I am pleased to speak in support of the Cross-Border Insolvency Bill 2008. The purpose of this bill is to give effect to the model law of the United Nations Commission on International Trade Law, UNCITRAL. The enactment of the model law in Australia should encourage other nations, particularly our neighbours and trading partners, to adopt this reform. Enactment of the model law in other countries will enable Australian creditors to pursue more easily corporate miscreants such as the infamous Christopher Skase.
I am pleased to speak in support of the Cross-Border Insolvency Bill 2008. The purpose of this bill is to give effect to the model law of the United Nations Commission on International Trade Law, UNCITRAL. The enactment of the model law in Australia should encourage other nations, particularly our neighbours and trading partners, to adopt this reform. Enactment of the model law in other countries will enable Australian creditors to pursue more easily corporate miscreants such as the infamous Christopher Skase.
To give some context of this legislation, it is worth recalling the 2004 Joint Parliamentary Committee on Corporations and Financial Services report, in particular chapter 13 of that report, which is a chapter headed Cross-Border Insolvency, and it has a subsection entitled Cross-border insolvency and corporate scoundrels. It is worth reading a couple of the paragraphs from that report, because it puts it in a colourful way but, regrettably, a very accurate way. It says:
13.14 Over recent decades, there have been reported cases of hundreds of millions of dollars being lost to creditors in Australia through the sustained and systematic misappropriation of company funds involving complex financial dealings often with the collusion of lawyers, accountants and other professional people. Such schemes frequently involve overseas transactions intended to place the recovery of debts beyond the reach of creditors. Attempting to recover assets from such companies or directors once the company has failed is costly, time consuming and often unproductive.
13.15 The financial scandals involving well known entrepreneurs such as Alan Bond and Christopher Skase highlight the difficulty and expense involved in chasing the money trail to locate assets that have been spirited away. This trail leads investigators through a maze of complicated business arrangements more often than not involving a network of corporate structures in different parts of the world that may act as agents and repositories of assets.
13.16 Mr Max Donnelly et al noted that Mr Robert Trimbole was one of the first of the high profile bankrupts and the first to realise Spain was a bankruptcy haven. While Trimboles assets in Australia were realised for the benefit of creditors, including a suburban residence which was the subject of competing claims and a rice farm located at Griffith, those held overseas proved out of reach.
13.17 Mr Christopher Skase provides one of the best known examples in Australia of corporate skulduggery where complicated overseas financial transactions involving family and the clever structuring of companies were used to prevent recovery procedures. He faced numerous charges in Australia including a set of thirty charges of dishonest conduct, through the provision of false information to independent directors, breach of fiduciary duties
and improper use of various information. The report goes on to give other examples.
One thing Australians cannot stand, and I think this was shown by the reaction to Christopher Skase, is the idea that those who do not pay their debts, rip off their business partners, rip off suppliers, defraud creditors could escape their obligations by skipping overseas. Just as it is important for other countries to be able to pursue insolvents in Australia, it is important for Australia to be able to pursue those who seek to escape their obligations in this country.
It is worth noting the key features of this bill. One could start by saying that cross-border insolvency arises when an insolvent debtor has assets or debts in more than one country. It is also a term that is used to refer to a range of other situations covering recovery of foreign debts, examination of foreign residence and claims against local assets by a foreign insolvency administrator. This bill introduces a regime which will facilitate procedures in insolvency administration involving more than one jurisdiction. The bill will also provide access to Australian courts for a foreign representativesomeone administering a foreign insolvency proceedingto seek a temporary stay of proceedings against the assets of an insolvent debtor. The proposed regime seeks to ensure that creditors receive equal treatment, regardless of their country of origin; foreign creditors have the same rights as Australian creditors. The regime also does not change the ranking of an unsecured creditor; foreign employees of a company will rank equally with Australian employees. The bill also applies the model law to personal bankruptcy, and it is worth noting that the main Australian laws affected are the Corporations Act and the Bankruptcy Act.
This legislation is long overdue. More than 10 years have passed since the adoption of the model law by UNCITRAL. The model law has been adopted by numerous countries already, including the United Kingdom, New Zealand, the United States, Colombia, South Africa, Japan, Poland and others. We are entering a period of uncertainty in international financial markets as well as an apparent downturn in the United States. The time to prepare for economic uncertainty, to secure future prosperity, is during the good times, a fact that apparently escaped the former government.
In Australia, the enactment of the model law was first proposed in 2002 in the Corporate Law Economic Reform Program paper No. 8 entitled Cross-border insolvency. The former Parliamentary Secretary to the Treasurer announced plans to adopt the model law on 17 October 2002, which is over five years ago, and it is regrettable that the former government took so long to get around to introducing the legislation in 2007. In 2004 the Parliamentary Joint Committee on Corporations and Financial Services conducted an inquiry into this matter that recommended the adoption of the model law. It is worth noting that it is now some 11 years since the model law was adopted by an UNCITRAL, 5 years since it was proposed by the Howard government and four years since it was recommended by a parliamentary committee. Now it is being passed under a Labor government. As it was put rather politely in the 2002 CLERP 8 paper, the movement towards enactment was not at the pace that might have been expected. It was pointed out in the CLERP 8 report that this change provides immediate short-term benefit for foreign representatives rather than for domestic benefit, but to leave the analysis there would be to miss the broader point.
The bill is significant not only for its practical implications, important though they are, but also for what the bill represents in terms of Australias engagement with the globalised economy. In an era of rapid globalisation, barriersto trade in goods and services, to asset transfers, to other international financial transactions between nationscontinue to fall. Equally, barriers both physical and administrative that prevent the movement of people are also being reduced by more rapid transportation. While these developments provide increased opportunities for governments, corporations and consumers, they also result in challenges for legal systems that continue to be separated by political borders. In such an environment, it is vital to develop common frameworks to provide certainty and consistency in the marketplace. Reforms such as the model law will serve to increase trade and investment by providing greater certainty. Consistent international rules governing the behaviour of market participants help to reduce the risk faced when operating in foreign jurisdictions as many firms, both large and small, now do. Clear and consistent rules about the operation of insolvency laws are particularly important for reducing the risk for creditors in international markets and for promoting increased trade and investment.
Harmonisation of market rules also reduces transactions costs for entities carrying on business across borders. Given the rapid advances in technology that are simplifying international business, this will affect an increasing number of firms and consumers. The bill is wholly consistent with Labors longstanding commitment to multilateralism. The Labor Party has always believed, as our national platform makes plain:
Global economic and social development, human rights, environmental protection and international security can best be achieved through multilateral diplomacy.
The negotiation of this model law is an example of multilateralism at work. It was a Labor government that was instrumental in furthering the development of model law under the then Attorney-General, Michael Lavarch. Across a range of foreign policy engagements, Labor has been committed to multilateralism in representing Australias interests in economic, social and environmental areas for very many years. Examples of this that I could quickly give include the leadership of Herbert Vere Evatt as President of the United Nations General Assembly and in drafting the UN Universal Declaration of Human Rights, the setting up of the Cairns group in 1986 to advocate the reduction of barriers in agricultural markets and its success during the Uruguay Round of trade negotiations, our promotion of Asia Pacific economic cooperation, the Canberra Commission on the Elimination Of Nuclear Weapons, and most recently Labors support for the Kyoto protocol.
The 2002 CLERP 8 paper also highlighted the potential for Australia to take a leadership role in enacting the model law. At that stage only a handful of nations had taken this actionthat was in 2002and it would have provided an opportunity for Australia to have acted as a leader if the former government had acted in a timely fashion. I fully support the Minister for Superannuation and Corporate Law in his statement in the other place that we will continue our work of cross-border insolvency through bodies such as UNCITRAL as we continue the inexorable move towards globalised markets. It will be vital for Australia to engage in international economic forums and with our trading partners on a multilateral basis. As the enactment of the model law shows, we can, through cooperation, continue to simplify trade and investment rules for Australian firms.
