Northern Australia Infrastructure Facility Investment Mandate Direction 2021-Exempt instruments raising significant scrutiny issues [2022] AUSStaCSDLM 32 (10 March 2022)

• Scrutiny concerns
• Exemption from disallowance

Northern Australia Infrastructure Facility Investment Mandate Direction 2021

FRL No.	F2021L00942[1]
Purpose	This instrument is a direction to the Northern Australia Infrastructure Facility's Board in relation to the performance of the functions of the Facility.
Authorising legislation	Northern Australia Infrastructure Facility Act 2016
Portfolio	Infrastructure, Transport, Regional Development and Communications
Source of exemption	Table item 2 of section 9 of the Legislation (Exemptions and Other Matters) Regulation 2015

Overview

1.1 The Northern Australia Infrastructure Facility (the Facility) provides financial assistance to States, Territories and other entities to develop economic infrastructure in Northern Australia.

1.2 The Northern Australia Infrastructure Facility Investment Mandate Direction 2021 (the instrument) provides an investment mandate to the Facility to guide the functions of the Facility and how it invests.

Scrutiny concerns

Exemption from disallowance

1.3 Senate standing order 23(4A) empowers the committee to scrutinise delegated legislation that is exempt from disallowance against the scrutiny principles set out in standing order 23. For such instruments the committee may also consider whether it is appropriate for the instrument to be exempt from disallowance.

1.4 The committee's scrutiny concerns in relation to this instrument's exemption from disallowance were first set out in detail in Delegated Legislation Monitor 14 of 2021.

Initial correspondence

1.5 The minister wrote to the committee on 14 October 2021 in response to the scrutiny concerns set out in Delegated Legislation Monitor 14 of 2021.

1.6 The minister advised that the exemption ‘provides certainty for NAIF project proponents who invest significant time and resources to demonstrate eligibility for NAIF financial assistance’.

1.7 The minister also advised that oversight of the NAIF’s investment activities were strengthened in 2021 with the addition of the Finance Minister as a jointly responsible minister. Further, the minister advised there are safeguards in the Northern Australia Infrastructure Facility Act 2016 (the NAIF Act) to prevent ministers from ‘issuing an investment mandate that seeks to influence or affect the investment of funds in particular projects or to particular cohorts.’

1.8 In relation to the exemption from disallowance, the minister advised that it would not have been possible to delay commencement of the instrument until a potential disallowance period expired, as this would have negatively impacted on the NAIF’s operations and prevented it from being able to provide financial assistance until early August 2021.

1.9 Finally, the minister advised that it is a requirement of the NAIF Act that a statutory review of the NAIF be conducted after 30 June 2024 and suggested that ‘an evaluation of the potential impacts of making the Investment Mandate disallowable could be considered as part of this review.’

1.10 The committee set out its response to the minister's advice in Delegated Legislation Monitor 16 of 2021. In particular, the committee requested that the minister make an undertaking to the committee that the 2024 statutory review will give consideration to the appropriateness of the exemption from disallowance of instruments made under subsection 9(1) of the NAIF Act, with specific regard given to the committee’s final report of the inquiry into the exemption of delegated legislation from parliamentary oversight.^[2] The committee also requested that the minister amend the explanatory statement to the instrument to set out the information provided in the minister’s letter of 14 October 2021 in relation to the justification for the instrument’s exemption from disallowance.

Recent correspondence

1.11 The minister responded to the committee in a letter received on 8 February 2022. The minister made an undertaking that the 2024 statutory review of the NAIF Act would consider whether it is appropriate for the NAIF's investment mandate to be exempt from disallowance.

1.12 However, the minister did not agree to the committee's request to amend the explanatory statement to the instrument to set out the information provided in the letter of 14 October 2021 in relation to the justification for the instrument’s exemption from disallowance. The minister advised that he considers it is unnecessary to do so, given that the exemption from disallowance is permitted by the enabling legislation and the Legislation Act 2003.

Committee view

1.13 The committee welcomes the minister's undertaking that the 2024 statutory review will consider whether it is appropriate for NAIF's investment mandate to be exempt from disallowance.

1.14 While noting the minister's advice in relation to the explanatory statement, the committee reiterates its view that at a minimum, all explanatory statements to exempt instruments should identify the source of the exemption and justify why the exemption is appropriate in the specific context of the instrument. The committee does not consider general statements identifying that an exemption is provided under the Legislation (Exemptions and Other Matters) Regulation 2015 is sufficient. The committee considers that the inclusion of this information in explanatory statements helps to improve parliamentary oversight over delegated legislation made by the executive.

1.15 The committee considers that, in the future, explanatory statements to instruments that are exempt from disallowance must set out in detail the exceptional circumstances that are said to justify the exemption in accordance with the committee's guidelines.^[3] The committee will continue to closely scrutinise such instruments and their accompanying explanatory statements under standing order 23(4) into the future.

1.16 The committee welcomes the minister's undertaking that the 2024 statutory review of the Northern Australia Infrastructure Facility Act 2016 will consider whether it is appropriate for the NAIF's investment mandate to be exempt from disallowance. In the meantime, the committee draws this instrument to the attention of the Senate as it sets out significant matters relating to the operation of the NAIF, including eligibility criteria for the provision of financial assistance, without the opportunity for appropriate parliamentary oversight through the disallowance process.

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[1] Accessible on the Federal Register of Legislation at https://www.legislation.gov.au/.

[2] Senate Standing Committee for the Scrutiny of Delegated Legislation, Final report of the inquiry into the exemption of delegated legislation from parliamentary oversight, 16 March 2021.

[3] Senate Standing Committee for the Scrutiny of Delegated Legislation, Guideline on standing order 23(4): instruments exempt from disallowance, February 2022, available at https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Scrutiny_of_Delegated_Legislation/Guidelines.