22 February 2006

Review of trans-Tasman MOU on Coordination of Business Law signed

New Zealand Commerce Minister Lianne Dalziel and Australian Treasurer Peter Costello today signed a revised Memorandum of Understanding on Coordination of Business Law between Australia and New Zealand.

The revised MOU reaffirms both countries’ commitment to coordination of trans-Tasman business law and commits both countries to working together to reduce impediments to trans-Tasman commerce.

The revised MOU also sets new priority areas for trans-Tasman business law coordination and acknowledges several important developments in the trans-Tasman environment, such as the objective of a trans-Tasman single economic market.

A review of the previous MOU (signed in August 2000), the report of which is also being released today, shows that substantial progress has been made in relation to the current work programme.

Several items have been completed, including legislation governing electronic transactions, while other items, such as an agreement on mutual recognition of securities offerings (which is also being signed today) are due to be implemented shortly.

In addition, significant work has been progressed on:
• Information-sharing and cooperation between regulators; and
• coordination of accounting standards through the Trans-Tasman Accounting Standards Advisory Group which led to a regional policy forum on International Financial Reporting Standards with representatives from Japan, Hong Kong, Singapore, China, Korea, Malaysia, Thailand, Indonesia and the Philippines.

The review also found overwhelming support in the trans-Tasman business community for trans-Tasman coordination of business law and for the MOU’s continuing relevance.

Ms Dalziel and Mr Costello welcomed the revised MOU and acknowledged the important role it would continue to play in reducing barriers to trans-Tasman commerce and trade.

"The Memorandum of Understanding has been a success in improving the trans-Tasman business environment. We are confident that the Memorandum of Understanding will continue to provide benefits to both countries over the next five years," they said.

Further information on the review, the revised MOU and final report of the review of the MOU can be found at the Australian Treasury website, www.treasury.gov.au, or the New Zealand Ministry of Economic Development website, www.med.govt.nz

The revised MOU is attached to this press release.

The Memorandum of Understanding Between the Government of New Zealand and the Government of Australia on Coordination of Business Law
This Memorandum:

• replaces the Memorandum of Understanding between the Government of New Zealand and the Government of Australia on Coordination of Business Law signed on 31 August 2000.

• records the following understandings reached in discussions between the Government of New Zealand and the Government of Australia regarding promotion of closer economic relations between New Zealand and Australia.
Mutual benefits to be obtained by the two countries

1. The Governments of New Zealand and Australia recognise the importance of accelerating, deepening and widening the relationship that has developed through the growth of trans-Tasman trade, particularly since the commencement of the Australia New Zealand Closer Economic Relations Trade Agreement in 1983. Both Governments consider that further coordination of significant areas of business law (including consumer law but not taxation) can facilitate the achievement of this goal.

2. Both Governments also acknowledge the importance of a global approach to business law issues (particularly in light of the increasing prevalence of electronic commerce) and the significance of the trans-Tasman relationship in that approach.

3. Both Governments have committed to the objective of a single economic market. The Australian Productivity Commission has defined this 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 of both countries.

4. Both Governments are aware that some existing laws and regulatory practices relating to business within each economy may impede the development of trans-Tasman business activity. Through the development of increased coordination and dialogue, both Governments will endeavour to minimise such impediments.

5. An array of approaches exists to achieve the goal of increased coordination in business law. Both Governments recognise 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. In working towards greater coordination, the efforts of both Governments will focus on reducing transaction costs, lessening compliance costs and uncertainty, and increasing competition.

6. This Memorandum of Understanding reflects our desire to deepen the trans-Tasman relationship within a global market, through increased coordination of business law, thereby creating a mutually beneficial trans-Tasman commercial environment. Such an environment will allow New Zealand and Australia to share a common outward focus in commercial activities within the greater global market.

7. Both Governments recognise the trend towards increasing international convergence of financial market and business regulation and the need to comply with international standards. Both Governments acknowledge the benefit of coordination in efforts to influence evolving international regulatory standards and regimes.
Existing business law coordination

8. Starting from their similar legal and commercial backgrounds, New Zealand and Australia have already achieved a significant degree of coordination and cooperation in a number of areas of business law, including:

a. competition laws enforced by the Commerce Commission in New Zealand and Australian Competition and Consumer Commission;
b. consumer protection laws, including fair trading laws;
c. cross investment activity including the offer of securities between Australia and New Zealand, in particular, equities and interests in managed funds; cross border listings on ASX and NZSX;
d. mutual recognition of registered occupations, as provided for under the Trans-Tasman Mutual Recognition Arrangement; and
e. New Zealand reforms regarding takeovers and securities law, and the adoption by both countries of International Financial Reporting Standards.
Maintaining existing business law coordination

9. Both Governments recognise that, having achieved a significant degree of coordination, the challenge is to maintain alignment in the areas where there are coordinated regimes.

10. Both Governments also recognise that effective law coordination requires a coordinated underlying legal infrastructure. Work on one aspect of this is proceeding through the Trans-Tasman Working Group on Enforceability of Court Proceedings and Regulatory Enforcement, established in 2003.

11. The administration of coordinated regimes is an important feature of the trans-Tasman market. Both Governments will seek to encourage cooperation between the relevant regulators and will seek to ensure that any opportunities for cooperation are maximised.
Further development of business law coordination

12. Attached in the Annex is a list of areas identified by both Governments as possible issues for coordination. Both Governments will examine further the scope for coordination of business laws and regulatory practices in each of these areas.

13.In order to determine the suitability of each of these issues for coordination, regard will be given to:
a. The desirability of ensuring for each particular situation, that a firm, ideally, will only have to comply with one set of rules, and have certainty as to the application of those rules in the other jurisdiction, and with which regulator (ie Australian or New Zealand) it needs to deal;
b. Whether the situation should be regulated solely through domestic rules or whether a bilateral, or multilateral solution would be more appropriate; and
c. Whether a good reason exists for the law in this area to be different between Australia and New Zealand.

14. Having taken these principles into consideration, both Governments will still need to ensure that realistic goals are set and that the benefits of coordination outweigh the costs. Globalising and localising factors also need to be considered by both Governments in this respect.
(Globalising and localising factors are forces that would push law makers to take either a more multilateral or a more domestic approach to the formation of business law. An example of a globalising factor could be the reduction of compliance costs and uncertainty to businesses trading across borders. An example of a localising factor could be a unique local condition).
Consultation

15. In addition to the items specified in the work programme (see Annex), when either Government considers that a difference between their respective business laws or regulatory practices gives rise to an impediment to the development of the trans-Tasman relationship, the two Governments will consult with a view to resolving the impediment, whether or not the area of law is already included in the programme and regardless of the priority accorded to the matter at the time.

16. Each Government will keep the other Government informed of proposed reforms in the business law area. Further, each Government will give the other the opportunity to be involved in the other’s reform process at an early stage. Early consultation is particularly important where a policy proposal has extra-territorial application that impacts on the other country or would have the potential to result in the removal of any right or benefit that the other country currently enjoys.

17. Each Government will take the necessary steps to facilitate early examination of the areas of business law and regulatory practices contained in the programme.

18. Both countries also place great value on cooperation between regulators, and between regulators and policy officers. The work programme has been varied to reflect this and it is hoped that Australian and New Zealand officers and regulators in each sphere will meet together annually to discuss issues of mutual interest.

Report back to Ministers

19. Officials will report annually to their respective Ministers responsible for business law as to the status of the work highlighted for action in the Annex to this Memorandum of Understanding.
Review of the Memorandum of Understanding

20. Both Governments mutually determine that they will review this Memorandum of Understanding five years from the date of its signature, and every five years following that date.
Outcome

21. The understandings set out in this Memorandum are not intended to preclude the possibility of earlier coordination in any area of business law or regulatory practice.
Commencement and implementation

22. The Minister of Commerce of New Zealand and the Treasurer of the Commonwealth of Australia will have responsibility on behalf of their respective Governments for the implementation of this Memorandum of Understanding including the establishment, and any variation, of the work programme.

23. This Memorandum of Understanding will come into effect on the date of its signature.

Signed in Australia on 22 February 2006 by:
Hon Peter Costello, Treasurer, for the Government of Australia
Hon Lianne Dalziel, Minister for Commerce, for the Government of New Zealand.

Annex

Work Programme for Coordination of Business Law

a) Managing cross-border insolvency including through implementation of the UNCITRAL Model Law on Cross-Border Insolvency;
b) Consideration of mutual recognition and/or further coordination of the regulation of financial intermediaries, including consideration of the desirability of adopting a mechanism which would allow for the disqualification of financial intermediaries in one jurisdiction to apply in the other jurisdiction;
c) Further coordination of disclosure regimes in securities law through mutual recognition/coordination of disclosure requirements;
d) Coordination of insurance regulation and the implementation and enforcement of insurance regulation;
e) Information sharing amongst regulators;
f) In relation to financial reporting:
– Consideration of the respective financial reporting frameworks in both countries and how these may potentially be better aligned;
– Working towards consistency of financial reporting standard setting arrangements; and
– Working towards continued convergence of financial reporting standards;
g) Managing cross-border recognition of companies;
h) Explore the desirability of adopting a mechanism which would allow for the disqualification of persons from managing corporations in one jurisdiction to apply in the other jurisdiction;
i) Coordination of anti money laundering supervisory frameworks to minimise compliance costs for financial institutions;
j) Development of a seamless processing regime for the granting of patents and the registration of trade marks, plant variety (or breeders’) rights and patent attorneys;
k) Coordination of competition law in the following areas:
– Consideration of cross appointments between competition regulators;
– Other cooperative arrangements such as a single-track procedure for business acquisition applications;
l) Where appropriate, joint participation in policy, research, compliance and education programmes on consumer issues relating to business law and explore the potential for sharing work and coordination of work on enhancing financial literacy.

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