Services, financial services, investment and digital trade
5.1
This chapter of the report discusses chapters in the Free Trade Agreement between Australia and the United Kingdom of Great Britain and Northern Ireland (AUKFTA) that deal with trade in services, including financial services, investment and digital trade.
5.2
Chapter 8 of the AUKFTA addresses cross-border trade in services. The chapter applies national treatment and most-favoured-nation (MFN) principles, in addition to prohibiting some restrictions on market access, and establishing a range of requirements for domestic regulatory regimes. Some provisions in this chapter are subject to non-conforming measures, which are listed by Parties separately. There are two chapter-specific annexes dealing with express delivery services in the context of postal monopolies, and access to certain port services by United Kingdom (UK)-registered ships.
5.3
Financial services are addressed in Chapter 9 of the AUKFTA, which applies national treatment, market access, local presence, MFN, and other obligations with regard to senior management and boards of directors. Parties are able to specify non-conforming measures. Other provisions deal with transparency, data localisation, back-office functions, and other regulatory measures.
5.4
Chapter 13 of the AUKFTA aims to reduce the barriers to investment between the two Parties. It does so by applying (subject to non-conforming measures) market access, national treatment and MFN treatment requirements; and by prohibiting some performance requirements and requirements for the nationality or residency of boards of directors or senior managers of public and private companies. Other provisions deal with expropriation and compensation, and prohibit limitations on transfers except in limited circumstances. There are no investor-state dispute settlement (ISDS) provisions in this chapter.
5.5
The Committee notes that with respect to the present application by the UK to accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Department of Foreign Affairs and Trade (DFAT) indicated it was likely that side letters would be agreed by Australia and the UK excluding the application of ISDS between our nations, just as there are such side letters agreed under the CPTPP by Australia and New Zealand.
5.6
Chapter 14 of the AUKFTA applies to measures of a Party affecting trade enabled or facilitated by electronic means. The provisions in the chapter can be separated into three main areas: the establishment of a framework for digital trade that allows for each Party to take its own legislative and regulatory approach, principles for transparency and to promote innovation, and provisions for the protection of data. There are various carve-outs and exceptions to the scope of the chapter.
Services
Services in the modern economy
5.7
There is no single definition for ‘services’, however it encompasses a range of intangible products, including:
business and professional: accounting, advertising, architecture, engineering, computer and related, law, merchanting, operational leasing, management consulting
communication: audio-visual, postal, courier, telecommunications, satellite
other: construction, distribution, education, energy, environmental, financial, insurance, health, social, travel, tourism, transport (freight and passenger), research and development
intellectual property (IP) charges, royalties and license fees.
5.8
Globally, services are the largest source of jobs and output with all segments of the economy depending on the provisions of services—services contribute to the competitiveness of trade in goods and when integrated with manufacturing and agriculture, allow for the creation of global value chains.
Existing services agreements
5.9
The existing multilateral agreement on services, the World Trade Organization (WTO) General Agreement on Trade in Services (GATS) was negotiated more than 25 years ago as part of the WTO Uruguay Round, and since then members of the WTO have not been able to agree on an update to this agreement.
5.10
Liberalising trade in services is complex, partly because services are largely intangible and non-storable, and barriers are typically regulatory rather than tariff. This is reflected in Chapter 8 of the AUKFTA, which as discussed below contains significant provisions on domestic regulation.
Trade in services between Australia and the UK
5.11
The UK is one of four entities that dominate global trade in services, the others being the United States (US), Japan, and the Euro area. While Australia has a trade surplus with the UK, it has a services trade deficit and though it halved in 2020 from 2019 levels, this was almost entirely attributable to a significant reduction in Australians travelling to the UK.
5.12
Typically, Australia’s largest services export to the UK is travel services (that is, people from the UK travelling to Australia for personal reasons (that is, not for business).
Table 5.1: Australia—Services trade with the UK: 2016-2020
|
|
|
|
|
|
|
|
Total services exports
|
$5,313
|
$5,402
|
$5,465
|
$5,852
|
$3,853
|
|
Total services imports
|
$7,881
|
$8,950
|
$9,484
|
$10,172
|
$5,997
|
|
Balance on services trade
|
-$2,568
|
-$3,548
|
-$4,019
|
-$4,320
|
-$2,144
|
|
|
|
Maintenance and repair nie
|
$1
|
$0
|
$1
|
$1
|
$0
|
|
Transport services
|
$250
|
$254
|
$255
|
$298
|
$125
|
|
Travel services
|
$3,027
|
$2,876
|
$2,803
|
$2,594
|
$738
|
|
Business
|
($241)
|
($254)
|
($264)
|
($236)
|
($77)
|
|
Personal
|
($2,785)
|
($2,622)
|
($2,538)
|
($2,358)
|
($661)
|
|
Education-related
|
($231)
|
($247)
|
($258)
|
($281)
|
($241)
|
|
excl education-related
|
($2,555)
|
($2,375)
|
($2,281)
|
($2,077)
|
($420)
|
|
Construction services
|
$0
|
np
|
np
|
np
|
np
|
|
Insurance and pension services
|
$14
|
$9
|
$10
|
$14
|
$15
|
|
Financial services
|
$540
|
$738
|
$701
|
$828
|
$639
|
|
IP charges nie
|
$81
|
np
|
np
|
np
|
np
|
|
Telecommunications computer and information services
|
$439
|
$491
|
$611
|
$545
|
$602
|
|
Other business services
|
$808
|
$756
|
$768
|
$1,228
|
$1,515
|
|
Personal, cultural and recreational services
|
$109
|
$154
|
$149
|
$165
|
$121
|
|
Government services
|
$46
|
$54
|
$60
|
$61
|
$28
|
|
Services imports
|
|
Maintenance and repair nie
|
$68
|
$63
|
$134
|
$223
|
$85
|
|
Transport services
|
$487
|
$500
|
$571
|
$521
|
$365
|
|
Travel services
|
$4,036
|
$4,244
|
$4,427
|
$4,636
|
$642
|
|
Business
|
($324)
|
($293)
|
($301)
|
($328)
|
($84)
|
|
Personal
|
($3,713)
|
($3,951)
|
($4,125)
|
($4,308)
|
($558)
|
|
Education-related
|
($35)
|
($25)
|
($21)
|
($28)
|
($13)
|
|
excl education-related
|
($3,677)
|
($3,926)
|
($4,104)
|
($4,280)
|
($545)
|
|
Insurance and pension services
|
$577
|
$792
|
$728
|
$744
|
$758
|
|
Financial services
|
$383
|
$686
|
$490
|
$662
|
$786
|
|
IP charges nie
|
$330
|
$658
|
$844
|
$879
|
$963
|
|
Telecommunications, computer and information services
|
$343
|
$367
|
$382
|
$379
|
$474
|
|
Other business services
|
$1,235
|
$1,073
|
$1,305
|
$1,594
|
$1,481
|
|
Personal, cultural and recreational services
|
$328
|
$467
|
$490
|
$408
|
$314
|
|
Government services
|
$93
|
$102
|
$114
|
$127
|
$128
|
Source: National Interest Analysis (NIA).
Key provisions in the trade in services chapter
Scope
5.13
The services chapter of the AUKFTA (Chapter 8) applies to measures of a Party affecting cross-border trade in services by service suppliers of the other Party. Those measures include measures affecting the:
production, distribution, marketing, sale or delivery of a service
purchase or use of, or payment for, a service
access to and use of distribution, transport or telecommunications networks and services in connection with the supply of a service
presence in the Party’s territory of a service supplier of the other Party
provision of a bond or other form of financial security as a condition for the supply of a service.
5.14
The chapter also contains annexes on express post delivery services and international maritime transport services.
Services activities not covered by the chapter
5.15
The chapter does not apply to financial services as defined in Chapter 9; government procurement; services supplied in the exercise of governmental authority; subsidies or grants provided by a Party, including government-supported loans, guarantees and insurance; audio-visual services; measures regarding citizenship, nationality or residence on a permanent basis.
5.16
While the chapter does apply to a range of air services that allow for air transport, it does not apply to air transport itself.
Key liberalising provisions
5.17
National treatment: Article 8.3 imposes national treatment obligations, and specifies these extend to the regional level of government.
5.18
MFN: Article 8.4 imposes MFN treatment obligations under which Parties have to offer treatment no less favourable than they accord in like circumstances to a non-Party.
5.19
Market access: No level of government is permitted to limit trade in services by, broadly, limiting the number of service suppliers, the value of service transactions, the number of service operations, or the number of natural persons that may be employed in a particular service sector. A Party also cannot limit the type of legal entity or joint venture through which services may be supplied.
5.20
Local presence: Parties are not permitted to require a service supplier to establish or maintain a physical presence as a condition for the cross-border supply of a service.
Non-conforming measures
5.21
Parties are permitted to specify ‘non-conforming measures’ where the requirements for national treatment, MFN and market access do not apply for certain services, and where local presence may be required.
5.22
The Parties agree to consult in cases where a non-conforming measure applied by a regional level of government is considered to create a material impediment to the cross-border supply of services.
Schedules of non-conforming measures
5.23
Australia and the UK have specified non-conforming measures in their respective schedules to Annex I and Annex II.
5.24
The annexes do not list a range of non-conforming measures, such as qualification requirements, technical standards, and authorisation and licencing requirements. To the extent these are non-discriminatory and do not constitute a limitation within the meaning of the AUKFTA, they continue to apply when not listed. Measures that may be permitted include the need to obtain a licence, satisfy a universal service obligation, to have recognised qualifications in regulated sectors, to have completed a period of recognised training, or to pass specific examinations, amongst other things.
Australia’s non-conforming measures in Annex I
5.25
Annex I for Australia identifies a number of non-conforming measures relating predominantly to national treatment and local presence—specifically, there would remain some residency or citizenship requirements, location and service requirements, and various licencing requirements—at the federal and state or territory level. Some provisions target market access, such as the requirement for authorisation for foreign fishing vessels or residency requirements for some licences in some jurisdictions.
5.26
Australia reserves the right to maintain and add to its schedule to Annex I any non-conforming measure at the regional level of government that existed at 1 January 2005, but was not listed in the schedule at the date of entry into force of the AUKFTA.
Views of participants—Removal of blanket exemptions for existing state/territory government non-conforming measures
5.27
According to the Australian Fair Trade and Investment Network, the blanket exemption for existing state/territory government non-conforming measures or exceptions applying to the services and investment chapters has been removed from the AUKFTA and all non-conforming measures or exemptions at a state/territory government level have to be listed separately in Annex I. This creates a danger not all exemptions applying to services and investment that should be listed have been listed. This concern was also raised by the Australian Council of Trade Unions (ACTU).
Australia’s non-conforming measures in Annex II
5.28
Annex II contains non-conforming measures that are existing, or where a Party may adopt new or more restrictive measures that do not conform with the national treatment, MFN, market access and local presence requirements. The rationale behind Annex II is it should contain only a few cases where there are well-justified sensitivities. This may be because there is insufficient regulatory development or other domestic sensitivities that make it necessary to reserve policy space for the future.
5.29
Annex II contains a significant reservation with regard to education services, specifying nothing in Chapter 8 or Chapter 13 (investment) would interfere with:
the autonomy of education institutions to set admissions policies, tuition rates, and course content
non-discriminatory accreditation, quality assurance, and standards requirements for education institutions
government funding, subsidies, grants or other public benefits to education institutions
non-discriminatory requirements on education institutions relating to establishing and operating in a particular jurisdiction.
5.30
Australia has listed a range of non-conforming measures to some or all of the national treatment, MFN, market access and local presence requirements in Chapter 8, including:
Australia’s foreign investment framework
local content and expenditure requirements for broadcasters
provision of law enforcement and correctional services
the following services to the extent they are social services established or maintained for a public purpose: income security or insurance; social security or insurance; social welfare; public education; public training; health; child care; public utilities; public transport; public housing.
5.31
Annex II places conditions on the MFN provision in a number of areas that would limit the extension of certain concessions to the UK. It also states subsidies programs under Australia’s Pharmaceutical Benefits Scheme and Medicare Benefits Schedule, or successor programs, are not within the scope of cross-border trade in services.
UK’s non-conforming measures in Annex II
5.32
The UK has similarly identified a number of non-conforming measures in Annex II including: the production, distribution or trade in war material; the supply of health professionals or cross-border retail sales of pharmaceuticals; education services that receive public funding or state support; and cross-border supply of social services.
5.33
Measures concerning health services that receive public funding or state support are dealt with for the UK through specific exemptions under Chapter 31.
Domestic regulation affecting services (authorisation)
5.34
Regulation relating to licences, qualifications or technical standards can potentially be a barrier to services trade even where there is an absence of market access restrictions or local presence requirements. Article 8.8 deals with any licensing requirements and procedures, qualification requirements and procedures, and technical standards required by competent authorities. The requirements under this article are extensive and detailed, and extend for six pages of Chapter 8.
5.35
Authorisation means permission resulting from a procedure a person must follow to demonstrate compliance with licensing or qualification requirements, or technical standards.
5.36
Where authorisation is required, information necessary to comply with requirements and procedures must be publicly available. To the extent practicable, applicants should not be required to submit multiple applications for authorisation.
5.37
Measures relating to authorisation must preclude assessment in an arbitrary manner. The measures must be based on criteria that are clear and transparent, objective and established in advance, and not discriminate between men and women. The associated procedures must be impartial, easily accessible to all applicants and allow the applicant to demonstrate whether they meet the requirements.
5.38
A number of provisions address processes undertaken by competent authorities, including when applications can be made; electronic submission; authentication of documents; timeframes and processing updates; notification of outcomes, including reasons for a rejection and procedures for resubmission; clear and transparent fee arrangements; procedures for examinations; independence and impartiality of competent authorities.
5.39
Where laws or regulations are proposed in relation to authorisation, there is a requirement for sufficient documentation and detail to be provided to allow interested persons to assess whether and how their interests may be ‘significantly affected’. There must be an opportunity for comment and for such comments to be considered, as well as a reasonable time between publication of the law/regulation and it coming into effect.
5.40
Where technical standards are to be adopted, these should be developed through open and transparent processes.
5.41
Where there are a limited number of licences available because of the scarcity of available natural resources or technical capacity, the selection procedure is to be impartial and transparent, and appropriately publicised. This selection process may take into account ‘legitimate policy objectives, including considerations of health, safety, the protection of the environment and the preservation of cultural heritage’.
Recognition and non-Parties
5.42
Article 8.9 deals with recognition for the purposes of fulfilment of a Party’s standards or criteria for authorisation, licensing or certification of service suppliers. It provides that a Party may recognise, whether through harmonisation or otherwise (based on an agreement or accorded autonomously):
… the education or experience obtained, requirements met, or licences or certifications granted, in the territory of a non-Party.
5.43
The effect of this provision is to allow a Party to enter into a recognition arrangement with a non-Party or non-Parties that does not include the other Party. This article closely follows article VII of the GATS which deviates from the MFN principle by allowing a Party to recognise qualifications (and so on) gained in one jurisdiction but not others.
Denial of benefits
5.44
In certain circumstances, a Party may deny the benefits of Chapter 8 to a service supplier of the other Party, if persons of a non-Party own or control the enterprise and other requirements are met.
Transfers and payments
5.45
Chapter 8 provides for transfers and payments that relate to the cross-border supply of services to be made freely and without delay, in a freely usable currency at the market rate of exchange.
5.46
In certain circumstances, however, a Party may prevent or delay a payment or transfer, through good faith application of its law, for instance when it relates to criminal offences, financial reporting, protection of rights of creditors, or ensuring compliance with orders.
Committee on Services and Investment
5.47
The Parties would establish a Committee on Services and Investment which would report to the Joint Committee, and be composed of government representatives of each Party. The Committee would:
review and monitor the implementation of Chapter 8 (including its annexes), Chapter 9 (financial services and annexes), Chapter 10 (professional services and recognition of professional qualifications), Chapter 11 (temporary entry for business persons), Chapter 12 (telecommunications), Chapter 13 (investment), and Chapter 14 (digital trade)
consider ways to enhance trade and investment, including through amendments to schedules of non-conforming measures and the temporary entry for business persons
facilitate exchange of information.
Annex 8A—Express delivery services
5.48
Annex 8A requires that where a Party maintains a postal monopoly, the scope of the monopoly must be appropriately defined. While each Party has the right to define the kind of universal service obligation it wishes to adopt or maintain, any such obligation must be administered transparently, and in a non-discriminatory and impartial manner.
5.49
Other provisions in the annex prohibit the abuse of a monopoly position, and do not permit a postal monopoly to cross-subsidise its own or any other competitive supplier’s express delivery services with revenues derived from monopoly postal services.
5.50
Express delivery service suppliers cannot be required as a condition of authorisation to supply a universal service. Neither can a Party apply fees or other charges exclusively on express delivery service suppliers in order to fund the supply of another delivery service.
Annex 8B—International maritime transport services
5.51
The aim of Annex 8B is to liberalise international maritime transport services by preventing a Party from reserving to its own organisations, ships or nationals, access to certain port services, subject to any non-conforming measures.
5.52
This is the first time there has been an annex dealing with international maritime services in an Australian trade agreement; it was included at the request of the UK, which while it did not have a commercial interest with Australia in the sector, wanted to set the precedent for future trade negotiations where it might have stronger commercial interests.
5.53
According to DFAT, the primary beneficiary of the annex would be UK registries or registered ships. It reflects:
… the current situation of nondiscriminatory access to port services, for example, and towage and pilotage services by foreign flagged vessels, including United Kingdom flagged vessels. But it provides the transparency and certainty for UK registries or registered ships that they have that access in the agreement.
5.54
The Committee was told the provisions in the annex were:
… subject to our usual reservation for cabotage. So we have preserved all of the existing settings that apply to cabotage in Australian waters. It only refers to international maritime transport services, so that means from an Australian port outside our waters to the United Kingdom or to a third country, not within Australian waters. That's key … it provides transparency and certainty but is subject to all of our cabotage reservations.
Provisions in the annex
International maritime transport services
5.55
Annex 8B defines ‘international maritime transport services’ as the transport of passengers or cargo by sea-going vessels between a port of a Party and a port of the other Party or of a non-Party, and includes the direct contracting with suppliers of other transport services, with a view to covering door-to-door or multimodal transport operations under a single transport document, but not the supply of those other transport services.
Obligations
5.56
National treatment-type obligations apply to vessels supplying an international maritime transport service and flying the flag of the other Party, and international maritime transport service suppliers of the other Party, with regard to:
use of port infrastructure and services of ports
use of maritime auxiliary services
access to customs services
assignment of berths and facilities for loading and unloading.
5.57
In certain circumstances, vessels supplying an international maritime transport service and flying the flag of the other Party, and international maritime transport service suppliers of the other Party, may reposition owned or leased empty containers, that are not being carried as cargo against payment, between ports.
5.58
A vessel flying the flag of the other Party and an international maritime transport services supplier of the other Party may also provide feeder services between ports, subject to authorisation by the competent authority where applicable.
5.59
Neither Party is permitted to have a cargo-sharing arrangement with a non-Party concerning maritime transport services.
5.60
Neither Party is permitted to require that all or part of any international cargo be transported exclusively by vessels registered in that Party or owned or controlled by nationals of that Party.
Views of participants—Concerns expressed about the impact of the annex on cabotage
5.61
The Maritime Union of Australia (MUA) argued that notwithstanding the non-conforming measures established in Annex I and Annex II (including the Coastal Trading (Revitalising Australian Shipping) Act 2012 (CT Act) that regulates cabotage in Australia), Australia would no longer be able to legislate for Australian registered ships to have exclusive access to certain maritime services because it would be required to provide UK-registered ships with ‘equivalency’ to certain maritime services.
5.62
Broadly, the MUA took issue with the manner in which the Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA) has interpreted and administered the existing cabotage law and practice (specifically the CT Act), which it said has ‘all but destroyed Australian cabotage’. It said there has not been a single ship reserved for an Australian cabotage trade since 2013 and instead DITRDCA has adopted a narrow interpretation of cabotage and granted temporary licences where required to foreign registered ships with foreign crew.
5.63
The MUA stated although the non-conforming measures appear to protect cabotage, the definition of cabotage in Annex II makes no reference to what it says is the core principle of cabotage: ‘the reservation for the ships and associated seafarers of the nation in question in relation to the transportation of goods and services between domestic ports’. The definition in Annex 8B refers only to the actions that constitute cabotage, not to who carries it out. This is similar to the interpretation the MUA stated DITRDCA has adopted in administering the CT Act.
The maritime services annex in the free trade agreement represents a significant departure from all previous free trade agreements, which have generally quarantined maritime services to respect domestic cabotage law. The maritime services annex in this free trade agreement severely qualifies that generally accepted quarantining, or ring fencing, of domestic cabotage law by providing a number of qualifications that undermine national sovereignty in the provision of maritime services.
… Australia will no longer be permitted to legislate for exclusive access to certain maritime services by Australian registered ships covered by the free trade agreement. That's because the free trade agreement requires UK registered ships to be given an equivalency to those specified maritime services. That feature directly undermines Australia's historic support for retention of maritime cabotage, notwithstanding that annex 2A to the free trade agreement provides that Australia reserves the right to adopt or maintain any measure with respect to maritime cabotage, services and offshore transport services.
5.65
With regard to the definition of cabotage, DFAT confirmed:
The definition of ‘cabotage’ as contained in our reservation, or exception, to the disciplines in the agreement is actually a longstanding definition of cabotage. It has been in a number of our FTAs [free trade agreements] over at least the last 10 years, so it is not a new definition by any means, and it is one that certainly reflects the current state of play of cabotage in Australia.
5.66
However, the MUA argued the AUKFTA would create an additional hurdle for any future Australian government that may wish to strengthen cabotage in Australia, for instance, by legislating for a national strategic fleet or instituting measures that would facilitate the long-term growth of the Australian shipping industry and enhance the Australian maritime skills base. It stated:
… the maritime services annex explicitly prohibits either Australia or the UK from adopting or maintaining a measure that requires all or part of any international cargo to be transported exclusively by vessels registered in that party or owned or controlled by nationals of that party. This would seem to prohibit Australia from legislating for a national strategic fleet comprising ships that are exclusively registered in Australia and would be required to treat UK registered ships as equivalent to Australian ships.
5.67
The MUA was also concerned the inclusion of Annex 8B and its codification of existing law and practice, would create a precedent for future free trade agreements (FTAs). While the UK may not make significant use of this aspect of the FTA, various European nations, with whom Australia is currently negotiating an FTA (the proposed Australia-European Union FTA) are large international ship service providers that currently provide substantial shipping services to Australia. Receiving national treatment with regard to cabotage would provide significant opportunities to these service providers.
5.68
Further, the MUA pointed out none of the states or the Northern Territory have separately listed marine laws and related laws that regulate the procurement of port service providers (including towage, mooring, pilotage, and bunkering services), which allow the states and the Northern Territory to establish procurement conditions, including the nationality of the ship to be procured for the service.
5.69
Australia has made a reservation in Annex I that it can add to the schedule any non-conforming measure at the regional level (state or territory level) that existed at 1 January 2005.
Financial services
5.70
Financial services have been part of the majority of trade agreements negotiated since the mid-1990s, either incorporated in the services chapter (as is the case with the GATS) or as a stand-alone chapter.
5.71
The AUKFTA defines financial services as:
… any service of a financial nature, including all insurance and insurance related services, all banking and other financial services (excluding insurance), and services incidental or auxiliary to a service of a financial nature.
5.72
The financial services chapter of the AUKFTA (Chapter 9) contains an extensive list of insurance and insurance-related services, and banking and other financial services to which the provisions in the chapter apply. Insurance includes direct insurance, reinsurance, insurance mediation, and a range of other services including consultancy, actuarial, risk assessment and claim settlement services. Financial services includes, amongst other things, deposits, guarantees, asset management, settlement and clearing services, securities, financial information, lending, advisory, and trading in money market instruments and derivatives.
Australia’s financial services trade with the UK
5.73
The recent state of Australia’s services and financial services trade with the UK was discussed in the NIA and is provided below—it shows Australia had a financial services deficit with the UK in 2020.
Table 5.2: Australia’s financial services trade with the UK: 2016-2020
|
|
|
|
|
|
|
|
Total services exports
|
$5,313
|
$5,402
|
$5,465
|
$5,852
|
$3,853
|
|
Total services imports
|
$7,881
|
$8,950
|
$9,484
|
$10,172
|
$5,997
|
|
Balance on trade
|
-$2,568
|
-$3,548
|
-$4,019
|
-$4,320
|
-$2,144
|
|
Financial services exports
|
$540
|
$738
|
$701
|
$828
|
$639
|
|
Financial services imports
|
$383
|
$686
|
$490
|
$662
|
$786
|
|
Balance on trade
|
$157
|
$52
|
$211
|
$166
|
-$147
|
Source: NIA.
Key provisions in the financial services chapter
Scope of the chapter
5.74
Provisions in Chapter 9 apply to any measure adopted or maintained affecting trade in financial services with respect to:
established financial service suppliers of the other Party
investors of the other Party and their investments in an established financial service supplier in the Party’s territory
cross-border financial services suppliers.
5.75
Financial services can be supplied across borders either from the territory of a Party into the territory of the other Party; in the territory of a Party to a person of the other Party; or by a national of a Party in the territory of the other Party.
5.76
A number of provisions from Chapter 8 (cross-border trade and services) and Chapter 13 (investment) are incorporated and made part of the chapter, including those relating to denial of benefits, treatment in cases of armed conflict or civil strife, payments and transfers, corporate social responsibility, and environmental, health and other regulatory objectives.
Exclusions
5.77
Generally, unless conducted by financial service suppliers in competition with a public entity or financial service supplier, Chapter 9 does not apply to:
public retirement plans or statutory systems of social security
activities or services conducted for the account or with the guarantee or using the financial resources of the Party, including its public entities.
5.78
Other exclusions are provided for:
government procurement of financial services
subsidies or grants provided by a Party with respect to the supply of financial services, including government-supported loans, grants and insurance
measures regarding citizenship, nationality, or residence on a permanent basis.
Exceptions
Prudential regulation
5.79
Providing they are not used as a means of avoiding particular obligations, a Party is not prevented from adopting or maintaining measures for ‘prudential reasons’, which are further defined in the chapter.
Central banks
5.80
Provisions in Chapter 9, along with Chapter 8 (cross-border trade in services), Chapter 12 (telecommunications), Chapter 13 (investment) and Chapter 14 (digital trade) do not apply to measures taken or activities conducted by a central bank or monetary authority, or by any other public entity in pursuit of monetary policies and related credit policies or exchange rate policies.
Law enforcement, regulatory supervision, and legitimate commercial interests
5.81
Provisions in Chapter 9 would not require a Party to:
allow access to information relating to the financial affairs and accounts of individual customers of financial service suppliers, or to any confidential or proprietary information which, if disclosed, would impede law enforcement, interfere with specific regulatory or supervisory matters, or would otherwise be contrary to public interest or prejudice legitimate commercial interests of particular enterprises
disclose confidential or proprietary information in the possession of public entities.
Annex 9A
5.82
Annex 9A specifies which financial services supplied from one Party into the territory of the other Party (cross-border), are subject to national treatment, market access, and local presence provisions.
Key liberalising obligations
National treatment
5.83
National treatment obligations apply to:
investors of the other Party
established financial service suppliers and investments of investors of the other Party in established financial service suppliers
financial services specified by Annex 9A or cross-border financial service suppliers of the other Party seeking to supply or supplying those services
cross-border financial service suppliers seeking to supply or supplying financial services in the territory of a Party to a person of the other Party, or by a national of a Party in the territory of the other Party.
5.84
National treatment obligations also extend to regional levels of government.
Market access
5.85
Parties are not permitted to maintain measures that impose certain limitations on:
number of established financial services suppliers or cross-border financial services suppliers
total value of financial service transactions or assets
total number of financial service operations or the total quantity of financial services output
participation of foreign capital in terms of a maximum percentage limit on foreign shareholding in established financial service suppliers or a total value of individual or aggregate foreign investments in established financial service suppliers
total number of natural persons who may be employed in a particular financial services sector or supplier
the type of legal entity or joint venture through which a service may be supplied.
5.86
So long as they are in compliance with market access requirements, Parties can impose terms, conditions and procedures for the authorisation of the establishment and expansion of a commercial presence.
Local presence
5.87
Except for financial services supplied from the territory of one Party into the territory of the other Party that are not identified in Annex 9A, there is to be no requirement for a local presence either through a representative office or an enterprise or branch of an enterprise.
Most-favoured-nation treatment
5.88
Each Party is to accord treatment no less favourable than it accords to a non-Party in like circumstances to:
investors and investments of investors of the other Party in established financial service suppliers
established financial services suppliers of the other Party
financial services or cross-border financial service suppliers of the other Party.
5.89
MFN treatment does not include international dispute resolution procedures or mechanisms. This means dispute mechanisms under another agreement cannot be accessed.
Senior management and boards of directors
5.90
With regard to established financial service providers, there are to be no requirements as to the nationality of senior management or boards of directors. Residency requirements cannot apply to more than a minority of the board of directors of established financial services suppliers of the other Party.
Non-conforming measures to the key liberalising obligations
5.91
Parties are permitted to retain existing non-conforming measures at a local government level. Parties can retain existing non-conforming measures at the central or state/territory level if they are set out in Section A of each Party’s schedule to Annex III. In Section B, Parties may specify sectors, sub-sector or activities for which they may maintain existing, or adopt new or more restrictive measures that do not conform with the liberalising obligations in Chapter 9.
5.92
Other provisions carry across some non-conforming measures in the schedules to Annex I and Annex II, and from the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
5.93
Australia has listed 11 non-conforming measures (eight in Section A and three in Section B) and nominated the obligations to which they apply. For Australia, non-conforming measures include requirements for banking and authorised deposit-taking institutions, life insurers, residency of directors, some restrictions maintained by state or territory governments, and juridical form.
Views of participants—Concerns non-conforming measures present regulatory barriers to FinTech
5.94
Wise, a global technology company listed on the London Stock Exchange, criticised Australia’s non-conforming measures in Annex III which it said would prevent it from using a certain financial product in Australia. Wise acknowledged the Australian Government had a domestic public policy position towards a well-regulated banking sector with prudential measures to ensure stability and capitalisation. However, it argued this ‘policy position’ limited innovation in banking and finance.
Transparency
5.95
Parties are to meet a number of requirements with regard to transparently and impartially implementing regulation; ensuring relevant laws, procedures and administrative rulings are made easily available; meeting requests for information; and consulting on proposed regulation and responding to substantive comments made during consultation.
5.96
Where Parties have measures relating to the authorisation for the supply of a service, a number of requirements must be met, including independence of decision making, transparency, impartiality and non-discrimination.
5.97
If authorisation is required for the supply of a service, the information must be publicly available, including details on fees, appeal procedures, and monitoring of compliance. Other provisions relate to streamlining of administrative arrangements, including authenticated documents, timeframes for consideration, communication with applicants, allowing an applicant to make representations in support of an application, and informing an applicant of the reasons for denial of an application and not preventing submission of another application.
Data transfer and data localisation
5.98
The AUKFTA recognises each Party’s regulatory requirements for the electronic transfer of information and except as noted below, neither Party is permitted to prohibit or restrict the transfer of information, including personal information, where the transfer is necessary for the conduct of ordinary business. Parties are not permitted (subject to exceptions below) to require the location of financial service computing facilities in their territories as a condition for conducting business.
5.99
Parties can adopt or maintain measures that contravene these requirements to achieve a legitimate public policy objective including protection of personal information, personal privacy, and confidentiality of individual records and accounts, providing the measure is not arbitrary or unjustifiable or a disguised restriction on trade, and is proportionate to achieve the objective.
5.100
Parties can require localisation of computing facilities where they cannot ensure appropriate access to information required for financial regulation or supervision, providing the financial service supplier has an opportunity to remediate the lack of access to information, and the other Party or its regulatory authorities are informed prior to the imposition of any localisation requirements.
5.101
The requirements of article 9.12 do not apply to credit information or related personal information, of a natural person. Neither do the requirements apply to information held or processed by or on behalf of a Party, or measures related to that information, including measures related to its collection. This means the government retains the right to legislate for matters like privacy.
Access to payment and clearing facilities and self-regulatory organisations
5.102
Established financial suppliers of the other Party are to be granted access to payment and clearing systems operated by public entities.
5.103
Similarly, self-regulatory organisations (such as securities or futures exchanges or markets, clearing agencies) are to observe national treatment and MFN requirements when a Party requires a financial service supplier of the other Party to be a member of, to participate in, or to have access to, a self-regulatory organisation.
Back-office functions
5.104
Subject to some exceptions, Parties are to allow, to the extent practicable and according to domestic requirements, the performance of back-office functions of established financial service providers by head office, an affiliate in its territory, or an unrelated service supplier. However, a Party may require an established financial service supplier in its territory to retain certain functions.
Electronic payments
5.105
Parties agree to endeavour to support the development of cross-border electronic payments by fostering the adoption of international standards, promoting interoperability of payment infrastructures, and encouraging innovation and competition.
5.106
The Parties agree that regulation should be proportionate to the risks undertaken by the payment service providers.
New financial services
Financial services new to the territory of a Party
5.107
Parties are required to permit financial service suppliers of the other Party to supply a new financial service that Parties would permit their own financial service suppliers to supply, in like circumstances, without adopting a law or modifying an existing law. Parties remain able to determine the institutional and juridical form through which the new financial service may be supplied and may require authorisation for supply of the service.
Financial services new to the territories of both Parties
5.108
Parties are able to permit financial service suppliers of the other Party to supply a financial service new to the territories of both Parties. Parties can determine institutional and juridical form through which the service may be supplied and may require authorisation. For cross-border financial service suppliers, this applies to financial services specified in Annex 9A.
Implementation and operation
5.109
The Committee on Services and Investment established under article 8.13 would to be responsible for the implementation and operation of measures in Chapter 9.
Consultations
5.110
The chapter provides for a Party to request consultation with the other regarding matters arising from the AUKFTA affecting financial services. Parties are required to give sympathetic consideration to a request from the other Party, and are to report the results of consultations to the Committee on Services and Investment.
5.111
Consultations are also provided for where a Party considers a non-conforming measure by a regional level of government creates a material impediment to trade or investment in financial services. The Parties are to enter into consultations to exchange information and consider whether further steps might be necessary and appropriate.
Forum
5.112
The Parties agree to establish a Joint Financial Regulatory Forum (the Forum) to facilitate regulatory cooperation between the Parties. The Forum would generally meet annually and include appropriately senior representatives from the Treasury, Australian Prudential Regulation Authority, Australian Securities and Investments Commission, Reserve Bank of Australia and other agencies as relevant. Equivalent agencies for the UK would be involved (Treasury, Bank of England, Financial Conduct Authority).
Dispute settlement
5.113
Dispute settlement as established in Chapter 30 applies to disputes pursuant to Chapter 9, with some modifications. Where disputes arise from the operation of the chapter, all panellists appointed are to have the necessary expertise relevant to financial services.
5.114
With regard to temporary remedies provided for in Chapter 30, the following principles are to be applied:
if the measure affects the financial services sector and any other sector, the complaining Party may suspend obligations in the financial services sector that do not exceed a level equivalent to the level of nullification or impairment in the complaining Party’s financial services sector
if the measure affects only a sector other than a financial services sector, the complaining Party cannot suspend obligations in the financial services sector.
Mutual compatibility of regulatory and supervisory frameworks
5.115
The Parties undertake to work to achieve mutual compatibility of their respective regulatory and supervisory frameworks, including by developing consistent regulatory approaches on an outcomes basis, and applying internationally agreed standards.
Deference
5.116
Where agreeable, the Parties shall defer to the regulatory and supervisory frameworks of the other Party. Under such an arrangement, the Party would not require the other Party’s regulatory and supervisory frameworks to be identical, but would base any assessment on regulatory outcomes. This would potentially allow for an entity’s fulfilment of certain aspects of regulatory or supervisory frameworks in one Party to satisfy certain aspects of regulatory or supervisory frameworks in the other Party.
5.117
Annex 9C contains significant detail on the requirements when regulatory changes are made in circumstances when deference is in place, and how a Party may rescind its decision to defer.
Investment
5.118
Investment is defined in the AUKFTA as ‘every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk.’ Forms of investment may include:
shares, stock, and other forms of equity participation in an enterprise
bonds, debentures, other debt instruments, and loans
futures, options, and other derivatives
turnkey, construction, management, production, concession, revenue-sharing, and other similar contracts
licences, authorisations, permits, and similar rights conferred pursuant to the Party’s law
other tangible or intangible, movable or immovable property, and related property rights, such as leases, mortgages, liens, and pledges.
Foreign investment between the UK and Australia
5.119
In 2021, the UK was the second largest recipient of Australian foreign investment ($537.5 billion or 16.2 per cent), after the US ($1,113.8 billion or 33.5 per cent).
5.120
In 2021, the UK was Australia’s second largest source of foreign direct investment ($718.6 billion or 17.4 per cent), after the US ($1,053 billion or 25.5 per cent).
5.121
From the UK’s perspective, Australia ranks around eleventh in terms of UK foreign investment, receiving around 2 per cent of UK outward foreign investment in 2020.
5.122
The sectors of the Australian economy that most benefit from UK direct foreign investment are the financial services industry (£13,317 million in investment positions in 2020), followed by the food, beverages and tobacco industry (£3,252 million in investment positions in 2020), and the professional, scientific and technical services industry (£2,876 million in investment positions in 2020).
5.123
Under the AUKFTA, investors from the UK would be able to access the higher threshold (up to approximately $1.2 billion in some circumstances) before an investment would need to be screened by the Foreign Investment Review Board. This threshold is applied to a range of countries with whom Australia has FTAs. Generally, the threshold for private investors is $289 million.
Key provisions in the investment chapter
Scope and relation to other chapters
5.124
The investment chapter of the AUKFTA (Chapter 13) applies to measures adopted or maintained by a Party relating to:
investors of the other Party
5.125
A number of provisions in the chapter also apply to all investments in the territory of a Party: performance requirements; investment and environmental, health and other regulatory objectives; investment and environment; and corporate social responsibility.
5.126
Obligations under Chapter 13 apply to central, regional (state/territory) and local governments or authorities, including any person exercising any delegated governmental authority.
5.127
The market access, national treatment, MFN, performance requirements and senior management/board of directors requirements of the chapter do not apply to audio-visual services, or to the establishment, expansion or acquisition of an investment carried out in the exercise of governmental authority.
Key liberalising provisions
Market access
5.128
Neither Party is permitted to adopt or maintain a measure with respect to market access that requires an economic activity be carried out through a specific type of legal entity or by a joint venture. Neither can a Party impose a range of limitations, including on, broadly:
the number of enterprises that may carry out a specific economic activity
the total value of transactions or assets
the total number of operations or the total quantity of output
the participation of foreign capital in terms of a maximum percentage limit
the total number of natural persons that may be employed.
5.129
An exception may be made for measures that apply to a specific site or a particular limited area within the territory of a Party, and in some cases to limit the production of an agricultural good.
National treatment
5.130
Each Party is to accord to investors and covered investments treatment that is no less favourable than it accords, in like circumstances, to its own investors and investments. This extends to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.
Most-favoured-nation treatment
5.131
Each Party shall accord to investors and covered investments equal treatment, in like circumstances, to investors and investments from a non-Party. This extends to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.
5.132
The MFN treatment provisions do not encompass international dispute resolution procedures or mechanisms. This means MFN treatment provisions cannot be used to access dispute resolution procedures under another agreement, for instance, one that contains ISDS provisions.
Performance requirements
5.133
The Parties are not permitted, in connection with an investment in its territory, to impose or enforce any requirement, commitment or undertaking to:
export a given level or percentage of goods or services
achieve a given level or percentage of domestic content
purchase, use or accord preference to goods produced in its territory
foreign exchange inflows or earnings
transfer a technology, production process or proprietary knowledge
direct supply exclusively to a specific market
accord preference to technology of the Party or of a person of the Party
locate the regional or world headquarters of an enterprise in its territory
achieve a given level of research and development
limit royalties in some circumstances.
5.134
The receipt of an advantage cannot be based on a requirement to achieve a given level or percentage of domestic content; to preference goods from the territory; or in relation to foreign exchange inflows or foreign exchange earnings.
5.135
However, the receipt of an advantage can be conditioned on a requirement to locate production, supply a service, train or employ workers, construct or expand particular facilities, or carry out research and development in the territory.
5.136
Parties are permitted to adopt or maintain measures to protect legitimate public welfare objectives, provided these are not applied in an arbitrary or unjustifiable manner, or in a manner that constitutes a disguised restriction on trade or investment.
Senior management and board of directors
5.137
Parties cannot require an enterprise to appoint persons of a particular nationality or residency to senior management or board of director positions.
Non-conforming measures
5.138
Each Party’s respective schedule to the AUKFTA’s Annex I and Annex II contain non-conforming measures for certain requirements in the cross-border trade in services (Chapter 8) and the investment (Chapter 13) chapters. For Chapter 13, Parties may specify non-conforming measures to: requirements for market access, national treatment and MFN treatment; from performance requirements (such as local content, transfer of technology, to purchase certain goods, invest in research and development, locate headquarters); and residency or nationality requirements for senior management and boards of directors. Australia’s foreign investment framework is listed as a non-conforming measure.
Treatment of investment
Minimum standard of treatment
5.139
Covered investments are to be afforded treatment in accordance with applicable customary international law principles, including fair and equitable treatment and full protection and security of investments.
Treatment in case of armed conflict or civil strife
5.140
Parties are to accord to all investors, non-discriminatory treatment with respect to measures adopted relating to losses suffered by investments in the territory from armed conflict or civil strife. If, in the case of armed conflict or civil strife, a Party suffers a loss in the territory of the other Party resulting from requisition or unnecessary destruction by the authorities or forces, the Party is to provide restitution and/or compensation.
Expropriation and compensation
5.141
Expropriation is not permitted except for a public purpose, in a non-discriminatory manner, on payment of adequate compensation, and in accordance with due process of law. Specific provisions establish the requirements for compensation, including the calculation of fair market value.
5.142
An exemption from this article applies to the issuance of compulsory licences for IP in accordance with the TRIPS, and for a Party’s decision not to issue, renew, or maintain a subsidy or grant (in some circumstances).
5.143
In cases of indirect expropriation, a determination depends in part on whether there is any interference with ‘reasonable investment-backed expectations’. This is explained in a footnote that specifies whether an investor’s investment-backed expectations are reasonable depends, to the extent relevant, on factors such as whether the government provided the investor with binding written assurances and the nature and extent of governmental regulation or the potential for governmental regulation in the relevant sector. In effect, this limits the scope for investors to pursue the government for alleged indirect expropriation.
Transfers
5.144
Article 13.10 prevents a Party from limiting transfers (such as contributions to capital, profits, proceeds from sale, under a contract, or arising from a dispute) in relation to covered investments, except in limited circumstances.
5.145
Limited circumstances include: in cases involving bankruptcy or insolvency; the issuing, trading or dealing in securities, futures, options or derivatives; criminal or penal offences; financial reporting where necessary to assist law enforcement or financial regulatory authorities; to ensure compliance with judicial or administrative proceedings; or in relation to economic sanctions.
Special formalities and information requirements
5.146
Parties are permitted to maintain requirements for special formalities in connection with covered investments, for instance, residency requirements for registration or requiring a covered investment be legally constituted under the law of the Party.
Denial of benefits
5.147
A Party may deny the benefits of the chapter in cases where the enterprise of the other Party is owned or controlled by a non-Party and the denying Party adopts or maintains measures with respect to the non-Party that would be violated or circumvented if the benefits of the chapter were accorded to the enterprise or its investments.
Regulatory, environmental and other objectives
5.148
Parties are able to maintain and enforce any measure otherwise consistent with the chapter to ensure investment in its territory is undertaken in a manner sensitive to the environment, health, or other regulatory objectives.
5.149
Parties are permitted to set their own levels of environmental protection consistent with the AUKFTA.
5.150
The Parties affirm the importance of corporate social responsibility, as noted in international standards, guidelines and principles.
Annexes to Chapter 13
Annex 13A – Customary international law
5.151
Annex 13A states Parties have a shared understanding of ‘customary international law’, and that the customary international law minimum standard of treatment of aliens refers to all customary international law principles that protect the investments of aliens.
Annex 13B – Expropriation
5.152
Annex 13B outlines the shared understanding that Parties have in relation to expropriation and identifies the differences between direct and indirect expropriation.
Annex 13C – Foreign investment framework
5.153
Annex 13C exempts the foreign investment frameworks (legislation, regulation, ministerial statements) of Australia and the UK from the dispute resolution provisions in Chapter 30.
Digital trade
5.154
Digital trade encompasses digital goods such as software and applications, services that can be remotely accessed (such as publishing, higher education, banking, healthcare), and e-commerce (buying, selling and exchanging goods, services and information through electronic networks, including accommodation and transport). Digital technologies have significantly transformed how the global economy operates and by reducing transaction costs and other traditional constraints, have opened trade to sectors that have previously been dominated by larger companies.
5.155
According to the Export Council of Australia, in 2018 digital trade enabled up to $43 billion of economic value in Australia’s domestic economy. This is expected to grow to an estimated $192 billion by 2030.
5.156
The NIA and Regulation Impact Statement provided no indication of the extent of digital trade between Australia and the UK. The UK impact assessment stated in 2019, the UK exported £4.3 billion worth of services to Australia via digital delivery, roughly 59 per cent of UK service exports to Australia. The UK impact assessment suggested 52 per cent of UK services imports from Australia were supplied remotely.
5.157
Many trade agreements, like the AUKFTA, restrict the ability of counties to limit the flow of data across borders. This is because the movement of data is the foundation of digital trade. The Organisation for Economic Cooperation and Development describes data, in the context of digital trade, as a means of production, an asset that can be traded, and a means through which global value chains are organised and services delivered.
Different frameworks for data protection
5.158
Laws and regulations that governments adopt to govern the cross-border transfer of data may differ depending on the framework on which they are modelled. Two such frameworks are the Asia-Pacific Economic Co-operation Cross-Border Privacy Rules (CBPR) in which Australia is a participant, and the European Union General Data Protection Regulation (GDPR) which guides the UK’s laws. Broadly, the GDPR is a top-down approach considered to privilege individual rights and privacy, while the CBPR works bottom-up and leans towards business and trade objectives.
Key provisions in the digital trade chapter
Scope and general provisions
5.159
The provisions in Chapter 14 of the AUKFTA apply to measures of a Party affecting trade enabled or facilitated by electronic means.
5.160
The chapter does not apply to:
government procurement (except conclusion of contracts by electronic means, and electronic authentication and electronic trust services).
5.161
Provisions relating to the cross-border transfer of information by electronic means and the location of computing facilities do not apply to a measure that has been specified as a non-conforming measure in Chapter 8 (services) or Chapter 13 (investment), meaning Parties can, where identified, limit the cross-border transfer of information and require the location of computing facilities locally.
5.162
Provisions related to the cross-border transfer of information by electronic means, location of computing facilities, source code and cryptography, do not apply to information held or processed on behalf of a Party.
Provisions establishing a framework for digital trade
Customs duties
5.163
Neither Party can impose customs duties on electronic transmissions, however this does not preclude a Party from imposing internal taxes, fees or other charges on electronic transmissions provided they are in a manner consistent with the AUKFTA (for instance, they are non-discriminatory and not a disguised barrier to trade).
Domestic electronic transactions framework
5.164
Parties must maintain a legal framework governing electronic transactions. The legal framework must be consistent with principles outlined in:
UNCITRAL Model Law on Electronic Commerce 1996
United Nations Convention on the Use of Electronic Communications in International Contracts.
5.165
In developing the legal framework, Parties are to endeavour to avoid unnecessary regulatory burden on electronic transactions, and facilitate input of interested persons.
Conclusion of contracts by electronic means
5.166
Each Party must ensure that its legal framework allows for contracts to be concluded by electronic means. The laws of a Party are not to create obstacles for the use of electronic contracts, or reduce their legal effect, enforceability or validity.
Electronic authentication and electronic trust services
5.167
Other than where the law of a Party does not allow it, neither Party is to deny the legal validity of an electronic document or signature based on the grounds it is electronic. Further, the Parties are not to adopt measures that would:
prohibit parties to an electronic transaction from mutually determining the appropriate electronic authentical methods for that transaction
prevent parties to an electronic transaction being able to prove to authorities that the use of electronic authentication complies with the applicable legal requirements.
5.168
Notwithstanding this permissive framework, Parties can require the method of authentication for a particular category of transaction be certified in a particular manner. Any requirements must be objective, transparent, and non-discriminatory. Parties are also to encourage the use of interoperable electronic authentication and mutual recognition of electronic authentication.
5.169
These provisions must be applied to other electronic processes or means of facilitating electronic transactions, including electronic seals, time stamps, registered delivery services, or trust services.
Digital identities
5.170
While providing for different legal and technical approaches, Parties must pursue the development of mechanisms to promote compatibility between their respective digital identity regimes.
Paperless trading
5.171
Parties are to endeavour to make electronic trade administration documents available to the public and to provide for these to be submitted electronically with equal legal effect as a paper version.
Electronic invoicing
5.172
Parties recognise the benefits of electronic invoicing in terms of efficiency, accuracy and reliability of transactions and the benefits of interoperability between their respective electronic invoicing systems. As such, the Parties agree to endeavour to ensure implementation supports cross-border interoperability between the Parties, and to share best practices and collaborate to promote their adoption globally.
Cross-border transfer of information by electronic means
5.173
While each Party recognises that the other has its own regulatory requirements concerning the transfer of information by electronic means (see discussion above), neither is permitted to prohibit or restrict the cross-border transfer of information by electronic means if the activity is for the conduct of the business of a covered person.
5.174
However, if there is a legitimate public policy objective, Parties may adopt such restrictions providing these are proportionate, and not applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination or operates as a disguised restriction on trade.
Views of participants—Opposition to deregulation of the digital economy
5.175
The ACTU opposed the rules on digital trade which it stated would ‘lock in the deregulation of the digital economy and entrench the power of technology companies to consolidate the exploitive “gig economy” business models; extract and control personal data; evade regulation including payment of taxes; and expand power through monopolies’.
5.176
The ACTU urged the Australian Government to preserve the right to regulate the rapidly evolving digital economy to protect workers’ rights and hold big tech companies accountable for complying with domestic laws, including on workers’ rights, privacy, taxation, and consumer safety standards.
Location of computing facilities
5.177
While Parties may have their own regulatory requirements regarding the use of computing facilities, including requirements relating to security and confidentiality of communications, neither Party is permitted to require a covered person to use or locate computing facilities in the Party’s territory as a condition for conducting business.
5.178
However, if there is a legitimate public policy objective, Parties may adopt such restrictions providing these are proportionate and not applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination or operates as a disguised restriction on trade.
Source code
5.179
Neither Party is permitted to require the transfer of or access to source code of software owned by a person of the other Party as a requirement for the import, distribution, sale, or use of that software (unless it applies to a remedy enforced in the context of legal proceedings). However, a government agency or judicial authority may require software source code be preserved and made available for investigation, inspection, examination, enforcement action, or judicial or administrative proceedings, subject to safeguards against unauthorised disclosure.
Cryptography
5.180
Neither Party is permitted to impose regulations that require a manufacturer or supplier of information and communications technology (ICT) products that use cryptography, as a condition of the manufacture, sale, distribution or use, to:
transfer or provide access to a particular technology or aspect of technology related to cryptography, that is proprietary to the manufacturer or supplier
partner or cooperate with a person in the Party’s territory in the manufacture, sale, distribution or use of the ICT product
use or integrate a particular cipher or cryptographic algorithm.
5.181
Exceptions are provided for networks owned or controlled by a Party, including those of central banks, for supervision of financial service suppliers or financial markets, and for the manufacture, sale, distribution or use of a commercial ICT product by or for a Party.
5.182
Law enforcement authorities retain the right to require service suppliers using encryption they control to provide, pursuant to that Party’s legal procedures, access to encrypted and unencrypted communications.
Cyber security
5.183
Article 14.20 contains cyber security provisions recognising, amongst other things, the benefits of risk-based approaches to cyber security.
5.184
The Parties are to endeavour to build capabilities, encourage risk-based approaches, strengthen collaboration, and maintain a dialogue on cybersecurity matters.
Provisions encouraging transparency and innovation
Open government data
5.185
The Parties recognise the importance of facilitating public access to and use of government information. Where it is made available to the public, Parties are to endeavour to ensure government information is anonymised and provided in a format that is easily used. Parties are to endeavour to cooperate to expand access to and use of governmental information to enhance and generate business and research opportunities.
Data innovation
5.186
Parties recognise the need to create an environment that enables and supports innovation, including through the use of regulatory sandboxes. They agree to endeavour to support data innovation by cooperating on:
the development of policies and standards for data mobility
sharing research and industry practices related to data innovation.
Open internet access
5.187
Subject to existing regulation, the Parties recognise the benefits of consumers being able to use services and applications on the internet of their choice subject to non-discriminatory network management processes, access network management information of their internet access supplier, and use the device of their choosing.
Protective provisions
Personal information protection
5.188
The Parties must adopt non-discriminatory practices in protecting users of digital trade from violations of their personal information, and publish information regarding how enterprises can comply with their legal requirements and individuals can pursue a remedy.
5.189
Chapter 14 recognises Parties may take different legal approaches to protecting personal information, but Parties are to encourage the development of mechanisms to promote compatibility between the different regimes, for instance by recognising regulatory outcomes or broader international frameworks.
Online consumer protection
5.190
The Parties are to maintain consumer protection laws and regulations that prohibit misleading, deceptive, fraudulent and unfair commercial practices.
Unsolicited commercial electronic messages
5.191
The Parties are to adopt measures regarding unsolicited commercial electronic messages that:
require suppliers to facilitate a recipient to prevent ongoing reception of unsolicited messages
require consent of recipients to receive commercial electronic messages
provide for the minimisation of unsolicited commercial electronic messages
ensure commercial electronic messages are identifiable as such.
Cooperation
5.192
The Parties undertake to endeavour to work together to address the challenges for small and medium-sized enterprises in the use of digital trade, and more broadly to exchange information on the different aspects of digital trade including information protection, cyber security, and electronic contracts.
Views of participants—No coverage of smart contracts
5.193
While the ANU Law Reform and Social Justice Research Hub (ANU-LRSJ) commended the expansive scope of Chapter 14, it raised the concern there was no coverage of smart contracts, particularly since smart contracts are recognised in the legal frameworks of Australia and the UK, and a wide range of businesses and industries in both countries are using smart contracts.
5.194
Smart contracts, according to ANU-LRSJ, can lower fraud loss, arbitration and enforcement costs, and other transaction costs.
5.195
Industry sectors that currently use smart contracts in Australia include public transportation and e-mobility (scooters, bikes), manufacturing and financial services, and other sectors, including the legal sector, are exploring the utility of such contracts.