Regulation of in-service safety for automated vehicles: due diligence obligations for Australian ADSE executive officers

A national automated vehicle safety law in Australia is currently being developed, with further recommendations set to be made in the first half of 2021. A key recommendation from the National Transport Commission (NTC) is that executive officers of entities responsible for importing automated vehicles hold some responsibility for the in-service safety of automated vehicles.

In practice, much of the responsibility for in-service safety of automated vehicles is likely to be placed on the manufacturer, but under the proposed approach, executive officers of automated vehicle importers may also be required to ensure compliance with any new obligations relating to automated vehicles, and may be held liable for failures to take reasonable actions to ensure such compliance.

Background: the NTC's proposals and discussion paper

Since January 2019, the NTC has been developing and assessing a range of regulatory options to assure the safe operation of automated vehicles while they are in service. Following a series of consultations, the NTC recommended a regulatory approach to the Commonwealth, State, Territory and New Zealand Ministers making up the Transport and Infrastructure Council. This approach includes a specialised national regulator, a general safety duty on Automated Driving System Entities (ADSEs)^[1] and due diligence obligations on executive officers of ADSEs to ensure ADSEs comply with their general safety duty.

For practical purposes, an ADSE is, in most cases, likely to be the national sales company responsible for importing and distributing the relevant Automated Vehicles in Australia.

In June 2020, transport ministers agreed with the NTC's recommended approach to regulating automated vehicles when they are commercially deployed on Australian roads, via a national regulator and a national law, supported by a general safety duty, and tasked the NTC with working in partnership with Australian governments to further develop the blueprint for a national automated vehicle safety law. One of the key questions to be decided is what obligations should be imposed on the original vehicle manufacturers and what obligations should be additionally imposed on executive officers in Australia to ensure importers comply with the general safety duty for in-service automated vehicles.

On 16 October 2020, the NTC published a discussion paper outlining its preliminary proposals for the new national law to establish a general safety duty on entities responsible for automated driving systems, due diligence obligations on their executive officers and a new national regulator for the in-service safety of automated vehicles. The discussion paper further develops the content of the national law, including proposals for the operation of the duties on regulated parties, the management of market exit of regulated parties and modifications to automated vehicles, the regulator’s compliance and enforcement approach and its interaction with other agencies including information exchange. It also explains how the national law will work under two different legislative implementation options and seeks feedback by 11 December 2020 from, in particular, Commonwealth and State and Territory road transport and enforcement agencies, regulators and agencies with a connection to in-service safety, vehicle manufacturers, automated technology providers, road managers, transport industry bodies and any other entities with an interest in the regulatory framework for automated vehicles in Australia.

The NTC's final recommendations are due to be delivered to the relevant ministers in May 2021.

Due diligence obligations on Australian executive officers

The NTC suggests that existing executive officer regulation (eg. through Corporations law, WHS law, Heavy Vehicle National Law, passenger transport law) is inadequate to meet the expectations of Australian governments when it comes to ensuring in-service safety for ADSs, and proposes to address the regulatory gap by introducing a duty of due diligence that obliges executive officers to take reasonable steps to ensure ADSEs comply with their safety obligations.

Similar executive officer due diligence requirements have been adopted in comparable regulatory frameworks operating in transport such as heavy vehicles, work health and safety , point-to-point transport, rail and road vehicle standards.

Who is an executive officer?

Executive officers of ADSEs are officers that have a major influence on the in-service safety because they have the power to make decisions that directly affect the design or operation of an ADS. Types of roles within the ADSE that may meet this description include Directors, General Managers, Product Managers responsible for ADS software development and testing and Communications Managers responsible for communications with, and disclosure to, the regulator.

What due diligence obligations arise for executive officers?

The extent of the duty will depend on a person's role in the ADSE's compliance with the general safety duty. An executive officer must do what a reasonable person in that person's position would have done to ensure the ADSE's compliance with its safety duty. Whether or not the steps taken by an officer are reasonable will depend on the circumstances, including the role and level of influence of the officer and the nature and structure of the ADSE. For example:

• Directors are not expected to be experts in automated vehicles or what makes them safe; however, they are expected to take reasonable care, for example by:
  • recruiting a CEO who has a strong record of safety/compliance;
  • ooutlining their high expectations of safety;
  • ensuring regular audits are performed by a qualified and independent third party; and
  • examining the contents of audit reports and asking the CEO the right questions;

• Product Managers with responsibility for research and development of ADS software would need to ensure that adequate testing of the software is performed, and escalate any in-service issues promptly and in good faith to the appropriate individual within the organisation;

• Communications Managers with responsibility for communications with, or disclosures to, the regulator would be expected to act promptly and in good faith (without withholding relevant information)

• Sales Managers and Aftersales Managers are less likely to be subject to the due diligence obligations where they are unable to influence safety related matters.

Compliance with the due diligence obligations may include taking reasonable steps to:

• acquire knowledge and keep up-to-date about automated vehicle safety matters;
• ensure the ADSE has the right resources and processes in place, and is using those resources and processes to eliminate or minimise automated vehicle safety risks;
• ensure the ADSE has the right processes to receive and respond to reports of safety incidents, hazards or issues, and processes to comply with the general safety duty;
• verify that the processes and resources set out above are being used.

The new national law may determine whether an executive officer failed to exercise due diligence, with courts having regard to the following factors:

• what the officer knew, or ought reasonably to have known, about the commission of the offence by the body corporate
• whether or not the officer was in a position to influence the body corporate in relation to the commission of the offence by the body corporate
• what steps the officer took, or could reasonably have taken, to prevent the commission of the offence by the body corporate
• any other relevant matter (see, for example, Work Injury Rehabilitation and Compensation Act 2013 (Vic), section 601(3)).

Limits of the due diligence obligation

Executive officers will not automatically be liable for the ADSE's breach of the general safety duty. The due diligence obligation will only apply to executive officers who are in a position to influence the safety of ADSs and the extent to which that responsibility has been exercised in the context of the individual's role. Executive officers will not be liable for aspects of the general safety duty that they have no influence over.

Importantly, the NTC recognises that decisions about the safety of ADSs are more likely to be made by ADSE executive officers outside Australia and therefore expresses the need for the national automated vehicle safety law to have extraterritorial application (similar to the Road Vehicle Standards Act).

Australian-based ADSE officers who are not in a position to influence ADS safety will not be liable for managing risks that are outside of their control. In practice, under the current proposal Australian-based officers are unlikely to be required to comply with additional obligations or face greater liability, as the "influence" that is the subject of the NTC's recommendation will largely, if not exclusively, take place overseas at the manufacturing points rather than at Australian offices, which tend to be more focused on public affairs or dealership aspects of the business.

For this reason, the primary due diligence obligations that will fall on Australian-based officers are likely to be limited to:

• turning their mind to the information provided to them by the OEM or overseas parent company and to act reasonably, in good faith and without negligence before relying upon it;
• ensuring that the Australian arm of the ADSE has processes in place to receive reports of local safety incidents, hazards or issues, and ensure proper communication with the Australian regulator and the OEM or parent company to respond to those incidents, hazards or issues.

The NTC is also considering whether to include in the national law a defence of "reasonable reliance" for Australian executive officers who rely on information provided by others (eg. OEM / parent company) when discharging their due diligence obligation and has specifically asked for market feedback in relation to this point in its discussion paper

Penalties for non-compliance

A breach of the due diligence obligation in relation to a breach of the general safety duty will be a criminal offence under the new national law.

Criminal sanctions will apply where an ADSE breaches the general safety duty and the regulator finds that the responsible senior executives of the ADSE did not meet their due diligence obligation in relation to that breach.

^[1] An ADSE is the self-selected party that will certify that the ADS can safely perform the driving task in place of a human driver. The ADSE will self select at first supply when applying to the Commonwealth government for type approval of the ADS under the Road Vehicle Standards Act 2018 (Cth).^{Back to article}