4.1 Unjust acquisition in breach of the Commonwealth Constitution
The prohibitions in relation to conflicted remuneration, volume-based shelf-space fees, and asset-based fees on borrowed amounts, the corresponding grandfathering provisions, and the anti-avoidance regime, each do not apply to extent that they would constitute the acquisition of property in breach of the Article 51(xxxi) Commonwealth Constitution.
Article 51(xxxi) provides that the Commonwealth can make laws with respect to the acquisition of property on just terms from any state or person for any purpose in respect of which the Commonwealth has power to make laws.
The legal and academic question, thus, is whether the imposition of any or all of the above-mentioned provisions, constitutes an acquisition by the Commonwealth of property of those impacted (namely, AFS licensees and their representatives) on unjust terms, meaning they infringe the Commonwealth Constitution.
Indeed, the grandfathering provisions were inserted because of Treasury's concern that the prohibitions on conflicted remuneration, volume-based shelf-space fees, and asset-based fees on borrowed amounts - without any grandfathering - would amount to an unjust acquisition of property in breach of Article 51(xxxi) of the Commonwealth Constitution. The "property" in these cases was identified to be existing contractual rights of licensees/representatives to otherwise prohibited payments.
One can see that the grandfathering provisions do undermine the impact of the FOFA reforms.
It will be interesting to see if an AFS licensee is prepared to test the application of Article 51(xxxii) to FOFA. Being in relation to the Commonwealth Constitution, the High Court of Australia would need to hear any such case in its original jurisdiction.
Whilst there is case law on the meaning, scope and operation of Article 51(xxxi), I am not aware of any cases which, on their facts, could directly apply to FOFA. What we do have, however, is a very recent decision of the High Court - being the tobacco "plain packaging legislation" case (Plain Packaging Case) 45 - which discussed Article 51(xxxi) in significant detail in the context of intellectual property rights, and which appeared to apply a very strict and literal interpretation to the words used in Article 51(xxxi): specifically (and somewhat obviously), that there had to be an acquisition by the Commonwealth of existing property.
A discussion of the meaning, scope and operation of Article 51(xxxi) is beyond the scope of this paper, however given the High Court's position on Article 51(xxxi) as provided in the Plain Packaging Case, it would be difficult to conclude that the High Court would determine that the FOFA prohibitions constitute an unjust acquisition of property in breach of the Commonwealth Constitution, as it is difficult to see how the "property" in question (if any) has been acquired by the Commonwealth.
Footnote
45 JT International SA v Commonwealth of Australia and British American Tobacco Australasia Limited v The Commonwealth [2012] HCA 43.
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