Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2013-2014-2015
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
ASIAN INFRASTRUCTURE INVESTMENT BANK BILL 2015
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon. J. B. Hockey MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Australia's membership of the AIIB ................................ 5
Index ..................................................................................................... 11
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
AIIB Asian Infrastructure Investment Bank
the Articles AIIB Articles of Agreement
the Bank Asian Infrastructure Investment Bank
ICESCR International Covenant on Economic, Social
and Cultural Rights
MDBs Multilateral Development Banks
1
General outline and financial impact
Australia's membership of the Asian Infrastructure
Investment Bank
This Bill provides authority and an appropriation for the payment of
Australia's capital contribution to the Asian Infrastructure Investment
Bank (AIIB or Bank), thereby facilitating Australia's membership of the
Bank.
Date of effect: The operative provisions of the Bill will commence on the
day after receiving the Royal Assent, or when Australia becomes a
member of the AIIB (whichever is the later).
Following completion of all necessary ratification processes, Australia
will lodge its instrument of ratification with the AIIB's Depository
(China). Australia's membership of the AIIB will become effective on the
date of lodgement, or on the day on which the Bank is established
(whichever is the later).
The AIIB will be established once the Articles of Agreement enters into
force, which will occur once instruments of ratification, acceptance or
approval have been deposited by at least ten signatories whose initial
subscriptions in the aggregate comprise not less than 50 per cent of the
total subscriptions of signatories. This is expected to occur relatively
quickly, likely by the end of 2015.
Proposal announced: The Government's decision to join the AIIB was
announced by the Treasurer and the Minister for Foreign Affairs in their
joint press release of 24 June 2015. On 29 June 2015, the Treasurer signed
the AIIB Articles of Agreement (the Articles) on behalf of Australia in
Beijing, China.
Financial impact: Under the Articles, Australia will be obligated to
provide a capital contribution to the AIIB that will be payment for
Australia's shareholding upon becoming a member of the AIIB.
Australia's total shareholding will be US$3.7 billion (approximately
A$4.6 billion based on 22 May 2015 exchange rates), comprising
US$738.3 million (approximately A$932 million) in paid-in capital.
Paid-in capital will be paid in five equal annual payments starting from
when Australia ratifies the AIIB Articles. There will be zero direct impact
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Asian Infrastructure Investment Bank Bill 2015
on the underlying cash balance, fiscal balance and net debt, as using cash
to purchase shares represents a change in the composition of the
Australian Government's assets.
The remaining US$2.9 billion (approximately A$3.7 billion) will be
callable capital which is a contingent liability against the Commonwealth.
Human rights implications: This Bill does not raise any human rights
issues. See Statement of Compatibility with Human Rights -- Chapter 1,
paragraphs 1.24 to 1.32.
Compliance cost impact: Nil.
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Chapter 1
Australia's membership of the AIIB
Outline of chapter
1.1 This Chapter describes the context for the AIIB and outlines the
Bill in detail, including commencement, authority and an appropriation
for the purchase of Australia's shareholding, the issuance of promissory
notes, and to extend certain privileges and immunities that Australia is
obligated to provide.
Context
1.2 The AIIB is an international financial institution proposed by the
Chinese Government to assist in funding major infrastructure projects
throughout Asia. The Treasurer, on behalf of Australia, signed the AIIB
Articles of Agreement in Beijing, China, on 29 June 2015.
1.3 There is an estimated infrastructure financing gap of
US$8 trillion in the Asian region this decade, and the AIIB will be part of
the solution to closing this gap. Joining the AIIB presents Australia with
opportunities to work with our neighbours and our largest trading partner
to drive economic growth and jobs. Working closely with the private
sector, the AIIB paves the way for Australian businesses to take advantage
of the growth in infrastructure in our region.
1.4 The AIIB's total authorised capital is US$100 billion, and is
expected to become operational by December 2015.
Detailed explanation of new law
Short title and introductory matters
1.5 The title of the legislation will be the Asian Infrastructure
Investment Bank Act 2015. [Section 1]
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Asian Infrastructure Investment Bank Bill 2015
1.6 A simplified outline of the Bill is provided in to assist readers,
however this outline is not intended to be comprehensive. Readers should
only rely on the substantive provisions. [Section 3]
1.7 Sections 1 and 2 will commence on the day after the Royal
Assent. Sections 3 to 8 will commence on the later of: the day the Bank is
established; or Australia becomes a member of the AIIB. [Sections 1 and 2]
1.8 Article 58(2) of the AIIB Articles of Agreement (the Articles)
outlines when Australia will become a member of the AIIB and Article 59
outlines when the Bank will be established.
1.9 Therefore, the commencement provisions set out in the Bill will
address the situation of the Bill having received the Royal Assent and the
Bank not yet having been established.
1.10 The Articles can be found on the AIIB's public website
(www.aiibank.org) and also on the Australian Treaties Library accessible
through AustLII (www.austlii.edu.au).
Authorise payments to be made to the AIIB
1.11 Payments that Australia must make for subscriptions of shares
of the capital stock of the AIIB is authorised by Section 5. This provision
covers the five instalments that Australia is required to make under
Article 6. [Section 5]
1.12 Similar to provisions in the relevant Acts for the Asian
Development Bank and the European Bank for Reconstruction and
Development, Section 5(2) provides for a general authority to make any
other payments required by the Articles. However, it is anticipated that
there will be no such payments required.
1.13 Australia's total shareholding will be US$3.7 billion, of which
US$738.3 million is paid-in and the remainder being callable. In the
event that the AIIB calls in these shares, Australia has an obligation to
make payments up to the value of the callable shares.
Issue of promissory notes
1.14 Section 6 will authorise the Treasurer, as the responsible
Minister, to make promissory notes and issue them to the AIIB in
accordance with the standard terms outlined in subsection 6(2), namely
that promissory notes will be: non-negotiable, non-interest bearing, and
payable to the Bank at par value upon demand. [Section 6]
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Australia's membership of the AIIB
1.15 Promissory notes are financial instruments that are frequently
used as part of a process to discharge the Government's obligations to
international financial institutions such as Multilateral Development
Banks (MDBs). Promissory notes provide both parties with more control
of encashments but can still be considered by the MDB as an asset.
1.16 The power to issue promissory notes under Section 6 is broad in
order to remain effective in the period beyond the payment of Australia's
initial capital subscription. However, the authorisation under Section 5(2)
limits the standing appropriation in Section 7(b) to payments that
Australia is required to make in accordance with the Articles only. It does
not authorise an appropriation for promissory notes issued for
discretionary activities, such as Australia's participation in AIIB-related
Special Funds (provided for in Article 17 of the Articles).
1.17 In the event that the Government determines that Australia
should participate in a Special Fund, then an appropriation can be made
through the Budget process, however Section 6 provides the necessary
authority to issue and draw down promissory notes to facilitate these types
of payments.
Appropriations
1.18 Section 7 authorises the Consolidated Revenue Fund to be
appropriated for the purposes of purchasing Australia's share subscription,
and for redeeming promissory notes issued according to Section 6.
[Section 7]
1.19 This appropriation power is limited, as the power to make
payments under Section 5 is only for purposes that Australia is required to
make under the Articles. This appropriation power will provide the
necessary authority to appropriate the Consolidated Revenue Fund in an
emergency -- such as the AIIB urgently calling on the 'callable' shares
held by Australia.
Privileges and immunities
1.20 Section 8(1) enables regulations to be made to extend certain
privileges that Australia is obligated to provide to the Bank under
Chapter IX (Status, Immunities, Privileges and Exemptions) of the
Articles. [Section 8]
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Asian Infrastructure Investment Bank Bill 2015
1.21 Section 8(2) enables regulations to be made to extend certain
privileges that Australia is obligated to provide to Governors, Directors,
Alternates, the President, Vice-Presidents and other officers and
employees of the Bank, including experts and consultants performing
services for the AIIB under Articles 50 of the Articles. [Section 8]
1.22 For example, Article 50 of the AIIB Articles requires the
exemption from application of laws relating to immigration and the
registration of aliens for experts and consultants performing services for
the Bank which are additional to those that would ordinarily be provided
to other international organisations.
1.23 Section 8(3) enables regulations to be made to extend certain
privileges that Australia is obligated to provide to Directors, Alternates,
the President, Vice-Presidents and other officers and employees of the
Bank, including experts and consultants performing services for the Bank,
in relation Article 51(2) of the Articles. The AIIB Articles, unlike other
international organisations, have an exemption from taxation of expenses.
Governors are not covered by Article 51(2) as they do not receive a salary
from the Bank. [Section 8]
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Australia's membership of the AIIB
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Asian Infrastructure Investment Bank Bill 2015
1.24 This Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
1.25 The Bill will facilitate Australia's membership of the Asian
Infrastructure Investment Bank.
1.26 The AIIB is an international financial institution proposed by the
Chinese Government to assist in funding major infrastructure projects
throughout Asia. The Treasurer, on behalf of Australia, signed the AIIB
Articles of Agreement in Beijing, China, on 29 June 2015.
Human rights implications
1.27 This Bill does not place new limitations on any human rights.
1.28 Membership of the AIIB is consistent with Article 2(1) of the
International Covenant on Economic, Social and Cultural Rights
(ICESCR). This Article requires that States take steps, including through
international assistance and co-operation, to assist in the progressive
realisation of the economic, social and cultural rights recognised by
ICESCR.
1.29 To give effect to Article 50 of the AIIB Articles of Agreement,
regulations may engage human rights on the freedom of movement by
conferring an exemption from the application of laws relating to
immigration and registration of aliens on experts and consultants
performing missions or services for the AIIB.
1.30 Article 50 of the AIIB Articles of Agreement provides that all
Governors, Directors, Alternates, the President, Vice Presidents, other
officers and employees of the AIIB including experts and consultants
performing missions or services for the Bank:
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Asian Infrastructure Investment Bank Bill 2015
• be immune from legal process with respect to acts performed
by them in their official capacity, except when the Bank
waives the immunity and shall enjoy inviolability of all their
official papers, documents and records;
• where they are not local citizens or nationals, shall be
accorded the same immunities from immigration restrictions,
alien registration requirements and national service
obligations, and the same facilities as regards exchange
regulations, as are accorded by members to the
representatives, officials and employees of comparable rank
of other members; and
• shall be granted the same treatment in respect of travelling
facilities as is accorded by members to representatives,
officials and employees of comparable rank of other
members.
1.31 The right to freedom of movement as per Articles 12 and 13 of
the International Covenant on Civil and Political Rights consists of three
elements:
• the right to freedom of movement within a country, which
includes the right to choose where to live within the country;
• the right to leave any country, regardless of the person's
citizenship; and
• the right to enter a country of which the person is a citizen.
Conclusion
1.32 This Bill is compatible with human rights because, to the extent
that it may engage human rights (if any), that engagement expands those
rights.
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Index
Asian Infrastructure Investment Bank Bill 2015
Bill reference Paragraph number
Section 1 1.5
Sections 1 and 2 1.7
Section 3 1.6
Section 5 1.11
Section 6 1.14
Section 7 1.18
Section 8 1.20, 1.21, 1.23
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