Australians should be concerned that our Courts are too readily exporting abroad the right to decide our own commercial disputes.
If you are a Franchisee who believes that you are being protected by the Franchising Code of Conduct, think again: The fact is that even though the Australian Code requires the mediation of a dispute here (before litigation can be commenced or a Franchise Agreement unfairly terminated) and the Code promotes the cheap and speedy resolution of disputes between a Franchisee and a Franchisor, the Code can be easily circumvented.
Foreign Franchisors, including large multinationals operating in Australia, have introduced provisions into Franchise Agreements which may stipulate that some particular foreign law will apply to the Contract and that any dispute between Franchisor and Franchisee must be arbitrated in another country, and even in another language.
Remarkably our Courts uphold these provisions – which are especially framed by foreign Franchisors, carrying on business in Australia, to thwart the protections of Australian Law. This means that the protection of small business takes second berth to globalisation, what our Courts describe as “the comity of nations”: a ‘cop out’ by Australian Courts and our legislature when it comes to enforcing safeguards for local Franchise operators.
Australian Courts are actually applying the pronouncement of Ronald Reagan’s US Supreme Court in Mitsubishi Motors Corp v Soler Chrysler-Plymouth Inc, 473, US 614 when, in 1985, by a 5-3 majority, a US Mitsubishi dealer was ordered to arbitrate its claim before a panel in Tokyo, as stipulated in the Franchise Contract.
This was a dispute between a major retail dealership in the US and Mitsubishi Head Office – not quite in the same category as the position of a Franchisee carrying on a small business in Australia, who was forced in July 2012, by the Federal Court in Sydney, to accept that, as Franchisee, he had no local remedy against the Franchisor, a multinational corporation, operating in Australia – notwithstanding the terms of the Australian Franchise Code.
If he wanted to agitate his rights, the Federal Court ruled, he would have to do so in the Italian language in Italy under Italian law – either before an Italian arbitration panel or, if on appeal, through the Italian Courts, which could take up to 12 years and would surely cost millions of Euro.
In the US, the Democratic Party has been fighting for years to pass the Arbitration Fairness Act, blocked by the Republicans in Congress. The thrust of the Arbitration Fairness Act is to refuse to enforce mandatory foreign arbitration and choice of foreign law causes in Franchise Agreements and to make sure that Franchisees in the US enjoy the protection of US law. That law has still not been passed.
Colonialism in Banking
Beware about doing business with the ANZ Bank in Singapore, if you think ANZ there is going to be treating you like an Aussie. Although the Bank trades under its Australian Business Number in Singapore, it claims the right to be “un-Australian” in its dealings with customers in Singapore.
We have clients who had permanent residency in Singapore, who naturally thought they would gain the protection of Australian Credit and Consumer Laws when they borrowed money from the ANZ Bank in Singapore(trading under its Australian Business Name), to obtain a mortgage against real estate that they were buying to live in, near the Margaret River in WA.
In their case, the ANZ Bank is refusing even to entertain whether it may have acted unconscionably and breached the Code of Banking Practice, which ANZ adopted in 2004 – but which the Bank claims does not apply to its Singapore dealings, even in its own name.
Don’t be fooled into dealing with an Australian Bank overseas because you think that its prudential standards will be higher, its accountability greater or that you will have access to the safeguard of conformity to Australian standards.
Too many Australian companies believe that they can operate in a sub-standard way outside of Australia and practise a kind of corporate neo-colonialism, displaying a high-handed and disinterested attitude to justifiable complaints.