2nd Annual Public Law Seminar

  • Doug Graham

Legislative Council Chamber, Parliament Buildings

Ladies and Gentlemen.

In 604 BC Laotzu, a Chinese philosopher said" The greater the number of laws and enactments, the more thieves and robbers there will be."

Whatever you view on Laotzu, New Zealand is over-governed. By this I mean that the business community, and society in general, is encumbered by an excessive amount of parliamentary laws, subordinate legislation, decrees, licences, codes and informal instruments. By way of comparison, the King James Bible has 4.5 megabytes of text. The Statutes and Regulations Database, which stores the text of New Zealand's public and private Acts, runs to 120 megabytes of text, or the equivalent of 27 King James Bibles.

This is not to suggest that the only good law is a dead law. But included amongst those on the books are laws which fail to achieve their objectives, are inefficient, impose excessive compliance costs, lack clarity or are simply redundant.

Let me take an example. Under the Innkeepers Act 1962 it states that 'Where any person deposits with any innkeeper any property, other than a vehicle or property left in a vehicle or a horse or other live animal or its harness or equipment, or leaves any such property in the inn or any of its appurtenances, and the person is or becomes indebted to the innkeeper for the supply of any food, accommodation, or services, the innkeeper may, in satisfaction of the debt, sell and dispose of the property by public auction in accordance with this section'.

why is it necessary to maintain a specific law in this case, rather than relying on general law relating to indebtedness? why, even in 1962, did we class horses along with vehicles as essential modes of transport? and while we might intuitively know what 'appurtenances', why does this outmoded language appear in the statutes book? Equally, I fail to see why the Government requires workers to name their hats under the Abrasive Blasting Regulations 1958, why publicans cannot be auctioneers, which is a prohibition under the Auctioneers Act 1928, or why when bailiffs impound the possessions of someone who has not paid their rent, the Distress and Relevin (another one of those obscure words) Act 1908, require that these possessions be stored not more than three miles from the premises from which they were taken. One can only speculate that in 1908, when walking or horseback was the main form of transportation, this law made sense. It does not make sense in 1998.

I have begun on a light note but the message is a deeper one. If government does not continually improve the stock of its regulatory interventions:

the cost to the business and society will be unnecessarily high, diverting productive activity into unproductive activity; the law will be so dense that it will become inaccessible to those who are obliged to comply with it; it will undermine the very credibility of government. Concerns over the density of the law, or to put it another way, the cumulative and interactive effects of a number of laws rather than the affect of a single law, are one of the hidden costs of the regulatory burden. To quote from a recent report the Ministry of Commerce received from KPMG following a survey of business:

The very small owner managed operations were typically focused on tax compliance, Statistics New Zealand and in some cases Customs as the main areas of cost. Within these small organisations (and I must point out that these comprise the majority of New Zealand businesses) there was little awareness of the obligations they may face under other legislation. In many cases if their professional advisors do not warn them of the requirements, they fail to comply. These businesses receive little support in education about legislation and just hope that they do not fail in any major area?. The message is that small businesses in New Zealand do not have time to both run a business, creating wealth and employment, and develop a working knowledge of all the laws which apply to them. The issue is not just one of the direct costs of complying with the law, but the hidden costs of understanding what you have to comply with in the first case. While the lawyers amongst you may see this as a growth opportunity, I take issue with a regulatory system which creates a disincentive for people to understand their rights and obligations under the law.

This takes me to my next point. Society relies on its citizens having respect for the rule of law, and this respect comes from being compliant ones self, and observing it being complied with by others. The fact that a large number of drivers appear to exceed the 100 kph speed limit is scarcely an incentive to keep ones own speed within the legal limit. And if the rule of law becomes undermined, so to does the credibility of government, those whose job it is to create the law and ensure that it is enforced.

This more philosophical debate is starting to be had around the world, from the US to the Chech Republic. President Havel, eminent thinker and leader of the Chech Republic summed up the views of many when he said that:

?I am deeply convinced that the clearer, more transparent, and comprehensible our legal system is to citizens, the greater our hope that it will be respected. Therefore, in addition to the routine passing of new legislation or the amending of old statutes, I urge you to pay greater attention to bringing order into our legal system and to attend to its incremental simplification?. I would now like to turn to the substantive part of my address, which is what are we doing to improve the quality of the law, with particular reference to business law.

Last year I announced a regulatory'six pack? of measures designed to help clean up the existing body of law, and ensure that new law is both necessary, and well designed and effectively implemented. This package includes:

1. Code of Good Regulatory Practice, 2. Regulatory Impact Statements. 3. Generic Policy Development Process 4. review of some specific Acts (Building, OSH, RMA, Privacy, Human rights, Meat Acts) 5. a Regulatory Responsibility Act, and 6. a regulatory taskforce.

I haven't time today to talk about these measures but I am pleased to advise that a considerable amount of progress has been made since that announcement.

What I would like to cover in the time remaining to me is what I am doing in my own back yard of the Ministry of Commerce, and particularly in the area of business law, intellectual property and competition law.

Business Law The Ministry of Commerce has primary responsibility for the strategic development of business law in New Zealand. This responsibility was formerly with the Ministry of Justice, but was transferred to the Ministry of Commerce in 1995 to reflect that Ministry's responsibility for improving the business environment. The business law portfolio involves some 30 primary statutes and 40 regulations.

The Ministry's principal focus is to ensure that the legal framework that it provides to businesses facilitates business activity, and does not impact adversely on either the ability of businesses to function, or on the effective and efficient operation of the markets of which those businesses are a part.

Before summarising some of the business law reform initiatives currently underway, I would like to outline my broad goals for business law reform. These include:

targeting for review those areas of the law which offer the greatest return in terms of reducing compliance costs and facilitating business achievement;

clearing out the statute books of those requirements that are outdated, ineffective and redundant. I have asked the Ministry to undertake a stocktake of all business law statutes by the end of the year;

involving the business community more fully in the process of determining priorities for business law reform and developing a CO-operative approach to reform;

establishing the Ministry as a policy innovator rather than as administrators of business law. Turning to the specifics:

Business Law Amendment Bill The team is currently working on proposals for amendments to business law to be included in a Business Law Amendment Bill later in 1998. The Business Law Amendment Bill represents a stage in the on going process of monitoring and incremental improvement of business law. The Business Law Amendment Bill is to include amendments to business law statutes that will reduce compliance costs to business associated with business law legislation and will promote the efficient use of economic resources, thereby encouraging enterprise and innovation in the economy.

The amendments which will be included in the Bill will address to some extent what research indicates are some of the business community's prime concerns with regulation. These are the cumulative costs of complying with regulation and the costs created by difficulties in reconciling different aspects of regulation. In aggregate the amendments will reduce these costs.

Most of the proposed amendments are based upon suggestions from business law practitioners and the business community. The proposed amendments also include some residual recommendations of the Company Law Monitoring Group which was set up in 1993 to monitor the introduction of the 1993 company law reform package.

Amendments are proposed to the Companies Act 1955, the Companies Act 1993, the Financial Reporting Act 1993, the Insolvency Act 1967, the Securities Amendment Act 1988, the Superannuation Schemes Act 1989 and the Unit Trusts Act 1960.

Capital Markets The Capital Markets Team have been working on a major review of the Securities Commission. There has been no specific review of the Commission's role and functions si nce its establishment in 1978, and since then there have been significant changes in both the securities markets and the regulation administered by the Commission. The Capital Markets team is reviewing:

what functions the Commission should perform and what priority it should give to particular functions; how the Commission should perform those functions; what should be the Commission's organisational arrangements and its relationships with Government and participants in the securities markets; and what should be the Commission's sources and levels of funding. The review was initiated by the release of a discussion document in December 1997. The Ministry received 23 submissions. I wish to thank all those persons who took the time to make submissions. The findings of the review have confirmed that the Securities Commission is a cost effective and efficient regulator of New Zealand securities markets. The Ministry's recommendations to me are for a minor refocussing of the Commission's functions rather than a substantial change. These include emphasising the Commission's regulatory and market overview functions, integrating the Commission's law reform function into the Government's wider strategy for business law reform, introducing greater third party funding of the Commission. I also propose that the Commission undertake a review of the Securities Regulations with a view to reducing costs. I will be taking these proposals to Cabinet in the near future.

Personal Property Securities Law Reform Proposals for reform of the law relating to personal properties securities are being worked on. I hope to be able to make an announcement in the near future on initiatives in this area.

Insolvency Law The Ministry of Commerce proposes to undertake a comprehensive review of personal and corporate insolvency law, including bankruptcy, liquidations, receiverships, and statutory management. Given the recent initiatives undertaken in relation to insolvency law in other jurisdictions it is time to review, and if necessary amend, our insolvency law to ensure that it provides an intelligible, accessible and coherent legal framework for insolvency that is based on policies which accord with current economic and social objectives. The Ministry is working on a framework for the review which it expects to release for discussion towards the middle of 1998.

Friendly Societies and Credit Unions The key objective of the review of the Friendly Societies and Credit Unions Act 1982 is to ensure that this legislation is efficient and effective, in particular, as a means of achieving economic and social benefits through aggregating capital and managing economic risk. The review will:

determine whether it is necessary to have specific legislation to recognise friendly societies and credit unions; if so, determine the form of that legislation, seeking to achieve consistency, where appropriate, with the corporate governance and other provisions of the Companies Act; and work with officials from Treasury and Inland Revenue Department to review the tax exempt status of friendly societies and credit unions. It is hoped to include a bill on the legislative programme for 1999 to give effect to the outcome of this review.

Life Insurance Act 1908 The Ministry will shortly commence a review of this legislation. This review will take a "first principles" approach in assessing the need for and type of, life insurance regulation required in New Zealand. Given the age of the legislation and the need to fully consider and consult on the issues likely to be raised in the review, the review is not expected to be completed until 1999, with legislation following in the year 2000.

Business Law Consultation Strategy The Ministry is currently consulting with the business sector on a proposal to establish a strategy for consultation with the business community on priorities and technical business law issues, including establishing a Business Law Consultative Group, which I would appoint. I expect a report from the Ministry on the outcomes of this consultation in the near future.

Intellectual Property Rights Another important area of reform for the Government is the law relating to intellectual property rights. My Ministry is responsible for a number of key statutes covering intellectual property rights including the:

Copyright Act 1994; Trade Marks Act 1953; Patents Act 1953; Designs Act 1953; Layout Designs Act 1994; and Plant Variety Rights Act 1987. There is currently under way a comprehensive review of the industrial property rights statutes, all of which are now over 40 years old. This review has taken a lot longer than expected because of the need to consult with Maori over proposed changes.

The review encompasses in particular, the Patents Act, the Designs Act and the Trade Marks Act. It is intended to ensure that the system of protection for intellectual property rights:

takes account of developments in business and technology, both domestically and internationally;

promotes innovation, and encourages the transfer of technology to New Zealand; and

remains consistent with New Zealand's international obligations. Proposed changes -

The proposed changes would complete the process begun in 1994 when important changes were made in order to implement the Uruguay Round TRIPS Agreement. The essence of the proposed reforms is as follows:

Patents In the area of patents, the proposed changes aim to ensure that the patent system offers real incentives to inventors while at the same time ensuring that there are appropriate checks and balances to prevent abuses of patent rights. They also aim to ensure that the patent system can take account of new technologies and that the complexity and cost of obtaining a patent is reduced.


The proposed changes aim to ensure that there are incentives to invest in design creation and that the system of protection for designs takes account of the desirability of promoting competition. Policy proposals are being measured against the criteria of flexibility, certainty in application and cost effectiveness.

Trade Marks

In the area of trade marks, the review has aimed to define the scope of rights that can be obtained under the Act more clearly and to reduce the costs involved in registering a trade mark.

Plant Variety Rights

There are also some proposed changes to the Plant Variety Rights Act. These changes are intended to bring New Zealand's Plant Variety Rights legislation into conformity with the 1991 Revision of the UPOV Convention and to correct deficiencies in the Act that hamper the effectiveness of the legislation.

Consultation with Maori As I mentioned earlier, Maori have expressed concern with the current system of protection for intellectual property rights. My Ministry has, therefore, undertaken consultation with Maori over the proposed changes during the past three years. This has led to substantial progress being made and I hope we can progress this area further in the near future. The consultation will also lead to progress in the reform of patent protection during the coming year.

International Obligations I would like to note that, where necessary, the Government has made some non-controversial changes to existing intellectual property rights statutes over the last few years.

The Intellectual Property Right Acts Amendment Bill currently in Parliament is an example of this. Once passed, it will enable us to give effect to bilateral intellectual property rights treaties, among other matters. In particular, proposed intellectual property rights arrangements with Chinese Taipei will be of particular interest to New Zealand software exporters.

Conclusion In conclusion I would like to thank the organisers for giving me the opportunity to briefly outline to you where we are headed, in particular with business law. It is important for New Zealand, as a whole that we have a relevant framework which allows business to generate the growth and wealth that we need to meet our social and environmental goals. I look forward to further progress in the reform programme during the coming year and would like to wish you well for the rest of the seminar. Thankyou.