Early Warner Regulation at no cost a case for urgent review Law Reporter

  • Date:01 Jun 2005
  • Type:CompanyDirectorMagazine
The Business Council of Australia (BCA) has just published a very important paper on the cost of regulation in Australia (Business Regulation: Action Plan for Future Prosperity).

Regulation at no cost? - a case for urgent review

The Business Council of Australia (BCA) has just published a very important paper on the cost of regulation in Australia (Business Regulation: Action Plan for Future Prosperity).

The Australian Institute of Company Directors of course has for some time been concerned at the sometimes haphazard way in which, for example, amendments to the Corporations Act have been introduced in Australia in recent years.

A case in point is of course the infringement notice regime that was included in the CLERP 9 legislation in 2004 - a case which was regarded as very urgent by the then chairman of the Australian Securities and Investments Commission, but which 11 months later does not appear to have a single case of action on the part of ASIC.

This is only one example.

The clear message from the BCA paper is that we do not need such legislation and in most cases legislation based on similar ad hoc impressions by regulators or others should be resisted wherever possible.

In the paper the BCA has also suggested that the amount and cost of regulation on large and small businesses in Australia is huge.

It is of course not only a drain on business resources but also a drain on the relevant governments because of the cost of administration that is involved with each new piece of legislation.

The AICD is currently participating a number of initiatives to ensure that we have a more sensible and sensitive process for the introduction of any necessary legislation. In that context, for example, the institute has continually raised the need for a sensible business judgment rule in relation to a number of different areas of the law including the prohibition of insolvent trading.

Indeed in a note in this month's Law

Reporter ("CAMAC provides some 'guiding lights' for company directors and officers"), I have briefly discussed this need in the context

of other proposed reforms.

Unfortunately there has been a lack of discipline on the part of nearly every government in Australia in evaluating the necessary cost benefit justifications for the introduction of legislation.

Although there are specific regimes in place to review the way in which legislation is evaluated and introduced, these are not generally working well, for Victoria, recently established the Victorian Competition and Efficiency Commission (established in 2004) which undertakes the task of evaluating the process for the introduction of relevant legislation and for assessing when such legislation may or may not meet the required benchmark.

The Victorian commission examines not only legislation but also regulations that are introduced - it requires a regulatory impact statements to be provided in relation to new regulations and a number of these have been assessed by it. This approach is one that will clearly be beneficial if introduced in other states/territories as well as at Commonwealth level in a more co-ordinated and considered fashion.

The AICD and its members should welcome the initiative taken by the BCA. The institute's stance in relation to a recent amendment to occupational health and safety legislation has led to some success in Victoria, although the position in New South Wales still remains fairly fragile.

The AICD's campaign in this area should be maintained. Additionally the institute's submissions in relation to the proposals to widen the statutory duties of directors to include issues relating to social responsibility may have been influential in slowing down the pressure for a quick legislative initiative in this area following the concerns raised by the James Hardie affair.

Later this year the AICD, and its specialist committees, will be hopefully be able to influence the federal, state and territory governments to ensure that unnecessary reforms are not introduced in this area of law without proper evaluation occurring.

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