Chapter 3 - Provisions of the Bill

Chapter 3 - Provisions of the Bill

3.1       In keeping with the findings of the Uhrig report, the provisions of the bill are designed to restructure the commission to fit the executive management template. Both the explanatory memorandum and the minister in his second reading speech note that the changes introduced in the bill form part of the implementation of the government's response to the Uhrig review. The Minister for Trade told the House:

The government is reviewing all statutory agencies in the context of the review recommendations, to ensure that we have the most effective accountability and governance structures across the whole of government.[36]

Abolition of Austrade's board and the creation of a CEO

3.2       The Australian Trade Commission is a body corporate created under the Australian Trade Commission Act 1985. The act also establishes an Australian Trade Commission Board which consists of:

  • a Chairperson;
  • a Deputy Chairperson;
  • the Managing Director;
  • the Managing Director of Export Finance and Insurance Corporation (EFIC);
  • government members; and
  • such number of other members, being not fewer than 4 nor more than 6, as the Minister determines, in writing, to be appropriate.[37]

3.3       Members of the board, other than the Managing Director and the Managing Director of EFIC, are appointed by the Minister and hold the office as part-time members. The Managing Director and Deputy Managing Director hold office on a full-time basis and at the pleasure of the Board.[38]

3.4       The bill repeals the Commission's body corporate status and its ability to acquire, hold and dispose of real and personal property.[39] The CAC Act is no longer to apply to the Commission.[40] The Explanatory Memorandum made plain that:

The Commission is not a body corporate and has no legal personality separate from the Commonwealth.[41]

3.5       New section 7 proposes to remove the governing board and create in its stead a statutory agency without such a board.[42] In keeping with the executive management governance structure, section 7 is to establish a CEO as the head of the body.[43] Proposed subsection 60(2) clearly stipulates that the CEO and the staff of the Commission together constitute a Statutory Agency.[44]

Response to the intention to remove the Austrade board

3.6       Professor Wettenhall noted that the intention to abolish the board is consistent with Mr Uhrig's recommendation but he could find no particular explanation of the need for change. He looked at the initial grounds for establishing Austrade in 1985 as a corporate board with a governing board. He noted that at that time, the government had extensive consultations with a broad cross-section of business leaders and major industry organisations on the proposed structure and activities of the Commission. In considering the structure of the Commission in 1985, significant weight was given to the value of having an independent authority with a board drawn largely from the private sector. Indeed, the then Minister for Trade told the House:

By establishing the Australian Trade Commission as a body corporate, the Bill will enable the Commission to have sufficient flexibility and independence of management to respond quickly to changes in international market conditions. It will also be a source of valuable advice for the Government and provide an early warning mechanism on international changes and trends affecting Australia's trade...

The government holds strongly to the view that very significant benefits will come from the guidance of a board of directors drawn principally from the private sector. Indeed, I am heartened by the very favourable reception that the interim board of the Commission...has received. The business qualities of that board indicate the seriousness with which the Government is going about the task of putting the activities of the Trade portfolio on a more commercially oriented basis.[45]

3.7       Professor Wettenhall asserted that Austrade's establishment as a body corporate was justified in 1985 in order that the Commission would 'have sufficient flexibility and independence of management to respond quickly to changes in international market conditions'. He concluded:

I find no argument here to show that there are changed conditions that invalidate that reasoning.[46]

3.8       DFAT and Austrade argued that the abolition of the board 'does not impact the capacity of government to seek the input of industry to Austrade's operations.' They stated further:

A range of non-legislated mechanisms for consultation with industry continue to operate. These include the Free Trade Agreement Export Advisory Panel and the Trade Promotion Advisory Committee. The amendments proposed in the...bill do not impact these consultation mechanisms, or the capacity to modify or establish additional or revised processes as required.[47]

3.9       Furthermore, DFAT and Austrade informed the committee that the chair of Austrade's Board had informed the Deputy Prime Minister of the Board's unanimous acceptance of the assessment's recommendations (see paragraph 2.30).[48]

Committee view

3.10      The committee notes DFAT's assertion that the removal of the board does not influence the capacity of the government to obtain independent advice or assistance from industry.

3.11      It appreciates, however, the value that an independent board comprising experienced people who are held in high regard in the trade and commercial sector bring to an organisation such as Austrade. It agrees with Professor Wettenhall that the explanatory memorandum or the second reading speech could have provided more detailed reasons and explanations for removing Austrade's board.

3.12      The committee believes that a statement from the government explaining the need to re-organise Austrade would provide Senators with a better understanding of the proposal to abolish Austrade's board and further assist them when considering the proposed legislation. The value of such an explanation is evident in light of the recognition given to the importance attached to having an independent board at the time of Austrade's establishment. Keeping in mind that the Uhrig report did not consider the governance structure of Austrade, the committee is of the view that a reliance on this report to justify the re-structuring of Austrade only partially explains the need for the proposed changes.

3.13      Austrade and DFAT's assurance that there already exists a range of non-legislated mechanisms for consultation with industry is vague. The committee would like more definite information on the mechanisms that Austrade will use to make up for the loss of its board and to ensure that it has the expert advice it needs to assist Australian business in developing export trade.

Recommendation 1

3.14      The committee recommends that the government provide parliament with a statement of reasons for abolishing the board which recognises the initial justification for establishing the board in 1985 and the changed circumstances giving rise to the proposed legislation.

3.15      Professor Wettenhall also argued that the continued use of the name 'Australian Trade Commission' would cause confusion if the board is eliminated and the commission becomes a single-headed statutory body under a CEO. He noted further that 'there seems to be no problem in referring to such single heads elsewhere as 'Commissioners' eg Commissioner for Superannuation, Commissioner of Taxation.' He stated further that 'I don't think we now refer to senior overseas trade representatives as 'trade commissioner', so there should be no ambiguity if this were done here'. The committee suggests that naming the CEO 'Commissioner for Trade' may also be a matter worthy of further consideration by the Parliament.

The CEO's terms of engagement

3.16      The CEO is to be appointed by the Minister by written instrument and holds office on a full-time basis for the period specified in the instrument. The period, however, must not exceed 5 years though the provision does not intend to limit the application of the Acts Interpretation Act 1901 that allows the ability to re-appoint.[49] The Remuneration Tribunal is to determine the CEO's remuneration. If no determination by the Tribunal of that remuneration is in operation, the CEO is to be paid the remuneration that is prescribed.[50]

3.17      The Minister may terminate the appointment of the CEO for misbehaviour or physical or mental incapacity. He or she may also terminate the appointment of the CEO if:

  1. the CEO:
    1. becomes bankrupt; or
    2. applies to take the benefit of any law for the relief of bankrupt or insolvent debtors;
    3. or compounds with his or her creditors; or
    4. makes an assignment of his or her remuneration for the benefit of his or her creditors; or
  2. the CEO is absent, except on leave of absence, for 14 consecutive days or for 28 days in any 12 months; or
  3. the CEO engages, except with the Minister's approval in paid employment outside the duties of his or her office.

3.18      Although the circumstances for terminating the CEO's appointment remain the same as those stipulated in the current act for appointed members of the board, the terminology has been changed. In the circumstances given immediately above the Minister 'may' not 'shall' terminate the appointment. The explanatory memorandum offers no explanation for the change.

3.19      Proposed Part 6 of the bill, directs that the Minister 'must' terminate the appointment of the CEO if, in the Minister's opinion, the performance of the CEO has been unsatisfactory for a significant period of time. It should be noted that the proposal puts in no doubt that the CEO's appointment under these circumstances is to be terminated. This is a stronger direction than that given in the current act which states that the Minister 'may' terminate the appointment of an appointed member to the board under such circumstances.[51]

Functions of the newly created CEO

3.20      The Act requires Austrade to perform the following functions:

  1. to facilitate and encourage trade between Australia and foreign countries (in this section referred to as Australian export trade) by:
    1. representing the trading and commercial interests of Australia in foreign countries;
    2. assisting, directly or indirectly, Australian organisations in trade negotiations;
    3. promoting, or participating in or co-ordinating projects to promote, Australian export trade;
    4. obtaining, and making available to Australian organisations, information relating to current or future opportunities for Australian export trade, including opportunities for involvement in overseas development projects;
    5. supporting and facilitating investment in foreign countries, and facilitating investment in Australia, where that investment is likely to enhance opportunities for Australian export trade;
    6. carrying out, or assisting other persons to carry out, or participating with other persons in carrying out, in whole or in part, overseas development projects, in circumstances where that course of action will benefit Australian organisations;
    7. administering the Export Market Development Grants Act 1997;
    8. developing and administering schemes to provide assistance in the development of markets in foreign countries; and
    9. facilitating access by persons to Departments of State of the Commonwealth or of a State and to instrumentalities established by or under a law of the Commonwealth or of a State where that access is likely to enhance opportunities for Australian export trade;
  2. to do any other act or thing required by this Act or by any other Act to be done by the Commission; and
  3. to act, outside Australia, as agent for Departments of State of the Commonwealth or for instrumentalities established by or under a law of the Commonwealth.[52]

3.21      Under the proposed legislation the functions and powers of the current Commission are to be vested in the new Commission. The explanatory memorandum makes clear that there is no intention to amend any functions of Austrade.

3.22      Proposed section 7A of the bill stipulates that the function of the Commission (other than the CEO) is to assist the CEO in the performance of his or her functions. The Explanatory Memorandum notes that this amendment is necessary 'because other provisions of the Bill vest the statutory functions held by the old Commission in the CEO'.[53]

Duties of the Commission

3.23      In performing its functions, the current Commission shall:

  1. comply with any directions given to it under section 10; and
  2. have regard to:
    1. the desirability of improving and extending the range and accessibility of advice, assistance and financial support available (whether through the Commission or otherwise) to persons involved, or likely to be involved, either directly or indirectly, in trade between Australia and foreign countries;
    2. the need to provide its services as efficiently and economically as possible; and
    3. Australia’s obligations under international agreements.[54]

3.24      Proposed section 9 simply confers on the CEO the duties of the old Commission. It should be noted, however, that the language used in the bill is more direct in that the new Commission 'must' not 'shall' perform his or her duties in such a manner that will best assist in the development of trade between Australia and other countries.[55]

3.25      Proposed section 9A allows the CEO to exercise his or her powers, on behalf of the Commonwealth, in Australia or elsewhere and section 9B allows him or her to charge fees for services.[56]

3.26      The bill also repeals Part IV of the current act which sets down the general powers and duties of the current Commission. As it now stands, the Act allows the Commission 'to do all things necessary or convenient to be done or in connection with, or as incidental to, the performance of its functions under the Act'.[57] The Explanatory Memorandum noted the reasons that made this no longer necessary:

As part of the Commonwealth, the CEO will exercise the executive power of the Commonwealth in delivering these functions and does not require prescribed powers.[58]

3.27      For clarity, it explained that section 9 of the act and the proposed changes to that section specifically confer additional powers on the CEO that are required for the effective, ongoing operations of the Commission.[59]

Power of Minister to give directions

3.28      Under subsection 10(1) of the current act, the Minister may give to the Commission, in writing, such directions with respect to the performance of its functions, and the exercise of its powers, under the act, as appear to the Minister to be necessary. It goes on to state inter alia that:

Nothing in this subsection shall be construed as empowering the Minister to determine that the Commission should deal in a particular manner with a particular person, or with a particular claim or application for a grant or other benefit, under the Export Market Development Grants Act 1997 or under a scheme approved by the Minister under section 30 of this Act.

A direction of the Minister under this section shall not operate so as to affect prejudicially an application under the Export Market Development Grants Act 1997 in relation to a grant year (with the meaning of that Act) that commenced before the day on which the direction was given.[60]

3.29      Consistent with these existing provisions, the Minister, under proposed changes, retains the power to issue direction in writing with regard to the performance of the CEO's functions and the exercise of his or her powers.

3.30      It should be noted, however, that the phrase 'Or under a scheme approved by the Minister under section 30 of this Act' is deleted from subsection 10(3). Section 30 of the act is to be removed and as noted in the Explanatory Memorandum:

As part of the Commonwealth, the CEO will exercise the executive power of the Commonwealth and does not require the prescription of powers.[61]

3.31      Also in keeping with current practice, a direction under the above proposed section is to be included in the annual report.

3.32      The explanatory Memorandum emphasised that the proposed changes to 10(3):

should not be seen to amend 'the limitation imposed by the Act on the Minister's power to issue directions that determine the manner in which a particular person, or a particular claim or application for a grant or other benefit under the Export Market Development Grants scheme, is to be treated.[62]

The bill also removes subsection 10(2) which states that:

Nothing in subsection (1) shall be construed:

    • as requiring the approval of the Minister to the entry by the Commission into a particular contract or other agreement or arrangement under this Act or to the giving by the Commission of any particular guarantee under this Act; or
    • as empowering the Minister to determine that the Commission shall or shall not enter into any particular contract or other agreement or arrangement or shall or shall not give any particular guarantee;

but the Commission shall not enter into a particular contract or other agreement or arrangement, or give a particular guarantee, contrary to a direction by the Minister under this section.

3.33      The Explanation Memorandum noted that;

The Financial Management and Accountability Act framework will govern the Commission's management of such affairs and recognising that the Minister retains the broad power of direction under section 10, and that directions provided under section 10 must be publicly disclosed in the annual report, this separate provision on limiting the power of direction from the Minister is no longer necessary.[63]

The Public Service Act and overseas engagement of staff

3.34      New subsection 7(2) states that the Commission is to consist of the CEO and staff of the Commission who are to be engaged under the Public Service Act 1999.[64] Consistent with the findings of the Uhrig report, Ms Lynelle Briggs, Public Service Commissioner, supported the view that public service functions funded by the taxpayer should be subject to the FMA Act and 'should at the same time have their employment framework brought within the Public Service Act unless there are impressive reasons for an alternative position.'[65] She added:

This would add substantially to the coherence of our culture as well as our governance framework. It would mean that public service values are applied more consistently to the performance of public service functions and to the way in which public servants understand themselves and what it is that they do. They would link the Uhrig review to the second great reform process of our decade: the focus on substantial cultural reform.[66]

3.35      Under section 74 of the Public Service Act 1999, the CEO may engage persons overseas to perform duties overseas as employees.[67] The Explanatory Memorandum noted that subsection 60(2) has been included in the bill to avoid doubt and reflect the unique role of the Commission in managing overseas posts. It stated:

The distinctive nature of Austrade's overseas engaged workforce in size and skill set in noteworthy. Overseas engaged employees comprise over half of the Commission's staff. There should be no ambiguity that such persons engaged under section 74 of the Public Service Act 1999, are part of the staff of the Commission.[68]

3.36      Also under proposed section 90, the Minister may delegate, in writing, all or any of his or her functions or powers under the Australian Trade Commission Act 1985 or the Export Market Development Grants Act 1997 to the CEO. In turn, the section provides that the CEO may delegate in writing, all or any of his or her functions and powers to staff of the Commission. The Explanatory Memorandum elaborated further that:

Owing to the relatively small number of staff, geographical dispersal of the Commission's offices and the frequent instances where overseas offices do not have Senior Executive Service Officers present, nor in some instances, do they have a Public Servant presence (a number of posts comprise a single Overseas Engaged Employee assisting exporters), there is a need for the efficient functioning of the organisation that appropriate delegations, as and when required, can be conferred on any staff member. These delegations will operate in the context of other controls on behaviour such as the Commission's Fraud Control Policy.

The provision of delegation will ensure that Commission employees are also able to exercise powers in a manner that will enable the efficient delivery of programs, such as the Export Market Development Grants scheme.[69]

3.37      The committee is concerned that the provisions of the bill do not appear to provide adequate checks and balances to ensure the appropriate and proper delegation of power.

Reporting obligations

3.38      Item 35 of the bill is intended to repeal Part VIII of the act that establishes the financial powers of the Commission. As noted earlier, the CEO and the Commission will be subject to the FMA Act and the specific provisions set down in this Part of the Act are no longer required. Under an amendment to the Financial Management and Accountability Regulations 1997, Austrade will be added to the list of prescribed agencies subject to the FMA.[70]

3.39      The committee drew attention in the previous chapter to the Uhrig Report which found that the FMA Act should apply to budget-funded Commonwealth bodies. The assessment carried out by the Minister for Trade concluded that Austrade is primarily a service delivery organisation that is largely budget funded and hence should come under the FMA Act as a prescribed agency.[71]

3.40      Under the proposed legislation, the CEO must, as soon as practicable after 30 June in each financial year, prepare and give to the Minister a report on the Commission's operations during that financial year. It further stipulates that this annual report must include:

  1. information about the Commission's operations under the Export Market Development Grants Act 1997;
  2. particulars of all directions given by the Minister to the CEO under subsection 10(1), other than any directions that includes a statement to the effect that the direction is not to be disclosed:
    1. for reasons of national security; or
    2. because its disclosures would have an adverse effect on the financial interests or property interests of the Commonwealth or of an instrumentality of the Commonwealth.[72]

3.41      The Minister is to ensure that a copy of the annual report is tabled in each House of the Parliament within 15 sitting days of that House after the day on which the Minister receives the report.[73]

3.42      These reporting provisions are consistent with those existing under the current act but, according to the Explanatory Memorandum, are changed to conform to the requirement that the Commission be subject to the guidelines for Financial Management and Accountability Act 1997 agencies on Annual Reports.[74]

3.43      The Department of Foreign Affairs and Trade informed the committee that Austrade will provide relevant information on its preparations and performance to the Secretary of DFAT in parallel to information provided to the Minister for Trade. It stated:

This reflects the DFAT Secretary's overall responsibility to the Minister for the administration of the foreign affairs and trade portfolio and DFAT's role as the principal source of advice to the Minister on governance responsibilities related to Austrade (assisted by advice from Austrade's executive management).[75]

Conclusion

3.44      As noted earlier, the committee approached a number of people who had criticised the findings of the Uhrig Report and also bodies with an interest in corporate governance. The committee noted Professor Wettenhall's concerns that no commentary accompanied the bill outlining the reasons for removing the board. The committee has recommended that, in light of the perceived need for an independent board of industry experts when Austrade was first established, the government provide a statement outlining the reasons for the abolition of the board.

3.45      In general, however, the lack of response to the committee's invitation to comment on the provisions of the bill indicates that the proposed restructuring of the Commission to fit the executive management template developed by the Uhrig Report is appropriate. Indeed, Alan Oxley, a former Australian Ambassador to the General Agreement on Tariffs and Trade told the Financial Review that it was important for Austrade to receive external advice from experts to avoid it being driven by bureaucratic systems. He argued that Austrade 'should have good external advice from people who have been successful exporters but you don't need an elaborate structure like the one they have'.[76] In summary:

They don't need a governance structure pretending to be a proper company.[77]

3.46      In considering the provisions of the bill and in the absence of any substantial criticism, the committee is satisfied that the proposed legislation is appropriate.

Recommendation 2

3.47      The committee recommends that the bill be passed.

 

SENATOR DAVID JOHNSTON
CHAIR

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