04 Feb 2021

EPBC Review Report released – includes recommendations for more effective enforcement and compliance

By Ian Temby, Adam Ray

The impetus towards more effective regulation which began with the Financial Services Royal Commission is continuing with these recommendations, which include an overhaul of enforcement powers.

The Samuel Review Final Report has been publicly released.

The Report found that compliance and enforcement under the current Act is ineffective and that the complexity of the legislation and "impenetrable terminology" were among the reasons that enforcement action was difficult.

One of the findings of the review was that enforcement provisions are rarely applied, and serious action rarely taken, and that penalties (particularly related to requirements for environmental approvals) were not commensurate with the harm of damaging a public good.

We see these observations as part of a wider trend in Commonwealth regulation, and in particular observe some parallels with the findings of the Financial Services Royal Commission with respect to the ineffectiveness of regulation of the financial industry. It is important for Commonwealth regulators and their advisers to be aware of this trend, and take steps to address issues of enforcement and compliance. While resourcing and difficult legislation will always be challenges to effective compliance and enforcement functions, the impetus towards more effective regulation may by a catalyst for further reform and the dedication of additional resources. There are also other steps regulators can take to improve the effectiveness of their compliance and enforcement functions, and some of those steps are highlighted by the report.

One of the key recommendations of the Samuel Report the establishment of an Office of Compliance and Enforcement to consolidate the Department of Agriculture, Water and the Environment's compliance functions. The Report says:

Ensuring a clear expectation for adequate compliance and enforcement … is a core element of the Review’s recommended accreditation mode.

The Report recommends that independent powers be assigned to the Secretary of DAWE and that the new Office of Compliance and Enforcement be provided with a "full suite of modern regulatory powers and tools, and adequate resourcing".

The Report does not explicitly recommend that that the Office be established as an independent statutory authority, although that appears to be Professor Samuel's preference given his recommendation, in the interim report, to establish an "independent, strong cop on the beat". Minister Ley has stated that "exactly how and where" the Office would be created within Government is a matter for discussion.

Across the Commonwealth, there are examples of compliance and enforcement offices sitting both within, and external to, the agencies which have administrative responsibility for the legislation with respect to which compliance is sought. At this stage, it seems likely that the Office will sit within the Department, although consideration will no doubt be given to the feasibility of adopting a different model.

Generally speaking, where the compliance and enforcement function is dispersed within an agency some consideration ought to be given to at least centralising this function, as recommended by the Samuel Report.

In terms of approach (consistently with various current Commonwealth regulatory regimes since the introduction of the Regulatory Powers Act 2014), the Report recommends a number of amendments to the EPBC Act, including:

  • powers to delegate authorised officers to undertake compliance
  • information sharing provisions
  • improvements to coercive powers including surveillance warrants
  • aligning penalties with potential harm or benefit (so that they provide a reasonable deterrent)
  • appropriate use of criminal sanctions

The Report also recommends that, where monetary penalties are unlikely to provide adequate disincentive, the use of remediation orders that deliver proper restoration should be included.

One of the key criticisms of the current EPBC Act that is raised in the Report is that there is no public confidence that the environment is being protected, in particular because there is limited transparency about what compliance and enforcement activities are being undertaken. As such, the Report recommends that all compliance and enforcement actions taken be published, together with the outcomes of the actions, and that this include all directions, prohibitions and improvement notices that have been issued.

In remarks that echo findings of the Financial Services Royal Commission into Financial Services, the Report says that the "compliance and enforcement functions need to establish a culture that does not shy from firm action where needed. This is essential to providing community confidence and giving business a clear and level playing field". This is another recommendation which has wider applicability – the clear trend is towards increasing transparency of compliance and enforcement action, and all agencies should consider whether the current recording and reporting of compliance and enforcement activity is adequate to give the public confidence in the effectiveness of the compliance and enforcement activity being taken.

The Minister's response to the review report noted that she wants to see (as Professor Samuel had recommended in the interim report) "a strong and independent cop on the beat" and that the Government "will work through to a strong model that provides assurance that absolutely underpins our standards and our agreements with the states". While it is not yet clear what the compliance and enforcement function will look like, any modernisation of that function, and a commitment from the Government to improve its regulatory approach, is likely to improve public confidence in the scheme.

Overall, the impetus towards more effective regulation which began with the Financial Services Royal Commission is continuing with these recommendations and it will be interesting to see how the recommendations are implemented and whether any innovative tools might be developed.

Beyond the Review, we would suggest that all regulators should regularly consider whether the powers and tools available to them are appropriate and adapted to achieve effective regulation.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.