EXPORT MARKET DEVELOPMENT GRANTS ACT 1997
Explanatory Statement
Export Market Development Grants (Associate and Fit and Proper Person) Amendment Guideline 2014 (No. 1)
The Export Market Development Grants Act 1997 (the Act) provides non-discretionary grants to Australian businesses which have incurred specified expenses promoting the export of their Australian goods, services, intellectual property rights and know-how. The grant is a partial reimbursement of the expenses incurred.
The Export Market Development Grants Amendment Act 2004 (the 2004 Amendment Act) amended the Act by introducing a ‘not fit and proper person’ test, to be applied by Austrade in accordance with Ministerial guidelines when assessing entitlement to payment of an EMDG grant.
The 2004 Amendment Act provided that a grant to which an applicant is otherwise entitled is not payable if, in accordance with Ministerial guidelines, Austrade determines that the applicant or an associate of the applicant is ‘not fit and proper’ to receive a grant.
As required under paragraph 101(1)(bb) of the Act, the Export Market Development Grants (Associate and Fit and Proper Person) Guidelines 2004 (2004 instrument) provide guidelines to be complied with by Austrade:
- in determining who is an associate of a person, for the purposes of the ‘not fit and proper’ provision; and
- in forming an opinion whether a person or any associate of the person is a fit and proper person to receive a grant.
The 2004 instrument’s ‘not fit and proper person’ rules do not apply to EMDG consultants preparing EMDG applications on behalf of their clients.
EMDG consultants have an interest in the outcome of their clients’ EMDG assessments and have an increasingly high public profile associated with the EMDG scheme. For example, Austrade promotes the services of EMDG consultants who have a demonstrated record of lodging accurate applications under the Export Market Development Grants (Extended Lodgement and Consultant Quality Incentive) Determination 2012 scheme.
The Export Market Development Grants Amendment Act 2014 (the 2014 Amendment Act) amended the Act by providing for Ministerial guidelines (2014 amendment guideline) to be made and complied with by the CEO of Austrade in forming an opinion as to whether an EMDG consultant or its associate is not a fit and proper person.
The 2014 Amendment Act provides that where an EMDG grant application is prepared by an EMDG consultant who is or whose associate is deemed to be not fit and proper, the application is deemed not to have been made and the applicant is invited to make a fresh application.
The 2004 instrument defines who is an associate of an EMDG applicant. In the 2014 amendment guideline, the classes of people who are “associates” are different depending on whether the CEO is applying s79A or s87AA of the Act. Section 2.3 applies only for the purposes of the s79A fit and proper test for EMDG consultants, while section 2.4 applies only for the purposes of the s87AA fit and proper test for applicants. Section 2.2 applies to both EMDG consultants and to applicants.
The 2014 amendment guideline also amends the definition of associates in the 2004 instrument so that they apply to individuals who have significant indirect shareholding in companies. Where section 2.5 (1) of the guideline uses the term voting power, this should be taken to mean effective control and decision making power.
The associates of a consultant include potentially important participants in the consultant’s business activities whose improper behaviour can raise serious doubts about the consultant’s reputation.
The 2014 amendment guideline contains assessment criteria to enable the CEO of Austrade to decide whether an EMDG consultant or any of its associates should be assessed to be not a fit and proper person.
In applying the assessment criteria set out in the guideline, it is expected that the CEO would only form an opinion that a consultant was not a fit and proper person where there was a relevant concern with that person’s capacity, trustworthiness or character to act as a consultant in the best interests of both their applicant client and the public funds from which EMDG grants are paid.
Without seeking to exhaustively list the circumstances in which an opinion could appropriately be formed that a consultant was not a fit and proper person, some examples are illustrative. A simple, isolated and explicable mistake would not be expected to be sufficient to warrant an opinion that a person was not a fit and proper person to act as an EMDG consultant, but repeated and material errors of the same or similar type may well be sufficient. Similarly, the making of a claim based on an interpretation of the law or the factual circumstances that is reasonably arguable although not agreed by Austrade would not be sufficient, but the making of claims that are palpably inconsistent with the law or that misrepresent the factual circumstances may be sufficient.
The power to reject a claim lodged by an EMDG consultant who is in the opinion of the CEO not a fit and proper person is viewed as significant and not to be exercised except in materially serious and warranted circumstances. Moreover, the fact that such decisions are subject to review by the Administrative Appeals Tribunal is expected to both temper the exercise of the power and provide rights of recourse to those affected.
Consultation arrangements carried out in relation to this legislative instrument
Austrade has consulted with industry associations on the application of a not fit and proper person test to EMDG consultants and with the Export Consultants Group (a chapter of the Export Council of Australia and the only body which represents EMDG Consultants) on the provisions of this instrument (the 2014 amendment guideline).
Commencement provisions for this legislative instrument
This instrument (the 2014 amendment guideline) commences on the day after it is registered.
Application provisions of this legislative instrument
This instrument (the 2014 amendment guideline) applies to EMDG applications made in the 2014-15 financial year and later years.
Review rights for decisions made under the legislative instrument
Review rights exist in relation to decisions made by Austrade to declare an EMDG consultant to be not a fit and proper person, including to the Administrative Appeals Tribunal.
Statement of Compatibility with Human Rights
Overview of the policy behind the legislative instrument
The Government, applicants and EMDG consultants all share an interest in the EMDG scheme maintaining broad public support. This public support depends upon public confidence in the probity of the scheme. EMDG consultants are a significant part of the scheme. They are publicly linked to the scheme, undertake significant promotion of the scheme, manage the majority of applications to the scheme, and earn fees from the scheme often on a success or commission basis. More than 60 per cent of all claims are prepared by EMDG consultants. The probity and good public image of EMDG consultants therefore has a significant impact on public perception of the EMDG scheme and the Government’s management of it. It is therefore appropriate that just as applicants are required to be fit and proper to receive a grant, so should consultants meet a similar standard. If the scheme were to be withdrawn due to negative public perception it would cause disruption and damage to thousands of businesses.
The EMDG scheme is the only significant financial assistance program for Australian small exporters. The total amount payable under the scheme is capped. Any grant that is paid on the basis of false or inaccurate information reduces the amount available to other applicants. Also, any amounts spent on monitoring and investigating the accuracy of claims reduces the overall amount available. It is not feasible for Austrade to verify the accuracy of every application (approximately 3000 applications each year). It is important that the EMDG scheme be able to operate on the basis that applications are honestly made.
The fit and proper person test for applicants provides an incentive for them to act honestly and with attention to accuracy. The new provisions appropriately extend this to consultants who prepare applications, often for applicants who themselves have little or no knowledge or experience of the scheme requirements. This instrument is intended to provide a further incentive to consultants not to make false and inaccurate claims, and an incidental incentive to applicants not to use consultants with a poor record for financial probity.
The consultants are not subject to the disciplinary rules of any professional or industrial body. The only control the government has over the conduct of consultants in the preparation of claims is by preventing them from preparing and lodging further claims. If a criminal offence (such as fraud or attempted fraud) can be proved in a particular case, a criminal prosecution can be brought, and in that case they will be automatically disqualified under s 78 of the EMDG Act from preparing applications for a period of at least 5 years. However, this will occur after the claim has been lodged and possibly after a grant has been paid.
The proposed provisions would assist to protect taxpayers’ funds from fraudulent or excessive claims, and to ensure the proper operation of the scheme and public confidence in the scheme.
Human rights implications
It is recognised that the making of a finding that a consultant is not a fit and proper person is significant and therefore it is appropriate that a number of procedural and other safeguards are available.
In particular, it is acknowledged that a finding that a person is not a fit and proper person to be involved in the process of preparing an application for a government grant is a finding that is likely to have an adverse impact on a person’s business reputation, even if the number of people who are aware of the finding is relatively small.
Art. 17 of the International Covenant on Civil and Political Rights states:
- No one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence, nor to unlawful attacks on his honour and reputation;
- Everyone has the right to the protection of the law against such interference or attacks.
Guidelines in this legislative instrument set out criteria for the CEO's decision. The CEO's decision will be subject to the normal rules of administrative law. These include the principle of procedural fairness (natural justice). In accordance with this legal requirement, before a decision is made, Austrade must advise each consultant it considers may be not a fit and proper person of the grounds for that concern, and of any adverse material or information that may be taken into account, and give the consultant the opportunity to respond. The consultant's response must be taken into account in making the decision.
Other applicable rules of administrative law include that the CEO must act reasonably on the basis of the evidence and must take account of relevant considerations and not take account of irrelevant considerations. The criteria in the guideline will be relevant considerations.
Consultants will have access to merits review by the Administrative Appeals Tribunal (AAT) of an adverse decision under s 79A. This is provided for by s 97(caa) of the EMDG Act.
In addition, consultants will be entitled to judicial review under the Administrative Decisions (Judicial Review) Act 1977 as well as under the common law. Judicial review would consider the lawfulness of a decision under s 79A, in particular, in relation to whether the decision complied with the rules of administrative law.
It is also important to note that s 79A determinations are not made for an unlimited period Section 79E of the EMDG Act provides that the excluded consultant may apply at any time for a revocation of the determination. In doing so, the CEO will have to take into account any relevant submissions by the consultant and any change in the circumstances, such as a successful appeal against a conviction or the lapse of time since any adverse event. The safeguards outlined apply each time the CEO makes a decision. Thus, a decision by the CEO that a consultant is not a fit and proper person does not operate indefinitely. It does not constitute a ban on the consultant in relation to all future applications.
In light of these various safeguards, the legislative instrument and its assessment criteria are considered to be a reasonable and appropriate measure to give effect to the aims set out above. In particular, it is considered that they do not breach a consultant’s right to be protected from unlawful attacks on his or her reputation.
This Instrument (the 2014 amendment guideline) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Other provisions
This instrument (the 2014 amendment guideline) is a legislative instrument for the purposes of the Legislative Instruments Act 2003 and is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.