Enforceable undertakings : an improved form of settlement

Abstract

An enforceable undertaking is an administrative sanction available to a number of Australian regulators at both the Federal and State level. It is a promise enforceable in court. In an enforceable undertaking, the alleged offender, known as the promisor, promises the regulator (for the purpose of this thesis, the Australian Securities and Investments Commission ('ASIC')) to do or not to do certain actions. Such a sanction is the result of an agreement between the alleged offender and the regulatory agency. An enforceable undertaking is thus a form of settlement. By analysing the 286 enforceable undertakings accepted by ASIC over the last decade (1998-2008), this thesis considers whether an enforceable undertaking is an improved form of settlement and identifies the strengths and weaknesses of this sanction. For the purpose of comparison, the manner in which enforceable undertakings are used by other regulators such as the Australian Competition and Consumer Commission is also considered. Some of the criticisms levelled at settlements, such as issues relating to transparency and accountability, are referred to and an assessment is made as to whether such criticisms apply to enforceable undertakings. The study finds that an enforceable undertaking is a flexible sanction that provides the regulator with a creative way to deal directly with certain alleged contraventions of the law. Further, an enforceable undertaking may be deemed to be moderately restorative in nature. Accordingly, this sanction may provide, in certain instances, a better outcome than other remedies that are at the regulator's disposal. Such a remedy has its own place in the Braithwaite's enforcement pyramid. An enforceable undertaking is, in addition, more transparent than a settlement. Its terms are unlikely to be perceived as unreasonable either by the promisor or the victims of the alleged offender. Further, while the use of settlements raises issues of accountability, the fact that an enforceable undertaking is subject to judicial review and is enforceable in court provides a certain protection to the promisor. Ultimately, if the terms of an undertaking are unreasonable, it is unlikely for the courts to give such promises any legal effect. Lastly, to ensure compliance of the promisor with the terms of the undertaking, an effective monitoring system has to be in place. However, since ASIC is more reactive than proactive in relation to the monitoring of undertakings, such a monitoring system relies heavily on self-regulation by the promisors. The thesis concludes that the current system of monitoring enforceable undertakings has a number of flaws that should be taken into account by the regulator. In summary, an enforceable undertaking is an enhanced form of settlement, the use of which by regulators should continue and generally replace the use of other forms of settlements.

Date of Award	2010
Original language	English