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Laws governing corporates are ‘are uniquely and unnecessarily complex’: ALRC
The Australian Law Reform Commission has unveiled “significant complexity” in Commonwealth legislation regulating corporations and financial services in a report tabled earlier today in Federal Parliament.
Jerome Doraisamy
Earlier today, Tuesday, 30 November, the Australian Law Reform Commission tabled its first interim report as part of a three-year review of complexity in Commonwealth legislation regulating corporations and financial services.
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The laws regulating corporations and financial services, the ALRC has submitted, “are uniquely and unnecessarily complex”.
In its interim report, the ALRC dived into the extent and nature of complexity in legislation, using empirical data and computational analysis to demonstrate what it called “the ballooning volume of law”.
“The Corporations Act has almost doubled in size over its 20-year lifespan,” it wrote.
“The act and its associated instruments now fill more than 13,000 pages. More and more prescriptive detail has been added over time, and new requirements have been added regularly. Dozens of instruments made by ASIC now ‘notionally amend’ the law, but it is not easy to determine which provisions have been amended, or how.”
Complex legislation, ALRC senior legal officers William Isdale and Christopher Ash penned in a submission, is “difficult to understand”.
“It is harder for consumers to know their rights; for practitioners to advise their clients; and for regulated entities to comply. Complexity also gives rise to rule of law concerns,” the pair wrote.
“We all bear the consequences, including through increased costs for financial products and services, and in publicly funding courts and regulators who must wade through the legislative thicket.”
Being able to navigate the law, Mr Isdale and Mr Ash continued, is critical to understanding and applying it.
“However, primary legislation is just the tip of the iceberg. Users may also need to consult the Corporations Regulations 2001 (over 1,300 pages in length), and over 270 ASIC legislative instruments, 200 regulatory guides, and 200 information statements.
“There appears to be little rationale for where or why the law is distributed. Most concerning is the frequent use of delegated legislation to ‘notionally amend’ the Corporations Act. More than 100 legislative instruments amend the text of the act itself, and more than 20 do so for all persons to whom the act applies,” they argued.
The Honourable Justice SC Derrington, who is the president of the ALRC, added that the commission’s task is “not simply to ‘tidy up’ the legislative framework in service of theoretical objectives”.
“At the core of this inquiry is the importance of ensuring the law is fit for purpose,” she advised.
“The law must facilitate industry, recognising the dynamic nature of the financial services sector and its significant contribution to the Australian economy. At the same time, consumers need to be able to understand and navigate the law to protect their legal entitlements,” her honour said.
As part of the tabling of its interim report, the ALRC is seeking feedback on 16 proposals and eight questions for reform, submission for which are due in late February of next year. The report contains 13 recommendations for reform, all of which pertain to legislative amendments and research processes for the Office of Parliamentary Counsel, which the federal government “could begin implementing immediately”, ALRC noted.
The inquiry is part of the federal government’s response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry released in February 2019. Further interim reports are due in September 2022 and August 2023, with the final report due by 25 November 2023.
