Source: http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd1213a/13bd131
Timestamp: 2017-06-24 06:37:14
Document Index: 13921751

Matched Legal Cases: ['art 1', 'art 2', 'art 3', 'art 1', 'art 4', 'art 5', 'art 4', 'art 5', 'art 4', 'art 1', 'art 2', 'art 1', 'art 1', 'art 1', 'art 3', 'art 5', 'art 1', 'art 2', 'art 4', 'art 3']

Bills Digest no. 131 2012–13
PDF version [612KB]
WARNING: This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill. Eugenia Karanikolas, Economics Section Jaan Murphy, Law and Bills Digest Section 5 June 2013
Key issues and related provisions
Portfolio: Trade and Competitiveness
Commencement: Sections 1 to 3 commence on Royal Assent. Schedule 1 commences on a day to be fixed by Proclamation. If no date is fixed by Proclamation, Schedule 1 commences no more than six months after Royal Asset.
The purpose of the Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013 (the Bill) is to amend the Export Finance and Insurance Corporation Act 1991 (the Act)[1] to: restrict the mandate of the Export Finance and Insurance Corporation (EFIC) so that it only provides its services when there is a ‘market failure’
impose a requirement on EFIC to ‘focus’ its activities towards small to medium enterprises (SMEs)
extend EFIC’s competitive neutrality arrangements to apply to all of its contracts entered into under its Commercial Account (as distinct from its National Interest Account)
remove the requirement to have a government member on EFIC’s Board of Directors
extend EFIC’s powers in relation to the guarantee of loans to include foreign subsidiaries and
expand the definition of what constitutes Australian export trade.
This Bill is divided into two parts. Part 1 contains the items that amend the Act. Part 2 contains consequential amendments to the Corporations Act 2001 and the Insurance Contracts Act 1984.
EFIC is the government export credit agency that provides export related services, including finance and insurance, to Australian exporters and investors in overseas markets.[2] EFIC was established in 1991.[3] The agency currently[4] has a mandate to operate in circumstances where the private sector is not able or not willing to provide support and therefore should not compete with commercial sector providers.[5] It is a self-funding authority under the Commonwealth Authorities and Companies Act 1997.[6]
EFIC uses two accounts, the Commercial Account and the National Interest Account. Under the Commercial Account EFIC is able to decide which contracts to enter into without having to obtain permission or direction by the Minister. Under the National Interest Account EFIC may be directed by the Minister to enter into a contract if the Minister is satisfied that it is in the national interest.
Inquiry into Australia’s Export Credit Arrangements On 1 September 2011, the Government announced an inquiry by the Productivity Commission (the Commission) into EFIC.[7] EFIC was examined in 2006 by the Department of Foreign Affairs and Trade (DFAT).[8] In its report DFAT recommended that a more detailed and independent review of EFIC be carried out in 2009–10.[9] On 1 September 2011, the Government requested the Productivity Commission (the Commission) to undertake a public inquiry into Australia’s arrangements for the provision of export credit through EFIC.[10] In conducting this inquiry, the Commission was asked to:
review the rationale for government involvement in the provision of export finance and insurance, and assessing current arrangements against the requirements of the Act
assess EFIC’s management of credit and funding risks
review EFIC’s pricing and service arrangements and assessing their impact on incentives for Australian exporters to access private sector providers of export finance and insurance products review EFIC’s exemption from competitive neutrality policy and
assess the interactions between EFIC and other government programs and consider alternatives that would achieve EFIC’s objectives.[11]
The Commission’s report, which contained 22 recommendations, was released in June 2012.[12]
The Government announced its response to the Commission’s report on 29 January 2013, stating that it agreed in whole or in part with 16 out of the 22 recommendations made by the Commission.[13] The Government has made a commitment to reform EFIC by:
requiring that the agency return surplus capital to the Australian Government[14]
removing EFIC’s ‘market-gap’ mandate and applying a new ‘market failure’ test to determine whether EFIC’s involvement in the market is required[15]
requiring EFIC to focus on providing assistance to SMEs[16] expanding the definition of Australian export trade
removing EFIC’s exemptions in regard to competitive neutrality[17] and
amending EFIC’s governance arrangements by removing government personnel from its Board.[18]
The Export Finance and Insurance Corporation Amendment (Finance) Act 2013 responded to the recommendation which required the return of excess capital to the Government.[19] The remaining reforms have been addressed in this Bill. Committee consideration
The Bill has been referred to the Senate Foreign Affairs, Defence and Trade Legislation Committee for inquiry and report by 14 May 2013.[20] This has since been extended to 17 June 2013. Position of major interest groups
General Electric In its submission to the Foreign Affairs, Defence and Trade Legislation Committee, General Electric (GE) appears to be supporting the proposed changes to EFIC.[21] In particular, GE supports the Government’s decision to focus assistance on SMEs rather than completely accept the Commission’s recommendation for EFIC’s assistance to be given only to SMEs, and urges the Minister to:
‘… consult stakeholders and carefully consider the definition of “market failure” in future regulation…’.[22]
The Department of Resources, Energy and Tourism (RET) commented, in support of the Government’s decision not to exclude any company ‘by virtue of its size and sector’ from receiving government assistance through EFIC, that:
In order to ensure that EFIC focusses the majority of its attention on SMEs, RET is comfortable with EFIC needing to seek Ministerial approval to provide services to the largest few businesses in any sector….[23]
In its submission, the Tasmanian Department of Economic Development, Tourism and the Arts was supportive of the proposed changes relating to focusing EFIC’s efforts on assisting export orientated SMEs.[24]
According to the Explanatory Memorandum this Bill will have no direct financial impact.[25]
Despite the requirement under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government did not provide a statement assessing the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Parliamentary Joint Committee on Human Rights considered the Bill and reported in its Sixth Report of 2013 that the Bill does not appear to give rise to any human rights concerns.[26]
Key issues and related provisions Market Failure
The Bill proposes to alter EFIC’s mandate to restrict it to providing its services only where ‘market failure exists’ (proposed subsection 13A). Item 2 of Part 1 of the Bill inserts into subsection 3(1) a definition of market failure which in effect says that what constitutes a market failure will be specified in a legislative instrument, made by the Minister. Further, item 7 of the Bill will prevent EFIC from providing insurance or any other financial service or product under Part 4 of the Act unless:
the relevant insurance or financial product or service is unlikely to be provided by any private sector provider and
the lack of available insurance or a relevant financial product or service from the private sector is due to a market failure.[27] Proposed subsections 3(1) and 13A(1) will therefore narrow the situations in which EFIC can provide assistance by making market failure an underpinning requirement. However, proposed subsection 13A(2) then provides that proposed subsection 13A(1) does not limit the provision of insurance or other financial services or products made in relation to national interest transactions, made under Part 5 of the Act.
In its report, the Commission argued that EFIC’s mandate should be re-orientated to address market failures affecting SMEs. The report argued that there was no evidence to suggest that some of the projects EFIC had provided help with suffered from market failure. The Commission’s position is that:
Market failure occurs where transactions that would enhance economy-wide wellbeing are not proceeding. The fact that some transactions (or projects) are unable to attract private sector support is not a market failure and may reflect assessments by market participants of the expected return of the transaction.
There is a risk of policy failure when governments intervene in financial markets by providing finance to projects rejected by the private sector. In Australia, previous government attempts to provide finance to projects that have struggled to attract commercial interest have ended in commercial failure and imposed substantial costs on the taxpayer.[28]
The Commission’s report provided a number of case studies where government assistance had been given to projects where there has been no apparent market failure. One example given was the case of Brookfield Rail Pty Ltd. In this instance, EFIC gave the company a US$270 million insurance policy in order for it to fund a rail upgrade in Western Australia. As was noted by the Commission, Brookfield Rail is a wholly owned subsidiary of Brookfield Infrastructure Partners L.P., a company with global operations and more than US$13 billion in assets.[29] The Commission commented that:
… it appears that the preferences of the parent company, Brookfield Asset Management, and Brookfield Rail’s lenders played an important role in the requirement for EFIC participation in the transaction. Additional debt was required to meet the company’s preferences for a particular investment return profile and additional security was required to meet the lender’s risk preferences. The company’s internal policy determined more debt was needed and, in turn, Brookfield Rail’s lenders determined that insurance was needed to enable the investment to go ahead — not a failure in financial markets.[30]
Provisions related to SMEs
EFIC’s ‘focus’ on SMEs
At present sections 7 and 8 of the Act set out EFIC’s functions and duties in terms of activities rather than which firms are to be assisted. In relation to the provision of insurance and other financial services and products under Part 4 of the Act, item 13 of the Bill imposes on EFIC a requirement to ‘focus on providing such services and products to SMEs’.[31]
Proposed subsection 23A(2) provides that proposed subsection 23A(1) does not limit the provision of insurance and other financial services and products under Part 5 of the Act (national interest transactions). EFIC may also provide insurance and financial products and services under Part 4 of the Act to non-SMEs provided the market failure test provided by item 7 (proposed section 13A) is met.[32]
Thus EFIC may continue to provide services to all businesses and not just SMEs.[33] This is contrary to the argument put forward by the Commission that there was little evidence to suggest that EFIC’s large corporate clients were in need of government assistance. As stated by the Commission:
Shortages of finance that limits future investment in infrastructure is generally not raised as an issue in the annual reports of EFIC’s large corporate clients. Several of those clients have reported strong financial positions and were optimistic about their ability to finance future investments.[34]
As mentioned above, the Government’s decision not to confine assistance to SMEs has been commended by stakeholders including the US multinational conglomerate GE.
Items 4 and 6 of the Bill insert a definition of an SME into the Act. Proposed subsection 3A(1) defines an SME as a company registered under the Corporations Act 2001 that:
meets the criteria in relation to the total amount of consolidated revenue (as calculated under the appropriate accounting standard)[35] and has less than the maximum number of employees as specified by the Minister.[36] Both the consolidated revenue and number of employees criteria are to be established by the relevant Minister in a legislative instrument, rather than being defined in the Act itself.[37] The Government has indicated that its definition will include those businesses with annual turnover of less than $100 million or fewer than 100 full-time equivalent employees.[38] This differs from the Commission’s recommendation, which stated that EFIC’s services should be focused on smaller firms with annual turnover of less than $50 million or those with fewer than 100 full-time equivalent employees.[39]
Integration of accounting standards into the definition of SMEs
The Bill defines how an enterprise’s annual turnover must be calculated for the purpose of meeting the requirements provided by the relevant legislative instrument made by the Minister. It does this by integrating the definition of an SME contained in the legislative instrument to an appropriate accounting standard.
Item 1 of Part 1 of the Bill inserts a definition of ‘accounting standard’ linked to the Corporations Act 2001. This definition in turn forms an integral part of the definition of an SME provided by proposed subparagraph 3A(1). Specifically, proposed subsection 3A(2) states that when calculating the consolidated revenue (for purposes of determining if a company is an SME) the consolidated revenue must be calculated:
… in accordance with the accounting standards in force at the relevant time (even if the standard does not otherwise apply to the financial year of the SME concerned).
It appears that Accounting Standard AASB 118[40] would apply to most SMEs seeking assistance from EFIC. Under Part 2M.3 of the Corporations Act 2001, a number of entities are required to prepare financial reports including:
disclosing entities
large proprietary companies and
registered schemes[41] Section 45A of the Corporations Act 2001 provides that proprietary companies are either small or large, based on a number of factors including annual turnover and number of employee.[42] This classification has impacts on reporting requirements.[43] Subsection 45A(6) of the Corporations Act 2001 requires that in determining if a proprietary company is large or small, the company must calculate consolidated revenue and the consolidated gross value of assets in accordance with the relevant accounting standards, even if the standard does not otherwise apply to the company.
The effect of linking the definition of an accounting standard to the definition of an SME by the Bill is that it is unlikely that an SME would have to produce a new set of financial reports prior to seeking assistance from EFIC.
Provisions expanding EFIC’s potential client base
Section 16 of the Act provides EFIC with the power to make guarantees in respect of loans (or proposed loans) that are (or will be) financing Australian export trade. The present section 16(1)(a) limits EFIC’s guarantees and subsidies in relation to loans to persons carrying on business in Australia, for the purposes of financing Australian export trade. Item 9 of the Bill expands the potential client base of EFIC to encompass foreign subsidiaries of Australian SMEs, entities that were not previously eligible for support (proposed subsection 16(1)(a)). (Note that the retention of the phrase ‘a person’ in proposed subparagraph 16(1)(a)(i) allows EFIC to lend money or provide guarantees to any type of entity carrying on business in Australia, as was previously the case – it does not limit the activity to SMEs.) Item 10 of the Bill restricts the provision of guarantees to lenders under section 16 of the Act. Proposed subsection 16(3) provides that EFIC must not give a guarantee to a foreign subsidiary unless the parent SME of the relevant foreign subsidiary has certified that there will not be a reduction in the number of persons employed by the SME in Australia during the term of the guarantee.[44] Proposed subsection 16 (4) defines an eligible foreign subsidiary as a body that:
is a subsidiary (within the meaning of the Corporations Act 2001) of an SME that is carrying on business in Australia[45] and
is not itself carrying on business in Australia.[46] Importantly, under paragraph 16(1)(b) of the Act the proposed guarantee must assist the development of Australian export trade. Proposed subparagraph 16(1)(a)(i) provides that EFIC, when providing guarantees under section 16 of the Act, is to ‘focus’ on SMEs but (as discussed previously in relation to item 13) can also provide them to other entities that meet the criteria in proposed subparagraph 16(1)(a)(i) and (ii).
Provisions relating to export trade The Commission noted that the provisions in the Act relating to which business is eligible to receive EFIC’s assistance are too broad and conceivably cover any transaction in the export supply chain.[47] It recommended that only those businesses directly involved in export trade should be eligible for EFIC’s assistance. The Bill would amend the Act by somewhat limiting EFIC’s ability to provide assistance in situations where the proposed contract is ‘integral’ to Australia’s export trade. While the term ‘integral’ is not defined, the Bill broadly defines what constitutes a benefit to Australian export trade. The definition focuses on outcomes including increase in exports, access to new markets and increases of dividend flows to Australia. This is a key definition and it goes to the core of many of EFIC’s operations. Notwithstanding the significance of this term, the Bill also proposes to also include a broad provision giving the Minister the power to decide what may be of benefit to Australian export trade. Item 5 of Part 1 of the Bill repeals and replaces subsection 3(5) of the Act to broaden the definition of Australian export trade. The present definition provides that Australian export trade includes any transaction (including the rendering of a service) involving:
a benefit flowing directly or indirectly from overseas to
a person carrying on business or other activities in Australia.[48]
Proposed subsection 3(5) expands the scope of what constitutes Australian export trade. The language used focuses on the outcome(s) of the transaction. Specifically, Australian export trade will include any transaction that:
increases exports from Australia (a sales/turnover based outcome)[49] increases access to new markets for Australian exports (a market shares/access outcome)[50] or
increases dividend flows from overseas to Australia (a return on investment/cash flow outcome).[51]
Proposed subparagraph 3(5)(d) will allow the Minister, in a legislative instrument, to specify any other benefit arising from a transaction as a reference to Australian export trade.[52] Proposed subparagraph 3(5)(d) therefore appears to be serving as a catch-all provision that will provide the Minister with discretionary power over a key definition that underpins significant operational parts of the Act.
Item 12 of Part 1 of the Bill amends paragraph 19(1)(c) of the Act to restrict the provision of tender and performance guarantees by EFIC to: export contracts[53] eligible export transactions (either in whole or part)[54] or
contracts that are integral to an export contract or eligible export transaction (rather than the current test of being ‘associated with such a contract’).[55]
Item 12 of the Bill therefore restricts the range and type of contracts and transactions that can be supported by EFIC. The use of the word ‘integral’ will potentially limit the scope of the expanded coverage, and is designed to ensure that EFIC will only provide assistance to domestic suppliers of products or services where those products or services are ‘integral’ to the export of goods or services from Australia.[56]
Competitive neutrality Competitive neutrality means that a public sector body should not have advantages over private sector bodies by virtue of its public ownership. EFIC is required to make a payment to the government equivalent to the amount of tax it would pay if it were a private business. Section 63A(2) of the Act imposes a requirement that when determining the amount of the tax-equivalent payment, the Minister must have regard to the purpose of ensuring that EFIC does not enjoy a net competitive advantage over other providers of short-term insurance contracts.
Items 22, 23 and 24 remove the references in the Act to short-term insurance contracts. This has the effect of expanding the application of the competitive neutrality principles to all insurance, financial products and financial services provided by EFIC.
Item 23 expands the scope of subsection 63A(2) of the Act by requiring the Minister to have regard to the purpose of ensuring that EFIC does not enjoy a net competitive advantage over other persons or bodies who provide insurance contracts or financial services and products that EFIC provides.[57]
Item 23 of the Bill reflects the Commission’s recommendation that the conduct of EFIC in relation to its activities on the commercial account complies with competitive neutrality arrangements.[58] However, the Bill does not respond to the Commission’s recommendation to set an appropriately benchmarked rate of return on equity held by EFIC or to price its commercial account facilities on the basis of the expected full economic cost of provision.
Items 3, 22, 23 and 24 of Part 1 of the Bill remove all references to short-term insurance contracts from the Act, reflecting the exit of EFIC from the provision of short-term export credit insurance in 2003.[59] However, given the powers provided to EFIC by Part 3 of the Act[60] (and common law and other legislative definitions of insurance), it is arguable that EFIC remains able to provide short-term export credit insurance, should it choose to.[61]
By removing the reference to short-term insurance contracts from the Act, items 22, 23 and 24 also have the effect of expanding the application of competitive neutrality principles to all of EFIC’s Commercial Account operations.[62] However, the Act does not appear to contain any provisions that exempt EFIC from the requirement to pay debt neutrality charges,[63] guarantee fees,[64] or tax-equivalent charges[65] in relation to national interest transactions made under Part 5 of the Act. It therefore appears that competitive neutrality principles will also apply to national interest transactions.
Other items and consequential amendments
Removing the government member from the EFIC board
Item 14 of the Bill responds to the Commission’s recommendation to remove the government member from the EFIC Board.[66] Items 15 to 21 and item 25 of Part 1 of the Bill amend related sections to remove references to the government member and increase the number of other board members (thus offsetting the loss of the government member and retaining the current maximum number of board members). Removing references to subsidies from the Act
Items 8 and 11 of Schedule 1 of the Bill remove references to ‘subsidies’ from the Act. This clarifies that the EFIC is to focus on providing insurance, financial services or other financial products to eligible entities (within the parameters discussed above) rather than providing subsidies. Item 26 of Schedule 1 of the Bill clarifies that sections 13A (market failures) and 23A (focus on providing services and products to SMEs) of the Act will only apply to contracts, guarantees and loans entered into or provided by EFIC after the commencement of Schedule 1 of the Bill.
Consequential amendments to other legislation
Items 27 and 28 of Part 2 of the Bill make consequential amendments to the Corporations Act 2001 and the Insurance Contracts Act 1984 to reflect EFIC’s divestment of its short-term export credit insurance business in 2003.
[1]. The text of the Export Finance and Insurance Corporation Act 1991 can be viewed at: http://www.comlaw.gov.au/Details/C2012C00160/Download
[2]. Export Finance and Insurance Corporation (EFIC), ‘About EFIC’, EFIC website, viewed 18 March 2013, http://www.efic.gov.au/Pages/homepage.aspx. Sections 7-8 of the Act set out EFIC’s functions and primary duties. [3]. Parliamentary Research Service, Export Finance and Insurance Corporation Bill 1991, Parliamentary Library, Canberra, 3 October 1991, viewed 18 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2FW5L00%22 [4]. One of the aims of this Bill is to remove EFIC’s ‘market gap mandate’. [5]. This is known as the ‘market gap mandate’ and is defined as ‘the segment of the credit and insurances services market where the capacity of commercial sector financiers and/or insurers is limited or insufficient to support the needs of Australian exporters and investors’: Export Finance and Insurance Corporation (EFIC), ‘EFIC Act’, EFIC website, viewed 30 April 2013, http://www.efic.gov.au/about/governance/Pages/EFICact.aspx. For more information on what is currently expected of EFIC see: C Emerson (Minister for Trade), ‘Statement of Expectations’, 19 July 2011, viewed 18 March 2013, http://www.efic.gov.au/about/governance/Documents/Minister-for-Trade-Statement-of-Expectations-19-July-2011.pdf?utm_source=seo&utm_medium=EFIC-Board&utm_campaign=seo-efic-expectations-PDF-110824
[6]. Department of Foreign Affairs and Trade, Submission to the Senate Standing Committee on Foreign Affairs, Defence and Trade, Inquiry into the Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013 [Provisions], viewed 18 April 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=fadt_ctte/efic_bill_2013_43/submissions.htm [7]. B Shorten (Assistant Treasurer) and C Emerson (Minister for Trade), Productivity Commission inquiry into the Export Finance and Insurance Corporation, media release, 1 September 2011, viewed 18 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F1060836%22 [8]. M Vaile (then Deputy Prime Minister and Minister for Trade), Review of the Export Finance and Insurance Corporation, media release, 9 March 2006, viewed 18 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F951J6%22 [9]. Department of Foreign Affairs and Trade (DFAT), Review of the Export Finance and Insurance Corporation, Commonwealth of Australia, Canberra, 2006, p. 11, viewed 18 March 2013, http://www.dfat.gov.au/publications/corporate/review-of-the-export-finance-and-insurance-corporation.html [10]. B Shorten (Assistant Treasurer) and C Emerson (Minister for Trade), Productivity Commission inquiry into the Export Finance and Insurance Corporation, media release, 1 September 2011, viewed 18 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F1060836%22 [11]. Productivity Commission (PC), Australia’s export credit arrangements, Inquiry report no. 58, Commonwealth of Australian, Canberra, 31 May 2012, p. 48, viewed 16 March 2013, http://www.pc.gov.au/__data/assets/pdf_file/0009/117486/export-credit.pdf
[12]. Further information on the recommendations and findings made by the Commission is set out in its report: Productivity Commission (PC), Australia’s export credit arrangements, op. cit., pp. 33–43. [13]. C Emerson (Trade and Competitiveness Minister), EFIC reforms to help business in Asia, media release, 29 January 2013, viewed 16 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F2193100%22 and Department of Foreign Affairs and Trade (DFAT), Government response: Productivity Commission review Australia’s export credit arrangements: the Export Finance and Insurance Corporation’s mandate and scope of operations, DFAT, viewed 18 March 2013, http://www.dfat.gov.au/publications/efic/government-response-to-PC-Review-EFIC.pdf [14]. This change relates to recommendation 8.3 of the Commission’s report and its finding that the Government does not appear to have received a sufficient rate of return for the risk incurred from guaranteeing EFIC’s operations: Productivity Commission (PC), Australia’s export credit arrangements, op. cit., pp. 33–43.
[15]. This Bill responds in part to the Commission’s recommendation to amend EFIC’s ‘market gap’ mandate to ensure that the agency only provides assistance when the market, left on its own, fails to allocate resources efficiently. The Commission found that EFIC was providing its services when no market failure existed. For example, assistance was given when firms had exhausted other avenues for finance, or a firm had been refused finance because of its unhealthy financial situation.
[16]. The Commission recommended that SMEs be defined under EFIC’s Statement of Expectations to include entities employing less than 100 full-time equivalent employees or having a yearly turnover of no more than $50 million (recommendation 5.1). The Commission commented that the only possible reason for having an agency like EFIC is for it to provide support to newly exporting SMEs, because they have limited experience in gaining access to capital and insurance. [17]. Under the current legislation only short-term insurance contracts entered by EFIC are subject to competitive neutrality provisions which include a debt neutrality charge, tax-equivalent payments and guarantee fees.
[18]. The removal of government personnel from boards was first recommended by the Uhrig (2003) review. The Commission supports Uhrig’s recommendation to remove government representatives from the Board as it may lead to conflicts of interest and increase the risk of poor governance: J Uhrig, Review of corporate governance of statutory authorities and office holders, report prepared for the Department of Finance, Canberra, June 2003, viewed 10 May 2013, http://www.finance.gov.au/financial-framework/governance/docs/Uhrig-Report.pdf [19]. The Export Finance and Insurance Corporation Amendment (Finance) Act 2013 has been enacted and received Royal Assent on 30 March 2013. The Act is available at: http://www.comlaw.gov.au/Details/C2013A00030. Further information about this Act is set out in the relevant Bills Digest: E Karanikolas, Export Finance and Insurance Corporation Amendment (Finance) Bill 2013, Bills Digest, no. 94, 2012–13, Parliamentary Library, Canberra, 2013, viewed 18 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2F2311969%22 [20]. Selection of Bills Committee, Report No. 4 of 2013, Senate, Canberra, 20 March 2013, viewed 30 April 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=selectionbills_ctte/reports/2013/rep0413.htm. Details of the inquiry are available on the Committee’s webpage: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=fadt_ctte/efic_bill_2013_43/index.htm
[21]. General Electric, Submission to the Senate Standing Committee on Foreign Affairs, Defence and Trade, Inquiry into the Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013 [Provisions], 5 April 2013, p. 2, viewed 18 April 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=fadt_ctte/efic_bill_2013_43/submissions.htm [22]. Ibid., p. 3.
[23]. Department of Resources, Energy and Tourism (RET), Submission to the Senate Standing Committee on Foreign Affairs, Defence and Trade, Inquiry into the Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) 2013 [Provisions], 18 April 2013, viewed 3 May 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=fadt_ctte/efic_bill_2013_43/submissions.htm
[24]. Tasmania Department of Economic Development, Tourism and the Arts, Submission to the Senate Standing Committee on Foreign Affairs, Defence and Trade, Inquiry into the Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) 2013 [Provisions], 16 April 2013, viewed 3 May 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=fadt_ctte/efic_bill_2013_43/submissions.htm [25]. Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, p. 3, viewed 18 April 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fems%2Fr5017_ems_6623c7af-842e-48ea-906a-03ad1bf36c7e%22 [26]. Parliamentary Joint Committee on Human Rights, Sixth Report of 2013, May 2013, p. 107, viewed 4 June 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=humanrights_ctte/reports/index.htm [27]. Proposed subsection 13A(1).
[28]. Productivity Commission, Australia’s export credit arrangements, op. cit., p. 107.
[29]. Ibid., p. 13.
[30]. Ibid., p. 205.
[31]. Proposed subsection 23A(1). [32]. While proposed subsection 23(1) requires EFIC to focus on SMEs, the Bill and Explanatory Memorandum do not outline what indicators would be used to determine if EFIC is ‘focused’ on SMEs or how the level of ‘focus’ would be measured.
[33]. The capacity of EFIC to continue to support non-SMEs (provided the market failure test is satisfied) was noted in the EM: Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, op. cit., p. 2.
[34]. Productivity Commission, Australia’s export credit arrangements, op. cit., p. 215.
[35]. Proposed paragraph 3A(1)(a) and proposed subsection 3A(2). [36]. Proposed paragraph 3A(1)(b). [37]. Proposed paragraphs 3A(1)(a) and (b).
[38]. Department of Foreign Affairs and Trade (DFAT), Australian Government response to the Productivity Commission review of Australia’s export credit arrangements, op. cit., p. 1.
[39]. Recommendation 9.1 of the Commission’s report: Productivity Commission (PC), Australia’s export credit arrangements, op. cit., pp. 33–43.
[40]. Australian Accounting Standards Board, Accounting standard AASB 118 revenue as amended, (at 1 January 2011), Aus1.1, Australian Accounting Standards Board website, 2010, viewed 8 May 2013, http://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPoct10_01-11.pdf [41]. Corporations Act 2001, subsection 292(1).
[42]. See Corporations Act 2001, subsections 45A(2) and 45A(3).
[43]. See Corporations Act 2001, subsection 292(1).
[44]. Proposed subsection 16(3).
[45]. Proposed paragraph 16(4)(a).
[46]. Proposed paragraph 16(4)(b).
[47]. Productivity Commission, Australia’s export credit arrangements, op. cit., p. 29.
[48]. Subsection 3(5) of the Act.
[49]. Proposed paragraph 3(5)(a).
[50]. Proposed paragraph 3(5)(b).
[51]. Proposed paragraph 3(5)(c).
[52]. Proposed paragraph 3(5)(d).
[53]. Paragraph 19(1)(a) of the Act.
[54]. Paragraph 19(1)(b) of the Act.
[55]. Subsection 19(2) of the Act.
[56]. Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, op. cit., p. 6.
[57]. Proposed subsection 63A(2); subsection 63A(1) of the Act.
[58]. Recommendation 6.2 of the Commission’s report: Productivity Commission (PC), Australia’s export credit arrangements, op. cit., pp. 33–43. [59]. Productivity Commission, Australia’s export credit arrangements, op. cit., pp. 46 and 93.
[60]. In particular, see sections 14 and 22 of Part 4 of the Act. See also subsections 11(2) and (5) of Part 3 of the Act. [61]. At common law ‘insurance’ is defined as where the insurer undertakes, in return for a premium (or other consideration), to pay the insured an amount of money (or equivalent benefit) on the happening of a specified event: Prudential Insurance Co v Inland Revenue Cmrs [1904] 2 KB 658. This common law definition of ‘insurance’ is reflected in section 763C of the Corporations Act 2001 (Cth), which treats insurance as a facility through which a person manages financial risk. See also: Insurance Contracts Act 1984 (Cth), section 11.
[62]. Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, op. cit., pp. 6–7
[63]. Section 61A of the Act. [64]. Section 62A of the Act.
[65]. Section 63A of the Act.
[66]. Recommendation 9.1 of the Commission’s report: Productivity Commission (PC), Australia’s export credit arrangements, op. cit., pp. 33–43.