Law reform to be prioritised in a range of areas
In 2022 we can expect law reform in a range of areas that are both locally and globally significant: cybersecurity; privacy and data; and environmental, social and governance, with a particular focus on climate change. Corporate, financial, data and consumer reforms will also feature.
Below are the major developments to watch:
Zero and negative interest rates
Although the Reserve Bank of Australia has stated a negative cash rate is highly unlikely in Australia, APRA expects banks to develop tactical solutions to implement zero and negative interest rates by 31 July 2022 and to be able to implement them within three months, if needed.
Au Domains
From March 2022, businesses with an Australian presence will be able to register a “.au direct” domain name (such as “cakes.au”), allowing for shorter, more memorable domain names.
Australian regulators collaboration
Increased volume and complexity of regulatory reform and overlapping regimes should see greater collaboration among the key Australian regulators (the OAIC, the ACCC and FIRB) in 2022.
"Beyond the ongoing developments in data, cybersecurity and financial reform, ESG is fast becoming the critical consideration for businesses operating in Australia. In particular, 2022 is set to see significant climate and social-related activity across the board. This will reach into areas such as investment and energy reform, social infrastructure (including social housing initiatives), green and social financing, as well as disputes and heightened regulatory scrutiny of ESG matters."
– James Darcy, Partner
Expected developments for 2022
Evaluation of changes to foreign investment laws: In 2022, the Government will consider the findings of its legislatively required evaluation of the 1 January 2021 changes to the foreign investment laws. The report, completed on 10 December 2021, will cover the impact of the reforms and their implementation on foreign investment in Australia and on the broader Australian economy, and whether the right balance is struck between welcoming foreign investment and protecting Australia's national interests.
Unfair trading prohibition: The Australian Competition and Consumer Commission (ACCC) is likely to continue advocating for a general prohibition on unfair trading practices to address unfair conduct that harms consumers and is not currently caught by consumer protection laws.
Privacy reform: Broad privacy law reform is expected in 2022. The Government previously flagged a review, including stricter requirements for when and how consent is obtained, an updated definition of “personal information” and enhanced enforcement powers for the Office of the Australian Information Commissioner (OAIC). Any changes in this area will be heavily scrutinised in light of COVID-19, with personal privacy being at the forefront of Australians' minds.
Developing Australia's hydrogen industry: The review of the national gas regulatory framework to accommodate hydrogen blends and other renewable gases will continue through 2022, with any legislative changes expected to take effect from 2023.
Continued regulatory reform in the energy sector: In 2022, continued energy-related regulatory reform is expected as Australia transitions away from a centralised, coal-based energy system to a more decentralised system, focused on renewable energy.
Offshore wind farm regulation: Australia is establishing a legislative framework for granting rights to the seabed of its national waters for the development of offshore electricity infrastructure, such as offshore wind farms and transmission infrastructure. Proposed legislation was introduced in 2021. Details will be developed in regulations that are planned to be published in 2022.
How corporates are responding to climate change: The “Say On Climate” is a new global initiative seeking to alter how listed entities engage with climate-related matters and their related disclosures. In Australia, despite the absence of a legal framework for advisory resolutions, this initiative is being supported by the boards of prominent listed Australian resources companies, which have voluntarily committed to submitting advisory resolutions for shareholder approval of their climate action plans at their 2022 annual general meetings.
Climate change litigation continuing to increase: Litigation is increasingly being used to seek to compel government and business to act on climate change and climate-related risks, with this trend expected to continue. Claimants are testing numerous litigation pathways, including claims based on human rights, tort law, consumer laws and corporate disclosure laws.
Investor state arbitration and the environment: The overlap between international investment and environmental protection is expanding, with environmental protection provisions featuring in International Investment Agreements, International Free Trade Agreements and a mounting body of environment-related investor-state disputes.
Below baseline credit scheme: The Government allocated A$280 million in its 2021 budget to implement a “below baseline” crediting scheme over the next decade. It will sit within the Safeguard Mechanism compliance framework and reward large emitters with tradeable “Safeguard Mechanism Credits” if they reduce their greenhouse gas emissions below agreed limits.
Financial Accountability Regime (FAR): The consultation period for the much anticipated FAR closed in August, with the FAR legislation expected to be passed in the Spring of 2022 Parliament session. The FAR regime will have significant implications for all entities regulated by the Australian Prudential Regulation Authority (APRA), particularly non authorised deposit taking institutions that are not currently caught by the Banking Executive Accountability Regime.
APRA phasing out reliance on Committed Liquid Facility (CLF): APRA expects all locally incorporated banks subject to the Liquidity Coverage Ratio to reduce their reliance on the CLF to zero by the end of 2022, subject to financial market conditions. Beyond 2022, APRA anticipates there will be sufficient high-quality liquid assets available to negate reliance on the CLF.
APRA update on key policy settings for capital framework reforms: APRA has provided an update to authorised deposit-taking institutions on capital framework reforms, which will come into effect from 1 January 2023. The reforms are intended to strengthen the financial resilience of the industry. APRA intends to maintain the current approach to capital buffers but modify capital requirements for higher-risk residential mortgage lending, and revise settings to improve the framework's flexibility.
Reserve Bank of Australia to test central digital currencies for international settlements: The RBA, with the Bank for International Settlements Innovation Hub and the central banks of Malaysia, Singapore and South Africa, will jointly test the use of central bank digital currencies for international settlements. The project aims to develop prototype shared platforms for cross-border transactions, using multiple digital currencies.
Changes to Australia's designs system: Amendments to Australia's designs regime, relating to the standard against which design registrability and infringement will be assessed, commenced in September 2021. Further changes take effect on 10 March 2022, including a 12 month grace period for some publications or uses of a design, a “prior use” defence and greater rights for exclusive licensees.
Merger reform: The ACCC wants to overhaul Australia's merger regime, including by adopting a mandatory and suspensory regime in which the need to file is automatically triggered above certain value thresholds. The ACCC has also proposed to change the legal test, lowering the standard of proof from the “substantial lessening of competition” test, and adding specific rules for merger parties with existing market power, as well as for large digital platforms. Extensive industry consultation and debate on the proposed reforms is expected in the year ahead.
Amendments to test for corporate tax residency: In the last budget, the Government announced proposed technical amendments to clarify the corporate residency test so that a company incorporated offshore will be treated as an Australian tax resident if it has both a “significant economic connection to Australia” and its central management and control is in Australia. The new law will have effect from the first income year after the date of Royal Assent of the new legislation but, as currently proposed, taxpayers will have the option of applying the new law from 15 March 2017.
Taxpayer Alert concerning foreign income of Australian residents: The Australian Tax Office (ATO) has signalled that, in the coming year, it intends to target high net worth individuals with substantial foreign assets and dealings, where it finds arrangements involving income or capital gains being disguised as loans or gifts from a foreign resident to an Australian resident. Together with the ATO's Tax Avoidance Taskforce targeting higher risk trust arrangements in privately owned and wealthy groups, and in light of the recent litigation concerning the Greensill family (see Year in Review section), the ATO is likely to dedicate more resources to investigating high net worth individuals with substantial foreign assets/dealings, and foreign residents with substantial Australian assets/dealings.
Combatting cybercrime: During 2022, the Federal Government will focus on laws to strengthen Australia's capability to combat cybercrime, as outlined in its Ransomware Action Plan, including mandatory reporting of ransomware incidents affecting businesses with a minimum A$10m a year turnover, and new penalties for non-compliance. It is also likely to overhaul the Autonomous Sanctions Act 2011 (Cth), prohibiting organisations from transacting with designated persons involved in malicious cyber activity. These reforms will align Australia with the EU, UK and US.
Security of critical infrastructure reforms: Security of critical infrastructure laws are likely to be passed in two amended bills following recommendations of the Parliamentary Joint Committee on Intelligence and Security. The first bill, which includes government assistance measures and cybersecurity notification requirements, will likely be passed and implemented before the end of 2021. All remaining elements will be deferred to the second bill and will involve industry consultation in relation to risk management programmes and declarations of systems of national significance.
Online safety reforms: Under the Online Safety Act 2021 (Cth), which takes effect from January 2022, online service providers will be under more stringent obligations to take down image-based abuse, cyber abuse, cyber bullying and seriously harmful online content, while the eSafety Commissioner will have new powers to ensure enforcement and create industry standards.
Proposed “pre determined” regulation of digital platforms: The ACCC has proposed the possibility of adopting an ex-ante approach to the regulation of digital platforms, such as introducing sector-specific rules to govern the conduct of key players, reflecting some measures currently being considered in the EU, UK and US. The ACCC will release a Concepts Paper in the second half of 2022 on these issues.
