Terms of Reference
[ Last Updated 24 January 2006 ]
July 2005
Contents
The Memorandum of Understanding between the Government of New Zealand and the Government of Australia on Coordination of Business Law [link to MFAT website] (MoU) was signed in 2000. It is required to be reviewed five years from the date of its signature, and every five years following that date.
The 2005 review of the MoU is an opportunity to both review the work programme and, in addition, identify any areas where the MoU might be strengthened.
The key principles in the MoU still appear relevant, however it is appropriate to consider:
- whether the framework set up by the MoU needs to be modified;
- what amendments need to be made to the MoU to reflect the changes that have occurred to the business and political environment over the past five years; and
- how the MoU can be amended to enhance future business law coordination.
MoU Framework
The MoU recognises that an array of approaches exists to achieve the goal of increased coordination in business law. It takes into account that one single approach would not be suitable for every area, that coordination is multi-faceted and does not necessarily mean the adoption of identical laws, but rather finding a way to deal with any differences so they do not create barriers to trade and investment. The focus of the MoU is on reducing transaction costs, lessening compliance costs and uncertainty, and increasing competition.
The framework is based on the presumption that coordination should take place unless there is a good reason for the law to be different between Australia and New Zealand. The MoU also notes, however, that the governments need to ensure in each case that the benefits of coordination outweigh the costs.
Experience over Past 5 Years
There has been a significant alignment of Australian and New Zealand business laws over the past five years. When the MoU was signed, New Zealand was beginning a period of significant reform of its financial markets regulation aimed at promoting confidence in New Zealand's markets. This involved strengthening the regulatory frameworks and bringing New Zealand into line with international norms, drawing where possible on Australian experience. Areas of significant reform undertaken by New Zealand in recognition that its regulatory regime did not meet international standards include takeovers law, the law relating to the regulation of stock exchanges, and insider trading and market manipulation law.
Hence much of the trans-Tasman alignment has been the result of unilateral reforms by New Zealand in areas such as securities market law, but it has also resulted from both countries aligning with international standards.
More recently, there have been a number of joint Australian and New Zealand coordination initiatives, such as the work on the adoption of international financial reporting standards and the proposal for the establishment of a mutual recognition regime for offers of securities. Another example of a joint initiative was the request by both governments to the Australian Productivity Commission to examine the potential benefits from greater cooperation, coordination and integration of the core components of the competition and consumer protection regimes of Australia and New Zealand.
Future Business Law and Regulatory Coordination
Over time the challenge will be to maintain alignment in areas where there are coordinated regimes, and this in turn will depend heavily on the efficacy and timing of the communication and consultation between the policy departments.
In some cases it may be appropriate for joint trans-Tasman research projects to be undertaken on issues where the two countries can benefit from putting resources into joint research. This may involve research by independent bodies such as the Australian Productivity Commission or internal research projects by officials which include a trans-Tasman focus on the regimes where the law is closely aligned.
In areas such as accounting standards, it has become apparent that regional co-operation as well as trans-Tasman co-operation may be a way of enhancing influence at the international level.
As the substantive rules are aligned there has been an increasing emphasis on cooperation between the regulators, i.e., the agencies responsible for the administration of the rules. This is likely to continue, and the review should have regard to trans-Tasman risks and opportunities in relation to the administration of business laws, and how these should be reflected in the work programme.
In addition, it is also recognised that effective law coordination requires a coordinated underlying legal infrastructure. Other complementary processes are progressing in parallel to the MoU work programme, in particular the work of the Trans-Tasman Working Group on Enforceability of Court Proceedings and Regulatory Enforcement.1
Business and Political Environment
Changes to the business or political environment for business law coordination are relevant for two main reasons: they could help focus the coordination work programme on what is seen to matter most, and they could influence "what is within the art of the possible" in terms of how to coordinate in the areas within the scope of the MoU. Without limiting what the review might reveal, the following developments in the business and political environment should be taken into account:
- The commitment by both governments to the objective of a single economic market (SEM), defined by the Productivity Commission as a geographic area comprising two or more countries in which there is no significant discrimination in the markets of each country arising from differences in the policies and regulations adopted by each country;
- recent research that reveals what business and consumers see as the barriers and opportunities to the achievement of a SEM,2 and the regulatory implications of this;
- the broader international context, and in particular the opportunities that trans-Tasman cooperation provides to influence evolving international norms as they relate to business law;
- the work relevant to business law coordination arising from the Australia-New Zealand Leadership Forums, which promote dialogue with the business sector.
Work Programme
The work programme should be reviewed. This review should include:
- an assessment of progress with implementing the current work programme;
- an assessment of what should be removed and/or amended on the current work programme, and what should be added. This will take into account the outcomes of the work on the business and political context.
There is a substantial ongoing work programme in a number of areas. It is expected that this work programme will comprise the bulk of the future agenda, however some additional items are likely to be identified. The review recognises that the MoU does not dictate the extent of progress on the individual agenda items, but provides the process for reporting annually to Ministers and for the five yearly reviews.
Approach to Review
Officials will consult with the Australian and New Zealand government agencies responsible for the administration and enforcement of business laws, as well as business and consumer stakeholders (this will include obtaining a consumer perspective).
A joint letter will be sent to these stakeholders seeking their views on whether the MoU principles are still valid, and asking them to highlight any areas which they consider should appear on the MoU work programme.
Officials will report to the Australian Treasurer and the New Zealand Minister of Commerce by 31 October 2005.
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