The New Zealand and Australian legal systems came a significant step closer last month, with both Parliaments tabling legislation to implement the 2008 Agreement on Trans-Tasman Court Proceedings and Regulatory Enforcement (the Agreement). The majority of these reforms make good sense and the harmonisation of civil proceedings and remedies should increase confidence in litigation within the region. However, the proposed regime will also allow cross-border enforcement of certain regulatory sanctions, which – as is widely recognised – raises more difficult questions.
The 2008 Agreement resulted from the work of the Trans-Tasman Working Group, which produced a discussion document in 2005, and a report in 2006. The New Zealand Trans-Tasman Proceedings Bill (the New Zealand Bill) was introduced on 24 November 2009 (although did not have its first reading before the summer Parliamentary adjournment); the Australian Trans-Tasman Proceedings Bill (the Australian Bill) was introduced on the following day (and is part way through its second reading, which was adjourned). They are in very similar terms.
Trans-Tasman businesses should welcome the reforms directed at harmonising the resolution of civil disputes. Both Bills are complex and technical documents. In short, under the proposed regime:
there will be greater ability to serve proceedings and subpoenas cross-border (for the former, leave will not be required)
the ‘give way’ rules will be the same: Australian and New Zealand courts will apply a consistent test as to the appropriate jurisdiction in which to try a dispute (at present the common law rules are somewhat incompatible, and can allow parallel proceedings)
domestic courts may order interim relief in support of civil proceedings in the other jurisdiction
final non-money judgments such as permanent injunctions and orders for specific performance may be recognised, with certain exceptions such as orders for the dissolution of a marriage. Currently only final money judgments are recognised
potential barriers to cross-border enforcement will be removed. For example, a New Zealand court may not set aside registration of an Australian judgment on natural justice grounds: these considerations may be raised only with the Australian court in which the dispute is heard
civil judgments of specified lower courts and tribunals will be directly enforceable in the other jurisdiction, and
certain trans-Tasman court appearances will be possible via video link.
There is no doubt that these measures will enhance the efficiency and efficacy of commercial litigation involving parties, witnesses, documents, assets or events touching both jurisdictions. The Bills' combined effect will be to make New Zealand litigation involving Australian elements a qualitatively different process from New Zealand litigation involving other foreign elements. This is the very intent of the regime, which is modelled on the Australian law (the Commonwealth Service and Execution of Process Act 1992), which regulates legal proceedings between Australian states and territories.
The proposed recognition and enforcement of regulatory sanctions is perhaps the most controversial part of the regime. The proposed reforms partially displace the longstanding rule that domestic courts do not enforce penal (as opposed to compensatory) laws of foreign states, because to do so is contrary to the principles of independent sovereignty.
Under the proposed reforms, some Australian regulatory penalties imposed by courts may now be directly enforceable in New Zealand and vice versa, in the same way as are civil judgment debts (see New Zealand Bill, Part 2, subparts 7 and 8). Specifically, sanctions framed as “civil pecuniary penalties” will be directly enforceable unless specifically excluded by Order in Council (a “negative list” approach). Sanctions framed as “regulatory regime criminal fines” will be directly enforceable only if declared to be so by Order in Council (a “positive list” approach). The net effect is that regulatory regimes based around civil penalties will achieve instant cross-border reach unless expressly excluded, whereas regulatory regimes based around criminal penalties will retain a domestic ambit unless expressly included.
It is not obvious that this difference in treatment is warranted. The preferential enforcement of civil penalties might be seen as a product of the historical aversion to cross-border enforcement of penal laws. However, civil penalties are penalties nonetheless, and in many commercial cases the distinction between civil and criminal penalties may be little more than nomenclature. For instance, a fine under s 40 of the Fair Trading Act 1986 is a criminal penalty, but a fine under s 80 of the Commerce Act 1986 is a civil penalty.
As a matter of broader principle, one might ask when and to what extent direct and mutual enforcement of regulatory penalties is desirable. The Agreement and the implementing Bills are further steps towards harmonisation through increased mutual recognition of court judgments. Where those court judgments relate to regulatory proceedings, the domestic regulatory systems of both New Zealand and Australia will have a broader reach. But this does not ensure (or even seek to ensure) that the respective regulatory systems will promote the same policies or pull in the same direction. There is therefore a risk of cross-cutting, rather than more streamlined, regulation in areas such as competition law, securities regulation and consumer protection.
One might argue that this is immaterial as the regime relates only to enforcement and not to primary regulation. But the line may be blurred – especially where one country’s domestic court imposes a penalty that directly or indirectly takes account of trans-Tasman conduct. Equally, seizure of a company’s New Zealand assets to satisfy an Australian regulatory penalty may be indistinguishable in practice from Australian regulation having direct effect in New Zealand.
Standing back, it would seem that two principles should guide regulation in this area:
enforcement should be restricted to situations in which the enforcing jurisdiction is satisfied with the other’s regulatory policies and penalties, and
perhaps more importantly, where regulated conduct affects both jurisdictions, the respective penal regimes should interact in a coordinated and non-duplicative manner.
These considerations do not appear to have been fully worked through during the consultation and formulation process (although the preamble to the 2008 Agreement records each Party’s confidence in the other’s judicial and regulatory systems). Rather, the emphasis has been on using the principle of mutual recognition to support the concept of an integrated trans-Tasman market.
One might predict that problems are likely to arise in the future. The Explanatory Note to the New Zealand Bill states that “[t]he Agreement indicates that only fines for offences under a regulatory regime that affects the effectiveness, integrity and efficiency of trans-Tasman markets and in which both countries have a strong mutual interest will be included in the scheme”. However, many of the regulatory regimes listed in the Working Group’s discussion document are of entirely domestic relevance.3 Conversely, in cases where there is truly a trans-Tasman nexus – that is, contravening conduct which affects both jurisdictions – the proposed regime may create more problems than it solves due to the increased risk of double penalisation. It seems it will fall to the respective regulators’ discretion, and not legal rules, to ensure a harmonised approach.
Anecdotal evidence suggests that New Zealand and Australian regulators are still a long way from sharing a common mindset or working in a truly coordinated fashion. The New Zealand Commerce Commission is unlikely to accept arguments that a New Zealand penalty should be reduced to take account of penalties imposed in Australia in respect of the same or related conduct. Likewise for the Australian Securities and Investments Commission. Perhaps in time a regime of mutual enforceability will foster a joint approach by regulators in such situations. For now, one can expect a somewhat imperfect overlap as the effects of closer coordination, but not single-source regulation, are felt.