Whistleblowing

The Parliamentary Joint Committee on Corporations and Financial Services report Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry noted in the preceding post features a chapter on whistleblowing, replete with conventional pieties 

7.1 Whistleblower protection laws provide legal rights and protections to individuals who provide a company, organisation, or regulator information about alleged misconduct and/or breaches of the law inside a company or organisation.   

7.2 The threat of whistleblowing acts as a deterrent to wrongdoing by increasing the likelihood that misconduct will be reported.[1] Indeed, the importance of whistleblowers and whistleblowing was emphasised to the committee throughout the inquiry. For example, Ms Catherine Maxwell, General Manager, Governance Institute of Australia (GIA), pointed to the critical role whistleblowing plays ‘in identifying and stopping misconduct’.[2] 

7.3 However, the committee also received evidence that the multiplicity of whistleblower protection laws is creating confusion and leading to poor outcomes for whistleblowers and employers. Further, the patchwork legislative approach excludes important sectors of the economy including the large professional services firms. 

7.4 Therefore, this chapter explores the adequacy of the current whistleblower protection laws in Australia. It begins by providing a background on public and private sector whistleblower legislation, including the failure to include the audit, assurance and consultancy sector under the provisions of the Corporations Act 2001 (Corporations Act). The chapter then considers the evidence regarding the multiplicity of whistleblower protection laws, and examines proposed reform options. Itconcludes with the committee’s views and recommendations. 

Background on public and private sector whistleblower legislation 

7.5 Whistleblower protection laws in Australia are legislated through various acts at the Commonwealth, state and territory level, depending on the sector and whether that sector is public or private. 

7.6 Evidence to the inquiry identified 17 different federal, state, and territory statutes applying to whistleblowers in Australia: Public Interest Disclosures Act 2013 (Cth); Corporations Act 2001 (Cth); Fair Work (Registered Organisations) Act 2009 (Cth); Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth); Aged Care Act 1997 (Cth); National Disability Insurance Scheme Act 2013 (Cth); Taxation Administration Act 1953 (Cth); Public Interest Disclosures Act 2022 (NSW); Public Interest Disclosures Act 2012 (Vic) (previously titled Protected Disclosure Act 2012 (Vic)); Public Interest Disclosure Act 2010 (Qld); Public Interest Disclosure Act 2018 (SA); Public Interest Disclosure Act 2003 (WA); Public Interest Disclosure Act 2012 (ACT); Public Interest Disclosure Act 2002 (Tas); National Anti-Corruption Commission Act 2022 (Cth); Public Service Act 1999 (Cth); and Independent Commissioner Against Corruption Act 2017 (NT).[3] Public sector whistleblower protections and their relation to officers and employees of consulting firms 

7.7 The Public Interest Disclosures Act 2013 (Cth) (PID Act) promotes accountability and integrity within the public service by encouraging the disclosure of information about alleged misconduct and wrongdoing. The objective of the PID Act is to provide support and protection from adverse consequences to individuals who disclose information and provide an avenue for public interest disclosures to be properly investigated and reported.[4] 

7.8 Amendments to the PID Act commenced on 1 July 2023, and focused on immediate improvements for public sector whistleblowers and support for corruption disclosures to the National Anti-Corruption Commission.[5] 

7.9 On 22 November 2023, further reforms to the PID Act through a staged approach were announced.[6] 

7.10T he PID Act can apply to officers and employees of consulting firms when contracted as service providers to the Commonwealth Government. The joint submission by Griffith University, the Human Rights Law Centre and Transparency International Australia noted that section 69 of the PID Act clarifies that a ‘public official’ whose disclosures may trigger the PID Act includes any individuals who are: a contracted service provider for a Commonwealth contract; or an officer or employee of a contracted service provider for a Commonwealth contract who provides services for the purposes (whether direct or indirect) of the Commonwealth contract.

7.11 Therefore, officers and employee of consulting firms may be covered by the PID Act, irrespective of whether the consulting firm is a body corporate, partnership or individual. However, the joint submission emphasises that misconduct can only be reported to an ‘authorised internal recipient’, which means they can only make a disclosure to the Commonwealth agency who is the party to, or responsible for, the consultancy contract (or to an independent agency like the Ombudsman) and not internally at their consulting firm. 

Private sector whistleblower protections and their relation to officers and employees of consulting firms 

7.12 Commonwealth whistleblowing laws that apply to the private sector include protections under the Corporations Act and the Taxation Administration Act 1953 (TAA Act). 

7.13 Entities subject to regulations under the Corporations Act and TAA Act include companies, superannuation entities or trustees, incorporated associations and bodies corporate that are trading or financial corporations. 

7.14 The Corporations Act requires these entities to have a whistleblower policy and to make it available to all officers and employees of the entity.[ 

7.15 To be eligible for whistleblower protection under the Corporations Act, an individual must be, or have been, in a relationship with the ‘regulated entity’ that the individual is reporting about as set out in section 1317AAA of the Corporation Act. 

7.16 In contrast to employees of corporate bodies or other financial licensees or trustees covered by the private sector whistleblower protection legislation under Part 9.4AAA of the Corporations Act, there are substantial inconsistencies and gaps for those employed by consulting firms or other contractors.

7.17 The main accounting firms in Australia, KPMG, Deloitte, EY and PwC, are partnerships in their legal form, even though most employees of the Big Four firms are engaged by service companies owned or controlled by the partnership. 

7.18 The joint submission by Griffith University, the Human Rights Law Centre and Transparency International Australia pointed out that partnership-based firms have lesser whistleblower protections because for the purposes of Part 9.4AAA of the Corporations Act: a partnership is not a ‘regulated entity’ (as required by section 1317AAA); a partner is not an ‘eligible recipient’ for protected disclosures of wrongdoing (section 1317AAC), despite being an owner and typically an important leader (unless they happen to also be a director or officer of a service company that employs or instructs the employee blowing the whistle); and a partner may also not themselves be an ‘eligible whistleblower’ (section 1317AA) and capable of benefiting from the protections if they disclose wrongdoing, other than in possibly in a very indirect sense. 

7.19 The Treasury expanded on this, stating: As partnerships are not companies, most aspects of the Corporations Act do not apply to partnerships. For example, partnerships are not regulated entities for the purposes of the corporate whistleblower regime. Partnerships are only subject to any state and territory laws that may protect private sector whistleblowers. 

2017 committee report on whistleblower protections and subsequent legislative reform 

7.20 This committee tabled a report titled Whistleblower protections in 2017 with 35 recommendations aimed at improving whistleblower protection legislation in Australia. 

7.21 Following the committee’s report, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 expanded whistleblower protections in Part 9.4AAA of the Corporations Act and Part IVD of the TAA Act, to provide broader protections for the corporate and financial sectors. The amending Act implemented approximately half of the recommendations from the committee’s 2017 report.[19] These amendments are due for statutory review in 2024. 

7.22 Although the amendments to the Corporations Act and TAA Act were introduced at the same time, the TAA Actapplies to partnerships and partners while the Corporations Act does not. Under the TAA Act, partners of an entity, company or partnership are eligible whistleblowers and are eligible recipients to receive disclosures 

7.23 The joint submission by Griffith University, the Human Rights Law Centre and Transparency International Australia argued that a failure to fully reform the private sector whistleblowing regime has led to substantial issues in the audit, assurance and consultancy sector. 

7.24 The Treasury Laws Amendment (Tax Accountability and Fairness) Act 2024 commenced on 1 July 2024 and expanded tax whistleblower protections. The new Act protects individuals blowing the whistle about related entities to the Tax Practitioners Board that may assist the board in performing its duties under the Tax Agent Services Act 2009. 

7.25 The joint submission by the Inspector-General of Taxation and the Taxation Ombudsman noted the recently commenced National Anti-Corruption Commission Act 2022 could provide an alternative pathway for disclosures in relation to the audit, assurance and consultancy sector.[24] 

7.26 The Accounting Professional and Ethical Standards Board (APESB) noted that the Code of Ethics for Professional Accountants(including Independence Standards) (APES 110) contains provisions for professional accountants, including auditors, to respond to Non-Compliance with Laws and Regulations (NOCLAR). However, APES 110, including the NOCLAR provisions, does not establish whistleblower protections. 

Issues with the multiple current whistleblower schemes 

7.27 Several inquiry participants drew the committee’s attention to complexities and inconsistencies within Australia’s current whistleblower legislation, the confusion this creates, and the potential constraints it imposes on disclosure. 

7.28 Professor AJ Brown, Professor of Public Policy and Law at the Centre for Governance and Public Policy, Griffith University, noted that each state and territory has whistleblower protection legislation covering the public sector and to varying degrees the private sector (see Appendix 4) and that ‘contractors and service providers to government may not be aware of state and territory whistleblowing protection laws’. 

7.29 The joint submission by Griffith University, the Human Rights Law Centre and Transparency International Australia stated many of the statutes are ‘out of date and inconsistent with the latest iteration of protections found in the Corporations Act’. 

7.30 Ms Maxwell from the GIA argued that the complexities of whistleblower protection in the private sector disincentivise employees from making disclosures: …Australian whistleblower protection laws are a complex patchwork. The area is complex to understand, complex to administer and confusing for anyone contemplating speaking up about unlawful, unethical, or irresponsible behaviour … A whistleblower should not need a nuanced knowledge of the applicable legal and regulatory frameworks to know which regulator or which law enforcement agency they should make their disclosures to, to qualify for protection. It is a strong disincentive to making disclosures if employees or other relevant parties feel that they require legal advice before making any disclosure 

7.31 Charted Accountants Australia and New Zealand (CAANZ) shared a similar view: The existence of numerous existing laws relating to whistleblowing regimes and protection in different industries such as banking and finance, taxation, aged care and child protection makes it difficult for an individual to know what protections are available to them and in what circumstances. 

7.32 Mr Kieran Pender, Senior Lawyer, Human Rights Law Centre, emphasised the uncertainty experienced by employees of partnership-based firms regarding whistleblower protections: Unfortunately, right now we have a huge gap between law and reality. The law says you can speak up safely, lawfully; it says it’s a crime to take reprisal against a whistleblower. But there are so many loopholes, there are so many complexities…if you’re a whistleblower at one of the Big Four accounting and consulting firms, you need a law degree—you need more than a law degree!—to know whether you’re protected and who to speak up to. 

7.33 CAANZ drew attention to the fact that, as a result of partnership-based firms being excluded from the whistleblower protection legislation under the Corporations Act, some firms have created their own whistleblowing policies leading to further inconsistencies: Whilst a number of organisations have voluntarily developed whistleblowing policies and procedures, these are not supported by legislation to ensure consistency in the programs and to adequately protect whistleblowers. 

7.34 The GIA highlighted a recent report by Your Call that illustrated the complexities of the current whistleblower legislation in Australia and the impacts of overlapping federal and state and territory legislation: …more than half of the participants at a Workshop said their organisations must comply with four or more separate sets of whistleblowing laws. Attendees also noted…inconsistencies between regimes…‘…when you get a disclosure, it could fall within all three whistleblowing regimes. In reality, we could end up having to do three separate investigations if we were to follow everything to the letter of the law, which just seems kind of ludicrous and…surely that can’t be the intended outcome.’ Another attendee observed: ‘Trying to meet the requirements of both [two laws] can be a challenge while trying to maintain the anonymity of the whistleblower and… if we don't maintain it, that's when we’ll put people off and in the future people won't come forward as whistleblowers if it’s obvious who that person is’. 

Options for reform 

7.35 This section examines the proposed reform options suggested by witnesses and submitters during the inquiry, including: expansion of current legislation to include partnerships; harmonisation of whistleblower legislation; a whistleblower protection authority; bounty or reward systems; and the whistleblower protection federal roadmap. 

Expansion of current legislation to include partnerships 

7.36 The committee heard from numerous inquiry participants about the need to improve and strengthen whistleblower protection for partners and partnership-based firms. 

7.37 KPMG Australia emphasised its commitment to whistleblower protections and noted that as a partnership, its commitment to whistleblowers is voluntary because ‘adherence is not currently a regulatory requirement under the Corporations Act’. Therefore, KPMG Australia proposed that the professional services sector should be required to commit to these protections under the Commonwealth Procurement Rules. 

7.38 EY Australia went a step further and recommended extending the whistleblower protection framework in the Corporations Act to large, registered partnerships.[35] This proposal was endorsed by the Institute of Public Accountants.

7.39 CAANZ supported extending Part 9.4AAA of the Corporations Act to partnerships across all sectors but noted the need for appropriate exemptions for small partnerships. 

7.40 Ms Vanessa Chapman, Group Executive, CAANZ, argued that Parliament should consider amending the definition of regulated entity for the purposes of Part 9.4AAA of the Corporations Act: …to bring partnerships or other structures within it…because there are many organisations that are not companies per se, that are not bodies corporate, but that are subject to Part 9.4AAA by virtue of being caught by the definition of regulated entity. 

7.41 CAANZ also proposed that the following be considered: whether section 1317AAB of the Corporations Act allows ASIC to prescribe partnerships (whether general, limited liability or other partnerships) as regulated entities for the purposes of Part 9.4AAA; and whether sections 115(1) and (2) of the Corporations Act, which effectively cap the size of partnerships, may provide a basis for bringing partnerships within the ambit of Part 9.4AAA. 

7.42 CAANZ pointed out that the Corporations Act treats a member of an audit team as an individual, not an entity, which differs from the treatment of other eligible recipients of whistleblower reports under the Corporations Act. CAANZ expressed concern that: …a junior member of the audit team who receives a protected disclosure may be limited in what they can share with superiors, including their manager or an audit partner. This puts the junior audit team member in a difficult situation as they are unlikely to be best placed to receive the disclosure.[40] 

7.43 To address this concern, CAANZ proposed amending section 1317AAC(1)(b) and section 1317AAB to better support members of audit teams who receive qualifying disclosures. However, CAANZ noted that a longer-term solution would be to enact a single law covering all non-government whistleblowers. 

Harmonisation of whistleblower protection legislation 

7.44 Most inquiry participants supported harmonising whistleblower protection legislation in Australia. Where they differed was over whether it was better to have a comprehensive Whistleblower Protection Act covering all government and non-government entities, or a harmonised set of laws that protect government and non-government entities separately. 

7.45 CAANZ preferred harmonising whistleblower protection legislation for all non-government whistleblowers,[42] but considered a single national whistleblower regime unnecessary. 

7.46 Deloitte concurred with CAANZ that harmonising whistleblower legislation for the audit, insolvency, tax and legal practitioner sectors would be appropriate. 

7.47The GIA concluded that Australia needs a general whistleblower regime in its own act applicable to the private sector. 

7.48 By contrast, the joint submission from Griffith University, the Human Rights Law Centre and Transparency International Australia recommended the establishment of a single Whistleblower Protection Act covering all private and not-for-profit entities and employers and entities under Commonwealth legislation or subject to Commonwealth regulation. 

Whistleblower protection authority 

7.49 Inquiry participants broadly supported the establishment of a whistleblower protection authority with many acknowledging the benefits of having a standalone authority to assist with understanding whistleblower protection legislation. 

7.50 The joint submission from Griffith University, the Human Rights Law Centre and Transparency International Australia stated that its ‘top priority remains the establishment of a whistleblower protection authority to oversee and enforce whistleblower protection laws and support Australian whistleblowers’. 

7.51 The joint submission noted that the Australian Government issued a discussion paper exploring whether there is a need for a whistleblower protection authority for the public sector but the joint submission emphasises that the need for this authority is not confined to the public sector only. 

7.52 The GIA highlighted the need for an independent stand-alone whistleblower protection authority to enforce whistleblower protection legislation, provide support to whistleblowers, and provide guidance to organisations regarding their obligations. 

7.53Ms Chapman from CAANZ supported: …a whistleblowing protection agency that can help not only whistleblowers but also organisations, employers, to understand what their obligations are in relation to the protection of whistleblowers within their organisation or to their organisation.[50] 

7.54 The Australia Institute observed that a whistleblower protection authority would make it easier for the National Anti-Corruption Commission to receive complaints and referrals.[ 

7.55 Professor Allan Fels supported ‘a fully independent, impartial whistleblower organisation that people have confidence in and go to’. 

7.56 Professor Dale Pinto, President and Chair of Certified Practicing Accountants Australia (CPA Australia), observed that a whistleblower protection authority could provide an alternative disclosure pathway for employees who do not feel comfortable blowing the whistle internally: Sometimes, whether it’s within firms or within organisations, junior staff would be reluctant within the hierarchy to raise an issue that they see. So, part of the information is having a mechanism—and I think Senator Scarr floated the idea previously of an independent whistleblower agency where people could, outside of their own particular entity, make a disclosure of information. 

7.57 The Community and Public Sector Union recommended the establishment of a whistleblower protection authority, and a commissioner to oversee the authority. 

7.58 Mr Pender from the Human Rights Law Centre noted that a similar system to the Office of the Whistleblower Ombuds in the United States (US)[55] could be an alternative to a whistleblower protection authority: …the US Congress has a dedicated independent body within it that helps members of parliament in the United States engage with whistleblowers, deal with whistleblowers. It helps them with best practice on intaking whistleblowers. It’s called the Office of the Whistleblower Ombuds in the US House. Even something like that, which would only require a small independent team in parliament working with committees, senators and MPs, could be a real game changer for whistleblower protection. 

Bounty, rewards or compensation for whistleblowers 

7.59 The Institute of Public Accountants argued that the committee should consider the provision of rewards or bounties to whistleblowers whose disclosures lead to the imposition of a penalty on an entity. 

7.60 The GIA noted that while it has not previously supported a bounty or rewards system, it will reconsider the system during the next stage of proposed whistleblower reforms. 

7.61 Professor Brown argued that it was important to address compensation for the detriment that whistleblowers suffer, as it is rare that they do not suffer detriment.[59] Professor Brown suggested that thresholds for compensating whistleblowers should be reformed to make them more practical and accessible because they are presently onerous, restrictive and inconsistent across Commonwealth whistleblower legislation. Professor Brown argued that the changes are needed ‘so that it actually becomes effective and feasible for people who have suffered detriment to apply to the courts or a tribunal…for compensation and relief’. 

7.62 The Human Rights Law Centre noted that under the current legislation, it is very rare for whistleblowers to be able to access compensation: Recently, the Human Rights Law Centre reviewed every whistleblowing case to go to judgement ever in Australia under both the Corporations Act protections and the Public Interest Disclosure Act. There hasn’t been a single successful case. The only case of compensation to a whistleblower for detriment across all of Australia since the first whistleblowing laws came in was a $5,000 compensation award under the Corporations (Aboriginal and Torres Strait Islander) Act. So the laws aren’t working in having that enforcement mechanism.

Federal roadmap 

7.63 In November 2022, Griffith University, the Human Rights Law Centre and Transparency International Australia published Protecting Australia’s whistleblowers: The federal roadmap, which provided an overview of the shortfalls of Australia’s whistleblower legislation (Figure 7.1). The roadmap sets out twelve key areas for reform, drawing from previous reviews and inquiry reports. 

7.64 Many of the key issues in the roadmap are a response to the committee’s inquiry into whistleblower protections in 2017, including: the establishment of whistleblower protection authority; ensuring a no wrong doors approach for disclosures; the enactment of a single law covering all non-government whistleblowers; the simplification and upgraded proof requirements for remedies and compensation; ensuring easier and consistent access to remedies; the enhancements of information sharing and ability to access support; the expansion of the definition of detriment attracting remedies; the protection of public and third-party whistleblowing; and the exclusion of solely individual employment grievances from PID protections 

7.65 The roadmap is supported by numerous inquiry participants, including the GIA, the Australia Institute and CAANZ. 

7.66 CAANZ expressed the view that: …Protecting Australia’s Whistleblowers: The Federal Roadmap presents a well thought out and internationally benchmarked set of measures that deserve consideration by Government as the process of reforming relevant law in Australia continues. ... 

Committee view 

7.67 Whistleblowing matters. It has a crucial role to play in identifying, stopping and deterring misconduct. 

7.68 Whistleblower protection laws should provide legal rights and protections to individuals who provide a company, organisation or regulator with information about alleged misconduct and/or breaches of the law. The need for consistent and harmonised whistleblower protection legislation 

7.69 The evidence provided to this inquiry revealed the substantial concerns of a range of stakeholders about the complexities, inconsistencies and gaps in current whistleblower protection legislation in Australia. 

7.70 This complex patchwork of legislation requires a high level of knowledge on the part of a whistleblower to understand which legislation and regulator covers the misconduct they wish to disclose. Unfortunately, this causes confusion and disincentivises whistleblowers from making a disclosure when they witness misconduct. 

7.71 Further, the multiplicity of inconsistent laws burdens employers with additional and unnecessary red tape because multiple pieces of different legislation may apply in any given situation. 

7.72 Given the complexities, attendant confusion, and frequent doubling up of resources, there was broad support for harmonising and aligning Australia’s whistleblower protection laws, although most inquiry participants favoured separate Acts for the public and private sectors. The committee recognises the vital importance of greater alignment across the public and private sectors.  

Professional Ethics and Corporations Law

The Parliamentary Joint Committee on Corporations and Financial Services report Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry features the following recommendations 

 1  The committee recommends that the Australian Government not permit PwC or any of its related entities to tender for government work until the completion of all ongoing investigations including but not limited to those by the Tax Practitioners Board, Australian Federal Police and Australian Taxation Office. Prior to PwC being eligible to tender for government work, PwC must demonstrate it has taken all appropriate remedial action in response to the outcomes of the investigations. 

2  The committee recommends that the Australian Government implement the recommendation of the Senate Finance and Public Administration Committee that the government commission an appropriate body to review and make recommendations on the long-term goal of regulation of large partnerships, including in relation to: the appropriate regulator and its powers, applicable governance principles, transparent reporting obligations, penalties for breach, and a roadmap for implementation given the complexities of overlapping jurisdictions. 

3  The committee recommends that the Australian Government reduce the allowable size of partnerships for accountants to a maximum of 400 partners, to align with the limits of legal partnerships. The government should establish a suitable transition period of up to 5 years for this change to enable the implementation of this recommendation whilst minimising disruption to the sector. A review of progress to this end should be conducted after 2 years, if at that time the entity has not chosen to incorporate. 

4  The committee recommends that the Australian Government consider increased accountability and response mechanisms, including a suitable penalty regime calibrated to the seriousness of the misconduct, for partnerships who have engaged in misconduct. 

5  The committee recommends that the audit, accounting, and consulting partnerships of firms with greater than 3000 staff be required to implement the Corporations Act 2001 requirements for governance and accountability, if appropriate through the adoption of the Australian Securities Exchange Corporate Governance principles. This should include the requirement for multidisciplinary partnerships to prepare their own general purpose financial reports, including remuneration disclosures and other obligations which may be applicable to partnerships. The government should review the operation of this measure within 3 years, with a view to extending its scope to mid-size partnerships. 

6  The committee recommends that the Australian Government enhance the transparency of large professional service firms by designating them as Public Interest Entities and requiring them to: subject them to audit if they are not already subject to these requirements, which would be filed with ASIC and be available for public inspection; and potentially be required to implement the Global Reporting Initiative Standards or the Public Interest Firm Code. 

7  The committee recommends that the Australian Government ensure that the financial statements disclosure requirements cover all relevant fees (that may raise a conflict of interests) paid to the entity’s auditor for audit and non-audit services. This should cover any single entity and their associated entities in Australia or overseas. 

8  The committee recommends that multi-disciplinary large accounting firms (and their associated entities both in Australia and internationally) should not be permitted to supply both audit and non-audit/consultancy services to the same client (and their associated entities both in Australia and internationally). 

9  The committee recommends that multi-disciplinary large accounting firms (including those required to lodge annual transparency reports under section 332A of the Corporations Act 2001) should be required to implement operational separation of their audit practice from their non-audit practice. The principles of operational separation should be materially consistent with those applying in the United Kingdom or other global best practice. 

10  The committee recommends that the Australian Government legislate to give further powers to the Australian Securities and Investments Commission to oversee audit to cover all partners within multidisciplinary firms regardless of which part of the firm they work in, as required in the UK Financial Reporting Council Audit Firm Governance Code. 

11  The committee recommends that the Australian Securities and Investments Commission: re-establish a program of random audit inspections; supplement its existing risk-based approach by also reviewing audit files where conflicts of interest arise from the Big Four firms providing other services to their audit clients (noting that such conflicts should not occur from the time of implementation of operational separation); and increase the level of resources that it devotes to financial report inspections and audit inspections until there is a significant improvement in audit quality. 

12  The committee recommends that the Australian Government implement a legislative requirement that the Australian Securities and Investments Commission publish all individual audit firm inspection reports. 

13  The committee recommends that the Australian Government implement the Financial Reporting Council recommendations to the Minister to pursue legislative change on disclosure of auditor tenure and audit fees in directors’ reports and going concern assessments in directors’ declarations. 

14  The committee recommends that the Corporations Act 2001 be amended to expand the auditor’s independence declaration to require the auditor to specifically confirm that no prohibited non-audit services have been provided. 

15  The committee recommends that the Corporations Act 2001 be amended to implement a mandatory tendering regime such that Public Interest Entities (including listed companies and the large multidisciplinary partnerships, such as the Big Four) required to have their financial reports audited under the Act must undertake a public tender process every ten years. 

16  The committee recommends that the Corporations Act 2001 be amended (following consultation with relevant stakeholders) such that entities required to have their financial reports audited must establish and maintain an internal controls framework for financial reporting, including requirements that: management evaluate and annually report on the effectiveness of the entity’s internal control framework; and the external auditor report on management’s assessment of the entity's internal control framework. 

17  The committee recommends that the Australian Government: consider mandating digital financial reporting for listed companies and other public interest entities in Australia; and following such implementation and evaluation: consider options for resolving barriers to implementing digital financial reporting for privately owned companies, not-for-profits and charities in Australia. 

18 The committee recommends that the Australian Government legislate to enhance the Australian Security and Investments Commission’s power to take enforcement action against audit firms, not just individuals, including for quality management standards. 

19  The committee recommends that the Australian Government consider requiring audit firms, or the audit section of multidisciplinary firms, to incorporate. 

20  The committee recommends that: the Australian Government adopt a phased approach and proceed with its proposal to integrate the accounting and audit standards boards with the Financial Reporting Council; and the Australian Government then establish an organisation in Australia equivalent to the United States Public Company Accounting Oversight Board. 

21  The committee recommends that the Australian Government reform the Companies Auditors Disciplinary Board (CADB) to improve its efficiency and effectiveness by: implementing improved, more stable and transparent arrangements for staffing and resourcing auditor disciplinary functions; providing more clarity around what cases trigger referral to CADB; removing the Australian Security and Investments Commission’s (ASIC’s) discretion over whether auditors can avoid a disciplinary process by resigning; compelling the findings of ASIC audit surveillance reports to be automatically referred to CADB; and giving CADB the power to make own-motion investigations, in addition to receiving referrals from ASIC or the Australian Prudential Regulation Authority. 

22  The committee recommends that the Australian Government consider additional mechanisms to ensure the Financial Reporting Council and any related standards boards, the Companies Auditors Disciplinary Board, the Australian Securities and Investments Commission, the Tax Practitioners Board, and the Australian Taxation Office and other government regulatory bodies are independent and are seen to be independent, including by ensuring that the bodies do not include individuals with a current financial interest in entities under the direct governance of the body. This may include revision of internal governance structures, independent review or audit of decision making and internal governance structures by an external third party, such as a government department or parliamentary committee or appropriate expert to ensure that the revolving door between the public and private sectors does not lead to perceived or actual conflicts of interest. 

23  The committee recommends that the Australian Government ensure that the new Financial Reporting Council has structural, governance and administrative arrangements which are independent from Treasury, including by ensuring that the new Financial Reporting Council do not include individuals with a current financial interest in entities under the direct governance of the body. 

24  The committee recommends that the Australian Government enhance and harmonise codes of conduct and requirements for disclosure of conflicts of interest for all bodies established under the Australian Securities and Investments Commission Act 2001, including the new Financial Reporting Council. 

25  The committee recommends that the professional accounting bodies’ reports to the Professional Standards Councils are published on the professional accounting bodies’ websites. 

26  The committee recommends that the Australian Government review the professional accounting bodies’ investigatory and disciplinary processes and, if appropriate, establish a single, independent body to perform these functions. Such a body should incorporate a positive disclosure standard so that relevant entities would be required to disclose incidents that are flagged to the Australian Securities and Investments Commission and the new integrated Financial Reporting Council. 

27  The committee recommends that the Australian Government bring forward legislation to make the term ‘accountant’ a protected term, so that only qualified accountants who are members of a professional body can use it. 

28  The committee recommends that the Australian Government, as part of establishing the new integrated Financial Reporting Council (FRC), consider how ethical standards and professional matters are to be treated (including the FRC’s role in creating standards, and the role of the Accounting Professional and Ethics Standards Board). Appropriate measures should be adopted to address the conflict of interest inherent in professional bodies setting and enforcing their own standards whilst overseeing entities who are their own fee-paying members. 

29  The committee recommends that the Australian Government consult with industry with a view to creating a consultancy code and associated consultancy code compliance body (with sufficient powers to ensure compliance with the code) within government that will register individual consultants and have graduated registration requirements for firms based on firm size. Government entities, including Corporate Commonwealth Entities, should be required to only engage consultancies who are members of this body. At a minimum the body should apply to persons providing consultancy services not subject to other mandatory obligations and membership requirements should include mandatory reporting of misconduct witnessed by other consultants. This should be reviewed three years after implementation. 

30  The committee recommends that the Australian Government consider the creation of a voluntary industry code for public interest entities’ engagement of consultancies, which includes the exclusive use of consultants subject to the code and/or registration body determined in recommendation 29. After three years, the government should review the capacity and effectiveness of the code becoming mandatory for public interest entities. 

31  The committee recommends that consulting firms undertaking government work be required to make a declaration if subject to supervised remediation whilst undertaking government work, and the exact terms of such supervised remediation. Upon tendering for government work, consulting firms should also be required to provide specific information regarding the engagement of the firm with global leadership, including but not limited to the provision of information regarding what oversight, if any, exists with respect to that firm’s engagement with Australian regulatory and legal bodies. 

32  The committee recommends that the Australian Government explore options to enhance accountability for consultants, potentially including the establishment of a public register (maintained by the relevant registration body) to record for public view all instances of malpractice. 

33  The committee recommends that the Australian Government and professional bodies develop mechanisms to enhance the transfer of misconduct information between regulators and all relevant professional bodies. 

34  The committee recommends that the Department of Finance consider further mechanisms to increase usage of small and medium-sized consulting firms in government procurement, including firms which exclusively undertake government work. 

35  The Committee recommends that the Australia Government consider options to improve the Australian Taxation Office’s tax settlement procedures with a view to making their details more transparent to all taxpayers and setting out appropriate procedures and protocols for their use, negotiation and terms. 

36  The committee recommends that the Australian Government take action to ensure greater alignment of whistleblower protection laws across the public and private sectors. 

37  The committee recommends that whistleblowing protections be applied to large audit, accounting and consulting firms. 

38  The committee recommends that the Australian Government consider options for greater practical support of whistleblowers such as a Whistleblower Protection Authority (covering both the public and private sectors), including access to civil remedies and financial compensation particularly in instances where disclosures result in the imposition of a penalty on the relevant entity or organisation. 

39  The committee recommends that the Australian Government continue to monitor and review legal frameworks and regulations that have been implemented to protect workers from harmful internal cultures and unsafe working environments in the form of bullying, sexual harassment and exploitation. 

40  The committee recommends that the Australian Government consider mechanisms to increase competition within the audit sector. This may include mandating tendering, mandating firm rotation for auditors, and mandating public interest entities be subject to joint audits which include smaller firms.

ISDS

'Bargaining in the Shadow of Awards' by Taylor St John, Malcolm Langford, Yuliya Chernykh, Øyvind Stiansen, Tarald Gulseth Berge and Sergio Puig in (2024) European Journal of International Law argues  

International investment disputes occupy a curious place in the research programme on compliance. On the one hand, there is a widespread presumption that respondent states generally pay the compensation that they are ordered to pay in adverse awards because not doing so risks reputational consequences such as less foreign investment or further litigation using the system’s transnational enforcement architecture. On the other hand, international investment disputes frequently continue long after awards are handed down, there are visible instances of non-payment and there is little available evidence about if or how most disputes are actually resolved. 

It has long been difficult to study what happens after an investor-state dispute settlement (ISDS) award is handed down. First, many post-award dynamics remain opaque or even confidential. Recent publications on compliance with ISDS awards have started to address these challenges by selecting tractable samples of the ISDS universe and collecting available evidence, including insights from counsel, claimants or state officials. Another reason why compliance with ISDS awards has been difficult to study is because much of what occurs falls outside traditional understandings of compliance processes. This is a conceptual issue. The concept of compliance focuses scholars’ attention narrowly, usually on payment, and thus misses the variety of strategies and events that occur in the process of resolving an international investment dispute. 

Therefore, in this article, we introduce a broader term – resolution – and look beyond payment at a wider landscape of post-award dynamics. It may be difficult to understand how or why a dispute was resolved without looking at domestic regulatory changes, contract renegotiations, pressure exerted through multilateral lending or other dynamics that are not formally related to compliance. To bring these dynamics into view and enable more research on what happens after ISDS awards, we introduce a bargaining framework. The first step in our framework places awards in the context of longer-term bargaining. The second step articulates how bargaining is different when it occurs in the shadow of an award. We present three mechanisms through which awards can shape outcomes, before arguing that the third mechanism is most common. 

There is much to be gained from broadening our expectations of how investment disputes may be resolved. Our framework enables researchers to see more of the dynamics occurring in practice and to appreciate the sophistication of actor strategies. The next section describes a variety of post-award dynamics, using both specific examples and aggregate data. The examples illustrate why we need a new framework to make sense of what is happening after ISDS awards. The third section develops the framework, a fourth section considers the role of enforcement architecture within a bargaining framework and a fifth section concludes.

Faith

'Human Law, Human Lawyers and the Emerging AI Faith' by Giulia Gentile in (2024) LSE Public Policy Review comments 

 The advent of AI has generated remarkable interest in the legal sector. A new ‘faith’ in the transformative power of AI has emerged among law practitioners. According to this new religion, AI would significantly improve the law and the legal profession thanks to automation and the ensuing gains. This development has a messianic taste insofar as it would support lawyers to deal with increasingly complex legal frameworks and a rising demand of legal services. Should lawyers embrace this new faith and allow themselves to be guided by the algorithmic power in the development of their practise? As for all new faiths emerging in times of crisis, this paper argues, caution is needed. The implications of the AI religion in the legal sector are far-reaching and shake the very understanding of human law and human lawyers. A critical perspective should be embraced by individual operators, firms and regulators when reflecting on the potential of AI for the legal sector. 

The law and legal professionals are currently experiencing a profound rethinking entailed by the advancement of legal artificial intelligence (AI) and data-driven automation (DDA). As history teaches us, in moments of crisis new gods and religions surface (1). Likewise, a novel faith in the transformative force of AI has emerged among legal professionals (2, 3, 4, 5, 6). These developments (AI and DDA) are creating new narratives and beliefs in the power of technology and its impact on law and the legal profession. 

With the emergence of AI systems, so has come the expectation that they may transform the law and the legal profession. AI and DDA are still developing, yet the hype among laywers is high, and not completely unfounded. AI and data-driven automation are both quantitatively and qualitatively noteworthy. Numerous scholars and professionals (2, 3, 4, 5, 6) argue that it is just a matter of time until the technology overtakes the legal profession. Now that AI has come, nothing will be the same for the law and lawyers. AI and DDA are mushrooming, beginning to colonise all aspects of the legal world, but there are real concerns about the quality of these tools. A telling example involves a US lawyer who used ChatGPT to draft briefs for a case. The judge hearing the case later discovered that the briefs included citations that did not exist and that had been forged by ChatGPT (7). 

It is evident that, while AI may be transformative, we must be cautious. The promised new land of artificial law and artificial lawyers may not be as proximate (or as promising) as one might think. Currently, the legal sector is floating somewhere between tradition and automation. 

This offers us the opportunity to go back to first principles. What distinguishes human law and human lawyers from AI law and AI lawyers? What does AI promise to bring to the legal sector and what may it take away? Reflecting on these issues is crucial to ensure the adequacy of prospective public policy developments on the development of the legal sector, and to ensure that we avoid lapsing into uncritical acceptance of the novel faith in AI. 

This paper explores these questions and provides reflections on the future of the law and lawyers in the AI era. It firstly illustrates the main scholarly theories about human law and human lawyers, before exploring recent developments in the legal sector of the 21st century. It closes with remarks on the implications of the novel AI religion for human law and human lawyers.

Jurisdiction

'Māori Rejections of the State’s Criminal Jurisdiction Over Māori in Aotearoa New Zealand’s Courts' by Fleur Te Aho and Julia Tolmie in (2023) 30 New Zealand Universities Law Review comments 

A significant and little-known protest is happening in Aotearoa New Zealand's criminal court. For years, on an almost daily basis, Māori defendants have been rejecting the state's exercise of criminal jurisdiction over them - claims that have been repeatedly rejected by the courts. In this article, we examine the extent and nature of this jurisdictional protest in the criminal court and offer some initial reflections on the implications of the protest and the court's response to date. 

We suggest that this protest is notable both for its scale and, at times, sophistication but that the court's response has been simplistic - dismissing without truly addressing the defendants' arguments. In our view, the courts cannot authentically address such claims without first acknowledging that their jurisdiction - and the state's authority to govern Māori - is founded on an illegitimate and unilateral assumption of power.

Ouch

'Could a robot feel pain?' by Amanda Sharkey in (2024) AI and Society comments 

 Questions about robots feeling pain are important because the experience of pain implies sentience and the ability to suffer. Pain is not the same as nociception, a reflex response to an aversive stimulus. The experience of pain in others has to be inferred. Danaher’s (Sci Eng Ethics 26(4):2023–2049, 2020. https://doi.org/10.1007/s11948-019-00119-x) ‘ethical behaviourist’ account claims that if a robot behaves in the same way as an animal that is recognised to have moral status, then its moral status should also be assumed. Similarly, under a precautionary approach (Sebo in Harvard Rev Philos 25:51–70, 2018. https://doi.org/10.5840/harvardreview20185913), entities from foetuses to plants and robots are given the benefit of the doubt and assumed to be sentient. However, there is a growing consensus about the scientific criteria used to indicate pain and the ability to suffer in animals (Birch in Anim Sentience, 2017. https://doi.org/10.51291/2377-7478.1200; Sneddon et al. in Anim Behav 97:201–212, 2014. https://doi.org/10.1016/j.anbehav.2014.09.007). These include the presence of a central nervous system, changed behaviour in response to pain, and the effects of analgesic pain relief. Few of these criteria are met by robots, and there are risks to assuming that they are sentient and capable of suffering pain. Since robots lack nervous systems and living bodies there is little reason to believe that future robots capable of feeling pain could (or should) be developed. 

Questions have been asked about whether or not a robot might be able to feel pain (Danaher 2020; Smids 2020; Sebo 2018). This issue is of particular interest because of the relationship between the experience of pain and sentience. An entity that has the phenomenological experience of pain must be sentient, because the ability to feel pain requires sentience. Those that can experience pain can suffer, and hence should be afforded moral status. 

What does it mean to have moral status? DeGrazia and Millum (2021) define moral status as follows: ‘To have moral status, an individual must be vulnerable to harm or wrongdoing. More specifically, a being has moral status only if it is for that being’s sake that the being should not be harmed, disrespected, or treated in some other morally problematic fashion.’ Terms closely related to moral status include moral patient, moral standing, moral considerability, personhood, and moral subject (Muhelhauser 2017). An entity that has moral status is one for which we should have moral concern. Sebo (2018) writes, ‘Where there is sentience there is reason for moral concern, for an entity that can experience pain can suffer”. Balcombe (2016) in his book ‘What a fish knows’ is clear about the relationship between pain, suffering and sentience. ‘Organisms that can feel pain can suffer, and therefore have an interest in avoiding pain and suffering. Being able to feel pain is not a trifling thing. It requires conscious experience’ (pp 71). 

If robots were shown to be able to feel pain, they would also deserve moral status. Conversely, if they are unable to feel pain, it is not clear that they would deserve moral concern. Sparrow (2004) reports the view that ‘unless machines can be said to suffer, they cannot be appropriate objects for concern at all’. Nussbaum (2022), writing about animals, concludes that ‘We do no harm to non-sentient creatures when we kill them, and since they do not feel pain we need not worry too much about the manner’. 

Being able to experience pain is not the only indication of sentience—sentient beings can also feel pleasure and other emotions and will have a subjective view of the world. As Nussbaum (2022) writes, ‘the world looks like something to them, and they strive for the good as they see it. Sometimes sentience is reduced to the ability to feel pain; but it is really a much broader notion, the notion of having a subjective view of the world’. Nonetheless, having the ability to feel pain requires sentience. 

It is possible for a being to be sentient yet unable to feel pain, as illustrated by the example of congenital analgesia, a rare genetic disorder of humans who do not feel pain. This possibility is not explored further here since our focus is on the experience of pain and what that means. Human individuals with congenital analgesia are clearly still sentient, for they have conscious experience of the world. However, consideration of the possibility that one day there could be machines that were deemed sentient yet were unable to experience pain is beyond the scope of this paper. The emphasis here is on the idea that if an entity has the phenomenological experience of pain, it must be sentient and capable of suffering. The experience of pain is like a litmus test for sentience. 

The terms ‘sentience’ and ‘consciousness’ are often treated as meaning the same, although some authors prefer one or the other. Damasio and Damasio (2022) use the term ‘consciousness’ rather than sentience. In what they describe as ‘a new theory of consciousness’, they distinguish between “the simpler ability to ‘sense’ or ‘detect’ objects and conditions in the environment” and consciousness, which “occurs when the contents of mind are ‘spontaneously identified as belonging to a specific owner’” (pp 2231). They point out that there are living species such as bacteria and plants that can sense or detect objects and conditions in the environment without having either a nervous system or internal representations of those objects or conditions. By contrast, they argue, consciousness involves internal representations. For them, ‘consciousness is present in living organisms capable of constructing sensory representations of components and states of their own bodies, but not in organisms limited to sensing/detecting’ (pp 2234). Nussbaum (2022) talks about sentience rather than consciousness. She describes how living creatures, from mammals to fish and birds, are assumed to be sentient. 

In this paper, it is assumed that sentience and consciousness are the same—a common assumption. Some writers do make a distinction between sentience and consciousness. For instance, Nani et al. (2021) suggest that plants may be sentient, but not conscious. For them, sentience represents ‘the immediate perception of an organism that something internal or external is actually happening to itself—it requires, therefore, feedback through a basic system of transmission signals.’ Although Nani et al. propose a conception ‘of different degrees of sentience, ranging from non-conscious sentience to conscious and self-conscious sentience’ they acknowledge that this is unusual ‘as it is commonly assumed that being sentient is the same as being conscious’. 

Discussions about the possibility of robots feeling pain, and of how we might determine whether they do, have tended to rely on speculations about future possibilities, as discussed in Sect. 2. Connections have been drawn between accounts of animal rights and robots (e.g. Gellers 2020; Gunkel 2012; Ryland 2020). However, these discussions pay little attention to the scientific experimental methods that have recently been used for exploring animal sentience (see Sect. 4). 

Many philosophers have speculated about the subjective experiences, or lack of experience, of animals. For Descartes, animals were effectively clockwork mechanisms without subjective awareness or reasoning powers. His follower, Malebranch, provides an account that represents this view (1689):dogs, cats and other animals, ‘eat without pleasure; they cry without pain; they believe without knowing it; they desire nothing; they know nothing’ (Malebranch 1689; Translated from Huxley 1896). Kant also saw animals as little more than machines, although he objected to the cruel treatment of animals by humans on the grounds that it would make the perpetrators more likely to be cruel towards fellow humans. He argued that we have an indirect moral responsibility towards them (Kant, Lectures on Ethics, 1997). The utilitarians were sensitive to animal suffering and wished to prevent it, as indicated by the quotation above from Bentham (1780), and further elaborated by Singer (1975) in his book on Animal Rights. 

Far more scientific evidence is available now about animal experiences and reasoning ability than was available to Descartes, or even to Kant or Bentham. Some of that evidence is summarised in the following Sect. 4 on ‘Inferring pain in animals’. Increasingly that evidence is being taken into account by writers such as Korsgaard (2018) and Nussbaum (2022). At the same time, there are those such as Danaher (2020), and Gordon and Gunkel (2022) who speculate about the possibility of robot suffering with little reference to available scientific evidence. In this consideration of the possibility of pain and suffering in robots, we begin with a brief description of pain itself. We then turn to an examination of the idea of pain in robots. The current progress towards developing robots that react to aversive stimuli is reviewed, followed by a discussion of how robot pain and sentience might be inferred or recognised. This is contrasted to the scientific approach to determining the experience of pain in animals. Some arguments against the possibility of robots feeling pain are presented and, in a final section, the consequences that follow from an assumption of sentience for both animals and robots are considered.

Kafka

'Kafka in the Age of AI and the Futility of Privacy as Control' by Daniel Solove and Woodrow Hartzog in (2024) 104 Boston University Law Review 1021 comments 

Although writing more than a century ago, Franz Kafka captured the core problem of digital technologies – how individuals are rendered powerless and vulnerable. During the past fifty years, and especially in the 21st century, privacy laws have been sprouting up around the world. These laws are often based heavily on an Individual Control Model that aims to empower individuals with rights to help them control the collection, use, and disclosure of their data. 

In this Essay, we argue that although Kafka starkly shows us the plight of the disempowered individual, his work also paradoxically suggests that empowering the individual isn’t the answer to protecting privacy, especially in the age of artificial intelligence. In Kafka’s world, characters readily submit to authority, even when they aren’t forced and even when doing so leads to injury or death. The victims are blamed, and they even blame themselves. 

Although Kafka’s view of human nature is exaggerated for darkly comedic effect, it nevertheless captures many truths that privacy law must reckon with. Even if dark patterns and dirty manipulative practices are cleaned up, people will still make bad decisions about privacy. Despite warnings, people will embrace the technologies that hurt them. When given control over their data, people will give it right back. And when people’s data is used in unexpected and harmful ways, people will often blame themselves. 

Kafka’s provides key insights for regulating privacy in the age of AI. The law can’t empower individuals when it is the system that renders them powerless. Ultimately, privacy law’s primary goal should not be to give individuals control over their data. Instead, the law should focus on ensuring a societal structure that brings the collection, use, and disclosure of personal data under control.