News
Back to basics in statutory interpretation = significant setback for Commerce Commission
First published NZLawyer magazine, 30 April 2010.
The Supreme Court has just dealt a blow to the Commerce Commission's efforts to pursue participants in (real and alleged) international cartels affecting New Zealand.
It was a year ago that we were discussing a "significant victory" for the Commission following a Court of Appeal decision in which that Court expanded the reach of the Commerce Act 1986 to overseas defendants. Now the Supreme Court in Poynter v Commerce Commission [2010] NZSC 38 has reversed that decision in what is plainly a significant setback for the Commission.
Recapping the facts
The Commission alleged Mr Poynter, who lives in Australia, was in breach of the Act by reaching understandings with other parties involving New Zealand markets for wood preservatives. Some other parties involved in the litigation (referred to as the Koppers Arch litigation) have admitted liability and had penalties imposed.
Mr Poynter lodged a protest to jurisdiction in the High Court, arguing the Act did not apply to him as an overseas defendant and denying involvement in the conduct alleged. It was common ground in the Supreme Court that Mr Poynter was not resident or carrying on business in New Zealand and that he had not personally engaged in any conduct in New Zealand (or even sent communications to New Zealand).
The section at issue
The key issue for determination was whether section 4(1) of the Act is an exhaustive statement of the circumstances in which the Act applies to conduct outside New Zealand. The Supreme Court has categorically stated that it is exhaustive.
Section 4(1) provides:
This Act extends to the engaging in conduct outside New Zealand by any person resident or carrying on business in New Zealand to the extent that such conduct affects a market in New Zealand.
The Commission accepted that section 4(1) did not apply as Mr Poynter was neither resident nor carried on business in New Zealand. It argued, however, the section was not exhaustive, and that the Act could still apply to Mr Poynter because either Mr Poynter's conduct was captured by the provisions of the Act relating to agency (section 90) and/or the provisions relating to conspiracy (section 80(1)(f)) or extensions thereof. In fact, by the Supreme Court stage, the Commission effectively argued that the case was not really about extraterritoriality at all because there was conduct carried out in New Zealand by others that was legally attributable to Mr Poynter.
After a careful review of these provisions, the Court rejected that either assisted the Commission. They did not apply on their face and the Court rejected that it should imply into the Act any further unspecified "agency" situations or that common law principles applying extraterritorial conspiracies assisted the Commission in any case.
The Court said:
When, as in this case, Parliament has stated expressly the circumstances in which an Act is to have extraterritorial effect, it would be most unusual if the Act was meant to provide for additional circumstances in which that was so, but this was left to a process of implication.
Statutory interpretation
In reaching its view the Supreme Court reiterated some of the basic principles of statutory interpretation when considering issues of extraterritoriality. It emphasised the presumption that Parliament does not intend to assert extraterritorial jurisdiction and that this can only be rebutted by "express language or by necessary implication". It noted that a necessary implication was not the same as a reasonable implication: "A necessary implication is not something judicially engrafted onto legislation as a judicial value or policy judgment, however reasonable that judgment may appear to be."
These principles of statutory interpretation are underpinned by considerations of international comity and the Court referred to cases in which it is emphasised that a Court should be slow to find a statute has extraterritorial effect without express words supporting that conclusion.
What of globalisation?
In the Court of Appeal, policy issues and, in particular, the effects of increased globalisation, had weighed heavily. The Court of Appeal considered that its approach reflected "the realities of globalisation". However, the Supreme Court said:
We are by no means insensitive to the suggestion that extraterritoriality issues should now be viewed from the perspective of the substantial changes that have taken place in recent times in the way people and businesses communicate with each other. Nor are we insensitive to what the Court of Appeal called the realities of globalisation. We do not, however, consider it is appropriate in the present context for the courts to impose piecemeal common law glosses onto a statutory code.
That is, the fact that there has been increased globalisation does not provide a basis for reading into a statute extraterritorial effect that does not exist on the face of the statute. The Court considered that if the Act required amendment to extend its application to someone in Mr Poynter's position that was a matter for Parliament to assess and address.
Practical effect
The reality of the Supreme Court's decision is that there will be situations in which an overseas participant in a cartel that is directed toward a New Zealand market will be beyond the reach of our competition regulator. At a time when international cartels are receiving some attention in the criminalisation debate, some may see this outcome as exposing a "loophole" in the Act.
However, it is important not to lose sight of the fact that:
- those parties to a cartel who implement the arrangement in New Zealand and in so doing, engage in conduct in New Zealand will be caught by the existing legislation; and
- those who are resident or carrying on business here but seek to reach an agreement offshore will also be caught by the legislation.
That is, it will be difficult for those involved in business in New Zealand to deliberately circumvent the Act.
Overall, the perhaps competing interests of competition law enforcement and international comity (and one should remember that different countries have different laws governing competition) require a line to be drawn somewhere. In this case, the line has been drawn by Parliament in section 4 of the Act.
