National Competition Policy Review of the Professional Standards Act 1994


2. The context of the review and the operation of the act

2.1 The context of the review - Competition Policy
2.1.1 The Council of Australian Governments ratified the National Competition Policy in April 1995. Under the Policy, all State and Territory governments committed themselves to actions aimed at increasing consumer and business choice, improving efficiencies and creating an overall business environment in which to improve Australia’s international competitiveness.
2.1.2 The Competition Principles Agreement requires Governments to review legislation and assess whether any restrictions on competition are in the public interest. There is a presumption that legislative restrictions should be repealed unless a public interest case to the contrary can be made out. Clause 5(1) of the Competition Principles Agreement provides:

The guiding principle is that legislation (including Acts, enactments, ordinances or regulations) should not restrict competition unless it can be demonstrated that:

2.1.3 The review of the Professional Standards Act will therefore need to demonstrate that any restrictions on competition imposed by the Act serve the public interest.

2.1.4 A key feature of legislative reviews under Competition Policy is the quality of outcomes. Reviews are directed at making better rules rather than necessarily fewer rules, and at demonstrating a net public benefit if restrictions are retained. It is also recognised that rules need to be constantly reviewed to ensure they remain relevant and achieve their objectives.

2.1.5 Even if legislation does not restrict competition, consideration needs to be given to whether its objectives can be achieved by better means. The diagram at Appendix B, based on one produced by the Centre for International Economics, demonstrates the goals of Competition Policy reviews.

2.2 The context of the review - Section 55

2.2.1 Section 55(1) of the Professional Standards Act provides:

55. Review of Act

2.2.2 The terms of reference prepared for the review are designed to ensure the requirements of both the section 55 review and Competition Policy review are met.

2.3 Operation of the Professional Standards Act

2.3.1 Under the Professional Standards Act, an occupational association may apply to the Professional Standards Council, which is established by the Act, for approval of a scheme to limit liability. The Act does not apply to all types of occupational liability and excludes, for example, liability for damages for personal injury, breach of trust, fraud or dishonesty.

2.3.2 Either an occupational association or the Council may prepare a scheme. Before approving a scheme, the Council must publish a notice in a major newspaper regarding the scheme, consider any comments or submissions received, and conduct a public hearing if this is considered necessary. Once the Council approves a scheme, the scheme is submitted to the Minister who may authorise the publication of the scheme in the Government Gazette. A scheme does not come into effect until gazetted and since the Minister authorises gazettal, approval of schemes is effectively required by the Minister. The Supreme Court may disallow a scheme if it does not comply with the Act. Schemes are also subject to disallowance by Parliament.

2.3.3 A scheme may apply to all members of an occupational association or to classes of members. An occupational association may exempt a person from the scheme.

2.3.4 An approved scheme operates to cap the occupational liability of its members. The Act imposes a cap of $500,000. The cap may vary for different classes of persons within an occupational association or for different kinds of work. Members of a scheme are required to have adequate insurance cover, and occupational associations are required to maintain systems for handling complaints and disciplining members, implement a risk management program, and ensure that members comply with requirements of the scheme.

Issues

2(a) Are the types of occupational liability covered by the Act appropriate? Should the Act be extended to cover other types of occupational liability?

2(b) Do the procedures for approving schemes provide for adequate consultation and accountability?

2(c) Is it in the public interest to allow occupational associations to exempt members from schemes?

2(d) Should schemes cover all members of an occupational group, or would such a requirement restrict consumer choice and competition?

2.4 The schemes as part of the legislation

2.4.1 An important issue is whether schemes approved under the Professional Standards Act should also be considered part of the legislation for Competition Policy review purposes. The schemes currently in force are the accountants scheme, the solicitors scheme, the investigative and remedial engineers scheme and the professional surveyors scheme.

2.4.2 The Council of Australian Governments has stated that regulation refers to:

….the broad range of legally enforceable instruments which imposes mandatory requirements upon business and the community as well as to those voluntary codes and advisory instruments … for which there is a reasonable expectation of widespread compliance. Council of Australian Governments, Principles and Guidelines for National Standard Setting and Regulatory Action by Ministerial Councils and Standard-Setting Bodies, November 1997, p.2

2.4.4 Arguments for excluding the schemes from review are based on the voluntary nature of the regime — occupational associations are not required to register schemes and their members are not required to join schemes even when they are registered. On the other hand, the effect of the Act and some schemes is an impact on competition, since schemes confer benefits on participants which may affect markets for the provision of services by occupational groups.

2.4.5 The review will consider the schemes generally. Therefore, comments are sought on the scope of the schemes, as well as in relation to the Act itself and the regulation.
2.4.6 It is noted that the NSW Attorney General’s Department completed a National Competition Policy Review of the Legal Profession Act in 1998. The review examined competition issues in relation to all aspects of the Act, including the provision of professional indemnity insurance to solicitors.

Issues

2(e) Is the scope and content of existing schemes appropriate?

FOOTNOTES:

1. Council of Australian Governments, Principles and Guidelines for National Standard Setting and Regulatory Action by Ministerial Councils and Standard-Setting Bodies, November 1997, p.2