Australia’s federation makes efficient cross-border business regulation challenging and ineffectual — the system needs urgent reform.
The recent success enjoyed by Malcolm Turnbull in persuading Australian premiers and chief ministers to adopt a uniform approach to laws for dealing with suspected terrorists shows state and territory governments can achieve a common approach to regulation when necessary. Unfortunately, when it comes to commercial and business law, there is a yawning gap in the various regulatory regimes.
The Commonwealth Government does not have the power to fully regulate our corporations law. Every five years, the Commonwealth asks the states to refer powers to ensure the Corporations Act 2001 adequately covers the field. If the states do not comply, a gap exists in the regulatory regime administered by the Australian Securities and Investments Commission. A similar problem exists with the Competition and Consumer Act 2010.
Many areas of business regulation are not governed by Commonwealth legislation. Following two failed attempts by South Australia to draft model legislation to regulate the operation of consumer credit, a model bill was settled in Queensland in the 1990s that operates by state-Commonwealth agreement as the uniform Australian law.
A pattern of legislative reform was finally agreed on at the 2008 Council of Australian Governments (COAG). It decided to implement many of the recommendations of the 2008 Business Council of Australia (BCA) report Towards a Seamless Economy: Modernising the Regulation of Australian Business. The BCA estimated the absence of practical uniform regulation across a range of business law areas costs the Australian economy $16 billion a year.
The COAG regime needs strengthening. We’ve been unable, for example, to introduce competition policy reforms because states and Commonwealth cannot agree. COAG is a less-than-ideal mechanism to decide on a common approach to regulation in areas where the Commonwealth does not have power to regulate. While there have been minor successes, recent COAG meetings to deal with areas such as fuel prices and the energy market have been failures.
There has been a partially successful review by the states (and Commonwealth) of strict liability and reversal of onus-of-proof business legislation by the combined action of COAG and most states. Usually, significant gaps remain in the manner in which this regulatory regime is developed.
It is ridiculous that businesses operating nationally have to comply with different sets of regulations in so many areas of commercial law in the banking/financial sector.
Common sense prevailed in one recent example and we now have a well-settled Commonwealth consumer law that prevents the exercise of unconscionable conduct in consumer and certain business activities. This is governed by a number of laws existing in all jurisdictions and based on the relevant statutory provision in the Competition and Consumer Act (previously Trade Practices Act). However, state and federal courts differ in interpretation of the legislation that exists in a number of different statutes in each of the states and territories, as well as in the Commonwealth regime. Indeed, in a recent major judgment, the High Court continued to apply an interpretation of the concept of unconscionable conduct that had been applied in New South Wales. On this, the Full Federal Court, in a decision arising under the Competition and Consumer Act (ACCC v Lux Distributors Pty Ltd  FCAFC 90), rejected the reliance on “moral obloquy” that the NSW court, judges, in the High Court in obiter dicta — and the Victorian Court of Appeal, one month after the Lux case — favoured in interpreting the concept of unconscionability, in the mistaken belief that this statutory remedy would destroy the law of contract. This inconsistent interpretation has created burdens for consumers and regulatory agencies such as the ACCC.
Cost of litigation
The cost of litigation is huge and growing alarmingly. In Australia, when consumers and other plaintiffs sue for damages, the loser is usually ordered to pay both sides’ legal costs. The continued absence of a regime that spreads costs more evenly between the parties, or where legal aid (no longer anywhere near as generous as when the concept was first introduced) might be made available, means parties who wish to pursue litigation may not be able to do so.
It is clear we should adopt common rules in Australia to govern these issues of litigation, especially business litigation. It is ridiculous that businesses operating nationally have to comply with different sets of regulations in so many areas of commercial law in the banking/financial sector (as well as sectors such as landlord/tenant).
There are many other areas of regulatory concern that would benefit from a truly national approach. These include the classification of goods, regulation of taxis (Uber, for example), energy control and occupational health and safety. Where business and other activities don’t need to be regulated in a state-by-state fashion, COAG (or a similar system) could be implemented to allow for a national approach to solving our increasingly complex economic environment.
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