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Australia: What happened in 2019 and significant events in 2020

Australian Law: Year in Review 2019 and Year to Come 2020 summarises some of the major developments across Australia last year, and a selection of key changes that we anticipate over the coming year. There are links to further reading, where available.

Key areas of focus in Australia included the legislative and regulatory responses to the final report from the Banking Royal Commission, as well as new measures to protect data and privacy, and a regulatory focus on cyber resilience.

Explore our overview of key developments below.

Updates in

16

key areas in 2019 and 2020

Significant legal and regulatory events in 2019

Explore the tabs below to review the key developments we expect to see in 2019

Banking

Updates to the Banking Code of Practice: In July, the Banking Code of Practice (the BCP) came into effect. To be an Australian Banking Association member, banks must subscribe to the BCP, and its provisions must form part of customer relationships. In November, the Australian Competition and Consumer Commission (the ACCC) authorised changes to the BCP, addressing RC recommendations in relation to vulnerable customers and small business protections. With ASIC approval, the changes take effect on 1 March 2020.

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Consumer data right – regime to start next year in the banking sector: In August, new laws established a consumer-driven data transfer system allowing consumers to direct their data to third parties.

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Class actions

Class actions: In January, the Australian Law Reform Commission (the ALRC) released its final report on class actions and litigation funding, with broad recommendations aimed at realigning the current landscape with the regime's original objectives.

Read more here and, for key case developments in 2019, here, here, here and here

Competition

Fairness in franchising: The Parliamentary Joint Committee on Corporations and Financial Services completed its Franchising Code inquiry, with 71 wide-ranging recommendations on perceived power imbalances and exploitation in this sector.

Criminal cartels on the rise: Criminal cartel cases continued as a key focus area for the ACCC. It also narrowed the scope of its Cartel Immunity and Cooperation Policy to exclude concerted practices and impose a higher level of cooperation from immunity applicants.

Read more here and here

More aggressive approach to merger enforcement: Concerned about under-enforcement of merger laws., the ACCC took action against Pacific National in relation to the Acacia Ridge intermodal terminal acquisition. The ACCC was unsuccessful and has appealed. The ACCC also opposed the proposed merger between Vodafone Hutchison Australia (VHA) and TPG Telecom. VHA sought a declaration from the court to permit the merger. The court is yet to hand down its decision.

Read more…

Corporate

Shareholder intention statements: Bidders and targets must be careful to secure shareholder support over more than 20% of target shares for bids and schemes, as ASIC prepares to issue new guidance on 'truth in takeovers'.

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ASIC Corporate task force: In October, ASIC released a report on director and officer financial risk oversight. It focused on financial services companies, but ASIC suggested other companies should also read the report findings.

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Data Govenance

Regulatory focus on cyber resilience: APRA and ASIC released information security standards and market integrity rules, requiring market participants and operators to improve the technological and operational resilience of critical systems, operations and data.

Read more here and here

Office of the Australian Information Commissioner: In early 2019, the Federal Government flagged its intention to broaden the Office of the Australian Information Commissioner's enforcement capacity. It has since secured key enforceable undertakings and been less conciliatory in dealing with privacy and data breaches.

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Prohibition on abhorrent violent material: In April, the Federal Government passed world-first laws requiring social media platforms to remove abhorrent violent material.

Energy

Energy: In July, the 'Retailer Reliability Obligation', which aims to ensure sufficient dispatchable electricity supply to meet peak demand, came into force.

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Inquiry into resources sector regulation: The Productivity Commission is examining regulations affecting business investment in the Australian resources sector.

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Native title compensation: The High Court delivered its first ruling on how compensation for extinguishment of native title rights will be calculated.

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Financial regulation

Financial services industry royal commission: Responding to the Royal Commission's (RC) final report released in February, the Federal Government released its reform agenda; the Australian Prudential Regulation Authority (APRA) announced a more active and 'constructively tough' approach to enforcement; and the Australian Securities and Investments Commission (ASIC) announced its 'why not litigate' enforcement approach and pushed for legislative reform to ensure proper punishment for breaches of the law. New laws increasing civil and criminal sanctions for corporate and financial misconduct, and stronger whistleblower protection laws, will also enhance ASIC's enforcement regime.

Read more here, here, here and here

Superannuation – compulsory retirement savings: In April, new laws introduced wide-ranging reforms for 'a more transparent and accountable' system.

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Foreign financial services providers: In July, ASIC announced plans to repeal two forms of financial services providers (FFSP) licensing relief, and to introduce a new FFS licensing regime, and new 'funds management' licensing relief for certain services provided from offshore to professional investors in Australia.

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Retail financial product requirements: In April, laws were enacted (commencing 2021) requiring product issuers to make 'target market determinations' for their products, and issuers and distributors to take reasonable steps to ensure retail products are marketed and distributed only to people in that target market. ASIC also has new 'product intervention' powers.

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Approval process for new financial sector entrants Following the introduction of shareholding and conduct laws in 2018 for new entrants, APRA has released rules clarifying the approval requirements.

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New draft APRA remuneration standard: In July, APRA released a discussion paper on a new remuneration standard, with potentially far-reaching implications for APRA-regulated entities.

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Insurance

Insurance and reinsurance In March, in response to the RC findings, the Federal Government released a consultation paper on classifying insurance claims as a 'financial service' under the Corporations Act 2001 (Cth).

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Intellectual Property

Intellectual property rights In September, laws exempting conditional licensing or assignment of intellectual property (IP) rights from most of the anti-competitive conduct prohibitions were repealed. So, commercial transactions involving IP rights are now subject to competition and consumer legislation.

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Protection of Indigenous knowledge: In October, IP Australia released a report summarising stakeholder feedback on improving Australia's IP system to protect and promote the integrity of Indigenous knowledge.

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Patents: The Full Federal Court dismissed the appeal in Encompass Corporation v InfoTrack but, unfortunately, did not clarify (and has left open the question of) the scope of patentability of computer-implemented inventions.

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Oil & Gas

Oil and gas: The Council of Australian Governments (COAG) Energy Council Hydrogen Working Group released consultation papers on its 'Hydrogen Strategy'.

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Real estate

Combustible cladding: Responsibility for the issue of combustible cladding used in buildings has fallen to each State Government rather than the Federal Government. Each state has carried out an audit to identify affected buildings and the required remedial work. The Victorian Government announced it will contribute to the cost of the remedial works, which will otherwise be borne by building owners.

Remedies for termination clarified by the High Court: In a welcome decision for principals engaging contractors for construction work, the availability of the restitutionary remedy of quantum meruit where a contractor elects to terminate a contract as a consequence of repudiation has been substantially limited.

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Stamp duty: Victoria and Western Australia introduced substantial changes to their stamp duty laws, expanding the scope of the meaning of land to include items that are 'fixed to land'. Victoria also introduced a 0.55% duty for transactions between members of a corporate group.

Tax

Transfer pricing: In the first Australian transfer pricing (TP) case since 2017, the Federal Court has further clarified Australia's TP rules and the application of the Organisation for Economic Co-operation and Development TP guidelines. The court emphasised that the Commissioner must respect the actual transaction when conducting the comparative analysis. The Commissioner has appealed the decision.

Tax concession limits for foreign pension and sovereign wealth funds: From 1 July, withholding tax concessions for foreign pension (FP) and sovereign wealth (SW) funds (and also some income tax exemptions for SW funds) will only be available if: (i) the investment in the Australian entity is less than a 10% interest; and (ii) the FP or SW fund cannot exert influence on the Australian entity's decision making, including that it cannot appoint a director. Subject to certain conditions, there is a transitional period (until 1 July 2026). The Australian Taxation Office (the ATO) is expected to release guidance in 2020.

Significant legal and regulatory events in 2020

Explore the tabs below to review the key developments you need to be aware of from 2020

Banking

APRA consultations on deposit holder protections and leverage ratios: In October 2019, APRA released a consultation paper on measures to protect Australian deposit holders where authorised deposit-taking institutions (ADIs) hold significant investments in their banking and insurance subsidiaries. APRA proposes that ADIs hold a greater amount of capital to support investment in large foreign and domestic subsidiaries, and reduced capital for investment in smaller subsidiaries. Responses are due by 31 January 2020 and the updated prudential standard is expected to come into force from 1 January 2021.

In November 2019, APRA released for consultation a response to submissions relating to its 2018 consultation on the leverage ratio requirement for ADIs, and proposed further amendments to incorporate recent technical changes to the Basel Committee on Banking Supervision’s leverage ratio standard. Responses are due by 7 February 2020.

Read more here and here

Corporate

ASIC Corporate Plan 2019–2023: In August 2019, ASIC released its Corporate Plan, with a vision to create a 'fair, strong and efficient financial system for all Australians'. It focuses on ASIC's post-RC aims to: promote better corporate cultures and behaviour; address consumer harms; and publicly denounce and deter wrongdoing with its 'why not litigate?' approach to enforcement.

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Updates to Australian Securities Exchange guidance note 9 – disclosure of corporate governance practices: In 2019, the Australian Securities Exchange (ASX) updated this guidance note, making several changes to address the ASX Corporate Governance Principles and Recommendations: 4th edition. The 4th edition reflects the ASX Corporate Governance Council's view that listed entities must align their culture and values with community expectations to address a declining trust in business and build long-term sustainable value for their security holders. On 1 January 2020 the guidance note will be formally released and the 4th edition will come into effect.

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ALRC discussion paper on corporate misconduct: In November 2019, the ALRC released a discussion paper with proposals to overhaul the federal corporate criminal responsibility regime. This comes in the wake of criticisms that the current system is ineffective at preventing, deterring and prosecuting serious corporate crime. Submissions are due by 31 January 2020, with final recommendations due by 30 April 2020.

Read more…

APRA addresses contagion risk within banking groups: APRA has also strengthened prudential measures designed to reduce the risk of deficiencies in one part of a corporate group damaging the financial or reputational strength of ADIs. The updated Standard, which takes effect from January 2021, incorporates some of the lessons learned from the global financial crisis.

Read more…

Competition

ACCC focus on fairness: Following the RC, the ACCC, like other regulators, will be focused on appropriate standards of corporate conduct. It has signalled an intention to use its competition and consumer law powers to call out corporate misconduct. The ACCC is currently advocating for the introduction of a general prohibition against unfair practices.

A push for merger reform: The ACCC is likely to continue advocating for a stricter stance on mergers, calling for law reform, including to shift the burden to the merger parties in cases involving concentrated sectors.

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Proceedings against big tech: Consistent with global trends, the ACCC will likely focus its law enforcement powers on big tech in 2020. In late 2019, the ACCC commenced proceedings against Google, alleging it misled consumers on its data retention practices.

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Data governance

Digital platforms and privacy reform: The ACCC's Digital Platforms Inquiry final report is expected to have significant and wide-ranging implications for competition, consumer protection, copyright and privacy in 2020. In the report, the ACCC has recommended reforms to increase the level of oversight over digital platforms, including: advance notice of acquisitions by large digital platforms, and the creation of a new branch within the ACCC to focus on the proactive monitoring and investigation of issues in digital platforms markets. Also, with the ACCC's action against Google and ASIC emphasising information security as a regulatory priority, it is expected a wider range of regulators will be involved in prosecuting privacy breaches in 2020. Reforms allowing easier sharing of data between government and researchers are also likely to become a reality.

Read more here, here and here

Domain name licensing: In October 2019, au Domain Administration Ltd, the administrator and self-regulatory policy body, released draft Licensing Rules, which, if implemented, will narrow the eligibility rules regarding non-Australian entities with no connection to Australia.

Read more…

Dispute resolution

Press freedom reform: Following Australian Federal Police raids on media organisations, and challenges in the Federal Court and the High Court, press freedom was a matter of great discussion in 2019. With two parallel Parliamentary inquiries into press freedom due to report in early 2020, reform in this area is likely to be a key element of the 2020 legislative agenda.

Read more here and here

Multilateral instrument: The multilateral instrument (the MLI) came into force for Australia on 1 January 2019 for dispute resolution procedures and withholding taxes on income derived from that date, and on 1 July 2019 for all other taxes. The modifications of Australia's tax treaties, and the application dates, will depend on the positions adopted by treaty partners. Some articles are mandatory (eg the prevention of treaty abuse and improved mutual agreement procedures), but most are optional. While many of Australia's treaty partners have signed the MLI (and modifications are already in effect for large trading partners, such as Japan, New Zealand and the United Kingdom), others (eg South Korea and the United States) have not.

The ATO and legal professional privilege: The ATO has signalled that it will take a tougher stance on taxpayers resisting disclosure of information to it in review and audit procedures under the legal professional privilege (LPP) doctrine. This area of focus has gained momentum since the High Court found in favour of the ATO in the 2019 Glencore International case, where the taxpayer sought to rely on LPP to prevent the Commissioner from using information in the leaked 'Paradise Papers' in the assessment of the company's tax affairs. The court found that the documents were not 'confidential' for LPP purposes, as they were already in the public domain.

Energy

Energy - oil, gas and electricity: The Federal Government's proposed 'big stick' energy legislation is expected to start in 2020. Once implemented, the legislation will define and prohibit several new types of misconduct in Australian electricity markets. The Energy Security Board will continue to implement its plan for developing options for a new market framework, aimed at ensuring a higher degree of network reliability and facilitating a technological shift towards a lower emissions electricity system. The target is to have the new market design operational by 2025. The COAG Energy Council will continue with its holistic review of the regulation of gas pipelines and consideration of improvements to transparency measures in gas markets. It is expected that a Regulation Impact Statement, setting out proposed reforms, will be released in early 2020.

Read more here, here and here

Financial services regulation

Transition from London Interbank Offered Rate: Following the UK Financial Conduct Authority's announcement that it would not support the Transition from London Interbank Offered Rate (LIBOR) beyond 2021, ASIC, with the support of APRA and the Reserve Bank of Australia, has written to a number of the major Australian financial institutions to ensure appropriate preparation for the transition to alternative benchmarks. Actions advised by ASIC include comprehensive assessments of exposure to LIBOR and implementing strong fall-back provisions for contracts referencing LIBOR.

Read more…

Infrastructure

Infrastructure: Investor appetite for Australian infrastructure remains strong. However, to maintain its status as a leading investment destination, Australia must address systemic issues that are adversely impacting the market, including cost overruns on major projects. The urban boom occurring in Australia will continue to put pressure on cities to keep up with the increasing demand for affordable housing and social, transportation and utility infrastructure. This is likely to result in more collaborative, efficient and creative contractual responses to meet this unprecedented demand.

Read more here and here

Insolvency

Insolvency: Following implementation of the 'safe harbour' and 'ipso facto' reforms, the lack of cases to test the scope of those provisions means the market continues to wait on their judicial interpretation, and the industry eagerly awaits test cases.

Modern slavery laws

Modern slavery laws: Australian entities (or entities carrying on business in Australia) with at least $100 million global consolidated revenue will be required to submit an annual modern slavery statement on the risks of modern slavery in their operations and supply chains by 2020.

Read more…

Real Estate

Increasing use of automated and integrated conveyancing technology: Technology in real property conveyancing practice has increased significantly over the past few years, enabling integration between eg searches and enquiries functions, conveyancing matter management, stamping, electronic financial settlement and registration of documents. There has also been increasing use of electronic contracts and electronic signatures. This functionality is expected to continue and expand during 2020.

Legislative reforms to the residential construction market: The Australian State and Territory Governments will continue to implement their own legislative reforms to increase effectiveness of compliance and enforcement systems for the building industry nationally.

Key contacts for Australia
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Explore our Year in Review 2019 and Year to Come 2020 series across 20+ jurisdictions and a number of topics.

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