Page 2861 - Week 10 - Thursday, 15 August 1991
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world and particularly in the United States, to see the appalling consequences for public policy in a federation when you leave issues of internal management of financial institutions to State laws.
You have the States that provide havens for dodgy corporate behaviour; Delaware in the United States springs to mind. There was what was known and described in the textbooks and journals in America as the so-called "race to the bottom" as States competed with one another to provide company structures that provided less accountability and less protection to shareholders and investors in order to attract corporations to their jurisdiction, and so attract the short-term benefit in smaller States in America by becoming the home to major corporate entities - and hang the rest of the country and the interests of shareholders and investors. The United States, as that occurred in the 1930s, has gone through a very long and tedious process of trying to superimpose Federal control over a State-based corporate system.
There was a long and bitter battle in the High Court over the Commonwealth's attempt to use the corporations power to establish a national companies law and, at the end of the day, the High Court said that the Commonwealth did not have that power. But it was a credit to the States and Territories - excluding the ACT, of course, because power was specifically withheld from the ACT at self-government, and I will explain why in a moment - because the States and the Northern Territory were very quickly able to come to an agreement that the Commonwealth should be referred sufficient powers to achieve what it sought to achieve in the national corporations law, which was a single, national company law for Australia.
Of course, the reason why the ACT was not given power to deal with companies and securities in the same way as any State was that it was always in the anticipation of the Commonwealth and its advisers that it may lose the High Court challenge and that the appropriate vehicle for national company law thereafter would be a Commonwealth-passed ACT ordinance to enable the ACT to be the vehicle for national uniform company law.
That has now been achieved, and it is clearly the case that that has been a major breakthrough for Australia. Across any partisan political barriers, all governments and all parties agree that the establishment of the Australian Securities Commission and the national company law has been of enormous benefit to Australia.
This was, I think, exampled no more clearly than in the recent decision by the Commonwealth Attorney and Treasurer to freeze the assets in unlisted property trusts. Had we had the old, so-called cooperative regime, where the States and the Commonwealth cooperated on corporate law matters, there would have been a process of at least days, but probably weeks, of seeking to reach agreement between the
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