4.1 Unjust acquisition in breach of the Commonwealth
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
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
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
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
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
45JT International SA v Commonwealth of
Australia and British American Tobacco Australasia Limited v The
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