find the latest legal job
Part Time Risk & Compliance Officer
Category: Other | Location: Brisbane QLD 4000
· Brisbane City · Flexible Part Time Hours
View details
Infrastructure Lawyer/SA
Category: Construction Law | Location: Sydney CBD, Inner West & Eastern Suburbs Sydney NSW
· Global elite law firm · Dedicated Infrastructure team
View details
Property Lawyer
Category: Property Law | Location: All Melbourne VIC
· 12 Month Contract · Diverse Work
View details
In-House Legal Counsel (Mid to Senior)| Regulated Markets (Energy and Gas)
Category: Generalists - In House | Location: Melbourne CBD & Inner Suburbs Melbourne VIC
· Full PD on Request · Exciting High Impact Role
View details
Family Lawyer
Category: Family Law | Location: Eastern Suburbs Melbourne VIC
· Boutique Firm · Great Reputation
View details
Jury out on CLERP9, says Justice Owen

Jury out on CLERP9, says Justice Owen

AS THE dust settles from the introduction of CLERP9 into Australian law, a senior judge has questioned whether the increased penalties for breaches of the Corporations Act 2001 will be an…

AS THE dust settles from the introduction of CLERP9 into Australian law, a senior judge has questioned whether the increased penalties for breaches of the Corporations Act 2001 will be an effective deterrent.

Justice Neville Owen, who chaired the Royal Commission into the collapse of insurance giant HIH, said recently that although CLERP9 increases the penalties for some contraventions of the Act from five to 10 years, in reality this may not discourage breaches.

“Will that really make a difference?” he said. “I think, as they say, the jury is well and truly out on that. I remember during the [HIH] Royal Commission speaking with a well-credentialed and respected Australian company director and chairman, and I asked him whether or not he thought that increasing penalties would have an effect and he just looked at me and said ‘anyone who is concerned with penalties would never get a seat on my board’.”

However, Owen admitted that striking a balance between prescriptive approaches and self-regulation is no easy task. “Legal regulation provides law and standards to dictate what is acceptable and it puts limits on what is permissible,” he said.

“The problem with this is that almost inevitably it leads to ‘one size fits all’, which is demonstrably the opposite,” he said.

“Speaking generally, a self regulating system can be more flexible and more readily adaptable than a system that is centred on prescriptive dictates. But self regulation in turn depends on the expertise, diligence and integrity of the operators in that particular market sector. It is reliant upon the theory of deterrence.”

But, he said, there are strong criticisms of the theory of deterrence. “First, putting aside the paucity of reliable empirical data which supports the value of deterrence, it is argued that the prospect of detention, rather than the severity of punishment, sways potential offenders from engaging in prohibited conduct,” Owen said.

“The most notorious example of this is the lack of deterrent effect of the death penalty,” he said, (adding he was not suggesting that corporate governance laws should carry the death penalty).

“The second major criticism of the general deterrence system is the serious injustice and practical application of what’s called exemplary sentencing, or more colloquially, ‘scapegoating’,” Owen said.

He added that it is an open question as to whether more prescription will have a significant effect. “It doesn’t seem to have worked in the past,” he said. “But of course we can’t simply stand still and allow things that are wrong to go unpunished, or systems that are not working to be immune to change. What I think is extremely important is to obtain and maintain a flexible approach.”

According to Owen, the best path to regulatory compliance is for Australian companies to create a ‘compliance culture’. “It seems to be whatever system of regulation that we put in place by way of rules and regulations, it’s not going to work unless there is a culture of compliance,” he said.

“The aim of any system of corporate governance, whether it be imposed or self-adopted, should be to ensure that those on whom responsibility falls understand what is required of them by the law, and by the reasonable and legitimate expectations of the market,” he said.

“The carrying out of those obligations and responsibilities would in an ideal world be second nature for those concerned. And establishing a culture of compliance is a significant step on the road to achieving the ideal world. The black letter of a corporate governance model will not be effective unless there is this culture of compliance.”

He added that in an ideal world, lawyers and risk practitioners would be out of a job. “In the Royal Commission report I emphasised the importance of a culture that stresses substance over form and that is another key thing that we should bear in mind,” Owen said.

“Substance must always prevail over form. And we must also look to a system that encourages decision making that is not only correct legally, but which accords to models of principles. Put in the vernacular, that is decision making that passes the smell test,” he said.

“Decision makers won’t always know the law. If they did, lawyers, and I suspect many other risk practitioners, would be out of a job. Wouldn’t it be wonderful if I were to be made redundant, not because I’m stupid, but because none of us are doing anything wrong. I’m afraid those days are a long way away.”

Stuart Fagg is the Editor of Lawyers Weeklys sister publication Risk Management.

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

Jury out on CLERP9, says Justice Owen
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
Violence
Nov 17 2017
It's time for politicians to commit to eradicating domestic violence
The national shame of domestic violence cannot be left unaddressed, writes Christine Smyth. ...
Nov 16 2017
From lawyer in law firm to senior governance professional
Promoted by Governance Institute of Australia As a law graduate, Kate Griffiths never imagined...
marriage equality
Nov 16 2017
Legislation the next hurdle for marriage equality
Lawyers have underscored the importance of ensuring same-sex marriage legislation does not limit ant...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...