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Chapter 4 - Conclusions and Recommendations
Introduction
4.1
The Committee is grateful to those organisations
and individuals who made submissions on, or testified regarding, the Corporate
Code of Conduct Bill 2000.
4.2
The Committee noted that a number of submissions,
such as those from the Australian Chamber of Commerce and Industry, and
Community Aid Abroad were of particular assistance to the Committee because, as
Senator Murray remarked, they contained “detailed
commentary ... on weaknesses and shortcomings in the bill”.[1]
4.3
A number of submissions and witnesses had mostly
negative criticisms. The Committee notes Senator Murray’s statement regarding
the usefulness of the “positive” criticisms, of which there were also a number,
such as those by Mr Sean Cooney.[2]
The Committee is assisted by negative criticisms in deciding whether to
recommend rejecting a bill, but regards positive criticisms as helpful in
devising ways to remedy deficiencies in proposed legislation.
4.4
The Committee is aware that no piece of
legislation is perfect, and it aids the legislation process greatly to have
potential flaws in draft legislation set out succinctly and have suggestions
put forward as to how to remedy these flaws.
Summary of findings regarding
the Bill
4.5
The current Bill may have been drafted with the
best of intentions. The protection of workers and consumers is undeniably a
laudable goal. The Committee’s task was to determine if the current Bill would
achieve this goal. Regrettably, for a variety of reasons discussed below, the
Committee believes that the Bill is impracticable and unwarranted.
100 employee threshold
4.6
The Bill’s scope, as noted by Mr Ross Cameron
MP, encompasses “proprietary companies as well as public companies”.[3] The Bill thus seeks to regulate
a large number of corporate entities.
4.7
Several submitters and witnesses suggested
lowering the current 100 employee threshold specified in the Bill.[4] This would have the effect of
increasing the number of corporate entities subject to regulation by the Bill.
4.8
The Committee concludes that regulating the many
corporations that would be covered by the Bill, even as currently drafted,
presents, as Mr Bosch stated, a “heavy burden” for the Australian
Securities and Investments Commission.
4.9
The Committee finds that this Bill may do more harm
than good and therefore the extra regulation required by the Bill would
constitute an unacceptable “burden” for the Australian Securities and
Investments Commission. The Committee therefore concludes that the regulatory
regime the Bill would create would be unworkable.
Threats
to Public Health
4.10
The Bill requires
corporations to “take all reasonable measures to prevent any serious threat to
public health”.[5]
4.11
The Bill does not
apply to all Australian corporations operating overseas, however, but only to
those with more than 100 employees. The Committee finds it unacceptable that
any legislation should imply that only certain corporations should refrain from
threatening public health.
4.12
Moreover, the
Committee believes that this part of the Bill is unnecessary. Common Law rights
relating to negligence would already allow foreign litigants in most
circumstances to sue in Australian courts for damage suffered from negligent
behaviour. The Committee considers it unwise to interfere with these Common Law
rights.
Foreign holding companies
4.13
The Bill would regulate Australian corporations
with over 100 employees overseas and
(b) a holding company of such a corporation.[6]
4.14
Such a holding company may not be an Australian
corporate entity. The Bill would therefore seek to regulate, for example, as Mr
Benjamin McLaughlin of the Australian Institute of Company Directors testified,
America’s General Motors.[7]
4.15
It would be an unusual extension of the
principle of extraterritoriality if the Australian Parliament enacted
legislation that sought to regulate the activities of foreign corporations in
foreign jurisdictions.
4.16
The Bill could be redrafted to remove this
anomaly, but any such redrafting to remove foreign corporations from the
purview of the Bill would allow Australian corporations to avoid being subject
to the Bill by having themselves incorporated in a foreign jurisdiction.
4.17
The Committee therefore unanimously finds that
it cannot contemplate the Australian Parliament enacting a Bill that ostensibly
regulates foreign corporations, if those corporations have Australian
subsidiaries.
Generic nature of the Bill
4.18
The Bill would impose “environmental,
employment, health and safety and human rights standards”[8] on some Australian corporations
with 100 employees overseas.
4.19
The Committee accepts that the Parliament has
enacted numbers of acts with extraterritorial application. The Committee,
however, agrees with Mr Pragnell
of CPA Australia that such existing legislation can be distinguished from the
current Bill by the fact that it is “targeted and very focused”, while the
current Bill is “generic”.[9]
4.20
The Committee
concludes that as presently drafted the Bill is so “generic” as to be vague to
the point of being unenforceable. One example in this context is the
requirement that corporations provide their employees with “satisfactory sanitary conditions”[10].
4.21
The Committee is
aware that regulations may be made under clause 18 of the Bill, which may
define what is meant by terms such as “satisfactory”. Nevertheless, the
Committee finds itself unable to recommend a Bill, the provisions of which are
so vague as to cause considerable uncertainty to industry.
Living
Wage
4.22
The Bill requires
an Australian corporation to pay its workers a “living wage”.[11] This term is derived from a case decided in Australia’s Commonwealth Arbitration Court in 1907.[12] The
Committee finds it anachronistic to suggest that an Australian concept from
1907 should be applied extraterritorially in the twenty-first century.
4.23
The difficulties
in determining the “living wage” would involve corporations in considerable
expense and there is no certainty, despite a corporation’s best efforts, that,
in the event of litigation, an Australian court would find that it had been
paying its workers a “living wage”. Australian corporations would therefore
always operate under the threat of litigation.
4.24
The Committee
concludes that the Bill’s requirement that a corporation be required to
determine a “living wage” in all of the jurisdictions in which it operates is
unreasonable and impractical.
4.25
Senator Murray
agrees that the definition of a living wage is problematic, and either needs to
be withdrawn or significantly amended.
Human
rights standards
4.26
The Bill, at clause 10, would require Australian
corporations operating overseas to avoid discriminating in its employment
practices
on the basis of race, colour, sex, sexuality, religion,
political opinion, national extraction or social origin.[13]
4.27
The Committee in no way endorses discrimination.
It is evident, however, from the submission of the Melbourne Practitioners of Falun
Dafa,[14]
that this clause of the Bill could be a source of friction with other nations.
Friction could result from Australian corporations being required either to
hire persons belonging to religions and political parties considered illegal in
the jurisdictions in which they operate, or else face litigation in Australian
courts.
4.28
The Committee finds itself unable to recommend a
Bill that has the potential to unnecessarily damage Australia’s foreign
relations.
Duty
to observe tax laws
4.29
Clause 11 of the Bill requires Australian
corporations to obey the tax laws of the jurisdictions in which they operate.
The Committee in no way condones tax evasion. Nevertheless, there are manifest
difficulties in any legislation that would require Australian courts to
adjudicate cases involving Australian corporations allegedly breaching foreign
taxation laws in foreign jurisdictions to the detriment of the consolidated
revenue of foreign nations. The correct place for such litigation is the
foreign states concerned.
4.30
The Committee unanimously concludes that, as a
matter of principle, it is inappropriate for the Australian Parliament to enact
legislation requiring companies to obey the laws of sovereign foreign nations.
Duty
to observe consumer health and safety standards
4.31
Clause 12 of the Bill requires Australian
corporations, producing goods and services overseas, to simultaneously satisfy
both Australian health and safety standards and the health and safety standards
of the jurisdiction in which they operate.
4.32
Amending the Bill so that Australian
corporations are required to adhere to Australian standards only could be
equivalent to encouraging Australian corporations to flout the laws of foreign
jurisdictions. Amending the Bill so that Australian corporations had only to
observe the standards of the jurisdiction in which they operated would be
tantamount to requiring corporations in foreign jurisdictions to comply with
foreign laws, which is clearly a matter for the foreign jurisdiction.
4.33
The Committee does not however subscribe to the
‘lowest common denominator’ view. That is to say, if a foreign jurisdiction
has less rigorous standards than Australia (say on mine safety, as an example),
then the Committee would be surprised if an Australian corporation does not try
to maintain the standards it maintained at home. However, the Committee finds
that attempting to legislate this, as expressed in clause 12 of the Bill, is a
fundamental defect in the Bill.
Duty
to observe consumer protection and trade practices standards
4.34
Subclause 13 of the Bill requires that
Australian corporations operating overseas refrain from “misleading or
deceptive” [15] conduct.
Considering the vast amount of litigation that a similar section in the Trade
Practices Act 1974 (Cth) has inspired, the Committee is concerned that
Australian courts may be swamped by corporations bringing actions against each
other. The Committee is not convinced that such litigation would be productive.
4.35
The Committee finds itself unable to recommend
legislation, the effect of which would be to dramatically increase the caseload
of Australian courts with corporations suing other corporations in order to
gain a commercial advantage.
Reporting
4.36
The Committee acknowledges that reporting may be
an essential part of ensuring compliance with some laws. The Committee notes
advice from the Australian Institute of Corporate Citizenship that reports
produced by corporations should be publicised, since publicity “encourages
continuous improvement”.[16]
4.37
The Committee concludes, however, that the
reporting requirements required by the Bill would be both “onerous and
expensive”,[17]
and are inconsistent with best practice. In addition the Committee accepts the
contention of CPA Australia and the Institute of Chartered Accountants in
Australia, that the deadline of 31 August for corporations to lodge Code of
Conduct Compliance Reports, presents corporations with a “more onerous time
frame than applies for other annual report information”.[18]
4.38
The Bill would require the Australian Securities
and Investments Commission to report on corporations’ compliance with the Bill.[19] The Committee agrees with the
assessment of Mr Sean Cooney that the Commission lacks the expertise to
evaluate whether corporations have complied with the terms of the Bill.[20]
4.39
The Committee concludes that the reporting
requirements of the Bill are unwieldy to the point of being impossible to
implement without significant costs being incurred by both corporations and the
Australian Securities and Investments Commission. The Committee finds that any
supposed benefits to be derived from the reporting regime would not compensate
for the loss suffered due to the imposition of associated costs.
Enforcement
4.40
The Bill requires corporations to report on
their compliance with the Bill to the Australian Securities and Investments
Commission, which in turn would prepare a report for the Commonwealth
Parliament.[21]
The Bill also will allow civil penalties to be applied to, and civil action to
be taken against, corporations which breach the Bill’s provisions.[22]
4.41
The Committee is grateful for the advice from
the Environmental Defender’s Office Ltd that the civil penalties to be imposed
by the Bill differ from those specified in the Environment Protection and Biodiversity
Conservation Act 1999 (Cth) even where the offences are similar.[23]
4.42
The Committee believes that, as a general rule,
similar offences should attract similar penalties. The Committee is unable to
discern any rationale for the penalties specified in the Bill and unanimously
concludes that enacting the Bill would lead to unwarranted confusion in the
corporate world, unless the Bill’s provisions were made consistent in these
respects.
The Status Quo
4.43
Various submitters and witnesses stated that the
status quo was unacceptable because it was tantamount to allowing
Australian corporations overseas to degrade the environment and abuse the
rights of foreign workers.
4.44
The Committee in no way endorses inappropriate
behaviour on the part on Australian corporations. The Committee notes, however,
that the evidence of inappropriate corporate behaviour which was presented to
it almost invariably concerned the same incidents. The Committee therefore
concludes that Dr Nahan of the Institute of Public Affairs was correct when he
testified that such incidents were “few in number”.[24] The Committee therefore
concludes that there is no evidence of systemic failure regarding Australian
corporate behaviour.
4.45
As a general rule the Committee believes that
the Parliament should legislate only where there is a demonstrated systemic
failure in the status quo. Since there is no evidence of systemic
failure in the status quo the Committee questions the necessity of
enacting such a wide-ranging and generic piece of legislation as the current
Bill.
4.46
The Committee concludes that there is no
demonstrated need for the current Bill.
Australia’s Reputation and
Extraterritoriality
4.47
The Committee does not accept that the Bill
would enhance Australia’s corporate reputation. The Committee is unable to see
any way that the Bill’s extraterritorial imposition of Australian standards on
corporations operating within the territory of sovereign, foreign nations will
be interpreted as anything other than implying that local standards are
inferior.
4.48
Any kudos gained by Australian corporations
appearing to adhere to high standards of behaviour will be lost if Australia is
perceived as suggesting that the laws of other nations are deficient.
4.49
The Committee notes that Australians in the past
have resented foreign nations applying their laws extraterritorially within
Australia. It is probable that the governments and numbers of citizens of
foreign nations will similarly resent any attempt by Australia to apply its
laws extraterritorially within their jurisdictions. This is particularly so in
relation to the current generic Bill as opposed to, for example, legislation
which specifically targets child sex tourism. The Committee therefore agrees
with Mr Bosch that there is reason to believe the Bill will be viewed overseas
as “arrogant, patronising, paternalistic and racist”.[25]
4.50
The Committee also notes that existing case law
provides avenues for foreign plaintiffs to seek redress for wrongs committed by
Australian corporations overseas.
4.51
The Committee therefore concludes that the Bill
is not only largely superfluous from the viewpoint of protecting the
environment and enhancing the conditions of foreign workers, but also has a
very real potential for offending foreign nations.
Conclusion
4.52
Mr Bosch reminded the Committee of the exchange
between the Shakespearian characters Friar Laurence and Romeo
Romeo: O, let us hence; I
stand on sudden haste.
Friar Laurence: Wisely and slow; they stumble that run fast.[26]
4.53
The Committee agrees with this assessment. The
Australian Parliament should not move hastily to legislate in this area lest
the result be more harm than good. The current Bill appears to have been
drafted, in the main, as a reaction to unrelated incidents overseas of
environmental damage. The Bill, however, would not necessarily result in fewer
incidents of environmental damage and abuse of workers’ rights, but rather
could cause Australian corporations to incorporate outside Australia, withdraw
from their operations overseas, and even involve Australia in acrimonious
exchanges with other nations about imperialism.
Recommendation
The
Committee recommends that the Bill not be passed because it is unnecessary and
unworkable.
Senator Grant Chapman
Chairman
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