This chapter discusses the new foreign interference and theft of trade secrets offences proposed in the Bill.
Foreign interference offences
Schedule 1 to the Bill introduces Division 92 into Part 5.2 of the Criminal Code. This Division contains nine new foreign interference offences. Their relevant sections and penalties are set out below:
Table 7.1: Foreign interference offences
Offence of intentional foreign interference – interference generally
Offence of intentional foreign interference – interference involving targeted person
Offence of reckless foreign interference – interference generally
Offence of reckless foreign interference – interference involving targeted person
Offence of preparing for a foreign interference offence
Knowingly supporting foreign intelligence agency
Recklessly supporting foreign intelligence agency
Knowingly funding or being funded by foreign intelligence agency
Recklessly funding or being funded by foreign intelligence agency
The offences in Subdivision B (92.2—92.4) criminalise a range of conduct undertaken by foreign principals who seek to interfere with Australia’s political, governmental or democratic processes, support their own intelligence activities or otherwise prejudice Australia’s national security. The offences in Subdivision C (92.7—92.10) target a range of conduct that involves funding, supporting and resourcing of foreign intelligence agencies.
Rationale for the new offences
The Explanatory Memorandum notes that current Commonwealth criminal law does not contain any offences targeting conduct undertaken by a foreign government that ‘falls short of espionage but is intended to harm Australia’s national security or influence Australia’s political or governmental processes’.
The Attorney-General’s Department submitted that the lack of criminal offences for this type of conduct:
has resulted in a permissive operating environment for malicious foreign actors, which Australian agencies are unable to effectively disrupt and mitigate.
Addressing the impact these new foreign interference offences would have on the rights of Australians, the Explanatory Memorandum states:
The Bill protects and promotes the right to opinion and freedom of expression, the freedom of assembly and association and the right to take part in public affairs and elections by:
introducing foreign interference offences, which will criminalise certain conduct that seeks to influence the exercise of Australian democratic or political rights …
Several participants in the inquiry expressed strong in-principle support for new laws targeting foreign interference in Australia. One participant, for example, submitted:
It should not be necessary to remind the Australian Government that we as Australian citizens do not wish to see any of our fellow citizens lose their democratic rights and freedoms through interference by a foreign power, and we do not believe that sections of our community should be subjected to subversive or intimidatory pressures.
Some of these submitters expressed doubts as to whether the new offences in the Bill were broad enough to capture all current foreign interference activity in Australia.
Some other participants expressed concerns about the potential negative impact of the laws on the rights of Australians. Nyman Gibson Miralis, for example, argued that
the proposed foreign interference offences significantly, disproportionately and unnecessarily infringe upon various individual rights including the freedom of expression, freedom of religion and even the constitutional guarantee of the implied freedom of political communication.
The Law Council stated it ‘does not support the proposed foreign interference offences in their current form’.
General foreign interference offences
The general foreign interference offences refer to the offences that appear in Subdivision B (92.2—92.4).
The offences in proposed subsections 92.2(1) and 92.3(1) apply where a person engages in conduct on behalf of or in collaboration with a foreign principal (or directed, funded or supervised by a foreign principal), and the person intends that, or is reckless as to whether, their conduct will
influence a political or governmental process of the Commonwealth or a State or Territory,
influence the exercise (whether or not in Australia) of an Australian democratic or political right or duty,
support intelligence activities of a foreign principal, or
prejudice Australia’s national security, and
any part of the conduct
involves the person making a threat to cause serious harm, whether to the person to whom the threat is made or to any other person, or
involves the person making a demand with menaces.
The ‘targeted person’ offences in proposed subsections 92.2(2) and 92.3(2) apply where a person engages in conduct on behalf of or in collaboration with a foreign principal (or directed, funded or supervised by a foreign principal), and the person intends that, or is reckless as to whether, their conduct will influence another person (the target)
in relation to a political or governmental process of the Commonwealth or a State or Territory, or
in the target’s exercise (whether or not in Australia) of an Australian democratic or political right or duty, and
the person ‘conceals from, or fails to disclose to, the target their relationship to the foreign principal.
For the purpose of these offences, the Bill states that the person does not need to have in mind a particular foreign principal and the person may have in mind more than one foreign principal.
Australian Lawyers for Human Rights noted that the targeted person offences do not require covert, deceptive, threatening or menacing conduct to take place, and could apply to ‘kindly and benign’ influence if the person fails to notify the target of their foreign connection. The group also queried how the targeted person offences would operate in practice:
One wonders who it is that the perpetrator should be notifying about their attempt to influence a political or government process? What if the target is ‘the Australian public’? what if the target is not clear? One also wonders how it is that the perpetrator should notify their target? If the Bill means to say that the perpetrator should make their foreign connection publicly known (even when their ‘target’ is private), what would achieve this? A statement on a website? A notice in a newspaper? And what does it mean that ‘the person does not need to have in mind a particular foreign principal’ (as provided in subsection (3) of each proposed section)? How can the perpetrator notify someone that they are acting ‘on behalf of’ a foreign principal when they do not even have any particular foreign principal in mind?
Meaning of key terms
The Bill does not define the expression ‘political or governmental process of the Commonwealth or a State or Territory’. The Explanatory Memorandum states that that the expression is intended to cover
matters within political parties (such as which candidate is pre-selected or the manner in which preferences are to be allocated at an election) as well as political matters within the parliamentary process (such as decisions by shadow Cabinet or decisions by political parties about policies).
The Foreign Influence Transparency Scheme Bill 2017 (FITS Bill) uses a similar expression, namely ‘activity for the purpose of political or governmental influence’. Proposed section 12 of the FITS Bill defines this expression as:
a process in relation to a federal election or a designated vote,
a process in relation to a federal government decision,
proceedings of a House of the Parliament,
a process in relation to a registered political party,
a process in relation to a member of the Parliament who is not a member of a registered political party,
a process in relation to a candidate in a federal election who is not endorsed by a registered political party, or
an activity that influences the public or section of the public in relation to an aspect of any the above processes or proceedings.
The Attorney-General’s Department indicated that the FITS Bill’s definition is deliberately limited to federal government processes and that
[t]he term ‘influence a political or governmental process of the Commonwealth or a State or Territory’ is not defined, but does explicitly extend to state and territory processes. This provides flexibility for a court to interpret the term based on the admissible evidence.
If the Committee’s view is that a definition is desirable, the definition in section 12 of the Foreign Influence Transparency Scheme Bill could provide a useful starting point.
Similarly, the Bill does not define the expression ‘an Australian democratic or political right or duty’. The Explanatory Memorandum states that the expression is intended to
cover a broad range of rights held by Australians in relation to participation in Australia’s democracy, including voting in elections and referenda and participating in lawful protests.
Australian Lawyers for Human Rights queried whether an ‘an Australian democratic or political right or duty’ refers to an individual or collective right, and whether the phrase is intended to have a wider meaning than in proposed section 83.4 (the offence of ‘interference with political rights and duties’—see Chapter 9).
The terms ‘foreign principal’ and ‘national security’ are defined in proposed sections 90.2 and 90.4 respectively. The breadth of these definitions is discussed in Chapter 3.
Offence for preparing or planning
Proposed section 92.4 will establish the offence of preparing for, or planning, an offence that appears in Subdivision B (92.2–92.4). The Explanatory Memorandum states:
The purpose of this offence is to give law enforcement means to deal with preparatory conduct and enable intervention before foreign interference occurs.
The Bill structures the offence at proposed section 92.4 similar to the offences for preparing for, or planning, a sabotage and espionage offence, at proposed sections 82.9 and 91.12 respectively.
General issues concerning the Bill’s inclusion of preparatory offences are discussed in Chapter 3.
The Bill does not define the terms ‘planning’ and ‘preparation’. The Explanatory Memorandum clarifies that these terms are intended to take their ordinary meaning:
The term ’preparing’ could include acts to conceive, formulate, make ready, arrange, and assemble an idea, plan, thing, or person for an offence against another provision in Subdivision A (foreign interference).
The term ‘planning’ could include acts to organise, arrange, design, draft, or setup an idea, plan, thing, or person for an offence against another provision in Subdivision A (foreign interference).
The Law Council contended that
[t]he preparing for a foreign interference offence in section 92.4 should not proceed. Instead, the ancillary provisions of the Criminal Code for incitement, conspiracy and attempt should be relied upon.
Offences involving foreign intelligence agencies
Sections 92.7 and 92.8 of the Bill create offences where:
a person provides support or resources to an organisation or a person acting on behalf of an organisation, and
the person knows that the organisation is a foreign intelligence agency, or the organisation is a foreign intelligence agency.
The Explanatory Memorandum states that ‘providing support or resources’ is intended to cover
assistance in the form of providing a benefit or other practical goods and materials, as well as engaging in conduct intended to aid, assist or enhance an organisations activities, operations, or objectives.
Box 7.1: Example—recklessly supporting a foreign intelligence agency
An Australian citizen knows an employee of a foreign government, but does not know the specific agency. The employee insists that the Australian citizen follow specific communication methods whenever in contact, and the Australian is aware that the employee uses several different names.
In response to specific requests, the Australian attends dissident group meetings in Australia and provides a list of attendees to the employee. The Australian also uses open source materials to find identifying details for several of the attendees, which the Australian passes to the employee.
Sections 92.9 and 92.10 of the Bill create offences where:
the person directly or indirectly:
receives or obtains funds from an organisation,
makes funds available to an organisation, or
collects funds for or on behalf of an organisation, and
the person knows that the organisation is a foreign intelligence agency or the organisation is a foreign intelligence agency.
Box 7.2: Example—recklessly funding a foreign intelligence agency
An Australian citizen undertakes ad hoc tasks for foreign individuals employed by a foreign government in return for preferential treatment. Based on the requests made, the Australian suspects these officials are foreign intelligence officers.
In response to a specific request, the Australian attends a prearranged location and gives a large sum of their own money to a foreign individual, who is visiting and that the Australian has not met before. The Australian does not know what the money will be used for.
Section 5.6 of the Criminal Code applies the ‘recklessness’ fault element automatically to circumstances, which the Explanatory Memorandum states this requirement:
[T]he organisation is a foreign intelligence agency and the person was reckless as to this element.
The Attorney-General’s Department noted that the offences in Subdivision C (92.7–92.11) were modelled from the structure of the terrorist organisation offences in sections 102.6 and 102.7 of the Criminal Code.
Box 7.3: Existing terrorism offences in the Criminal Code
Section 102.6 of the Criminal Code outlines the offence for getting funds to, from or for a terrorist organisation. A person commits an offence if:
the person intentionally:
receives funds from, or makes funds available to, an organisation (whether directly or indirectly), or
collects funds for, or on behalf of, an organisation (whether directly or indirectly), and
the organisation is a terrorist organisation, and
the person knows the organisation is a terrorist organisation, or is reckless as to whether the organisation is a terrorist organisation.
Section 102.7 of the Criminal Code outlines the offence for providing support to a terrorist organisation. A person commits the offence if:
the person intentionally provides to an organisation support or resources that would help the organisation engage in an activity that is directly or indirectly engaged in, preparing, planning, assisting in or fostering the doing of a terrorist act,
the organisation is a terrorist organisation, and
the person knows the organisation is a terrorist organisation, or is reckless as to whether the organisation is a terrorist organisation.
Both offences are punishable by imprisonment for 25 years or 15 years, depending on whether the person knows the organisation is a terrorist organisation.
Separately, financing terrorism offences exist at sections 103.1 and 103.2 of the Criminal Code. These offences require that a person is reckless as to whether the funds will be used to facilitate or engage in a terrorist act and are punishable by life imprisonment.
The Law Council suggested that the offences in sections 92.7 and 92.8 of the Bill should require that the person intends, or is reckless as to whether, the support or resources would assist a foreign intelligence organisation in an act prejudicial to Australia’s security. This suggested change would align the offences closer to existing section 102.7 of the Criminal Code.
Based on the model of the existing financing terrorism offences, namely sections 103.1 and 103.2 of the Criminal Code, the Law Council also suggested that sections 92.9 and 92.10
should require that the person is reckless as to whether the funds will be used to facilitate or engage in activities prejudicial to Australia’s national security or, in the case of obtaining funds, involve undue influence.
The Attorney-General’s Department considered that these additional requirements, to align the offences closer to sections 102.7 and 103.1, were not necessary nor appropriate, as the provision of support or funding to a foreign intelligence agency ‘in and of itself, presents a threat to Australia’s national security’.
In responding to a question as to why the terrorism offences in section 102.7 explicitly state a fault element of recklessness, while the equivalent offence at proposed section 92.8 does not, the Attorney-General’s Department stated:
The department is not able to clarify why a different approach was taken in the drafting of the existing terrorism offences in section 102.6 and 102.7. However, the effect of both drafting approaches appears to be the same, in that the result is that recklessness is the applicable fault element.
The joint media organisations expressed concerns about the breadth of the term ‘support’ in proposed sections 92.7 and 92.8:
We are concerned that any communication—online, in print or by broadcast—that positively reports about a foreign intelligence agency would breach these sections.
The organisations brought to the attention of the Committee the case of a Wall Street Journal journalist who was imprisoned in Turkey for engaging in ‘terrorist propaganda’ through one of her articles. The journalist
wrote an article about all sides of conflict in a region, including interviewing and reporting the views of the PKK. Because the reporter gave the PKK a voice at all, the article was regarded as terrorist propaganda. Similarly, if any foreign intelligence agency was using a local digital platform and a journalist reported on it, that journalist and the media company would very likely breach the provision.
The organisations also highlighted an instance in Australia where a news organisation was directed to remove an online article:
news.com.au wrote a story exposing Islamic State’s use of popular online trading sites to target potential victims. News.com.au was directed to remove the story after the Classification Board found that the story indirectly provided instruction on the doing of a terrorism act. The story reported the instructions given to readers of an IS magazine. The Australian Press Council found that the story did not breach the Council’s Standards of Practice.
The joint media organisations recommended that proposed sections 92.7 and 92.8 should become 92.7(1) and 92.8(1) respectively, and should be subject to 92.7(2) and 92.8(2) which should both read:
Publication of information by a journalist in the course of public interest reporting (which may relate to foreign intelligence agencies) does not amount to the provision of ‘support’ for the purposes of section [92.7(1) /92.8(1)].
The Attorney-General’s Department suggested that the joint media organisations’ submission ‘reads too much into the word “supports”’. It noted that to commit the offence a person would need to intend to provide support to a foreign intelligence agency.
At a public hearing, the Attorney-General’s Department stated:
The explanatory memorandum … clarifies that support in that context covers the provision of a benefit or other practical goods or aid. I would also say that that language is consistent with, and mirrors, the language used in the terrorism offences of providing support to a terrorist organisation.
The Attorney-General’s Department also indicated that these offences deliberately do not require the person to intend any outcome, such as harm to Australia’s national security.
Sections 92.5 and 92.11 of the Bill provide defences to a prosecution to foreign interference offences. The defence applies where the person engaged in conduct that is:
in accordance with a law of the Commonwealth,
in accordance with an arrangement or agreement to which the Commonwealth is a party, or
in the person’s capacity as a public official.
The Explanatory Memorandum states that these defences are appropriate because
the source of the alleged authority for the defendant’s actions is peculiarly within the defendant’s knowledge. It is significantly more cost-effective for the defendant to assert this matter rather than the prosecution needing to disprove the existence of any authority, from any source.
The Law Council suggested that the foreign interference offences should provide a defence for persons acting in the public interest. The purpose of the proposed defence would be to protect investigative journalists or ordinary citizens:
For example, an investigative journalist or a citizen exercising the freedom of expression may engage in ‘covert’ conduct to influence the exercise of an Australian democratic or political right in collaboration with a person acting on behalf of a foreign principal.
WWF-Australia also considered that a defence for persons acting in the public interest should be provided for the proposed foreign interference offences.
The Attorney-General’s Department responded:
It is not clear that conduct constituting a foreign interference offence [can] be excused from criminal liability on the basis that it is ‘in the public interest’. Conversely, conduct that [is] ‘in the public interest’ is unlikely to fall within the scope of the foreign interference offences in the Bill.
The Law Council argued that a defence for persons acting in their capacity as public officials should not proceed for certain foreign interference offences, namely where:
a person intends or is reckless as to whether the conduct will prejudice Australia’s national security (92.2(1)(c)(iv) and 92.3(1)(c)(iv)),
any part of the conduct involves the making of threats to cause serious harm (92.2(1)(d)(ii) and 92.3(1)(d)(ii)), and
any part of the conduct involves making a demand with menaces (92.2(1)(d)(iii) and 92.3(1)(d)(iii)).
In particular, the Law Council argued:
Such a defence for public officials appears antithetical to the very intent of the bill—namely, to protect Australia against acts of sabotage, espionage and foreign interference. Furthermore, such a defence would, in practice, be unnecessary in circumstances where a court may consider that the requisite fault elements, once proved by the prosecution, are inconsistent with a public official acting in their capacity.
The Attorney-General’s Department responded that
There are a range of scenarios in which these defences are appropriate, including where public officials are working with Australia’s allies and partners for mutually beneficial outcomes.
Interaction with the Foreign Influence Transparency Scheme Bill 2017
The Foreign Influence Transparency Scheme Bill 2017 was part of the package of legislative reforms that the Prime Minister introduced on 7 December 2017.
The Attorney-General’s Department indicated that the foreign interference offences and the Foreign Influence Transparency Scheme Bill 2017 are complementary measures and should not be considered in isolation.
The Law Council outlined its concern about the possible interaction of the proposed foreign interference offences with the Foreign Influence Transparency Scheme Bill 2017:
If enacted, the Foreign Influence Transparency Scheme Bill 2017 would create criminal offences for intentionally or recklessly not registering under the scheme. Strict liability offences are in place for registrants that fail to notify the Secretary of material changes, report on certain activities, or keep adequate records of activities. A person who is found guilty for one of these strict liability offences may be considered to be operating in a ‘deceptive’ manner for the purposes of the proposed foreign interference offences.
The Law Council called for greater clarity about the interaction between the two Bills in the Explanatory Memorandum:
[T]he Explanatory Memorandum to the Bill should make clear that a finding of guilt in relation to the Foreign Influence Transparency Scheme Bill 2017 will not necessarily amount to a finding of guilt in relation to the proposed foreign interference offences in the Bill.
The Attorney-General’s Department responded:
Section 4C of the Crimes Act would prevent a person being prosecuted for both a FITS offence and a foreign interference offence.
Additionally, the Attorney General’s Department stated:
Registration under the Foreign Influence Transparency Scheme could indicate that a person is engaged in registrable activities for the purpose of influencing a political or governmental process. This may be relevant for paragraphs 92.2(1)(c)) and 92.3(1)(c) …
Registration of activities [under the FITS Bill] will not necessarily mean activities are not covert—noting that a registrant would be unlikely to register in a manner that discloses the commission of an offence.
Subsection 4C(1) of the Crimes Act 1914 states that where an act or omission constitutes an offence under two or more laws of the Commonwealth, the offender shall not be liable to be punished twice for the same act or omission.
Under Schedule 4 to the Bill, discussed in Chapter 10, enforcement agencies will be able to apply for a telecommunications interception warrant for the purposes of investigating any of the proposed foreign interference offences.
Presumption against bail
Consequential amendments in Schedule 1 to the Bill, discussed in Chapter 10, will impose a presumption against bail for some proposed foreign interference offences. The presumption will apply in circumstances where the defendant is alleged to have made a threat to cause serious harm or a demand with menaces.
As discussed in Chapter 1, the Committee recognises the need for new laws to respond to the threat of foreign interference in Australia. Unchecked foreign interference has the potential to undermine the integrity of Australia’s democracy and threaten the rights and freedoms of Australian people. The Committee therefore supports the introduction of new foreign interference offences.
However, the Committee notes concerns raised by some participants in the inquiry about the current drafting of the foreign interference offences in proposed Division 92 of the Bill. These included concerns about the definitions of ‘foreign intelligence agency’ and ‘national security’ for the purposes of the foreign interference offences. The scope of these terms is discussed in more detail in Chapter 3.
The Committee notes that section 4C of the Crimes Act deals with situations of ‘double jeopardy’ and provides that a person cannot be prosecuted twice for the same act or omission. The effect of this provisions is that a person could not be prosecuted under the FITS Bill and a foreign interference offence for the same conduct.
The Committee notes that the offences in proposed sections 92.7 to 92.10, relating to supporting or funding foreign intelligence agencies, are based on similar existing terrorism offences in sections 102.6 and 102.7 of the Criminal Code.
The Committee notes the Law Council’s concerns that, unlike existing terrorism offences, proposed sections 92.7 and 92.8 (knowingly or recklessly supporting foreign intelligence agency) do not include a requirement for recklessness as to whether a person’s support would help foreign intelligence undertake activities that prejudice Australia’s national security. However, the Committee notes that the intent of this Bill is to capture behaviour that may not be inherently malicious, but may nonetheless assist foreign intelligence agencies—for example, facilitating travel arrangements within Australia to enable covert activities. Consequently, the Committee considers that including this further requirement is not appropriate and may reduce the effectiveness of the provisions.
The Committee has considered concerns expressed by the joint media organisations that the term ‘support’ in proposed sections 92.7 and 92.8 could extend to journalists reporting positively, or neutrally, about a foreign intelligence agency. The Committee notes the intention expressed in the Explanatory Memorandum that the term ‘support’ covers the provision of a benefit or other practical goods or aid, and therefore would be unlikely to apply to the examples provided by the media organisations. However, the Committee considers that further clarity would be achieved through amending the Bill to make explicit that the term ‘support’ refers to ‘material support’ and providing examples in the Explanatory Memorandum.
The Committee recommends that the Bill be amended to explicitly provide that the term ‘support’ refers to ‘material support’, and that the Explanatory Memorandum provide examples of conduct that will not constitute material support, for example, news reporting, editorial or opinion writing and humanitarian assistance.
In relation to proposed sections 92.9 and 92.10 (Knowingly, or recklessly, funding or, being funded by foreign intelligence agency) the Committee considers that the financing terrorism offences in sections 103.1 and 103.2 of the Criminal Code are not an appropriate comparison for these offences. Rather, the offences are based on existing section 102.6 (Getting funds to, from or for a terrorist organisation). In comparing the proposed new offences with section 102.6, the Committee is satisfied that no additional elements are required in sections 92.9 and 92.10.
The Committee notes the intent of the Bill to include preparatory offences targeting activities that may fall short of ‘attempt’ under section 11.1 of the Criminal Code. The Bill’s use of preparatory offences was discussed in general terms in Chapter 3. The Committee considers that the ability to prosecute and prevent foreign interference is a key function of the Bill and therefore considers that the preparing and planning offences for foreign interference should remain.
Theft of trade secrets
Schedule 1 will also amend Part 5.2 of the Criminal Code to insert a new offence for theft of trade secrets involving a foreign government principal (Division 92A).
The new offence and proposed penalty is set out below.
Table 7.2: Theft of trade secrets involving foreign government principal
Theft of trade secrets involving foreign government principal
Overview of the offence
Proposed Division 92A is intended to protect ‘trade secrets’ by making it an offence to dishonestly receive, obtain, take, copy or duplicate, sell, buy or disclose certain information where the conduct is connected to a foreign government principal.
In contrast to a number of other offences in Part 5.2 of the Criminal Code, the proposed offence of theft of trade secrets does not contain a ‘national security’ element. The offence arises where:
a person intentionally and dishonestly receives, obtains, takes, copies or duplicates, sells, buys or discloses information; and
all of the following circumstances exist, and the person is reckless as to these circumstances:
the information was not generally known in trade or business, or in that particular trade or business concerned,
the information has a commercial value that would be, or could reasonably be expected to be, destroyed or diminished if the information were communicated, and
the owner of the information had made reasonable efforts in the circumstances to prevent that information from becoming generally known, and
any of the following circumstances apply, and the person is reckless as to this element:
the person engaged in the conduct on behalf of a foreign principal,
the person engaged in the conduct on behalf of a person acting on behalf of a foreign principal,
the person engaged in the conduct in collaboration with a foreign principal,
the person engaged in the conduct in collaboration with a person acting on behalf of a foreign principal,
the conduct was directed, funded or supervised by a foreign principal, or
the conduct was directed, funded or supervised by a person acting on behalf of a foreign principal.
The person does not need to have in mind a particular foreign government principal, and may have more than one foreign government principal in mind.
Although the term ‘trade secret’ is not used in the wording of the offence, the Explanatory Memorandum provides that it is intended that the offence will protect this type of information, consistent with comparative international laws. The Explanatory Memorandum characterises the theft of trade secrets as ‘economic espionage’.
The proposed sabotage, espionage and foreign interference offences arise in connection to a ‘foreign principal’. In contrast, the offence in proposed section 92A arises in connection to the more narrowly defined concept of a ‘foreign government principal’. Proposed section 90.3 of the Bill defines ‘foreign government principal’ as:
a foreign country’s government or the government of part of a foreign country,
an authority of the foreign country’s government, or an authority of part of a foreign country,
a local or regional government body of a foreign country,
a foreign public enterprise,
a foreign political organisation, and
entities or organisations owned, directed or controlled by a foreign government principal or multiple foreign principals from the same foreign country.
The Bill defines ‘dishonest’ to mean:
… dishonest according to the standards of ordinary people; and known by the defendant to be dishonest according to the standards of ordinary people.
The Bill proposes to apply a modified form of extended geographical jurisdiction ‘Category B’ to the theft of trade secrets. An offence will be within jurisdiction if:
the conduct constituting the offence occurs wholly or partly in Australia
the result of that conduct occurs wholly or partly in Australia, and
the conduct occurs outside Australia and at the time of committing the offence, the person is an Australian citizen, resident or body corporate;
the defendant will not be able to avoid prosecution on the basis that the country in which he or she committed the offence does not have a corresponding economic espionage/theft of trade secrets offence.
The Bill also proposes enabling law enforcement agencies to obtain a telecommunications interception warrant to investigate this offence.
Rationale for the new offence
In its submission, the Attorney-General’s Department outlined that the purpose of the new offence is
to combat the increasing threat of data theft, business interruption and economic espionage, particularly by or on behalf of foreign individuals and entities.
The Department referred to ASIO’s 2016–2017 Annual Report, which stated:
In addition to traditional espionage efforts to penetrate government, foreign intelligence services are targeting a range of Australian interests, including clandestine acquisition of intellectual property, science and technology, and commercially sensitive information.
The Department noted that ‘interference in Australia’s commercial dealings and trade relations by or on behalf of foreign governments has serious consequences for Australia’s national security and economic interests’. Its submission identified potential targets of economic espionage as including
highly valuable and sensitive information held by the CSIRO and the Defence Science and Technology Group, commercial secrets such as negotiating position on natural gas and iron ore prices and trade secrets related to nuclear power, metal, solar production and defence industries (including trade secrets held by private contractors).
The Department noted that Australia ‘lags behind’ the comparable jurisdictions of New Zealand, Canada and the United States in relation to having specific offences for economic espionage. The Department drew the Committee’s attention to a number of convictions under the United States offence, with examples including theft of microchip blueprints, secrets related to military training, aviation technology information and wireless technology.
Conversely, the Law Council of Australia noted that the United Kingdom does not criminalise economic espionage.
The Director-General of Security outlined at a public hearing the threat posed by foreign intelligence services to private sector interests:
Foreign spies are now not only interested in government information; we know that they also pursue privileged information and intellectual property from the private sector. That includes the agricultural sector, the mining technology field, medical research, the tertiary institution research and development field and, of course, the financial sector data.
ASIO noted that there have been instances of Australian companies facing significant financial loses as a result of this type of activity:
We have examples of where, both through cyber and human means, foreign intelligence services have targeted major resource companies, our financial institutions et cetera, with a view to obtaining information from those particular organisations. … We know of instances where Australian companies, for instance, have lost hundreds of millions of dollars through the stealing of intellectual property, et cetera, et cetera, where that information has been taken—stolen—as I said, by human and cyber means and taken back to the particular country in question and used for their own purposes.
Mr Peter Jennings noted that a number of states have increased efforts to steal intellectual property. Mr Jennings submitted that the introduction of laws aimed at countering the theft of trade secrets was ‘timely and necessary’.
Professor Rory Medcalf commented that intelligence secrets and intellectual property, including scientific research, obtained from Australia could be used by foreign powers to attain a military and economic edge:
Some of this information is held by the Australian Government and the Australian Defence Force; some is held within private companies; and some is potentially embodied within academic research.
The offence will be punishable by a maximum penalty of 15 years imprisonment. The Explanatory Memorandum provides:
The commission of this offence would have serious consequences for Australia’s security and economic interests. It is unacceptable for foreign principals to seek to interfere in Australia’s commercial dealings and trade relations. The penalty is consistent with comparable offences in which provide for a link with a foreign principal including section 91.8 (espionage on behalf of a foreign principal) and section 92.3 (offence of reckless foreign interference).
The general defences set out in Part 2.3 of the Criminal Code will be available. The Bill does not propose offence-specific defences.
Consistent with other Part 5.2 offences, the consent of the Attorney-General will be required before a person can be committed for trial. The Attorney-General’s consent is not required to arrest, charge or remand an accused person in custody or on bail.
Human Rights Watch submitted that the consent requirement is not sufficient to remedy the threat to liberty that the trade secret offence carries.
Civil versus criminal enforcement
The Law Council of Australia did not support the proposed offence, arguing that persons and organisations affected by economic espionage should pursue civil enforcement. In support of its recommendation that the offence does not proceed, the Law Council noted a number of difficulties in criminalising theft of trade secrets, including that:
the public would bear the cost of these prosecutions;
there is a lack of evidence that criminal sanctions would have a greater deterrent effect than civil law; and
criminal sanctions may draw greater publicity, which could deter victims from coming forward.
In response, the Attorney-General’s Department distinguished between the theft of trade secrets on behalf of a foreign government, and theft of trade secrets conducted by other actors. The Attorney-General’s Department submitted that the former ‘amounts to economic espionage which is harmful to Australia’s national security and economic prosperity’ and is thus criminalised. The Bill does not propose to criminalise the latter, recognising that ‘[t]his is properly left to civil enforcement mechanisms or state/territory theft offences’.
The Director-General of Security spoke of malicious foreign actors taking advantage of a number of ‘gaps’ in Australian laws. In relation to the proposed secrecy, espionage, sabotage and trade secrets offences, the Director-General advised:
I believe these new laws are needed urgently. There’s a pressing requirement to deter hostile foreign spies who are conducting espionage and foreign interference against Australian interests as we sit here today. The proposed laws would, in my view, make Australia a much harder target for foreign intelligence services.
Describing the current environment, the Director-General commented:
[F]acing no realistic prospect of criminal investigation and prosecution for their activities against us, our foreign adversaries are currently shielded from the significant disincentive of public exposure and punishment, and they are taking advantage of this gap. … Criminal prosecutions for espionage, foreign interference, secrecy, sabotage and economic espionage offences that are tested in our courts and reported in our media will send a very powerful message to those orchestrating such activity against us. Prosecutions will also discourage individuals from being caught up in these activities.
The Law Council also raised concerns that criminal sanctions would not compensate the owners of trade secrets for their loss. The Department responded:
In terms of compensation, section 21B of the Crimes Act allows a sentencing court to make an order requiring an offender to make reparation to any person, by way of money payment or otherwise, in respect of any loss suffered, or any expense incurred, by the person by reason of the offence.
Throughout this inquiry, the Committee has reviewed offences with a view to ensuring that each offence is sufficiently clear and unambiguous; enforceable; and appropriately targeted and proportionate to the threat. For most offences the threat has been to our national security. In the case of the theft of trade secrets offence, it is worth noting that the direct threat is to private interests – that is, the offence endeavours to protect private interests from threats to their proprietary information.
The Committee notes the concerns raised by the Law Council of Australia that, as the proposed new offence protects private interests, it would be more appropriately pursued privately by the affected person (that is, under the civil law).
However the Committee notes the rationale expressed in the Explanatory Memorandum that the theft of trade secrets on behalf of a foreign government amounts to economic espionage, and that this conduct ‘can severely damage Australia’s national security and economic interests’. The Committee also notes the advice provided by ASIO about the range of private sector interests that have been targeted by foreign government actors in the past, and the substantial economic losses incurred by Australian companies as a result.
The Committee recognises that non-government bodies and other private citizens hold information that could, if acquired by a foreign government actor, be used to disadvantage Australia’s national security. Further, the coordinated theft of trade secrets by foreign government actors could, in the long term, substantially diminish Australia’s economic wellbeing and competitiveness. Accordingly, the Committee accepts the necessity of the provisions to deter privately held ‘trade secrets’ from being targeted by foreign state actors, and to provide law enforcement and prosecutors with the tools they need to respond to this type of theft.
In relation to the detail of the provisions, the Committee questions whether it is sufficiently clear that the proposed threshold of ‘dishonestly’ stealing trade secrets would capture economic espionage committed by cyber vectors—for example, by hacking into a company’s electronic records in order to access commercially sensitive information and intellectual property. The Committee recommends that, if this conduct is intended to be captured by the offence, then this should be reflected in the Explanatory Memorandum.
The Committee recommends that the Explanatory Memorandum be amended to clarify whether the offence is intended to capture the theft of trade secrets by hacking or other online vectors.