Click on the following for details of the draft decree

FNPF Decree 2011 – A
FNPF Decree 2011 – B
FNPF Decree – 2011 C
FNPF Decree 2011 D
FNPF Decree – 2011 E
FNPF Decree – 2011 F
FNPF Decree 2011 – G

The Proposed (Draft) Fiji National Provident Fund Decree 2011: Commentary

Dr Shaista Shameem 

1.0       Introduction

The proposed (draft) Fiji National Provident Fund Decree 2011 is, unfortunately, a piece of law that will make life very complicated for the ordinary citizen of Fiji. This will be particularly so for members of the Fund and pensioners who may want to know how their pension benefits will be affected in light of the new retirement policy to be put in place by the Government. This brief commentary confines itself to two main issues highlighted by a survey of the proposed Decree, namely, (i) its lack of clarity due to shortcomings in drafting and (ii) its substantive content adversely affecting rights of members and pensioners.

2.0       Problems with drafting

 Recent decrees promulgated by Government have revealed serious defects in drafting and the proposed FNPF Decree is no exception. New laws are particularly vulnerable to drafting defects mainly because of lack of consultation due to the current legal milieu in which these decrees are drafted. Normally, drafts of legislation are put through a number of readings in Parliament. However, this rigorous process is unavailable in a situation where the executive arm of government drafts laws for promulgation by the President. Consequently, defects, which have the effect of weakening the law itself thereby thwarting coherent interpretations of it by courts and/or public officials, do ultimately undermine public confidence in the law-makers. When Parliament sits again in future, it would be advisable for its members to revisit all the decrees promulgated since 2009 to ensure compliance with basic drafting rules. This would reassure the public that the laws affecting them do not suffer from internal contradictions and inconsistencies, have prospective application only, and are of a sufficiently generalized nature as required by the basic rules of legal drafting.

The proposed FNPF Decree’s drafting problems are many. In relation to pensioners’ rights it is not clear in the wording whether the new law will affect those already on pensions. This is quite a serious defect because those keenly following the David Burness case (Burness v FNPF, Republic of Fiji and AG Civil Action No 183 of 2011), will not have a clue whether David Burness’ pension (or pensions of others) will be reduced pursuant to the new law. The commencement date for the proposed decree has not been provided and, given recent history, retrospective application of decrees is now quite common in Fiji. According to section 3, the Minister has discretion regarding the commencement date of the new decree. In fact, different parts of it will come into effect on different dates depending on whether or not the Minister is satisfied (inter alia) that the Board has complied with ‘Part 2 of the transition law’.

This brings me to another drafting defect. The phrase ‘transition law’, according to the interpretation section, refers to the new decree itself; however the long and short titles of the decree do not refer in any way to it being a ‘transitory law’- transition to what, one may ask. Will there be another FNPF Decree later? If so, when? Will that decree more explicitly reduce pensions already granted to pensioners?

Section 29 (1) of the proposed Decree is another example of lack of clarity resulting from weakness in drafting. The section states ‘The Fiji National Provident Fund established under the former law continues in existence under that name, subject to the other provisions of this law and any provision of the transition law’.  If, as the interpretation section states, the transition law is the decree, what is meant by the words ‘this law’ in the same sentence? Given that this is quite an important section because it is supposed to tell us what relationship the proposed decree has with the FNPF Act Cap 219, section 29 (1) of the decree is a perfect example of confusion in the minds of the drafters about what exactly they are reforming- the long title states the decree is to ‘reform the Fiji National Provident Fund’. So, the question is, what is the relationship between Cap 219 and the proposed Decree? And, if section 29 (1) states that the ‘former law’ is still in existence, why not just draft a simple amendment to it, instead of putting in place a new convoluted ‘reform’ decree?
 

The biggest confusion comes from sections 45-56 of the proposed decree. There is now a gradation within the entitlements and accounts part of the decree so that there is proposed a ‘preserved account’ and a ‘general account’. There is also a ‘supplementary fund’ nominated later in the decree. Initially one would think that FNPF withdrawals can in future take place from either the preserved account or the general account but not both. However, apparently, a member can withdraw an amount from both preserved account and general account. So what is the purpose of having two different accounts when a member can withdraw from both? It is not clear from a member’s perspective what precise difference there is between these two accounts.

Perhaps one of the more serious drafting defects comes from the new language employed in what is essentially a superannuation law. The phrase ‘retirement income products’ is used to describe what looks like ‘pensions’ or, the word already used in section 63 of the proposed decree as well as Cap 219, ‘annuities’. Probably the phrase ‘retirement income product’ places the emotive language of old people’s pensions into the scientific category of clinical market-forces, Thatcherism/Rogernomics and Richard Posner right-wing type of labeling of what is essentially a contributory social security scheme for aged (and vulnerable) persons. The phrase ‘buy a retirement product’ is also used in this section. For a contributory and mandated scheme such as FNPF, these phrases are a misnomer. Such fashionista labeling, pretending that the people of Fiji are really in the marketplace buying and selling retirement ‘products’, is not a good look for a government expressing itself as being ‘for the people’. Since this decree is still in draft form, I would suggest an immediate removal of this objectionable phrase. Or else, if the market-forces jargon is to be employed in the proposed decree, opening up the pension scheme market to other providers so that there a reality of market forces and choices in the pension scheme in Fiji would be a good idea.

Section 71 (1) is perhaps the best example of a legal howler in the draft decree. That section states, ‘A revocation or suspension of approval of an approved retirement income product does not affect the retirement income product provider’s obligation in relation to the product assumed before the revocation or suspension’. Clearly a refresher course in legal drafting is required to avoid such circularity in expression.

Also consider section 92 (2)..’Despite any rule of law or principle of equity to the contrary, for the purpose of investment, property of a fund may be mixed with property of another fund’. Should the word ‘mixed’ be substituted by the word ‘combined’? Also, should the word ‘the’ come before the words ‘property’ in the two places they occur in this section? It appears that a course in plain English writing is also required. In fact there are many such English language errors and awkward sentences in the proposed decree. If government wants to write its laws in English, it should at least get the language part right so that there is no confusion in the minds of those who are expected to abide by the laws that are drafted.

Section 96 of the proposed decree is completely incomprehensible. Consider Section 96 (1) (f) (there are two subsections (f) by the way)- ‘and no right of a person in relation to those amounts and entitlements- are capable..’ leading to a serious scratching of the head as to this section’s intended meaning.

Section 142 states…’the decree binds the State but does not make the state liable to be prosecuted for an offence’, but, as is rightly pointed out as a note in this section (presumably as an aside for fixing it up), the State is a major employer. How government will get over this legal conundrum is yet to be revealed. Clearly the State intends to prosecute all other employers if they breach the decree, except itself! And yet the decree states that all classes of members will be treated equitably. This section alone, if the State is indeed granted immunity, will weaken the decree beyond redemption.

It would be embarrassing to point out any further drafting defects. However, there is a final one that must be mentioned so serious is its implication. There is a structural inconsistency between Schedules 2 and 4, to such extent that the very core of the Burness human rights application is revealed, and can be confirmed, for its rationality of purpose. Schedule 2 refers to ‘Review of Decisions and Determinations’ and Schedule 4 is ‘Retirement Income Products Provided by the Board’. Section 1 of Schedule 2 states that ‘decisions or determinations’ of the Board in relation to FNPF members and annuitants can be reviewed. This means that determinations on annuitants (including pension cuts) are within the purview of any review process. However, contrarily, section 1 of Schedule 4 states that…’the single life annuity product is a promise made by the Board to pay the annuitant a specified amount each month for as long as the annuitant lives’. The question is: why would an annuitant (read pensioner) need a review of a decision made by the Board (the Board being permitted very broad decision-making by virtue of section 63 of the decree) if there is a promise made by the Board to pay the annuitant, at the time of the application, a certain amount for the rest of his or her life? Schedules 2 and 4 are inconsistent with each other and this inconsistency has a direct implication for the continuation and judicial determination of the Burness case.

(3) Substantive content of the proposed decree affecting rights of members and pensioners

The first serious substantive amendment to the FNPF Act Cap 219 is that the decree removes the trusteeship nature of the original Act of Parliament. Section 6 (3) states… ‘The Board is not a trustee of any of the property of a fund’. Why the words ‘a fund’ is used rather than ‘the fund’ is unclear. However, notwithstanding the explicit removal of the quality of trusteeship, in other sections (for example section 9) the Board’s duty is expressed in trust terms, it seems creating an ‘implied trust’ without the Board having to face the responsibility and the duties of an express trust as in Cap 219. Nevertheless, all the assets of the Fund are expressly stated to be the assets of the Board.

The second serious substantive amendment by decree is the composition of the Board of the FNPF. The Board will now consist of 7 members, not 6. There are no special qualifications, as previously, in relation to employer, employee and government representation on the Board. The qualifications of persons appointed will be in the areas of finance, business, investments, accounting and law. There is no provision for a person versed in social welfare or social security type work to be appointed to the Board. The proposed decree seems to be quite scientific and structural functionalist in approach to the social issue of superannuation.

The third serious amendment relates to the new responsibilities given to the Reserve Bank of Fiji to micro-manage the Board and, by extension, the Fund. The whole of Part 11 of the proposed decree is called ‘Supervision by the Reserve Bank’. Whether section 4 of the Reserve Bank Act allows such hand-holding of the FNPF is another matter but perhaps a new decree on the RBF is also contemplated. Section 132 of the proposed decree gives the RBF powers of direction in a wide spectrum of responsibilities including, it seems, over staffing of the FNPF.

The fourth serious amendment and also a defect is the aforementioned Schedule 2 which breaches the separation of powers doctrine and, notwithstanding the decree’s painstaking desire to avoid it, introduces a conflict of interest dimension within the decree. The FNPF Board not only sets up the mechanism for review of its decisions in relation to members and annuitants, it also participates in the review process. The Board therefore can be placed in the untenable position of reviewing one of its own decisions. There is no provision for a higher authority such as a court being given the power to review a decision of the Board, even though the decree does not explicitly state that the Board is the final decision-maker. This leaves the question of judicial review wide open.

Another significant amendment is that the power of making regulations is now vested in the Minister (presumably the Minister of Finance, though the responsible Minister is not named in the decree), and not the Board. The Board, however, can make ‘rules’.

 

(4) Conclusion

It seems obvious that the proposed decree needs to be reviewed for its drafting shortcomings which makes the law difficult to understand and confusing to apply. The question of whether or not the new decree will apply to pensioners already receiving their pensions is left to the discretion of the Board, as it is currently drafted. This is far too discretionary for the human rights of pensioners, particularly since the FNPF is not a social welfare hand-out but a contributory scheme.

The discretionary nature of decision-making over the extent and type of investment is also a problem for members and pensioners alike. This was one of the problems in the amendment of the FNPF Act in 2006 and was criticized by the current government for not providing sufficient protection from abuse of funds belonging to the members of FNPF. The pre-2006 provision, including the application of the Trustee Act, has not been restored in the proposed decree. In fact the Board’s power to invest wherever it wants, notwithstanding the Reserve Bank of Fiji scrutiny which is confined to conflict of interest issues mainly in any event, remains a cause for concern. And because the Trusteeship has been explicitly removed in the proposed decree, members and pensioners will have even less power to hold the Board to account in case of bad investments. The fear held by many members and pensioners that the FNPF is a ‘slush fund’ for the government of the day is not assuaged by the proposed decree as currently drafted.

My suggestion would be for the government to release the draft for wider public review and then consider whether all the amendments it is proposing are really necessary in view of the aim of the proposed decree. The simple solution would be, as others have advised, to make amendments in relation to future annuities, if it is necessary to keep the Fund solvent. The other provisions in the proposed decree mainly amend the language of Cap 219 but the effect of these and other amendments noted on core rights and expectations of members and pensioners is significant.

 

November 24^th 2011.