Ministerial guideline on the use of enforceable undertakings

1. Introduction

Section 107 of the Mineral Resources (Sustainable Development) Act 1990 (the Act) gives the Minister for Energy and Resources (the Minister) the power to enter into a written undertaking (an enforceable undertaking) with the holder of an authority under the Act (an authority holder) where the Minister believes on reasonable grounds that the authority holder has contravened or is likely to contravene the Act or regulations and in certain other circumstances.

The power to enter into an enforceable undertaking may be exercised where the Minister considers, having regard to the criteria specified in guidelines made under section 120A of the Act, that an enforceable undertaking is an appropriate enforcement mechanism.

This guideline is made under section 120A of the Act. Its purpose is to specify the criteria to which the Minster will have regard in deciding whether to enter into an enforceable undertaking.

References to ‘the Minister’ in this guideline include any person to whom the Minister has delegated the power to enter into an enforceable undertaking in accordance with section 120 of the Act. As at the date of this guideline, the persons to whom the Minister has delegated that power are the following officers in the Department of Energy. Environment and Climate Change:

• Executive Director, Earth Resources Regulator; and
• Director of Regulatory Compliance, Earth Resources Regulator.

2. Enforcement of the Act

2.1 Purpose and objectives of the Act

The Victorian exploration, mining and extractive industries are regulated primarily under the Act, together with the Mineral Resources (Sustainable Development) (Mineral Industries) Regulations 2019 and the Mineral Resources (Sustainable Development (Extractive Industries) Regulations 2010 (collectively, the regulations).

The purpose of the Act is to encourage mineral exploration and economically viable mining and extractive industries which make the best use of, and extract the value from, resources in a way that is compatible with the economic, social and environmental objectives of the State.

The objectives of the Act are:

• to encourage and facilitate exploration for minerals and foster the establishment and continuation of mining operations by providing for:
  • an efficient and effective system for the grant of licenses and other approvals;
  • a process for co-ordinating applications for related approvals;
  • an effective administrative structure for making decisions concerning the
  • allocation of mineral resources for the benefit of the general public; and
  • an economically efficient system of royalties, rentals, fees and charges;
• to establish a legal framework aimed at ensuring that:
  • risks posed to the environment, to members of the public, or to land, property or infrastructure by work being done under a licence or extractive industry work authority are identified and are eliminated or minimised as far as reasonably practicable;
  • consultation mechanisms are effective and appropriate access to information is provided;
  • land which has been mined or from which stone has been extracted or removed is rehabilitated;
  • just compensation is paid for the use of private land for exploration or mining;
  • conditions in licences and approvals are enforced; and
  • dispute resolution procedures are effective; and
• to recognise that the exploration for, and mining or extraction of, mineral resources and stone must be carried out in a way that is not inconsistent with the Native Title Act 1993 (Cth) and the Land Titles Validation Act 1994 (Vic.).

In the administration of the Act, regard is to be had to the principles of sustainable development set out in section 2A of the Act, which are as follows:

• community wellbeing and welfare should be enhanced by following a path of economic development that safeguards the welfare of future generations;
• there should be equity within and between generations;
• biological diversity should be protected and ecological integrity maintained;
• there should be recognition of the need to develop a strong, growing, diversified and internationally competitive economy that can enhance the capacity for environment protection;
• measures to be adopted should be cost effective and flexible, not disproportionate to the issues being addressed, including improved valuation, pricing and incentive mechanisms;
• both long and short term economic, environmental, social and equity considerations should be effectively integrated into decision-making;
• if there are threats of serious or irreversible environmental damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation and decision-making should be guided by:
  • a careful evaluation to avoid serious or irreversible damage to the environment wherever practicable; and
  • an assessment of the risk-weighted consequences of various options;
• development should make a positive contribution to regional development and respect the aspirations of the community of Indigenous peoples; and
• decisions and actions should provide for community involvement in issues that affect them.

The Act and Regulations are available at www.legislation.vic.gov.au

2.2 Earth Resources Regulator

The Act and Regulations are administered and enforced by the Earth Resources Regulator, a division of the Department of Energy, Environment and Climate Change (the department). The Earth Resources Regulator is committed to achieving and maintaining high levels of compliance in the mineral and extractive industries.

This guideline complements the Earth Resources Regulator’s ‘Interim Compliance Strategy (2021–2022)’.

2.3 Undertakings as a compliance tool

An enforceable undertaking is a written instrument entered into by an authority holder and the Minister in accordance with section 107 of the Act. An authority holder that enters into an undertaking may subsequently withdraw or vary the undertaking only with the consent of the Minister.

An enforceable undertaking can provide a means for achieving efficient, cost-effective and innovative outcomes as an alternative to prosecution or other enforcement mechanisms. In deciding whether to enter into an enforceable undertaking and negotiating its terms, the Minister will have regard to the purpose and objectives of the Act.

There may be circumstances in which the Minister accepts an undertaking while the Earth Resources Regulator continues to investigate the subject matter of the undertaking with a view to exercising other compliance measures in relation to the same or a related matter (where appropriate and in accordance with the Act).

Other measures used by the Earth Resources Regulatior to address non-compliance with the Act or to address remedial issues include:

• education;
• official warnings;
• infringement notices (see section 106 of the Act);
• directions and remedial or stop work notices (see sections 95M, 110, 110A and 110B of the Act);
• injunction applications (see section 110AA of the Act); and
• prosecution for offences, including for contravention of an enforceable undertaking that is in force (see section 108 of the Act).

3. When are enforceable undertakings appropriate?

3.1 When undertakings will be considered

Enforceable undertakings may be considered if the Minister believes on reasonable grounds that the holder of an authority:

• has contravened or is likely to contravene the Act or the regulations;
• has not complied with any condition to which the authority is subject;
• has not complied with any condition specified under section 44 of the Act (relating to consents);
• has not complied with any condition applying to the carrying out of a work plan; or
• has undertaken work on land otherwise that in accordance with the work plan, (this conduct is referred to collectively in this guideline as a contravention or other compliance issue).

The Minister will only enter into an undertaking if the Minister considers that an undertaking is an appropriate enforcement mechanism, having regard to the criteria specified in this guideline.

3.2 Evaluation criteria

The criteria to which the Minister will have regard when considering whether an enforceable undertaking is an appropriate enforcement mechanism are:

• the nature of the alleged contravention or other compliance issue in terms of:
  • the seriousness of the conduct involved;
  • the impact of the conduct on the environment; and
  • the impact of the conduct on community wellbeing and equity;
• the risk of the alleged contravention or other compliance issue worsening;
• whether the alleged contravention or other compliance issue can be resolved through other compliance mechanisms under the Act;
• the ability of an enforceable undertaking to remedy the alleged contravention or other compliance issue and its consequences;
• prospects of the contravention being remedied;
• the long and short term benefits to the economy, environment, community and equity of reaching a resolution through an enforceable undertaking;
• the apparent good faith of the authority holder;
• perceptions of industry and the general public in terms of consistent, transparent and effective enforcement of the Act;
• deterrence of future contravention of the Act by the authority holder and the industry
• more broadly; and
• such other criteria as the Minister considers relevant to the achieving of the purpose and objectives of the Act in the particular circumstances of the alleged contravention or other compliance issue.

4. Acceptance of undertaking

4.1 Entering into an undertaking

The Minister does not have the power to require the holder of an authority to enter into an enforceable undertaking, but may raise it as an option for addressing an alleged contravention or other compliance issue. It is up to the authority holder to decide whether or not it wishes to enter into an enforceable undertaking.

An authority holder may withdraw from the process of agreeing the terms of an enforceable undertaking at any stage prior to the undertaking being entered into by the Minister. The undertaking is taken to have been entered into by the Minister when it has been executed by a duly authorised representative of the authority holder and has been executed by the Minister.

4.2 Typical elements of an enforceable undertaking

Enforceable undertakings must be in writing and should be detailed, specific and free from ambiguity.

While the content of each undertaking is subject to negotiation, most undertakings entered into by the Minister will directly address the conduct that has given rise to the alleged contravention or other compliance issue and its consequences.

An undertaking is an alternative to prosecution or other enforcement action under the Act and, as such, the authority holder is required to demonstrate through the commitments it makes in the undertaking that it is serious about achieving compliance and promoting the purpose and objectives of the Act.

An acceptable undertaking typically includes the following elements:

• an acknowledgement or admission by the authority holder that the Minister believes on reasonable grounds that the authority holder:
  • has, or is likely to have, contravened the Act or regulations;
  • has not complied with any condition to which the authority is subject or any condition specified under section 44 of the Act;
  • has not complied with any condition applying to the carrying out of the work plan under the authority; or
  • has undertaken work on land otherwise than in accordance with the work plan under the authority;
• details of the corrective action that will be taken by the authority holder to remedy the alleged contravention or other compliance issue and its consequences (see further paragraph 4.5 below);
• reporting requirements from the authority holder to the Earth Resources Regulator that may include the provision of:
  • periodic reports as to when and how the authority holder is complying with its obligations under the undertaking;
  • supporting evidence by the authority holder to verify that it is complying with the undertaking; and
  • a final report and supporting evidence when the authority holder considers the requirements of the undertaking have been fully satisfied (see further paragraph 5.4 below);
• future actions aimed at preventing a recurrence of the same or similar contraventions or other compliance issues (such as the implementation of internal compliance and/or training programs), including timeframes and other relevant details;
• an acknowledgement that the Minister and the department may:
  • make the undertaking publicly available, including by placing it on the Earth Resources Regulator’s website; and
  • make public reference to the undertaking from time to time, including in media statements and in the Earth Resources Regulator’s publications;
• an acknowledgement that the undertaking in no way derogates from the rights and remedies available to any other person arising from the alleged contravention or other compliance issue; and
• an acknowledgement that the undertaking will not restrict the ability of the Minister or the Earth Resources Regulator to utilise other enforcement mechanisms against the authority holder (other than as restricted by law).

4.3 Unacceptable terms

Undertakings will not be entered into by the Minister if they include:

• a denial by the authority holder that the conduct contravened the Act or regulations or otherwise did not constitute a compliance issue;
• any terms that are inconsistent with an existing licence or work authority condition;
• any terms imposing obligations on the Minister or the department;
• a requirement that the Minister or the Earth Resources Regulator will not in future institute proceedings or other compliance measures in the particular matter;
• a statement that the undertaking is not an admission for the purposes of third party actions (although the undertaking need not explicitly state that it is such an admission);
• terms imposing obligations on third parties;
• terms purporting to set up defences for possible contraventions or other compliance issues;
• statements that the conduct was inadvertent; or
• self-serving statements by the authority holder that seek to minimise the consequences of the conduct or for public relations or promotional purposes.

4.4 Enforceable undertaking template

While there is no fixed form for an enforceable undertaking, an undertaking should generally set out:

• details of the authority holder;
• a description of the alleged contravention or other compliance issue;
• what the authority holder undertakes to do; and
• acknowledgments.

4.5 Corrective action and industry compliance

In the resolution of any matter, the Earth Resources Regulator is concerned with finding ways to ensure compliance with the Act and to otherwise have regard to the purpose and objectives of the Act.

Where relevant, an undertaking should:

Promote the principles of sustainable development

An undertaking should identify failings in the authority holder’s systems and/or management that led to the alleged contravention or other compliance issue, and any adverse long and short term economic, environmental, social and equity consequences. Where relevant, an undertaking should make commitments to address the adverse consequences of the contravention or other compliance issue, in addition to ceasing the contravention or other non-compliance.

When negotiating the terms of an enforceable undertaking the Earth Resources Regulator may require the authority holder to consult with communities and/or any relevant agencies affected by the alleged contravention or other compliance issue to discuss how any adverse consequences of the contravention or other compliance issue can be addressed.

The authority holder could achieve this through engaging the community in forums aimed at understanding the impacts on community and agreeing on restorative measures to address compliance issues.

Outcomes of the community consultation, as well as a commitment to ongoing community engagement where appropriate, may be reflected in the terms of the undertaking.

Promote industry best practice

Alleged contraventions and other compliance issues experienced by one authority holder may also be experienced by other authority holders. Sharing experiences, lessons learned and best practice can help support compliance with, and therefore the purpose and objectives of, the Act.

When negotiating the terms of an enforceable undertaking the Earth Resources Regulator may require the authority holder to assess how its actions may have affected the industry, what it has learned from the matter and how it can use the implementation and outcomes of the undertaking to promote industry best practice.

For example, this may be achieved through:

• sharing the outcomes of research;
• actively engaging in industry forums to communicate the objectives of the undertaking and knowledge gained through complying with its terms; and/or
• educating other authority holders and assisting them to implement similar processes or changes.

These are only examples of ways in which an enforceable undertaking may be used to promote industry best practice and the purpose and objectives of the Act. Other ways may be appropriate having regard to the particular circumstances of the contravention or other compliance issue.

4.6 Public awareness

Section 107(7) of the Act authorises the Minister to publish an enforceable undertaking in any manner the Minister considers appropriate.

The Earth Resources Regulator may make enforceable undertakings publicly available to ensure transparency in remediating risks to public safety, land, infrastructure and the environment. This may include:

• placing the undertaking, or an extract of actions and outcomes provided for in the undertaking, on its website;
• referring to the undertaking in media statements and in Earth Resources Regulator publications; and
• any other form or publication considered appropriate to the particular matter.

The Earth Resources Regulator will consider requests by authority holders to exclude from publication some aspects of an undertaking involving genuinely commercially sensitive information. However, this is a matter within the Earth Resources Regulator’s discretion and authority holders should not assume that any part of an enforceable undertaking will be kept confidential.

5. Compliance with an undertaking

5.1 Offence to contravene an undertaking

Section 108 of the Act provides that it is an offence for an authority holder to contravene a section 107 for an undertaking that is in force.

5.2 Withdrawing an undertaking

Section 107(3) of the Act provides that the authority holder may withdraw an undertaking only with the consent of the Minister.

5.3 Variations

Section 107(3) of the Act provides that the authority holder may vary an undertaking with the consent of the Minister. This allows for changes if undertakings are subsequently found to be impractical or where circumstances change.

Variations may be made public in the same way as the original undertaking.

5.4 Reporting and monitoring

Once an enforceable undertaking has been entered into, the Earth Resources Regulator will require its implementation and effectiveness to be reported on and monitored. The authority holder must report on progress against milestones, which will be subject to monitoring and audits by or on behalf of the Earth Resources Regulator.

To assist in monitoring compliance, the Earth Resources Regulator seeks the inclusion of undertaking provisions requiring relevant information to be made available to it:

• periodically – for example, a quarterly audit of compliance with the undertaking;
• in specified circumstances – for example, where there is an alleged contravention of the undertaking, information relating to the alleged contravention; or
• at the request of the Earth Resources Regulator.

The Earth Resources Regulator may also require a commitment to an independent audit of the authority holder’s compliance with the undertaking at regular intervals for the period of the undertaking.

Where it has reason to believe that the authority holder has contravened an undertaking, the Earth Resources Regulator will usually first try to resolve the matter by consultation. If this approach fails, the Earth Resources Regulator will not hesitate to utilise other compliance tools that it considers are proportionate to the contravention, including prosecution.

5.5 Prosecution

Section 107(4) of the Act provides that while an undertaking is in force, proceedings may not be brought for an offence constituted by the contravention or other thing that is the subject of the undertaking.

However, if the authority holder withdraws an undertaking before it has been fulfilled, the Earth Resources Regulator may bring proceedings for an offence constituted by the contravention or other thing that is the subject of the undertaking.

For the avoidance of doubt, except to the extent provided in the Act, the entry into of an undertaking does not prevent the Earth Resources Regulator from continuing to investigate the subject matter of the undertaking, with a view to:

• monitoring the authority holder’s compliance with the undertaking and with the Act generally;
• exercising other compliance measures in relation to the same or a related matter; or
• bringing proceedings in relation to the matter in the event of withdrawal of the undertaking.