received from business, market and legal sources’.35

Law Society of New South Wales The Law Society of New South Wales opposes the abolition of CAMAC and endorses the position of the Law Council of Australia in its communications with the Minister and its submission to Treasury.36

The Law Society of Western Australia The Law Society of Western Australia (WALS) opposes the abolition of CAMAC.37 In its detailed submission to Treasury WALS noted:

 the decision to abolish CAMAC appears to have been announced by the Commonwealth Government with little, if any, prior consultation with Western Australia or the other referring States and Territories, such unilateral action being at odds with the spirit and intent of the various Corporations Agreements that underpin the referral of State powers to the Commonwealth Government to enable it to legislate nationally in the area of corporations law

33. GIA, Submission to Treasury, Consultation on Exposure Draft of Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014, op. cit.; Governance Institute says ‘bring back CAMAC’, op. cit., p. 1. 34. Ibid., pp. 2-5. 35. GIA, ‘Consultation on Bill to abolish CAMAC should consider retaining it’, AICD website, 7 October 2014, accessed 14 January 2015; GIA,

Submission to Treasury, Consultation on Exposure Draft of Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014, op. cit., p. 5. 36. The Law Society of New South Wales (NSWLS), Submission to Treasury, Consultation on Exposure Draft of Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014, ‘Letter in Support of Submission

by Law Council of Australia dated 22 October 2014: Exposure Draft of the Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014’, NSWLS website, 23 October 2014, accessed 14 January 2015. 37. Law Society of Western Australia (WALS), Submission to Treasury, Consultation on Exposure Draft of Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014, ‘Commonwealth Government's Decision to

Abolish Corporations and Markets Advisory Committee’, WALS website, 24 October 2014, p. 11, accessed 12 January 2015.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 10

 the important role that CAMAC plays in allowing continuing representation of the business and financial communities of the States and Territories in the process of corporate law reform in return for the referral of powers is being overlooked (emphasis added)

 CAMAC has a proven track record of producing detailed and thoughtful reports including sound, market oriented recommendations in which efficiency considerations are at the forefront

 the important and valuable role played by CAMAC is based upon a unique model that cannot be replicated from within an existing Government Department such as the Markets Group of the Department of Treasury; and

 the proposed abolition of CAMAC in the manner proposed by the exposure draft Bill will leave the States without a formal structure for input into the process of formulation of reforms to corporations and financial markets law. 38

The WALS was of the view that the exposure draft Bill and explanatory material were ‘more notable for what they do not say than for their content’.39 The WALS stated that it holds the work of CAMAC ‘in the highest regard’40 and that the reports of CAMAC and its predecessors formed the basis for many of the matters ‘we now take for granted as fundamental to our system of corporations law in Australia’. The WALS cited the laws pertaining to continuous disclosure, share buy-backs and executive remuneration as examples.41

The WALS detailed what it considered to be the inconsistency between the decision to abolish CAMAC and its stated rationale: the Government’s goal of ‘streamlining government structures’ to ‘identify improvements that would ensure greater value for taxpayer’s money’ to ‘reduce duplications and increase efficiency in how public funds are used’ (emphasis added).42

The Society does not consider that CAMAC is a body which needs to be abolished to eliminate duplication, or remove waste. In particular the Society notes that:

 the role of CAMAC as a specialist independent research based corporation is not duplicated elsewhere in the government, indeed, it acts on specific references from the Government;

 CAMAC already provides great value to the taxpayer - it operates on a modest budget and draws upon the expertise of highly experienced members of the legal, economic, academic and business communities of each of the States and Territories, such persons making their services available to CAMAC in effect, for little or no charge. To replicate this model through another government department would quickly incur substantial consultancy fees whilst making the rationale for "streamlining" its function redundant.

 CAMAC already minimizes its overheads by sharing its premises and back-office support functions with ASIC, and hence already demonstrates efficiency in how public funds are used to deliver services. 43

The WALS is of the view that, in relation to the rationale that abolishing CAMAC would result in cost-savings, ‘the stated policy rationale for the Budget Announcement does not stand up to scrutiny’.44 It concluded that:

CAMAC provides great value for money to the taxpayer, given the quality and relevance of its reports. There is no need for it to be targeted as part of the "Smaller and More Rational Government" reforms... 45

38. Ibid., p. 2. 39. Ibid., p. 10. 40. Ibid., p. 6. 41. Ibid., p. 7. 42. Ibid., pp. 8-9. 43. Ibid., p. 8. 44. Ibid., p. 9. 45. Ibid.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 11

The WALS also expressed doubt about the ability of Treasury to continue CAMAC’s work to the same level of quality and for the same cost, and stated that the key features of the CAMAC model (which contributed to its past success) are ‘not matters that can be replicated by merging it into ... Treasury without undertaking structural reform’.46

The WALS concluded that its preference is for CAMAC to be retained, or alternatively, new statutory arrangements be put in place to ensure state input into the process of corporations and financial markets law reform continues, thus ‘keeping with the spirit of the original referral of powers’.47

Law Council of Australia, Business Law Section In both its correspondence to the Minister for Finance shortly after the Budget announcement and in its subsequent detailed submission to Treasury regarding the exposure draft Bill, the LCA opposed the abolition of CAMAC.48

June 2014 letter The LCA wrote to the Minister on 11 June 2014 regarding the proposed abolition of CAMAC.49 Whilst setting out what it saw as the risks posed by the abolition of CAMAC to future corporations and financial market law reform, the LCA also provided an extensive and detailed analysis of why it believed CAMAC should be retained. In brief, the LCA argued that:

• the abolition of CAMAC would undermine the current system of corporations and markets law reform, which ‘contrasts very favourably with the ad hoc, under resourced, inefficient and crisis-oriented law reform practices of the Australian states and territories prior to the commencement of the national cooperative companies and securities scheme’

• ‘the principal Commonwealth legislation concerning corporations and markets depends for its constitutional validity on referrals of power by the states, which they have done pursuant to a Corporations Agreement. The Corporations Agreement assumes the existence of CAMAC and deals with its composition. The abolition of CAMAC pursuant to a Commonwealth budget decision, without proper participation by the states, is inconsistent with that assumption and consequently puts state referrals of power at risk. We note that the referral of power by the states is subject to a sunset, currently in 2016’

• CAMAC has delivered a substantial quantity of first-class reports and discussion papers very economically and has established an enviable reputation for sound, market-oriented recommendations in which ‘efficiency considerations are at the forefront’ and the red tape reduction is therefore ‘a happy consequence of implementation’50

• ‘specialist expertise encompassing both law and economics is necessary to achieve meaningful reform. It is neither practical nor efficient to maintain this expertise within the Treasury bureaucracy. Experience suggests that the kind of specialist legal knowledge required is unlikely to develop or be maintained at senior levels within the Treasury, given its core functions lie outside this arena’51

• hence the retention of CAMAC (which possesses both) ‘is desirable to supplement the resources and expertise within Treasury’.52

The LCA also stated that in its view, if CAMAC were abolished and its functions transferred to Treasury ‘we are apprehensive that the quality of corporate and market law reform will inevitably deteriorate’ due to:

• the absence of permanent institutional arrangements for sound and practical business and professional input into corporate and financial markets law reform

46. Ibid.

47. Ibid., p. 11. 48. LCA, Letter to Minister for Finance, Commonwealth budget proposal to abolish corporations and markets law reform body, 11 June 2015, pp. 1-2, accessed 3 February 2015; LCA, Submission to Treasury, ‘Exposure Draft of the Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee) Bill 2014’, 22 October 2014, pp. 3-4, accessed 3 February 2015.

49. LCA, Letter to Minister for Finance, Commonwealth budget proposal to abolish corporations and markets law reform body, op. cit. 50. Ibid., pp. 3 and 6. 51. Ibid. p. 8. 52. Ibid., pp. 3, 6, 8.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 12

• the inevitable necessity for corporations and markets law reform to compete for resources to develop sound research-based proposals and

• lack of transparency and increased exposure of the law reform process to the political cycle.53

October 22 submission On 22 October 2014, the LCA lodged a detailed submission with Treasury regarding the exposure draft Bill, which expanded upon the LCA’s earlier correspondence with the Minister and also addressed the responses it received from Minister.54 The LCA noted that in his response to the LCA’s earlier correspondence, the Minister made six related points:

1. the abolition of CAMAC will:

- streamline the shape of government, reduce duplication, and improve coordination and accountability (Reduction in duplication argument) - reduce costs associated with separate governance arrangements and increase efficiency in how public funds are used to deliver services to the community (Cost reduction argument 1) - ensure greater value for taxpayers' money (Cost reduction argument 2) 2. the principle of sourcing advice from independent sources will be met in the following way: Treasury will act

as an adviser and coordinator of advice, the Government will receive independent advice from relevant regulators, and Treasury will draw on legal expertise in other specialist parts of the public service (Alternative advice sourcing model argument)

3. the Government expects that Treasury policy advice will be informed by regular professional engagement with industry, including experts on corporations and financial markets law and practice, but business is 'quite capable of putting its views to government without the need for an additional layer of taxpayer-funded bureaucracy' (Industry engagement argument) and

4. the legacy work which CAMAC had on hand is being handed over to Treasury to consider, and 'to the extent that there remain important issues that warrant ongoing work, this will be considered against other priorities’ (Legacy argument).55

The LCA’s responses to the above arguments are summarised below.

Reduction in duplication argument The LCA, whilst accepting ‘the perceived need to reduce the number of Australian Government bodies and streamline the shape of government’ argued that the abolition of CAMAC will not result in any reduction in duplication because:

… no duplication between the work of CAMAC and other government work has been identified, and there is none, because CAMAC acts on references from the Government and other relevant stakeholders. 56

The LCA also argued that CAMAC (due at least in part to its structure) effectively coordinates its efforts with other relevant parties (for example, the Australian Securities and Investments Commission (ASIC), Treasury and professional associations). Further, the LCA argued that CAMAC operates transparently ‘by publishing discussion papers and reports’ which it makes available for scrutiny and assessment in both ‘the public and private sectors’ and hence there is no lack of accountability.57

53. Ibid., p. 4. 54. LCA, Submission to Treasury, Consultation on Exposure Draft of Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014, ‘Exposure Draft of the Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee) Bill 2014’, op. cit.

55. Ibid., pp. 3-5. 56. Ibid., p. 3. 57. Ibid.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 13

Cost reduction argument 1 The LCA noted that CAMAC operates in ASIC accommodation and employs ‘only three full-time staff’, along with a part-time committee (which operates at minimal cost). It noted that CAMAC's operational budget is under $1 million per annum.58

The LCA then stated that if CAMAC were abolished and its advisory function merged into Treasury, additional expenses would be incurred to ensure that ‘CAMAC's important work is continued and all relevant inputs are properly assessed’.59 As a result, the LCA formed the view that:

… in these circumstances it is highly unlikely that there will be any cost saving, unless the task of corporate and market law reform is substantially downgraded or weakened. 60

Cost reduction argument 2 The LCA stated that there was ‘no adequate basis for contending that greater value for taxpayers' money and more efficient delivery of services to the community’ would be achieved by the abolishing CAMAC.61 This point was also made in a number of other submissions.62

Alternative advice sourcing model argument The LCA said that while the proposals presented in the Minister’s response to the LCA’s earlier communication, if implemented ‘…may deliver independent advice from the public sector, they will not ensure that policymakers will receive the balanced independent advice based on practical understanding of how corporations and markets operate.’63

The LCA also noted that it could not be assumed that all advice sourced from the public sector would be independent, as ‘some parts of the public sector (for example, regulators) have a measure of self-interest in promoting certain kinds of reforms’.64

Industry engagement argument In response to this argument, the LCA stated that:

… the Minister's reasoning on this point does not recognise the fundamental distinction between, on the one hand, business lobbying, which (while no doubt more professional and capable now than in the 1980s) is generally driven by the need to promote the commercial interests of business; and on the other hand, the assessment of law reform proposals by disinterested experts who understand how corporations and markets actually work.

65 (emphasis

added).

The LCA noted that:

…it is essential that there be a properly instituted facility for expert, practical and transparent input into legislative and regulatory policy regarding corporations and markets

58. Ibid.

59. Ibid., pp. 3-4. 60. Ibid., p. 4. 61. Ibid.

62. See: WALS, Submission to Treasury, ‘Commonwealth Government's Decision to Abolish Corporations and Markets Advisory Committee’, op. cit., pp. 8-9; ARITA, Submission to Treasury, ‘Response to consultation draft legislation to abolish the Corporations and Markets Advisory Committee’, op. cit., p. 2; GIA, Submission to Treasury, ‘Cessation of the Corporations and Markets Advisory Committee (CAMAC): Exposure Draft Bill’, op. cit., pp. 2-4.

63. LCA, Submission to Treasury, ‘Exposure Draft of the Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee) Bill 2014’, op. cit., p. 4. 64. Ibid.

65. Ibid., p. 5.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 14

CAMAC's experience shows that input must be available throughout the process of developing reform proposals, and not merely when an exposure draft is released for public comment… 66

Finally, the LCA noted that CAMAC has established processes by which its proposals are considered, during the development phase, by a wide variety of legal and other experts, acting pro bono, enabling them to fine tune CAMAC's recommendations.67 In this way, the LCA indirectly made the same point that a number of other interest groups and commentators have made, namely that securing the type of expertise provided by CAMAC for use by Government (through its staff, committees, subcommittees and processes) in the future for less than the present (modest) annual cost is, at best, unlikely given the high cost of procuring such expertise from the private sector.68

Legacy argument The LCA noted that it is a matter of concern that:

… the Minister has made no commitment to continue the fundamentally important legal and regulatory issues with which CAMAC has recently been grappling, concerning the annual general meeting, crowd sourced funding and managed investment schemes, upon which business and markets as well as regulators need the assistance of law reform.

69

Final position The LCA reiterated its opposition to the abolition of CAMAC and urged the Government to reconsider its decision, as CAMAC’s retention was in the interests of ensuring that:

… a program of sound legal and regulatory reform in the corporations and markets area is continued and enhanced, for the benefit of the Australian economy and the reduction of business costs. 70

Financial Services Council From the publically available submissions to Treasury regarding the exposure draft Bill and explanatory material, it appears that the Financial Services Council (FSC) is the only interest group that supports the abolition of CAMAC. The primary reasons given by the FSC for supporting CAMAC’s abolition are:

• that CAMAC duplicated work that is (or could) be done by ASIC and/or Treasury and

• some recent CAMAC inquiries (and subsequent reports) were characterised by ‘deficiencies in both substance and form’.71

These arguments are examined below.

Duplicative role and function of CAMAC In contrast to all the other publically available submissions, the FSC argued that ‘CAMAC is a prime example of a duplicative and redundant body’ because:

• both CAMAC and ASIC have the power to advise and make recommendations to the relevant Treasury Portfolio Minister, on their own initiative or when requested by the Minister, about matters relating to:

- amendment or reform of corporations legislation - the operation or administration of corporations legislation - companies or specific segments of the financial products and financial services industry and - proposals to improve the efficiency of the financial markets.72

66. Ibid.

67. Ibid.

68. LCA, Submission to Treasury, ‘Exposure Draft of the Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee) Bill 2014’, op. cit., pp. 4-5. 69. Ibid., p. 5. 70. Ibid., p. 9. 71. Financial Services Council (FSC), Submission to Treasury, ‘Abolition of the Corporations and Markets Advisory Committee (CAMAC)’, FSC

website, 24 October 2014, accessed 16 January 2015. 72. Ibid., pp. 1-2.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 15

The FSC is of the view that ‘ASIC should carry out its functions without the need for duplication by CAMAC’ and that it ‘should also be acknowledged’ that Treasury has ‘principal responsibility for developing corporations and financial services policy and regulation’ and argued that by ‘working together, both ASIC and Treasury are best placed to handle issues currently also within CAMAC's remit’.73

Deficiencies in recent inquiries The FSC was the only interest group which did not praise CAMAC’s inquiry and consultation processes or the thoroughness of its reports. The FSC’s submission focused on the perceived correctness and workability of CAMAC’s recommendations in relation to charitable trusts and managed investment schemes.74 For example, in relation to CAMAC’s inquiry into charitable trusts the FSC expressed the view that:

• CAMAC's recommendations were not ‘grounded in empirical data, evidence of trustee wrongdoing or any market failure’ and that the recommendations ‘represented a significant departure from long-standing core principles of trust law’ and

• none of the reform proposals ‘put forward by licensed trustee companies’ (including those that purportedly addressed the dual market in charitable trusteeship services and competitive neutrality) were adopted by CAMAC.75

In relation to CAMAC’s inquiry into managed investment schemes, the FSC said that:

• its August 2012 report into managed investment schemes (MIS) included wide-ranging recommendations, some of which:

- would have involved significant changes to the regulation and taxation of MIS - had the potential to significantly disrupt the financial services industry and - were unworkable and did not reflect relevant industry and market practice.76 The FSC also criticised CAMAC’s inquiry and consultation processes, arguing that, in relation to the charitable trusts inquiry, ‘trustee companies were not afforded proper consultation by CAMAC and a reasonable opportunity to respond to negative assertions being made against them’.77 The FSC then concluded that:

… the FSC supports the Government's decision to proceed with the abolition of CAMAC. In essence, we believe it represents an opportunity to remove unnecessary duplication of government function by a body which has presided over process and substance failures. 78

In this regard, the FSC stands alone as, as detailed above, the other interest groups whose submissions are publically available praised CAMAC’s processes and the quality of its reports (even if disagreeing with some of their recommendations)79 whilst expressing the view that CAMAC’s structure, processes and work is markedly different from those of ASIC and Treasury, and hence there is no duplication that needs to be removed.80

Financial implications According to the Bill’s Explanatory Memorandum, the abolition of CAMAC is expected to result in underlying cash savings of $3.1 million over the forward estimates.81 However, many of the submissions to the Treasury

73. Ibid., p. 2. 74. Ibid., p. 3. 75. Ibid.

76. Ibid.

77. Ibid.

78. Ibid.

79. AICD, Submission to Treasury, ‘Corporations and Markets Advisory Committee’, op. cit., p. 2: ‘Regardless of one's views as to the recommendations proposed by CAMAC on particular issues, it has played a critical role in identifying, explaining and analysing corporate law and market related problems. CAMAC has also played an important educational role by preparing high quality and well researched reports which effectively set out technical issues in a clear and highly readable manner.’ (emphasis added).

80. LCA, Submission to Treasury, ‘Exposure Draft of the Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee) Bill 2014’, op. cit., p. 3: ‘… no duplication between the work of CAMAC and other government work has been identified, and there is none…’.

81. Explanatory Memorandum, Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014, p. 3, accessed 12 January 2015.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 16

consultation regarding the exposure draft Bill expressed doubt that the abolition of CAMAC would result in any real savings.82

The differing views about the potential savings or costs flowing from the abolition of CAMAC are examined under the heading ‘Key issues and provisions’ below.

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.83 The Government considers that the Bill is compatible.

Key issues and provisions Current position In the view of some stakeholders, Part 9 of the Act gives effect to the underlying ‘spirit and intent’ of the Intergovernmental Corporations Agreement, namely providing a formal mechanism for continued representation by the referring states into a body responsible for reviewing and suggesting reforms to corporations and financial markets law.84 Currently Part 9 of the Act provides for the establishment of CAMAC, its functions, appointment of members and independence from Government as detailed below. Item 11 of the Bill repeals Part 9 of the Act in its entirety.85

Establishment Section 146 of the Act (located in Part 9 of the Act) established CAMAC, and provides that it is a body corporate (that is, it has a separate legal personality from the Commonwealth). Section 159 then provides that it is not subject to Commonwealth, state or territory taxes.

Functions Section 148 of the Act provides that CAMAC’s functions are (either by its own initiative or when requested by the Minister) to provide advice and recommendations to the Minister about any matter connected with:

• law reform in relation to corporations legislation (including making or amending corporations law)

• the operation or administration of corporations legislation

• companies or a segment of the financial products and financial services industry or

• a proposal for improving the efficiency of the financial markets.

In contrast, ASIC has much broader range of functions, reflecting its central role as national regulator.86 In particular, it has a range of specific functions and powers conferred by a large number of Acts, including, for example, the Insurance Contracts Act 1984 and the National Consumer Credit Protection Act 2009.87 However, in addition to its functions related to its central role as a national regular, subsection 11(3) of the Act also provides that ASIC may (that is, it does not have to), when requested by the Minister (or on its own initiative) provide advice or recommendations in relation to the matters referred to in section 148. Whilst this appears to support the view that ASIC and CAMAC unnecessarily duplicate each other’s functions, there are important differences in how those functions are actually discharged (discussed below).

Members The Act specifically provides that CAMAC will, ‘as far as practicable’ have at least one member from each of the referring states and the Northern Territory and that the Minister must have ‘regard to the desirability of the views of business communities in this jurisdiction being adequately represented amongst the members’.88 This is

82. See for example the sources cited above at footnote 62. 83. The Statement of Compatibility with Human Rights can be found at pages 16 to 18 of the Explanatory Memorandum to the Bill. 84. See for example: WALS, ‘Commonwealth Government's Decision to Abolish Corporations and Markets Advisory Committee’, op. cit., p. 2. 85. Australian Securities and Investments Commission Act 2001, accessed 7 February 2015. 86. See sections 11 to 12A of the Australian Securities and Investments Commission Act 2001, accessed 7 February 2015. 87. Ibid., section 12A. 88. Ibid., subsection 147(5).

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 17

necessary to give effect to the Agreement, which facilitates the referral of the states’ corporations powers to the Commonwealth.89

In contrast, the Act does not require that ASIC’s membership provide representation to (and input from) of each referring state. Whilst the Act requires that members of both ASIC and CAMAC must have appropriate knowledge or experience in one or more of the listed fields (for example, business, financial markets, law), ASIC’s members are appointed by the Governor-General on the nomination of the Minister, and, importantly, there is no requirement that each referring state have a member.90

Independence The Act provides that the Minister can, in writing, direct ASIC about what ‘policies it should pursue, or priorities it should follow, in performing or exercising any of its functions or powers’.91 In contrast, the Minister is not able to direct CAMAC in such a manner. As a result, whilst CAMAC is an independent body capable of undertaking its work in such manner as it sees fit and without the risk of political interference, ASIC is not. As a result, whilst there appears (and is) a degree of potential duplication between ASIC and CAMAC, the two entities have significant structural differences.

Summary of the role and functions of ASIC and CAMAC Whilst there appears to be a level of potential duplication, a closer examination of the Act reveals that whilst sharing some functions, ASIC and CAMAC currently actually fulfil different roles and purposes.

CAMAC’s central functions relate to its designated role: as a multi-jurisdictional corporations and financial markets law research and reform body, designed to ensure continued input from the referring states and their business communities into future corporations and financial markets legislation and policy. It is marked by:

• its singular focus on corporations and financial markets law reform

• its independence from the Government of the day and

• the representation of business communities in each referring state and its cross-jurisdictional representational requirements.

As a result of its design, CAMAC has, in actual practice, often led discussion around corporate and financial markets law reform rather than merely responding to deficiencies in legislation identified as a result of a particular corporate collapse, scandal, or court case. Likewise, it fulfils its functions in an independent manner and does not merely respond to policy proposals or Ministerial directions emanating from the Government of the day.

In contrast, ASIC’s central functions relate to its role as a national regulator, and one that is required to follow the directions of the Government of the day. As a result, even though it shares some of the same functions allocated to CAMAC in relation to corporations and financial markets law reform, ASIC’s structure does not ensure that business communities from each referring state will have representation, nor that each referring state will have input into not only the proposal or issue being examined, but also how the relevant inquiry will be conducted. Further, it is argued by the LCA that ASIC may see the task of corporations and financial markets law reform from the perspective of a regulator, rather than the more balanced perspective taken by CAMAC that is ‘conducive to the reduction of costs and red tape’.92

89. Corporations Agreement 2002 as amended, subclauses 605(1)-(4) and (6) deal with the appointment of members to CAMAC and its various sub committees (for example, the Legal Sub-Committee of the Advisory Committee). They provide that the referring states and Northern Territory may nominate such persons, and that the Commonwealth ‘will’ consult with the Ministerial Council and the relevant state or territory Minister in making appointments to CAMAC.

90. See: Australian Securities and Investment Commission Act 2001, sections 9 (ASIC) and 147 (CAMAC). 91. Australian Securities and Investment Commission Act 2001, subsection 12(1). 92. LCA, Submission to Treasury, ‘Exposure Draft of the Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee) Bill 2014’, op. cit., p. 4: ‘…it cannot be assumed that all advice sourced from the public sector will be

independent, as some parts of the public sector (for example, regulators) have a measure of self-interest in promoting certain kinds of reforms.’

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 18

Changes proposed by the Bill Item 11 of Schedule 1, Part 1, of the Bill repeals Part 9 of the Act.93 Items 1-8, 10 and 12-13 make necessary consequential amendments to the Act, reflecting the abolition of CAMAC. Item 9 repeals and replaces subsection 11(3), to effectively replicate existing section 148 of the Act (which will be repealed by item 11). Proposed subsection 11(3) provides that ASIC may on its own initiative (or when requested by the Minister) provide advice and recommendations about any matter connected with:

• law reform in relation to corporations legislation (including making or amending corporations law)

• the operation or administration of corporations legislation

• companies or a segment of the financial products and financial services industry or

• a proposal for improving the efficiency of the financial markets.

The Bill does not replace CAMAC. Instead, proposed subsection 11(3) provides that ASIC may continue to perform the specific functions listed (previously tasked to CAMAC by section 148 of the Act). The proposed provisions contained in Schedule 1 of the Bill are consistent with the stated policy aim of abolishing CAMAC and having Treasury act (as the policy agency) ‘as an adviser and coordinator of advice’ in relation to corporations and financial markets law reform.94 The abolition of CAMAC raises a number of issues, discussed below.

Does the Bill actually remove duplication? A number of the submissions to Treasury regarding the exposure draft Bill questioned whether there was any duplication between CAMAC and other bodies that actually needed to be eliminated. For example, the AICD noted that:

We understand that in the short term the abolition of CAMAC and streamlining its functions into Treasury may appear to be an effective cost saving measure. While we commend the Government for seeking savings in general, we are of the view that dismantling CAMAC is contrary to the Government's own objectives as set out in the Smaller and More Rational Government Reforms. Those reforms seek to remove inefficient and complex structures, seek a leaner and more business-like way for the Government to operate and prevent the proliferation of wasteful structures. CAMAC epitomizes the high quality, effective and cost conscious approach the Government is trying to achieve.

95

The AICD also (indirectly) indicated that in its view, the work of CAMAC is not being duplicated by other bodies (such as ASIC) as:

… the Government's decision to dismantle CAMAC is likely to increase red tape in the long term. This is because there will no longer be a cost effective, highly experienced and independent body considering improvements to the corporate law in Australia. 96

The GIA also questioned whether the work of CAMAC was being duplicated by other bodies. It noted that:

While we understand the government’s desire to reduce the number of Australian Government bodies as part of streamlining government, we are of the view that any such rationalisation must proceed on the basis of the merits of each body and the value it can bring to government decision-making rather than simply on the basis of reducing the numerical total of Australian Government bodies.

That is, Governance Institute is strongly of the view that any review of Australian Government bodies needs to take into account whether the functions of each body are:

 no longer required, or

93. Australian Securities and Investments Commission Act 2001, accessed 7 February 2015. 94. S Ciobo, ‘Second reading speech: Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014’, House of Representatives, Debates, 4 December 2014, p. 14246, accessed 12 January 2015. 95. AICD, Submission to Treasury, ‘Corporations and Markets Advisory Committee’, op. cit., p. 2. 96. Ibid.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 19

 if required, can be replicated or provided equally efficiently by a government department.

If the functions of a particular body are still required and cannot be replicated or delivered equally efficiently by a government department, Governance Institute is of the view that the body should be retained. 97

The GIA then expressed the view that the functions of CAMAC cannot be (and therefore by implication, are not currently) replicated by Treasury.98

In its submission, the WALS was particularly robust in expressing the view that the neither the work nor role of CAMAC is duplicated and therefore needs to be abolished.99 The WALS noted that:

• the role of CAMAC as a specialist independent research based corporation with ensured state representation is not duplicated elsewhere

• CAMAC already provides great value to the taxpayer as it draws upon the expertise of highly experienced members of the legal, economic, academic and business communities of each of the referring states, and those persons are, in effect, making their services available to CAMAC for little or no charge

• CAMAC already minimises its overheads by sharing its premises and back-office support functions with ASIC and hence already demonstrates efficiency in how public funds are used to deliver services and

• ‘CAMAC is the antithesis of an overgrown bureaucracy’ as its part-time committee member structure, supported by its ‘highly skilled and experienced executive consisting of only two lawyers and an administrative assistant’ demonstrates an extremely lean and efficient structure.100

The WALS also made the point that the ‘important role that CAMAC plays in allowing continuing representation’ from the referring states into the process of corporate law reform ‘in return for the referral of powers is being overlooked’.101 Given the uniqueness of CAMAC’s structure and operating methods (as distinct from its legislated functions) the WALS argued that CAMAC is a ‘unique model’ that cannot (and therefore by implication, is not) duplicated within existing government agencies.102 The LCA also made a similar point, stating that:

… no duplication between the work of CAMAC and other government work has been identified, and there is none, because CAMAC acts on references from the Government and other relevant stakeholders. 103

The only interest group to express the view that the work of CAMAC is duplicated by other government bodies was the FSC (discussed above under the heading ‘Financial Services Council’). However, the FSC focused on the legislated functions of CAMAC and ASIC respectively, whereas the other interest groups focused on the actual work undertaken by CAMAC, ASIC and Treasury, their consultative models, underlying structures and actual roles played in relation to corporations and financial markets law reform.

In summary, the view that the work of CAMAC is duplicated by ASIC or Treasury (and hence the argument that the abolition of CAMAC is necessary to remove duplication) has been rejected by most interest groups. Further, even though there is an overlap of legislated functions between CAMAC and ASIC, the unique role played by CAMAC in the context of the referral of corporations powers by the states is not duplicated, nor is the approach taken by CAMAC to its work.

Will the abolition of CAMAC actually result in savings? As noted above under the heading ‘Policy basis for the Bill’, the basis for the Bill is the Coalition’s 2013 election commitment to build a more efficient government by identifying saving and efficiencies and reducing the size of the Commonwealth government. The Government argues that:

97. GIA, Submission to Treasury, ‘Cessation of the Corporations and Markets Advisory Committee (CAMAC): Exposure Draft Bill’, op. cit., pp. 1-2. 98. Ibid., p. 3. 99. See for example: WALS, Submission to Treasury, ‘Commonwealth Government's Decision to Abolish Corporations and Markets Advisory Committee’, op. cit., pp. 8-10.

100. Ibid., pp. 7-8. 101. Ibid., p. 2. 102. Ibid. 103. LCA, Submission to Treasury, ‘Exposure Draft of the Australian Securities and Investments Commission Amendment (Corporations and

Markets Advisory Committee) Bill 2014’, op. cit., p. 3.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 20

Ceasing the operation of small bodies and committees generates savings beyond merely the saving of the annual appropriation. The ongoing operation of small agencies absorbs resources across the broader Commonwealth Public Service, including through the oversight costs incurred by responsible departments, central agencies and integrity agencies.

104

This argument was rejected by almost all of the interest group submissions to Treasury, as well as by a number of commentators, as documented above. In summary, whilst reducing the numerical total of Commonwealth Government bodies can reduce the ‘size’ of government, such moves will only reduce the actual cost of government where:

• an abolished entity is no longer required and its functions cease entirely (that is, they are not transferred to another entity)

• an abolished entity’s functions and work is continued at the same quality by another entity for less than the amount previously spent on the abolished entity or

• the work performed by the abolished entity can be (and is) performed by the private sector at a lower cost and at the same quality.

The majority of the submissions consider that the abolition of CAMAC will not result in actual cost savings for the reasons outlined below.

CAMAC is required A number of submissions argue that the unique role CAMAC performs is still required (not in the least due to the Agreement) and that even if CAMAC is abolished, the work it performs will still need to be undertaken.105 The Government appears to agree that CAMAC’s functions will still need to be carried out, noting that CAMAC’s functions will be delivered via Treasury and through the sourcing of advice from regulators, specialist parts of the public service and through ‘regular engagement with relevant experts and with industry’.106

In summary, the majority of submissions to Treasury argue that the abolition of CAMAC will only result in real long-term savings if its work is performed by another entity for less than the amount spent on CAMAC each year. The likelihood of this being achieve is discussed below.

Can Treasury, ASIC and other bodies perform the work of CAMAC? A number of submissions expressed scepticism about the possibility of Treasury or other bodies being able to perform the work of CAMAC to a similar quality for a similar or lower cost. For instance, the GIA stated that ‘Treasury will not be able secure access to the calibre of expertise represented by the members of CAMAC in any ongoing and timely fashion or at comparable cost’.107 The LCA noted that:

… if CAMAC is abolished and its advisory function is merged into the Markets Group at Treasury, the Department will need to incur additional expenditure… in order to ensure that CAMAC's important work is continued… in these circumstances it is highly unlikely that there will be any cost saving, unless the task of corporate and market law reform is substantially downgraded or weakened.

108

The WALS made a similar point: ‘…Treasury is not currently resourced to perform the functions of CAMAC. Additional staffing would be required if the Government is genuinely committed to merging CAMAC's functions into this Department, as opposed to ceasing CAMAC's functions for practical purposes’.109 These views were

104. S Ciobo, ‘Second reading speech: Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014’, op. cit., p. 14245. 105. See for example: WALS, ‘Commonwealth Government's Decision to Abolish Corporations and Markets Advisory Committee’, op. cit., pp. 6, 8-9. 106. S Ciobo, ‘Second reading speech: Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory

Committee Abolition) Bill 2014’, op. cit., p. 14246. 107. GIA, ‘Cessation of the Corporations and Markets Advisory Committee (CAMAC): Exposure Draft Bill’, op. cit., pp. 2-4. 108. LCA, ‘Exposure Draft of the Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee)

Bill 2014’, op. cit., pp. 2-3. 109. WALS, ‘Commonwealth Government's Decision to Abolish Corporations and Markets Advisory Committee’, op. cit., p. 9.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 21

echoed in an editorial in the Australian Journal of Corporate Law, which noted that ‘it will be difficult for government to achieve this same level of knowledge and expertise at the same cost in the Treasury.’110

In summary, there appears to be widespread scepticism about the ability of Treasury (and the Government more generally) being able to perform or procure CAMAC’s work at a comparable quality and cost.

Can the work performed by CAMAC be performed by the private sector at a lower cost? Of the submissions to Treasury that addressed this issue, all were highly sceptical of the ability of the Government to source the quality of expertise provided by CAMAC at a comparable cost through ‘regular engagement with relevant experts and with industry’.111 For example, the GIA stated that:

The members of CAMAC, many of whom can command far in excess of the sitting fee when undertaking their normal duties, will not be available to Treasury on an ‘as-needs’ basis when it requires the depth of knowledge and experience to formulate advice on challenges in corporate and market law. 112

The LCA also expressed the view that ‘…if CAMAC is abolished, the Government will not be able to secure access to this level of expertise and experience at comparable cost.’113 ARITA expressed a similar view, stating that:

…without CAMAC, to bring in the required resources for the types of reviews that CAMAC delivered (and were needed by Government and industry) is likely to cost the Government far more in third party provider studies and reports’. 114

The WALS also expressed scepticism at any potential savings, noting that any attempts to replicate the work of CAMAC through another government department would ‘quickly incur substantial consultancy fees whilst making the rationale for "streamlining" its function redundant’.115 These views were echoed by a number of commentators, with one stating:

Can Treasury cover CAMAC’s beat on CAMAC’s budget of less than $1 million a year? Frankly, I doubt it. Getting external advice won’t be an option: consultants will hoover up $1 million before they clear their throats. 116

In summary, if the work of CAMAC is simply ceased, and is not continued by Treasury, ASIC or outsourced to the private sector, then long-term budget savings are possible. In relation to CAMAC’s work being continued by Treasury or ASIC, most interest groups expressed the view that such a move would either not result in savings, result in a reduction in the quality of work produced, or both.

Finally, most interest groups and commentators expressed the view that the work of CAMAC cannot be performed by the private sector for the same cost, and would likely result in increased costs to Government, should the type of advice provided by CAMAC be regularly sourced from private sector providers.

In summary, it would appear that the majority of interest groups and commentators are, at best, sceptical that the abolition of CAMAC will result in any long-term savings and reinforce the point that reducing the number of Commonwealth Government entities to achieve a ‘smaller’ government does not necessarily (or automatically) equate to a reduction in the actual cost of government over the medium to long-term.

110. N Andrews, ‘Hail and farewell, Companies and Markets Advisory Committee’, op. cit., p. 226. 111. LCA, ‘Exposure Draft of the Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee) Bill 2014’, op. cit., p. 4; S Ciobo, ‘Second reading speech: Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014’, op. cit., p. 14246.

112. GIA, ‘Cessation of the Corporations and Markets Advisory Committee (CAMAC): Exposure Draft Bill’, op. cit., pp. 2-4. 113. LCA, Commonwealth budget proposal to abolish corporations and markets law reform body, op. cit., pp. 3-4. 114. ARITA, ‘Response to consultation draft legislation to abolish the Corporations and Markets Advisory Committee’, op. cit., p. 2. 115. WALS, ‘Commonwealth Government's Decision to Abolish Corporations and Markets Advisory Committee’, op. cit., p. 8. 116. M Maiden, ‘Corporate law agency faces the end’, The Sydney Morning Herald, 5 June 2014, p. 28. See also: S Smith, ‘War on red tape set to

claim a vital corporate voice’, The Weekend West, 4 October 2014, p. 117, both accessed 20 January 2015: ‘If the decision to scrap the [Australian Charities and Not-for-profit Commission] ACNC is difficult to understand, what is there to make of the Abbott Government’s decision to also abolish the influential Corporations and Markets Advisory Committee? As with the ACNC, the Government’s decision on CAMAC has been driven by an at times blind and undiscerning mantra to eliminate red tape and duplication, and “increase efficiency”. Yet it won’t get better bang for its buck. Established 25 years ago to provide the government with independent advice on corporate law, the committee is made up of part-time members drawn from business, academia and the Australian Securities and Investments Commission, has three full-time support staff and costs little more than $1 million a year to run. If only some government ministerial offices provided such value.’

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 22

What are the consequences arising from a failure to pass the Bill? If this Bill should fail to pass the Parliament, there may be questions raised about the future of CAMAC. In 2013-14 and 2014-15 CAMAC received funding under Appropriation Act (No. 1), under the Treasury portfolio.117 CAMAC may not be allocated any funding in the next Budget.

According to section 147 of the Act, the Members and Convenor of CAMAC (other than the Chairperson of ASIC) are appointed by the Minister. Section 149 then provides that each period of appointment must not exceed three years. Section 151 sets out how the appointment can be terminated, and assuming the abolition Bill does not pass, this provision still operates. The question is then, can termination of appointment only occur in accordance with this provision, or can the Minister simply revoke the instrument of appointment?

An analogy can be found with the Climate Change Authority and the Clean Energy Finance Corporation which have continued in existence as previous Bills seeking their abolition failed to pass the Senate.118 As the Shadow Minister, Mark Butler stated:

The Clean Energy (Carbon Tax Repeal) Bills - totalling 11 bills - were introduced to the Senate on 2 December 2013. Labor and the Greens voted to separate the Bills relating to the abolition of the Climate Change Authority and the Clean Energy Finance Corporation and be debated in their own right. Each Bill was defeated in the Senate, meaning both the CCA and CEFC will continue their operations.

119

Even if no funding for CAMAC is provided in the upcoming Budget, until lawfully abolished, funding would have to continue for remuneration of appointees until terms of appointment expire.

CAMAC cannot continue without funding. Whilst CAMAC could potentially generate revenue by charging fees for its services, it is unlikely this would be sufficient to fund it for any prolonged period.

Although it may be possible for the Treasury to provide funds for its continued operation, this would be at odds with the Government’s resolve to realise efficiencies by abolishing CAMAC (and other Commonwealth entities), so this option would appear unlikely. Therefore CAMAC would remain in limbo until such time as this Bill is passed.

Other provisions Proposed Part 2 of Schedule 1 of the Bill contains a number of transitional and savings provisions. The operation of these provisions are adequately explained on pages 8 to 16 of the Bill’s Explanatory Memorandum.

Concluding comments One underlying rationale for the Government’s policy outlined in the ‘Smaller and more rational Government’ Ministerial Paper is to identify saving and efficiencies in all areas of government, as a contribution towards bringing the budget ‘back under control’, to reduce government debt and eventually deliver ‘sustainable Budget surpluses into the future’.120 Whilst passage of the Bill would contribute to a numerical reduction of total Commonwealth Government bodies, it would appear far less certain that it would result in a reduction in the actual cost of government. A number of interest groups consider that, if the work of CAMAC is to be replicated through ad-hoc inquiries conducted by private sector consultants, it is:

• highly unlikely that the amount of work produced by CAMAC can be procured for less than the amount currently spent on CAMAC each year and

117. See: Appropriation Act (No. 1) 2014-2015, Schedule 1, Treasury Portfolio Summary (p. 145); Appropriation Act (No. 1) 2013-2014, Schedule 1, Treasury Portfolio Summary (p. 150). 118. The Climate Change Authority (Abolition) Bill 2013 failed to pass the Senate in March 2014, whilst both the Clean Energy Finance Corporation (Abolition) Bill 2013 and Clean Energy Finance Corporation (Abolition) Bill 2013 [No. 2] also failed to pass in December 2013 and March 2014

respectively. Note that new Bills to abolish the bodies are currently before the Parliament-see Climate Change Authority (Abolition) Bill 2013 [No. 2] and Clean Energy Finance Corporation (Abolition) Bill 2014, accessed 9 February 2015. 119. M Butler (Shadow Minister for Environment, Climate Change and Water), Time comes for Abbott to step up on climate change, media release, 17 March 2014, accessed 9 February 2015. 120. Liberal Party of Australia and the Nationals, Our plan, real solutions for all Australians: the direction, values and priorities of the next Coalition

Government, op. cit., pp. 4-5, 16-17; Australian Government, ‘Part 2: expense measures’, Budget measures: budget paper no. 2: 2014-2015, op. cit., pp. 70; M Cormann (Minister for Finance), Smaller and more rationale government 2014-15, Ministerial paper, Department of Finance (DoF) website, May 2014, accessed 27 January 2015.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 23

• likely to end up costing the Government significantly more to produce the same amount and quality of work produced by CAMAC.

Further, interest group submissions also expressed scepticism about the ability of Treasury to undertake or coordinate the work of CAMAC to the same level of quality and for the same cost. As a result, these groups consider that passage of the Bill (that is, abolition of CAMAC) is unlikely to lead to long-term savings to the actual cost of government, unless the type work performed by CAMAC is either discontinued entirely or reduced.

In addition to the uncertainty in relation to the Bill’s ability to contribute to a reduction in the actual cost of government (as opposed merely to a numerical reduction in the number of Commonwealth Government entities), passage of the Bill would remove a key entity established as part of the Agreement that underpins the referral by the states of their corporations powers to the Commonwealth. Given the value that the referring states place on structures and institutions that ensure their continuing and permanent input into corporations and financial markets law reform, there is a danger that passage of the Bill would:

• breach the Agreement or, at the least, undermine the spirit of the Agreement and

• jeopardise the future continuation of the referral of the corporations power from the states to the Commonwealth or

• necessitate a new round of negotiations about appropriate structures and institutions to ensure continued (and independent) input from the referring states and their business communities into future corporations and financial markets law reform.121

As noted earlier under the heading ‘Overview of the history and role of the Corporations and Markets Advisory Committee’, as a result of various High Court decisions, in order for Australia to have a unified national system of corporations law and administration, it is necessary for the states to continue to regularly refer their corporations powers to the Commonwealth (they have not permanently referred them). If a state (or a number of states) refused to refer their corporations power in 2016 (when the current referrals expire) Australia would return to having differing corporations law, depending on the jurisdiction in which a corporation was operating. Further, if all the states refused to refer their corporations powers in 2016, the Commonwealth would no longer have the constitutional basis necessary to enact comprehensive corporations legislation, and hence significant parts of the Act and related legislation would no longer be constitutionally valid.

It should be noted however, that inter-governmental agreements like the Agreement, are not usually justiciable, since their political nature and, sometimes, the lack of precision in their terms, negate an intention to create legal relations. Whilst it is possible that the High Court would interpret the Agreement as giving rise to rights that are enforceable as a contract, that would appear unlikely.122 Hence whilst the Agreement appears to require the Government to consult with, and obtain the approval of at least three state or territory members of, the Ministerial Council to repeal some sections contained within Part 9 of the Act as proposed by item 11 of the Bill, it is not clear what (if any) legal consequences (for example, High Court litigation) would flow from a failure to do so. In contrast, potential political consequences (for example, a state refusing to refer its corporations powers until CAMAC is re-established) would appear to be a more likely response to such a failure.

In summary, the Bill raises a number of important issues beyond the numerical reduction of Commonwealth Government entities, including how to best reduce the actual cost of government and in relation to continued referral of the states’ corporations powers to the Commonwealth.

121. LCA, Commonwealth budget proposal to abolish corporations and markets law reform body, op. cit., p. 3: ‘The Corporations Agreement assumes the existence of CAMAC and deals with its composition. The abolition of CAMAC pursuant to a Commonwealth budget decision, without proper participation by the states, is inconsistent with that assumption and consequently puts state referrals of power at risk. We note that the referral of power by the states is subject to a sunset, currently in 2016.’

122. D Williams QC, ‘Intergovernmental agreements’, Public Policy, 6(1/2), December 2011, pp. 93-100, accessed 6 February 2015.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Australian Securities and Investments Commission Amendment (Corporations and Markets Advisory Committee Abolition) Bill 2014 24

© Commonwealth of Australia

Creative Commons

With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.

In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.

To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.

Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.

Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.

Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Entry Point for referral.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.