2 Legal Foundations
Learning objectives
On completion of this chapter, you should be able to:
- understand the importance of the law in our lives
- understand what ‘law’ is and how it is created
- identify the main sources of PNG law
Key terms
You will encounter some key terms in this chapter, which will help you to better understand the law and this chapter. These terms are:
-
- Civil law system: a complete legal system with its origins in Roman law and the Napoleonic Code.
- Common law: that part of English law developed from the common custom of the country as administered by the common law courts.
- Customary law: the term used to describe the common law rights and interests of tribal people in land according to their laws, traditions and customs.
- Equity: fairness or natural justice.
- International law: that body of law concerned with regulating conduct between nation states.
- Municipal (or domestic) law: that body of law concerned with regulating the relations or conduct between individuals and organisations within a state’s borders.
- Organic law: defined in s 12 of the PNG Constitution as laws passed by the National Parliament and which have the status of constitutional laws and are superior to an Act of Parliament.
- Plaintiff: the party commencing a civil action in a court of first instance.
- Private law: that body of law concerned with regulating the relationships between individuals within the state—for example, contract law and tort law.
- Public law: that body of law concerned with the relationship between the state and the individual—for example, criminal law and constitutional law.
- Retrospective laws: laws that change what people’s rights were in the past.
- Separation of powers: the vesting of the legislative, executive and judicial arms of government into three separate branches with none of the three branches able to exercise total power.
- Statute law: laws passed by Parliament.
Introduction
This chapter contains background information on the PNG legal system. It is not exhaustive as we would need a book for that, but it will provide you with a basic understanding of what is ‘law’, how laws are made, its role, the major and minor types of laws that make up the PNG legal system and understanding the role of Parliament and the importance of the Constitution. This chapter has been divided into 6 parts to make it easier to understand, however it is not exhaustive.
Part 1: Why is an understanding of law important in business and life?
This chapter will help you understand your legal system and how it impacts on you both in business and your personal life. The interesting thing about the law is that you and it are in almost constant contact every day but, like a lot of people, you don’t realise it and understand it. So here is a question to think about: is a basic understanding of the law such a foolish thing?
What is the importance of the law as a regulatory tool in society and business?
Law is basically a device to regulate the economic and social behaviour of people like you who live in a society. If people lived in complete isolation and didn’t carry on any economic activity or recognise any superior authority, there would be little or no need for laws to exist because there would be little to regulate or control. Think about life in a remote village in the Highlands and then about life in a city like Port Moresby. Is there the same level of regulatory control in both, or needed in both?
In most nations around the world, people don’t live in complete isolation and business activity is carried on regardless of whether people like it or not. If you live in a city or town, you depend on the existence of businesses for work and money, and for the purchase of goods and services for your survival. What do you think would happen if there were no rules to regulate business or what you could do as a member of the community? This is where the law comes in.
The law, as a regulatory device, provides the mechanism for society to function by prioritising needs and desires through tools such as legislation (Acts and regulations of Parliament) and custom or customary law.
When you look more closely at the PNG legal system, it has what can be best described as a dual legal system with a formal court system and a customary court system which generally applies in two broad areas: marriage and land ownership. The latter is recognised by the PNG Government because many villages, for example, in the Highlands, prefer to resolve disputes in a traditional way rather than more formally through the courts.
Can we define the term ‘law’?
We should begin by trying to explain what the term ‘law’ means. In trying to do this just accept that it is not easy as evidenced by the numerous unsuccessful attempts to produce a universally acceptable definition of ‘law’ over the centuries. Yet, despite this lack of agreement on a precise definition of ‘law’, it is still possible to identify two common themes:
- control by humans like us; and
- human conduct, regulated by a superior authority or power—in this case the government of PNG and the elders of villages.
So, let’s not be too academic and go for a general definition:
. . . a set of rules developed over a long period of time regulating people’s interactions with each other, which sets standards of conduct between individuals and other individuals, and individuals and the government, and that are enforceable through sanctions.
In the case of PNG, ‘the supreme laws’ are contained in The Constitution and Organic Laws (which have the status of constitutional law see section 11 (s 11) of the National Constitution). But in addition, there are rules and principles of conduct that are enacted by government including the Bougainville Constitution and legislation, organic laws of PNG, local-level government, decisions of the courts, and customary law.
We should note that when a reference is made to ‘the law’, it is a reference to the body of law generally, while a reference to ‘a law’ is a reference to a particular legal rule.
Online Reference
If you have access to the internet, have a brief look at the Constitution of the Independent State of Papua New Guinea and see if you can locate section 11 (s 11) as mentioned above.
Are rules always law?
While it is generally true to say that the law is a set of rules, do not assume that all rules are (or will be) automatically law. There are numerous examples of rules governing daily behaviour that are not laws and, generally will not become laws—for example, rules controlling sport, playing games, social behaviour, family behaviour, or how a person should behave at school and university. The list is endless. But just remember that while these rules are not intended to be legally enforceable, it does not mean that they cannot finish up in court in the event of a dispute arising over the rules, particularly in sporting contests.
To determine when a rule becomes law isn’t always an easy task. Consideration needs to be given to where the rule comes from. If it is made by a person or organisation rather than by parliament or the courts, it generally cannot be said to be a rule of law.
So where do tribal laws fit in? Are they part of the legal system? In the case of PNG, they are part of custom or customary law and expressly provided for in the Constitution (see Schedules 1.2 and 2.6 of the National Constitution).
When looking at the ‘law’ in PNG, it should be noted that tribal connections are at the core of PNG’s culture. This is not going to change in a hurry as customary law has still got a significant role to play in the community.
What is the role of the ‘law’ as a regulatory tool?
In society generally, the law as a regulatory tool not only prescribes what people like you cannot do, it also informs you of what you can do and what you must do. For example, you cannot commit a crime, but you can own property, and you must pay taxes. But the law also plays a number of other roles, such as guaranteeing your freedom, permitting free enterprise, establishing rules for business and commerce, and providing a means to settle disputes peacefully.
Could business exist without a legal system?
Do you think business, as you know it, could exist without the law? To operate effectively and efficiently, you need to understand that business needs laws to regulate business activities, to facilitate business transactions and to settle disputes that can arise between manufacturers, wholesalers, retailers and consumers (like you) of goods or services.
As we noted at the outset to this chapter, there are very few aspects of life—business or personal—that are not regulated by law, either directly or indirectly, in developed countries like Australia.
In countries like Australia, England, America and other developed countries, laws shape every stage of commercial enterprise. Because people are constantly engaged in business transactions, an understanding of business law is important and this is equally true in those areas of PNG where there is commercialisation, as in shops and industry. As you will discover, the principles of contract law, for example, enable both individuals and businesses to rely on agreements:
- of employment
- to purchase raw materials
- for the purchase and sale of goods or services
- for the purchase of a home or a business
- to insure property
- for the appointment of an agent
- to catch a bus or to purchase a plane ticket
- to buy food and fuel
- to buy clothes
- to go to the movies, and so on.
So, when things go wrong, they provide a remedy to persons ‘injured’ (they have lost money or suffered some other form of loss or damage) by another’s failure to perform an agreement.
Reflection
Think about your country for a moment. Do you think PNG is a highly regulated country? Look at the type of regulatory frameworks currently in place.
Part 2: What are the sources of law in PNG?
The laws of PNG consist of the National Constitution and any laws made or adopted by it and the Organic Laws (which together are the supreme law of PNG), Acts (or legislation) of Parliament, the Provincial Laws, customary law, common law and equity.
Common Law
This is law created through the reported decisions of judges (the doctrine of precedent or case law) in the higher courts (which in the case of PNG are the National Court and the Supreme Court). It is non-statutory law and based on decisions that were made about similar cases in the past. It is law made by the courts, not parliament, and it usually includes the principles of equity or equity law (or fairness). It has both a criminal and civil jurisdiction.
In a civil case, for example, you have been injured because of the carelessness of another person, the onus of proof rests on you as the plaintiff to establish on the balance of probabilities that your claim is stronger than the person who caused the injury (the defendant). This is a lower burden of proof than required in a criminal case where the onus is on the Crown to prove a case against an accused beyond reasonable doubt.
The role of the judge in this case is to decide questions of law unless there is no jury (who would decide questions of fact) although it has become increasingly common for judge only trials because of the complexity of commercial cases coming before the courts.
The concept of precedent is fundamental to the functioning of the common law system. Remember that there are two kinds of precedent:
- Binding precedents are past decisions of superior courts which must be followed by judges in other similar cases by that court and lower courts in the same jurisdiction (as long as facts of the case are sufficiently similar)
- Persuasive precedents are ones that should be seriously considered, but which are not required to be followed because they might be from a superior court in another hierarchy (for example, a decision of an Australian court such as the NSW Court of Appeal as it is a different jurisdiction).
The emphasis is on remedies, usually in the form of monetary relief (or compensation) and is available ‘as of right’ under common law.
Equity
Equity is a separate body of law from common law and in the event of a conflict between the common law or equity, equity will prevail. It is a discretionary remedy available to the court when monetary damages, which are a common law remedy, might not achieve a fair outcome for a plaintiff.
Equity law does not apply to all civil disputes, and it has no application in criminal law. Where equity might apply is where the injured party (the plaintiff) does not want damages because it is not ‘as of right’) or where there is an unconscionable dealing by a stronger party in a contractual situation. Unlike common law, equity is not available ‘as of right’ and it involves a plaintiff coming to the court in good faith (as in, based on fair dealing and asking the court to exercise their discretion in granting an equitable remedy.
The two main types of equitable remedy, which are court orders are:
- an injunction: a court order that directs a person to stop doing something that could harm the interests of another and may be granted as a temporary order (called an interlocutory injunction) before the court makes a final order in the matter, or as a final injunction; and
- specific performance: a court order directing a person to carry out an obligation that they have accepted, often in a contract—for example, to complete a sale of land. It is not available where the contract requires a personal service such as an employment contract because of the difficulties created for the court to supervise.
What are the differences between common law and equity?
| Common law | Equity |
|---|---|
| 1. A comprehensive system | 1. Not a comprehensive system—for example, it never had a criminal jurisdiction. |
| 2. Remedies are not discretionary – damages | 2. Remedies are discretionary |
| 3. Common law rights are enforceable at any time, subject to the operation of the Fraud and Limitations Act 1988 | 3. Remedies must be applied for promptly or they may not be enforceable |
| 4. Common law rights are valid against the whole world. | 4. Equitable rights are valid only against those persons specified by the court. |
| 5. Follows the common law; it will not override it except where there is a conflict and then equity prevails. | |
| 6. Acts only against the individual (that is, in personam), not property. |
Statute law
Statute laws are laws made by parliament, such as the National Parliament in PNG, in the form of statute law or legislation (also known as enacted law) or other government bodies in the form of by-laws, orders, rules and regulations, and known as delegated legislation.
The laws created by Parliament are the highest ranking in the land, overruling all other laws. As noted earlier, while statute law assumes the existence of common law, in the event of a conflict between common law and statute law, the latter will prevail. Common law principles will be maintained only to the point at which they conflict with statute law.
The reason why statute law prevails is that judges are independent of Parliament (and the people), while politicians, who are responsible for the making of statute law, are accountable to the people through the electoral process. If people don’t like the laws that the politicians make in Parliament, they can vote them out at election time. There is, therefore, a degree of accountability as far as politicians are concerned which is absent in the case of judges because you can’t vote out the judges. A judge can be removed from power only by reaching the age of retirement, or by misbehaviour or incapacity. It is largely for this reason that in the event of a conflict between statute law and common law, statute law prevails.
Customary law
Customary law is a body of rules and practices derived from the country’s regional customs and which govern a community and their way of life. In the case of PNG, with its very diverse society in terms of its cultural practices and customs, each area in PNG has its own customary laws which, in addition to the western legal system they inherited from European occupation, have been recognised and provided for in the Constitution and are now a recognized part of the PNG legal system.
So, what is customary law in the context of PNG? Its inclusion in the National Constitution preamble (Preamble, s 5) and sch 1.2 has established its place within PNG’s legal system and provides a definition:
‘The customs and usages of indigenous inhabitants of the country existing in relation to the matter in question at the time when and the place in relation to which the matter arises, regardless of whether or not the custom or usage has existed from time immemorial.’
The same definition can also be found in the Interpretation Act 1975, s 1 and in 2000 when the PNG National Parliament enacted the Underlying Law Act 2000 , which also incorporated the same definition of customary law in s 1.
Organic law
Organic or fundamental law is a system of laws which form the original foundation of a government and can include a constitution which is a particular form of organic law.
Organic Laws, which are part of the laws of PNG (see s 9(b) of the National Constitution) are defined in s 12 of the National Constitution as laws made by Parliament and in terms of status sit above an Act of Parliament in the context of importance. They can only be changed or repealed by another Organic Law or by alteration of the Constitution under s 13 and made and certified in accordance with s 14.
Online Reference
Examples of Organic laws can be found at Papua New Guinea Organic Laws. An example of an Organic Law is the Organic Law on Provincial Governments and Local-level Governments 2014.
Underlying law
Underlying law is a reference to the separate common law of PNG. It is made up of customary law and the common law of England (including the House of Lords, Court of Appeal, and the King’s Bench) up to PNG’s independence in 1975 (Underlying Law Act 2000, s 3(1)).
Underlying Law Act 2000 is an interesting Act as it sets out the sources, application, formulation and development of underlying law and the roles of the common law and customary law. It should be noted that insofar as underlying law and its application by the courts, s 5 provides that ‘the courts, especially the Supreme Court and the National Court, shall ensure that, with due regard to the need for consistency, the underlying law develops as a coherent system in a manner that is appropriate to the circumstances of the country’.
Online Reference
The Underlying Law Act 2000 can be found online.
Revision questions
Time for a break. Give yourself constant breaks so you can have time to reflect on, and think about, what you have read. Write down your thoughts because they will form the basis of your notes:
A. Common law ceases to be common law when it becomes codified. What does this mean?
B. Common law can exist without equity, but equity cannot exist without common law. Can you explain why?
C. What is the main remedy in a common law action?
D. In the event of a conflict between statute law and common law which takes precedence, and why?
E. What is Organic Law and why is it important in PNG?
F. What is customary law and why is it important in PNG?
Part 3: What are the characteristics of a legal system?
To be effective and have widespread community acceptance, whether it be in PNG or anywhere else in the world, a legal system must have the following characteristics:
- clarity and certainty
- flexibility
- fairness and
- accessibility.
Does the legal system provide clarity and certainty?
The law needs to be as clear and certain as possible. It can never be absolute, but it should be predictable and flexible so that you, and people like you, as well as businesses can conduct their affairs knowing what the law is (or being able to find out what it is), and what the consequences of their actions will be if they follow or don’t follow the rules.
In part, this need for certainty helps to explain why parliaments are reluctant to pass retrospective laws (laws that change what people’s rights were in the past), as such laws can have the effect of making an act that was lawful at the time it was done subsequently unlawful. This, in turn, can produce elements of uncertainty or unpredictability in the community as well as unfairness in the legal system.
Is the legal system flexible?
If there is to be widespread community acceptance of the law, then the law must be seen as responsive, and adaptable, to changing circumstances—that is, it must be flexible.
If the law cannot respond or adapt to change in a timely fashion, then there is a real risk that it will become redundant because it is not meeting the needs of the community it serves and they will ignore it. Consider, for example, how the law has responded to the rapid advancement of technology or adjusted to changes in moral values within the community.
Is the legal system fair?
The law must be seen to be fair and just, at least by most members of the community. If the law is seen as inequitable, unfair, unreasonable or unjust, it will not be accepted or obeyed by the community. Widespread community rejection of the law inevitably leads to civil unrest, with members of the community taking it upon themselves to enforce what they perceive the law to be. In other words, members of the community take the law into their own hands, for example, the Port Moresby riots in January 2024.
A concept that is closely identified with the law is justice. It is highly desirable that there be some sort of relationship between law and justice, but do the terms ‘justice’ and ‘fairness’ mean the same thing? Unfortunately, ‘justice’ can be a difficult term to define. As Lord Denning (1955: no pagination), one of England’s greatest judges, suggested:
It [justice] is not a product of intellect but of spirit. The nearest we can go to defining justice is to say that it is what right-minded members of the community—those who have the right spirit within them—believe to be fair.
A legal system embodies what society believes is right or fair. It protects our safety and protects our rights as members of the community against abuses by other people, organisations and even the government. In simplistic terms, a legal system is all about justice and it is supposed to mean that everyone is entitled to be treated fairly.
If a person breaks the criminal law or you are injured because of the actions of another—for example, someone robs you or the other person is negligent (a law of torts action) or they breach a contract you have with them—the community assumes that the legal system will ensure that the person who robbed you will be punished and that the person who injured you will compensate you for the damage they caused you. It is assumed by the community (and both parties) that should the matter go to court they will receive a fair trial.
As you are probably aware, there are many different types of laws. In PNG for example, there are three law-making sources – the National Parliament, the Provincial Parliaments and local or village bodies. But which body do you go to if you want to find out what type of law might apply to your problem? Be aware that you may have a problem. Many of the laws currently in force in PNG are outdated, culturally inappropriate, lack operational effectiveness, are difficult to find, and are no longer relevant or up to date.
Don’t believe that the PNG legal system is foolproof and just (or fair), because it is not. Humans are not foolproof, and nor are you as you make mistakes now and will continue to do so through life, and as laws are made by humans, they will not be foolproof either. As our society evolves, it is to be hoped that the legal system will also evolve and that existing injustices will gradually disappear and be replaced by fairness with the passage of time.
Is the legal system accessible?
The legal system is based on the premise that everyone is expected to know the law, which explains why it is not possible to argue, in a court of law, ignorance of the law as an excuse for breaking the law. But given the complexity of the legal system, is this expectation realistic?
The fact is that no one knows all the law. All we can assume is that everyone has access to the law. This can be through copies of legislation (for example, through the PNG government printer and Government Gazette) and cases (for example, law reports), the Internet, or through a lawyer.
Online Reference
A useful site for PNG case law and legislation (but note that Sessional Legislation is only including up to 2021) is Papua New Guinea Primary Materials.
Solving the problem of accessibility doesn’t solve the problem of knowledge—that is, that everyone is expected to know the law. Accessibility doesn’t equate with knowledge or understanding of the legal system. That only comes when you or a business can:
- identify the legal issue
- determine what area of law may apply
- know where to find information about the relevant area of law
- understand the relevant elements of legislation or a case
- be able to understand and interpret what was read
- apply the relevant legal rules to the facts.
A basic understanding of how the legal system operates reduces the possibility of a serious legal issue arising. But if such a problem arises anyway, an understanding of some basic legal skills will result in dealing with the problem in an opportune manner for a better result.
Revision questions
Time for another break. Think about what you have just read and try to answer the following questions:
Part 4: Why should we classify laws?
An understanding of the main principles underlying each source of law is important when trying to understand how the law and business interact. But first you need to understand what area of law may be applicable to the matter you are dealing with.
Law can be classified in different ways depending on the purpose of the classification and the needs of the classifier. Common classifications include:
- by legal system
- international law and municipal (or domestic) law
- public law and private law
- substantive law and procedural law
- criminal law and civil law.
Are there other legal systems?
Do not assume that there is just one or two legal systems in the world of which one is the PNG legal system. Arguably, there are two major legal systems — a common law system (such as in PNG) and a civil law system (such as in Europe and a lot of Asia) — of the Western world. There are several other legal systems in existence around the world including dual systems (such as in PNG) which is made up of a formal court system and a customary court system.
If you are doing business overseas, either as an importer (or exporter or investor), there are political, economic and legal factors that you have to take into account. Where legal factors are concerned, you need to consider what legal system you are most likely to encounter. These legal systems could be any of the following:
Common law system
As noted earlier, the common law system is derived from case law (or precedent) and legislation. It is accusatorial in form and the burden of proof depends on the type of case. If it is criminal, the onus is on the Crown to prove their case beyond reasonable doubt while if it is civil, the burden of proof is on the plaintiff and they must establish their case on the balance of probabilities.
Civil law system
The civil law system is a comprehensive codified system of law with its origins in Roman law. In civil law systems, comprehensive legal codes and statutes are designed to cover every contingency and form the primary source of law. While case law exists in civil law jurisdictions, it is considered a secondary source and does not have the same influence as it does in common law systems.
Unlike the common law system, the civil law system follows an inquisitorial approach and it is the judge who asks questions, gathers evidence, determines the issues to be decided and applies the law. Juries are rarely involved in civil actions.
Socialist law system
The socialist law system is based on the philosophy of Karl Marx (as in the eradication of capitalism and the elimination of private ownership). With its emphasis on codes, means it is really only a variation of civil law but with an emphasis on public law. Like the civil law system, it is a complete code of written laws whose primary source of law is legislation. While it is inquisitorial in form and judges dominate trials, courts are subordinate to the legislature. It applies to more than 30 per cent of the world’s population.
Islamic law system
Islamic law system has its roots in religious doctrine, particularly relying on the Koran (or Qur’an) which is the central religious text of Islam and believed by Muslims to be the literal words of God and, a complete code of conduct that provides guidance through life. In addition, there is the hadith (or Sunnah) which are the decisions and sayings of the prophet Muhammad.
Religion and Islamic law are intertwined to greater and lesser degrees depending on the country. What should be noted is that Sharia (which means the “correct path “in Arabic) isn’t the same as Islamic law. While Islamic law is influenced by local customs and evolves over time, it is important to understand that Islamic laws are based on interpretations of sharia. The emphasis is on divine revelation and while it coexists with other laws, Islamic law encourages disputes to be resolved outside the court through arbitration (tahkim) and mediation (sulh). As an aside, it is interesting to note that where contract law is concerned, the emphasis is on fairness.
Islamic law applies to approximately 25 per cent of the world’s population with most of the world’s almost 50 Muslim majority countries having laws that refer to sharia.
Hybrid and dual law systems
Several countries have mixed legal systems which incorporate common, civil, and religious law systems into what is effectively a hybrid system that is unique to the country’s needs.
As noted at the start to this section, PNG currently has a system that can be described as a dual legal system because it is made up of a formal court system and a customary court system. Currently, the dual system of law is not applicable to all sections of law. Generally, it applies to only two broad areas: marriage and land ownership, but this is not to say that the role of customary law within the legal system will not gradually increase over time with the growth of an indigenous Melanesian jurisprudential influence, as enshrined in the preamble of the national Constitution as goal number 5 of the Five National Goals and Directive Principles.
Online references
A quick and easy way to identify a country’s legal system is to use the free website JuriGlobeLegal Systems. The World Factbook, a cia.gov website, is another source to learn about legal systems around the world.
Why is knowledge of a legal system important?
The purpose of providing an overview of some of the world’s legal systems is to provide you with a better understanding of some of the complexities involved when dealing with other nation-States, since no two legal systems are the same.
Video reference
Why do countries trade? Look at this short video about what makes an economy grow.
Familiarity with the political and economic status, and the legal system, of a potential trading partner is essential. Businesses must abide by the local rules and regulations of the States in which they operate. Governments make and enforce the rules and regulations based on their political beliefs and ideologies. So, you may want to assess at least the following matters when assessing risk:
- How stable is the government?
- What sort of government is it – democracy dictatorship?
- Is the prospective country politically stable?
- What impact does the prospective State’s political system have, if any, on the economy and, how may it impact on you, your firm and industry?
- What sort of legal system does the prospective State? Will you need to assess how local policies, rules and regulations will affect your business?
While all nation-States have a legal system, it is important to remember that there will always be differences in local policies, rules and regulations. You need to assess the level of risk involved, balancing political, economic and legal realities with the need to control and manage trade.
In addition to the different types of legal systems, two further classifications of law are:
International law and municipal (or domestic) law
International law is that body of law concerned with regulating, for the most part, the conduct between nation-States. Nation-states like PNG could not enjoy the benefits of trade and commerce, exchange of ideas, or even normal routine communication without some system of international law and, it is only the nation-State which enter into international trade treaties and agreements with other Nation States that must abide by international law.
Three of the better-known trade agreements with PNG is a member are:
- GATT — the General Agreement on Tariffs and Trade is a multilateral treaty that aims to encourage free trade in goods and PNG has been a member since 1994 (and a member of the World Trade Organisation or WTO since 1996)
- the Vienna Sales Convention — this is a multilateral treaty that sets out standards of conduct for sales agreements between traders of signatory countries and PNG has been a member since December, 1994
- APEC — Asia-Pacific Economic Cooperation is a regional treaty that provides special trading advantages to its 21 member states. PNG has been a member since 1993.
Municipal (or domestic) laws come from statute or case law. They regulate the relations or conduct between individuals (or natural persons) and organisations legal persons) that come within the nation state’s borders. This doesn’t mean that the individual or organisation must be a citizen of the state making the law, just that it must be within the nation state’s borders. For example, if you live in PNG, you are subject to the municipal or domestic laws of PNG. But if you visit Australia, you become subject to the municipal or domestic laws of Australia.
Public law and private law
Public law is concerned with the organisation of government and the relationship that exists between the government and the people. The areas of law that form part of public law — such as administrative law, constitutional law, criminal law, industrial law and taxation — are areas in which the public has a determining interest.
Private law is concerned with those areas of the law that deal with situations involving disputes over rights and obligations between people or organisations. There are numerous branches of private law, but some of the more important areas that are relevant to business that you will encounter (and will discover in the following chapters) include contract law, commercial law, negligence (law of torts), consumer law and agency. But do not think that this list is an exhaustive list of areas of law relevant to business because it is not. It does not included areas such as corporations law, partnerships, property law, negotiable instruments, trusts, and taxation to mention but a few.
Is a knowledge of criminal law important?
To date the focus has been on civil law but it would be wrong to assume that criminal law is something you don’t need to worry about in business. There is an increasing amount of legislation relevant to business that carries criminal penalties, particularly in the area of corporations, work health and safety and consumer protection.
Note that insofar as Criminal Law is concerned, unlike a civil law action brought by a plaintiff, the action is brought by the Crown on behalf of ‘the people’ (not the police, as they enforce the law) against a ‘person’ for the commission of an act that the state considers to be a crime and that should be punishable by a penalty (for example, a fine or jail) if it can establish its case against the accused beyond reasonable doubt. Note that there is a higher degree of proof than is required in a civil case, where the plaintiff must only prove their case on the balance of probabilities.
In addition to the criminal sanctions that can be found in the criminal law legislation of PNG, an increasing amount of business-related legislation also carries what are known as civil penalties (also known as pecuniary penalties or fines) where there is a breach by a corporation (corporate crime) or an individual (if it is an employee, white-collar crime).
Civil penalties are reserved for conduct that falls short of criminal behaviour. The legislation provides for pecuniary penalties for conduct that falls short of criminal behaviour, but without the stigma attached to a criminal conviction, as (for the purposes of the law) an offence has not been committed.
Civil penalty proceedings generally require proof only to the standard of the balance of probabilities unless there are serious allegations of impropriety, in which case the court must be satisfied to a higher standard of proof. An example of where civil penalties can be found is the Companies Act 1997 — Part XXII, s 413 where corporations, directors and managers may incur criminal or pecuniary (fine) penalties for breaches of the Companies Act 1997.
Online reference
The Companies Act 1997 is a good example of an Act which can impose a civil penalty on a corporation or senior management for, in this case, a failure to comply with the Companies Act 1997.
Who is a ‘person’ in law?
All rules of law are concerned with the activities of persons. You will probably think of people or humans, but you would only be partly correct. For the purposes of the law, the reference to a ‘person’ includes not only human beings but also entities or organisations, which can have rights and obligations in much the same way as natural persons. Examples of entities include the Crown, companies and incorporated associations.
Revision questions
It’s time for another break. Here are some more questions for you to consider. Remember to write down your thoughts for your notes.
A. Explain why an understanding of different legal systems around the world might be useful for you in business.
B. Why do you think it important to know what the term ‘person’ means in law?
C. Why is it important to understand the difference between international and domestic law in business?
D. Why do you think an understanding of the main principles underlying each source of law is important when trying to understand how the law and business interact?
Part 5: What is PNGs political structure?
There are three tiers of government: national, provincial and local. If you wish to establish a business in PNG, you may need to consider the Acts, regulations and policies of all three levels of government, but note that finding up-to-date copies of legislation is time consuming and difficult.
The Doctrine of Separation of Powers
When PNG became independent it adopted a Westminster system of government as a constitutional democracy. Section 99 of the PNG Constitution provides for the separation of powers doctrine which provides for three arms of government, namely: the Executive (the Prime Minster and Cabinet), the Legislature (Parliament), and the Judiciary (the courts). Each arm has their own area of responsibility, and they keep a check on the actions of the others to prevent a concentration of power of any one branch, and to provide for checks and balances for effective and efficient government.
The separation of powers, together with the principle of ‘responsible government’, provide a guide for how laws are made and managed. Responsible government means that a party (or a coalition of parties) must have the support of a majority of members of the House to form a government (the Executive or Prime Minister and Cabinet). As noted in the last paragraph, this provides a check on the Executive and ensure accountability to Parliament. In addition, the Constitution vests the power of judicial review on the Supreme Court over both the legislation passed by Parliament and the actions of the Executive to ensure legislation passed by parliament, and the actions of the Executive government, comply with the Constitution.
National Government
PNG’s National Government is a single or unicameral national parliament (there is no Upper House or Senate) that operates a multi-parliamentary democracy nationally. It has 118 members who are elected for 5 year terms, 96 of whom are from constituencies and 22 from single member provincial electorates (on election, each of the single members also becomes a governor of their province unless they become a Minister). It is a constitutional monarchy with a Head of State (King Charles III), who is represented by a governor-general nominated by parliament who performs mainly ceremonial duties.
The PNG Constitution was adopted in 1975 and has been amended at least 43 times since then reflecting that it is essentially the product of a political process. Unlike western countries PNG has dozens of small political parties with no–one party getting enough votes to govern in its own right, which has resulted in a fluid party system and a lack of well-developed policy framework.
The Constitution and the Organic Law regulate the law–making powers of the National Parliament and can be found at Part VI of the Constitution and s 41 of the Organic Law on Provincial Governments and Local-level Governments 2014. While provincial and local or village governments have specific powers, they are subject to the national law but only to the extent that the national interest requires, otherwise they have relative autonomy.
Interestingly, as part of a constitutional review process the Constitution was reviewed by the Constitutional and Law Reform Commission (CLRC) in relation to its form and system of government. The CLRC report to the government was submitted in December 2023 but the report is still to be released and whether and what changes it might bring remains to be seen. Currently, the National Government is responsible for foreign investment, exchange control, immigration, trading and financial corporations, banking, most taxation, customs and excise, shipping and overseas trade.
Provincial Governments
There are 21 separate provinces and a National Capital District (which is similar to a provincial government) within PNG. Their powers are delegated to them by the National Government but note that as the powers of the Provincial governments are delegated to them, they are subordinate to the National Government.
Powers of the Provincial Governments include agriculture, fishing, trade and industry, land and land development, forestry and natural resources, rural health, transportation, village and urban or community courts (but not jurisdiction), commissions of inquiry, with limited revenue raising powers to impose sales and services tax.
Local and village Governments
Local and village governments are enshrined in the national Constitution and the Organic Law at Part VIA, s 187I of the Constitution while ss 26, 27, 28 and 44 of the Organic Law on Provincial Governments and Local-level Governments 2014 and the Local-Level Governments Administration Act 1997 provide the legal basis for the 336 local-level governments (LLGs). The Minister of Provincial and Local Government Affairs is responsible for local government.
The powers of LLGs are subject to the national law and provincial governments, but only to the extent that the national or provincial interest so requires. A council will represent several villages and manage and administer the area that is under its control including labour and employment, provision of water and electricity, local trading and the local environment, some revenue-raising powers, and jointly with provincial governments, for health and environmental protection, waste disposal, roads and economic promotion.
Online reference
The Department of Provincial and Local-level Government Affairs provides a link between the National Government and the Provinces and LLGs.
Part 6: Do I need to know the National Constitution?
Hopefully you are now aware that the Constitution and the Organic Laws are the supreme law of PNG and that, subject to s 10 of the Constitution (construction of written laws), all Acts that are inconsistent with it are invalid to the extent of any inconsistency. You don’t need to know the National Constitution of by heart, but it is useful to be aware of what it contains because it is the most important document in your legal system.
Online reference
Rather than try and give you a summary of the National Constitution, look it up online on the Papua New Guinea Consolidated Legislation webpage.
Reflection questions
Time to take a break from reading and think about the following questions:
A. What reasons can be put forward to explain why the PNG National Constitution has undergone change at least 43 times since its inception in 1975?
B. What do you think is the purpose of having a Constitution? Do we even need one?
C. Is the Constitution too complicated and should it be simplified? Explain why?
D. If you had the power, what would you change in the Constitution? Explain why?
Key points
An understanding of the following points, coupled with your answers to the Revision Questions, will help you to better revise material in this chapter and should form the basis for your notes. Don’t try to memorise what you read but rather focus on understanding the material.
- What is law? There is no universally accepted agreement on ‘what is law’, but a starting point is that the law is a set of rules, developed over a long period of time, regulating people’s interactions with one another.
- What is Organic Law? Organic Laws regulate the legislative powers of the National, Provincial and Local Governments of PNG and found in ss 41- 44 of the Constitution. The Constitution and the Organic Powers are the supreme law of PNG and all legislation that is inconsistent with the supreme law is invalid and void to the extent of any inconsistency.
- What are rules, and what is law? It does not automatically follow that rules are always law. To determine whether a rule is law, consider where it came from, how it deals with the person who has broken the rule, and the type of penalty that is handed down.
- What are the various classification of law? Laws may be classified in a number of ways, including:
- the common law system (based on precedent and statute law) and the civil law system (based on a code-based system)
- customary law (laws that exist within tribal communities established through cultural or societal norms that existed before European occupation of PNG)
- international law (which regulates conduct between states) and municipal or domestic law (a state’s internal laws)
- public law (concerned with the organisation of government and with the relationship that exists between people and the government—for example, constitutional law, industrial law, taxation)
- private law (concerned with relations between natural and legal persons—for example, contract law, torts law, property law, company law); and
- substantive law (actual rights and duties under the law) and procedural law (the rules of civil and criminal procedure, and evidence).
- What is the distinction in common law between civil law and criminal law? Civil law involves an action between individuals, where the plaintiff (who starts the action) has to establish, on the balance of probabilities, that their case is the more believable than that of the defendant and aims at compensating them. Criminal law involves an action brought by the state, with the state having to establish beyond reasonable doubt that the accused has committed a wrong for which they should be punished.
- What are the major and minor sources of law that together make up the PNG legal system? Three major types of laws are common law, equity and statute law, while minor types include customary law.
Chapter 2 references
Denning A (1955) The road to justice, Stevens & Sons Ltd, London.