The committee heard a broad range of views on the provisions of the Australia’s Foreign Relations (State and Territory Arrangements) Bill 2020 and the Australia’s Foreign Relations (State and Territory Arrangements) (Consequential Amendments) Bill 2020, and the underlying policy intent of this legislation. Key issues raised included:
the policy rationale for the bills, and whether the scope of the proposed scheme would achieve the intended outcomes;
the constitutional basis for the legislation;
the broad definition of ‘foreign policy’ and other issues relating to the scope and operation of the Minister's decision making powers under the bill;
the impact of the legislation on particular entities, including state and territory governments, public universities and corporations; and
issues relating to resourcing for the implementation of the scheme.
Policy rationale for the bills
The committee heard evidence on the policy intent and scope of the bill across a number of points.
Support for the bills as a means of combatting foreign interference
Submitters and witnesses to the inquiry broadly acknowledged the need for coordinated measures to promote resilience from foreign interference among Australia's institutions at all levels.
A number of submissions expressed support for the bill as a mechanism to assist in combatting foreign interference and influence in Australia and address the risk of foreign governments undermining Australian sovereignty. For example, the Australian Values Alliance submitted:
Over the past three decades Australia’s Foreign Relations have been exposed to excessive liabilities where state, territory, local councils and public universities reached agreements detrimental to Australian national interests and foreign policies with foreign government entities. Some foreign powers, the Chinese Communist Party (CCP) in particular, have taken advantage of the democratic federal system and open society of Australia to damage Australian national interests and undermine the core democratic values and institutional integrity of Australia…It is absolutely necessary for Australia to take a consistent approach to foreign engagement across all levels of Australian government at this critical time of great uncertainty.
Need for visibility of state and territory arrangements
Submitters and witnesses commented on the necessity of the bills and whether greater Commonwealth visibility and oversight of arrangements between state and local governments and universities and foreign entities is in fact warranted.
The Department of Foreign Affairs and Trade (DFAT) articulated why greater Commonwealth visibility of subnational arrangements with foreign entities is seen as necessary:
Under Australia’s federal system, the Commonwealth Government has responsibility for conducting Australia’s foreign relations. The Minister for Foreign Affairs (the Minister) is accountable for managing these relations and is supported by DFAT. Drawing on our overseas network of posts and foreign policy expertise, as well as the Commonwealth Government’s analysis and intelligence capabilities, the Minister and DFAT are best placed to conduct foreign policy analysis and most equipped to understand risks and opportunities arising from arrangements with foreign governments, and how these may be managed and leveraged to advance Australia’s interests. Knowledge of foreign arrangements also enables the Commonwealth to cooperate and promote those foreign arrangements it considers beneficial.
DFAT stated that globalisation ‘has seen increasing direct engagement between State, Territory and local governments and Australian public universities with foreign government entities’, and submitted further:
Because of their different functions and expertise, States and Territories, local governments and public universities may not have a full understanding of specific risks or sensitivities associated with certain foreign arrangements. An increasingly contested and competitive global order calls for a more coordinated approach.
Professor Clive Hamilton of Charles Sturt University commented that this legislation is required now to assist state and territory entities carry out appropriate due diligence in relation to their foreign arrangements:
Why is Australia’s Foreign Relations (State and Territory Arrangements) Bill 2020 deemed necessary now rather than ten or perhaps thirty years ago? The reason is simply that until recently it has not been evident that a foreign state has been building relationships with subnational governments and with universities as a means of influencing or interfering in Australia’s foreign policy and shaping the national conversation in ways more favourable to the foreign state. Interference by the People’s Republic of China is rife in Australia and includes a divide-and-conquer strategy exploiting the federal system of government and using universities to build its “discourse power”. These are elements of the systematic, coordinated and well-resourced campaign by the Chinese Communist Party to extend its influence into the major institutions of democracy in Australia.
As long as subnational governments and universities continue to live in a state of innocence, they will remain easy targets for the CCP’s influence campaign. Once they understand that they face new risks from foreign interference then they have a simple but powerful means of responding—due diligence. Proper due diligence carried out on potential foreign partners will tell them what they need to know and how to proceed.
The committee heard evidence of examples of poorly worded agreements between state and territory entities and foreign governments, which would have benefited from greater oversight and input from DFAT.
Need for a unified voice in Australia's foreign relations
The Attorney-General, the Hon Christian Porter MP, summarised the rationale for greater Commonwealth coordination of Australia’s foreign engagement as follows in the bills’ second reading speech:
In the face of an increasingly complex and challenging global environment, in all international engagement, across every level of government and across every country, it is vital that Australia speaks as one nation, with one voice.
Some submitters contested the idea that it is necessary for Australia to speak with ‘one voice’ when it comes to foreign relations and matters of foreign policy. Asialink submitted that while it ‘both understands and fully supports the role of the Commonwealth Government in protecting Australia’s security and long-term national interest’, effective diplomacy and international engagement ‘requires not “one voice” but a diversity of relationships and interactions between Australia and other countries’. Asialink argued further:
The provisions of the Bill as currently drafted offer neither an effective mechanism for ensuring that Australia’s long-term national security interests are best protected, nor do they recognize that application of a narrow definition of Australia’s “foreign policy interests and values” as determined by [DFAT] risks undermining the rich and diverse range of international engagements across our democracy.
[A]s a country Australia needs to be more creative than ever in using our relationships to drive deeper engagement going forward between Australia and the Indo-Pacific as well as finding new and innovative ways to cooperate. An openness to a diversity of voices in Australia and the region, a keenness to network at many levels of society, and a deep commitment to developing the capabilities and knowledge across sectors necessary to seek out the shared opportunities for Australia and the Indo-Pacific should be foremost in our foreign policy.
Diminishing the diversity of the relationships—in particular, those at state and local government level and in our university sector—which support Australia’s international engagement would undermine our future security and national prosperity.
Asialink recommended that rather than seeking to review arrangements between non-Commonwealth Government actors and foreign entities, the government should provide clear examples of arrangements or agreements it believes undermine national security and guidelines to provide a level of transparency and certainty for state and territory entities.
Ms Melissa Conley Tyler, Research Fellow in the Asia Institute at the University of Melbourne, submitted that the legislation ‘rests on a fundamental misunderstanding of the scope of foreign policy and the nature of modern diplomacy’, arguing that ‘Australia benefits when multiple actors across society engage internationally and balance the ups and downs in official relationships’. Further:
[S]peaking with one voice is not an appropriate goal. International engagement by multiple voices gives many points of contact and provides ballast in a relationship to ride out diplomatic storms. When things are difficult at a political level is precisely when you need to maintain other connections. The modern idea of diplomacy emphasises broad engagement: not the stiff dance of elites but the jazzy dance of the masses. It can’t be exclusively managed by foreign offices.
Overall coverage of the bill
The committee heard evidence on the scope of the bills, and how the proposed legislative scheme might interact with other legislation and regulatory measures aimed to address issues around foreign interference in Australia and Australia's international engagement.
For example, the Law Council of Australia's (Law Council) submission raised the question of the necessity of the scheme as proposed by the bills given, the existing operation of the Foreign Influence Transparency Scheme Act 2018 (FITS Act), which provides a transparency register under which individuals or entities are required to register certain activities if they are taken on behalf of a foreign principal.
Other schemes were also discussed including: Australia's foreign investment review framework and the related Security of Critical Infrastructure Act 2018; the University Foreign Interference Taskforce; and restrictions under the Autonomous Sanctions Act 2011 and the Defence Trades Control Act 2012.
The Law Council commented in its submission:
Neither of the Explanatory Memorandums for the Bills, nor the Minister’s Second Reading Speeches make reference to these existing regimes, and there is an absence of explanation as to how the proposed scheme will complement these ongoing obligations. It may be appropriate for the Committee to inquire as to whether further justification for the proposed scheme is required noting existing frameworks already in place.
Whether the coverage of entities under the bill would achieve its ultimate policy goal was also questioned, as summarised by Professor George Williams AO of the University of New South Wales at a public hearing of the committee:
[O]ne striking thing about this bill is just the amount of omission, because you've described some areas, but what about all the other areas, which may enter into, frankly, far more problematic arrangements? They might be private universities. They might be other not-for-profits. They might be corporate entities that are involved in defence issues and the like. So this bill is really heavy-handed but deals with such a small subset of the sorts of arrangements that might counter our foreign policy that it leads to a sense of incoherence. It's not going to solve the problem, because vast things are not even covered. Again it suggests: where is the holistic view as to how actually to get to that goal? This bill is just not it.
In responding to these concerns, DFAT noted the other schemes 'that also serve to protect Australia’s interests in dealings with foreign entities', but stated that 'these other schemes serve a different purpose and have a different policy intent'. It expanded on this point as follows:
The Foreign Investment Review Board advises the Government on Australia’s foreign investment policy. The Security of Critical Infrastructure Act 2018 seeks to manage national security risks posed by foreign involvement in Australia’s critical infrastructure. Through the University Foreign Interference Taskforce, government and universities have also jointly developed Guidelines to counter foreign interference in the Australian university sector, to help protect universities against coercive, covert, deceptive or corrupting interference by or on behalf of foreign actors. Other regimes, such as Defence Export Controls and autonomous sanctions also have a role to play in respect of trade in goods and services.
Each of these schemes serves an important function in ensuring that Australia’s national interests are protected in dealings with overseas entities. There may, at times, be intersections between these regimes and the scheme established by the Australia’s Foreign Relations (State and Territory Arrangements) Bill 2020 but it is important that the Bill does not seek to replicate or duplicate these schemes. However, none of these regimes addresses the critical gap that the Bill seeks to fill–that of facilitating Commonwealth oversight of foreign arrangements entered into by States and Territories and their entities. The Bill’s objective is consistency of Australia’s foreign policy between all levels of Australian government, as opposed to our investment, national security or other interests.
Constitutional basis of the bill
The Explanatory Memorandum (EM) to the bill notes that section 51(xxix) of the Constitution empowers the Parliament to make laws with respect to ‘external affairs’. The EM states that the external affairs power ‘supports legislation with respect to matters or things outside the geographical limits of Australia, as well as legislation with respect to matters concerning Australia’s relations with other nations’.
Professor Williams gave evidence that, contrary to common view, constitutional responsibility for foreign affairs is not the exclusive domain of the Commonwealth:
[T]he key concept underlying the bill [is] that the Commonwealth has an exclusive responsibility for setting Australia's foreign policy, negotiating treaties and representing our nation internationally. Unfortunately, this statement requires some qualification. The Constitution does not vest exclusive responsibility in the Commonwealth for these matters. In fact, the power over external affairs in section 51 of the Constitution, as reflected in other parts of the Constitution, is held concurrently by both the Commonwealth and the states.
Professor Williams described the bill as ‘quite remarkable in the history of our Federation’ because ‘it has always been clear, from when the states were colonies until they became states, that in fact they have engaged actively in matters that would be regarded as foreign or external affairs’.
Professor Williams argued that this conception of external affairs matters because the High Court has held that a federal law will be invalid if it impairs the capacity of a state to function in accordance with the constitutional conception of the Commonwealth and the states in Australia’s federal structure:
This implied immunity of the states has been used in several cases to overturn federal laws that undermine the ability of state executives, courts and parliaments to operate in accordance with their functions.
Professor Williams argued that any attempt under the bill to revoke agreements such as the Victorian Government’s 2018 memorandum of understanding with the Chinese National Development and Reform Commission on the Chinese Belt and Road Initiative could be overturned in the High Court:
That was an agreement between the Premier in Victoria and a Chinese entity. It goes to the heart of the exercise of executive power by the state of Victoria, and it's a matter that only the High Court can ultimately resolve as to whether it trespasses, through this bill, into state functions.
It was noted that the matters the Minister must take into account when making a declaration in relation to an arrangement (or negotiation concerning an arrangement) under clause 51 of the bill include: ‘whether the declaration would impair the continued existence of the State or Territory as an independent entity’; and ‘whether the declaration would significantly curtail or interfere with the capacity of the State or Territory to function as a government’. Professor Williams argued that these inclusions show that the bill’s drafters ‘were obviously aware of this possibility of constitutional invalidity’:
That set of considerations there may either mean the minister is prevented from actually making any declaration about that Victorian agreement—in fact, almost any state executive agreement may fall outside the scope of this legislation, because of that consideration in section 51(2)—or, if the minister ignores or does not fully take into account those considerations, there's then the risk of constitutional invalidity.
The University of Melbourne submitted along similar lines that that there is ‘a constitutional flaw in the Bill in its singling out of State entities for special burdens to which other entities are not exposed’:
Legislation that singles out entities (including universities) established by or under State law for differential treatment compared to entities (including public universities) that have no such connection to a State (including private universities) would be seen as imposing a special disability or burden on the exercise of powers and fulfilment of functions of the States (including public universities), which curtails their capacity to function (as governments). This risk of invalidity is unlikely to be reduced by the requirement that the Minister take into account (when deciding to make a declaration) the matters listed in clause 51(2)(c) and (d) of the Bill.
DFAT evidence on constitutionality
DFAT officers gave evidence that it had received legal advice from the Commonwealth Solicitor-General on the constitutionality of the bills, and stated that DFAT is 'confident in the constitutional basis for the legislation'. DFAT officials declined to elaborate further on the legal advice received or specifically answer the questions raised by other witnesses about constitutionality.
When specifically asked to provide further information on notice, the Attorney‑General lodged a formal claim of public interest immunity with the committee, citing 'the long-standing practice of successive Australian Governments to not disclose privileged legal advice' as the basis of his claim to withhold the specifics of the legal advice provided by the Solicitor-General from the committee.
Definition of key terms in the bill and breadth of Ministerial discretion
Submitters and witnesses raised concerns around some of the key terms and definitions in the bill; particularly, the definition of ‘foreign policy’, as well as the definition of ‘institutional autonomy’ in relation to foreign universities. The breadth of the decision making powers granted to the Minister under the bill was another key concern to a number of stakeholders.
Definition of 'Australia's foreign policy'
A number of submitters and witnesses raised issues relating to the definition of 'Australia's foreign policy' in the bill.
Clause 5(2) of the bill provides that Australia's foreign policy 'includes policy that the Minister is satisfied is the Commonwealth’s policy on matters that relate to:
Australia’s foreign relations; or
things outside Australia;
whether or not the policy:
is written or publicly available; or
has been formulated, decided upon, or approved by any particular member or body of the Commonwealth.
The Minister must approve an arrangement under the bill (and in the case of core foreign arrangements, must approve the negotiation of such an arrangement) if the Minister is satisfied that the proposed agreement or negotiation:
would not adversely affect, or would be unlikely to adversely affect, Australia's foreign relations; and
would not be, or would be unlikely to be, inconsistent with Australia's foreign policy.
A number of submitters and witnesses expressed concern at the way the definition of 'foreign policy' is framed in the bill. For example, the University of Western Australia (UWA) described the definition of Australian foreign policy as 'extraordinarily wide'.
UWA argued that the Minister’s satisfaction that something is Commonwealth policy whether or not written or publicly available or formulated decided upon or approved by anybody, means that 'a crucial determinant of his or her power resides in a decisional black box devoid of transparency and accountability':
It allows for the possibility that the Minister or an official delegate can determine the existence of a policy, for the first time, in the context of approval or disapproval of a particular arrangement. The definition should be narrowed so as to exclude that possibility. The Minister or decision-maker, acting on a view of Australian foreign policy should be required to state the relevant policy and the basis of his or her satisfaction that it is Australia’s foreign policy within the meaning of the definition. Absent any such disclosure the decision-making process is opaque.
Professor Williams stated that 'foreign relations' and 'foreign policy' are two of the most important terms in the legislation, and commented:
Foreign policy is defined to include the concept 'any things outside of Australia'. I must admit it's hard to think of a less precise method to define foreign policy than by 'things outside of Australia'. Many 'things' may have nothing to do with foreign policy, and may be about Australians who are outside of Australia, but are about our national interest. It's an overly broad definition that takes us no closer to clarity on this key term.
…[W]hat is problematic is that foreign policy about 'things outside Australia' can include policy that has never been released and never been approved, hence, it may include policy that exists only in the mind of a foreign minister but runs counter to the declared policy of the Commonwealth. It may also include policy that has never and will never be approved by cabinet.
The Law Council of Australia submitted that the broad approach to defining foreign policy ‘creates challenges for those tasked with applying the proposed measures’:
This will present particular difficulties for the legal profession. It is difficult to envisage how a legal practitioner might advise their client in respect of policies that are not publicly available, or which may not yet have been formulated. While proposed subclause 51(2) includes matters that the Minister must make into account, this is an inexhaustive list, and could benefit from additional guidance to assist in interpretation.
The same is true for the thresholds in the proposed scheme for the requirement that the Minister must be satisfied that an arrangement would not adversely affect, or would be unlikely to adversely affect, Australia’s foreign relations. The term ‘foreign relations’ is not defined in the Bills, making it difficult for entities to assess whether an arrangement is likely to adversely affect such relations.
The Northern Territory (NT) Government submitted that the definition of ‘foreign policy’ in the bill may create significant challenges, and recommended that guidance should be published ‘to assist in determining how the Minister will consider the range of matters relating to Australia's foreign policy when assessing a proposed negotiation or arrangement’.
The Tasmanian Government expressed similar concerns about the broad scope of possible considerations the Minister could make, and submitted that it would ‘appreciate, and benefit from, greater clarity on the criteria arrangements will be assessed against’.
DFAT responded to concerns about the definition of foreign policy as follows:
Australia’s foreign policy and foreign relations are not static and change over time dependent on a range of domestic and international factors. This is inherent in their nature and any system for managing Australia’s foreign relations needs to be flexible to account for this dynamism. Foreign relations are also by their nature and law a matter for the Federal Executive and subject to Executive discretion.
It is, therefore, appropriate that Australia’s foreign policy be defined broadly to include policy that the Foreign Minister is satisfied is the Commonwealth’s policy on matters that relate to Australia’s foreign relations, regardless of whether the policy is written or publicly available or emanates from a particular member or body of the Commonwealth. Equally, it is appropriate for the Foreign Minister to exercise discretion in determining the nature of that policy.
That said, the fact that the Minister’s decisions in respect of arrangements will be made transparent in the public register will enable State and Territory entities to build a picture of what kinds of arrangements may be deemed to be adverse to or inconsistent with Australia’s foreign policy. We also expect there to be an ongoing dialogue between DFAT and State and Territory entities about Australia’s foreign policy and foreign relations to assist to maintain their awareness in that regard.
Breadth of Ministerial discretion in making decisions
A number of submitters commented on the circumstances in which the Minister may make a declaration about an arrangement or a negotiation under the bill, expressing concerns about various matters including:
the retrospective application of the bill to contractual and other arrangements already in existence;
the ability of the Minister to reverse a decision about an arrangement at any time in the future;
the lack of procedural fairness for entities affected by the Minister’s decisions;
the inability for parties to seek compensation if they are negatively impacted by a Ministerial decision under the bill;
the timeframes relating to Ministerial decisions for some agreements; and
the lack of formal input or review in relation to Ministerial decisions.
Various submitters voiced objections to the retrospective application of the legislation to arrangements, including contractual agreements, that are already in place. UNSW submitted that this retrospective application is ’inherently objectionable, given the potentially far-reaching impacts of the legislation on existing arrangements’.
The EM justifies this aspect of the bill as follows:
Such [pre-existing] arrangements may be adverse to Australia’s foreign relations or inconsistent with Australia’s foreign policy in the same way as prospective arrangements and it is therefore necessary for the Minister to have the power to assess, and make declarations in relation to, such arrangements. This ensures that the Minister can achieve the object of this Act…and effectively protect and manage Australia’s foreign relations.
Ability for Minister to revoke or change decisions made under the bill
The uncertainty created by the Minister’s ability to make declarations about an arrangement at any future point in time, even after an approval decision has been made in relation to that arrangement, was noted with concern in evidence to the committee.
The Explanatory Memorandum states that these provisions are necessary 'to ensure that the Minister has the ability to revisit the ongoing appropriateness of arrangements if circumstances change':
This recognises that Australia’s foreign relations and foreign policy are not static but can evolve in response to domestic and international factors. For example, an arrangement which is consistent with Australia’s foreign policy upon entry may become inconsistent with foreign policy over time, as circumstances change and Australia’s foreign policy evolves.
The NSW Government submitted:
Section 40(2) gives the Minister the power to make a declaration in respect of any foreign arrangement in operation, regardless of any earlier decisions. Sections 41 and 42 also allow the Minister to declare invalid legally binding arrangements under Australian or foreign law. If passed, the status of a large number of commercially important and beneficial arrangements will be rendered uncertain.
Universities Australia commented:
The fact that the Minister has the ability to make a declaration prohibiting or amending an arrangement at any point after the arrangement has finalised creates significant uncertainty. Combined with the lack of clarity regarding what constitutes a change in Australia’s foreign policy posture, this creates an environment which may deter international partners from making collaborative arrangements or funding commitments. There is also no protection to ensure the ongoing viability of agreements or collaborations should there be future changes or shifts in foreign policy.
Procedural fairness provisions and inability to seek compensation
Submitters raised concerns about the bill specifically excluding any right to procedural fairness for parties affected by Ministerial decisions, as well as the exclusion of the scheme from the application of the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act).
The Explanatory Memorandum to the bill states that it is appropriate to fully exclude procedural fairness (in terms of both the hearing and bias rules) in the context of this legislative scheme, given the object and purpose of the Act:
The Minister’s decision-making powers and functions under this Act relate to this purpose and involve considerations entirely within the Commonwealth’s and, by proxy the Minister’s, responsibility and discretion. Australia’s foreign relations and foreign policy evolve with time and in response to international events and circumstances, and are not always appropriate to be made public or shared with State/Territory entities, courts or the public at large. This is strengthened by the fact that the Minister’s decisions in relation to core foreign arrangements must be personally exercised.
The EM continues that given the nature of decisions made under the scheme, the ‘Minister’s impartiality (or appearance of impartiality) is not relevant to the exercise of his or her decision-making powers’, because the Minister’s decisions ‘will be based on considerations of foreign policy and foreign relations, as determined by the Commonwealth and promulgated through the Minister’. Further, the Minister is not required to afford parties an opportunity to be heard before exercising powers or performing functions under the scheme, in recognition that 'in certain circumstances, the provision of reasons itself could adversely affect Australia’s foreign relations, especially to the extent that the decision may be based upon classified information'.
In relation to excluding the bill from the application of the ADJR Act, the Attorney-General’s second reading speech states that individuals affected by a decision under the foreign relations bill may still seek judicial review by the Federal Court and the Federal Circuit Court or by the High Court, which 'will ensure that affected individuals have an avenue to challenge decisions that affect them'.
The Law Council submitted that the committee should have regard to the appropriateness of removing procedural fairness under the proposed scheme, given that this removes the right for an entity to access reasons for decisions and be able to respond to them. It also suggested that the exclusion of procedural fairness may affect public confidence in the proposed scheme through a lack of transparency.
The Law Council submitted further that the removal of procedural fairness and merits review ‘become more significant given the potentially broad scope of the proposed scheme’:
The combination of a scheme that relies on broad concepts such as inconsistency with foreign policy and adverse effects on foreign relations, together with a lack of transparency may raise concerns as to the potential for inconsistency and arbitrariness in the decision-making process. Such an approach may be seen to be in contrast to the stated aim of the measures to promote systematic and consistent approaches to foreign engagement.
Professor Williams commented that the removal of procedural fairness is 'very unusual in this type of legislation' and argued that this is problematic:
It means that an agreement may be overturned, but the parties will have no idea why. They won't know whether they can make a new agreement, if it was just one term in the agreement, if it was many terms—they will be left uncertain as to how to respond.
UNSW submitted that the legislation should not exclude the application of the principles of procedural fairness and should allow administrative review, as well as mandating that reasons be provided where an arrangement is invalidated. It stated that the 'objectives of the legislation can be achieved without excluding the rules of procedural fairness and there are no urgency or other grounds which justify the exclusion of those rules'.
In relation to the provision of reasons on decisions made by the Minister, Professor Williams noted that the bill could require that reasons be provided to affected parties confidentially in certain circumstances, such as where national security considerations are involved; this would provide for greater clarity for participants without undermining the objectives of the legislation.
Submitters argued that the lack of procedural fairness is compounded by the fact that parties who have an agreement terminated under the bill cannot seek compensation in most circumstances. The NT Government submitted:
Section 57 of the Bill provides that the Commonwealth is liable to pay reasonable compensation for an acquisition of property resulting from the operation of the Act. This clause provides no further level of certainty or compensation than is constitutionally required. The operation of the Bill potentially leaves State and Territory Governments exposed to significant loss and damages in circumstances that may not be able to be foreseen. This especially so given the ability of the Minister to retrospectively declare a foreign or subsidiary arrangement invalid, unenforceable, required to be varied or terminated notwithstanding having previously approved entry into the arrangement.
The NT Government's position is that the Bill should provide for protection of State and Territory Governments from civil liability, and for compensation beyond acquisition of property, including wasted or forfeited costs.
As an example of potential forfeited costs, the NT Government pointed to section 35(1) of the bill, which gives the Minister the power to declare negotiations of a non-core arrangement invalid despite there being no requirement to seek approval to negotiate such arrangements. It stated that this part of the scheme 'may result in inefficient use of State and Territory Government departments, Local Governments and Universities resources as it increases the risk of forfeited costs in negotiations that are later cancelled'. The NSW Government also reiterated this concern in its submission.
Professor Williams raised issues relating to the potential cost and reputational damages that could arise in relation to pre-existing arrangements:
Past agreements will also be especially problematic, because they will rarely have unilateral variation conditions. These are normally seen as not being appropriate within subcontracts. They raise issues of fairness and the like. In the absence of unilateral variation terms, a declaration by the minister will expose the Australian party to potentially very significant forms of compensation, let alone reputational risk, and also Australia to the possibility of sovereign risk, given how this will send signals about the inability to contract with confidence with overseas parties.
Timeframes for ministerial declarations under the bill
The NSW Government noted that Ministerial approval to negotiate and enter into 'core foreign arrangements' is implied if the Minister does not respond to a notification from the relevant state or territory entity within 30 days. It submitted that in practice, many arrangements must be negotiated and concluded in much shorter timeframes:
Thus, a blanket 30 day “waiting period” will effectively prevent States from securing certain opportunities—or force a difficult choice to proceed without relevant approvals. Where an arrangement presents low foreign policy risk but high economic or policy benefit, a shorter, more active approval process should be available.
The NT Government expressed the same concerns in its submission.
Lack of certainty for non-core foreign arrangements
Unlike the 30 day approval window relating to ‘core foreign arrangements’, there are no timeframes for potential Ministerial decision in relation to ‘non‑core foreign arrangements’. Representatives of the university sector argued that this creates greater uncertainty in relation to these agreements, as there is no guarantee of if or when the Minister will make an initial decision about a non-core foreign arrangement. The Group of Eight recommended that the bill be amended 'to ensure that the 30-day provision which applies to core arrangements being deemed automatically approved in the absence of [the Minister's] response be extended to non-core arrangements'.
Input into Ministerial declarations under the bill
The Group of Eight raised concern that, compared with other schemes dealing with foreign interference, the bill provides broad and singular discretion to the Minister. It noted, for example, that Australia's foreign investment review framework includes the existence of a Foreign Investment Review Board 'whose advice can guide the Treasurer’s decision rather than the full responsibility resting on one Minister’s shoulders'.
The Group of Eight argued that a similar mechanism could be beneficial under the bill, and recommended that 'a high-level expert committee be established as an advisory mechanism to the Minister to guide decisions on foreign arrangements under this legislation, including industry, academic, and state government representatives'.
Impact of the bill on particular types of entities
The committee heard evidence relating to several particular types of entities included in the definitions of 'State/Territory entity' and 'foreign entity' under the bill, in particular: state and territory governments; local governments; public universities; and corporations.
Evidence from state and territory governments
The committee received submissions from the New South Wales (NSW), Tasmanian, Northern Territory (NT) and Australian Capital Territory (ACT) governments. Each of these governments expressed qualified support for objectives of the bill, while providing suggestions for amendments or refinements to the approach taken in the legislation. State and territory government submissions emphasised that agreements entered into with foreign entities provide significant economic and social benefits across a range of areas.
The NSW Government submitted that it 'acknowledges the importance of achieving a consistent and coherent approach to Australia’s foreign relations and foreign policy' and stated that it 'supports the broad intent' of the bills. The submission continued:
At the same time, NSW recognises that in a globalised world, economic prosperity and security is underpinned by numerous, carefully considered State arrangements with international partners. As the Explanatory Memorandum notes, most of these arrangements deliver significant benefits for Australia. They create commercial opportunities or enhance the States’ proper execution of their responsibilities (e.g. in health and education) while presenting minimal or no foreign policy risk.
The NSW Government stated that it is in the national interest for such arrangements to 'continue with minimal constraints', and that the bill must strike an appropriate balance:
States are best placed to identify and enter arrangements that serve their economic and policy goals and to build investment pipelines that drive the national economy. Now more than ever, such arrangements are needed to secure Australia’s economic future, create jobs and promote economic recovery from COVID-19.
In seeking to regulate legitimate foreign policy interests, it is important that the Bill strikes the right balance between risk and convenience. Foreign policy considerations must enhance the quality of decision-making without impairing States’ agility or producing unintended economic consequences.
In this context, the NSW Government argued that the bill needs refining to create more procedural certainty for low risk arrangements:
Agility and procedural certainty are critical to the successful negotiation and conclusion of international arrangements, especially where downstream investment or commercial outcomes are anticipated. For States to continue securing successful outcomes, it is important that the processes and timeframes for notification and approval align with realistic negotiating demands. Certainty is also required to ensure the efficient and effective allocation of States’ resources to negotiations.
The NSW Government argued that as currently drafted, some provisions of the bill create uncertainty in the processes to be followed and the status of arrangements, and recommended that the Australian Government 'consider the impact of these provisions on relationships with international partners and investors and work with States and Territories to ensure confidence is preserved'.
The NT Government expressed similar concerns about the potential regulatory burden created by the bill, arguing that it must be aligned with the realities of negotiating international agreements with significant economic outcomes at stake. It submitted that this issue ‘will become increasing important once the resumption of international travel commences, as an economic effect of COVID-19 has seen trade and investment opportunities becoming increasingly contested’. The NT Government summarised:
Noting that the proposed legislation is intended to provide Australian sub‑national governments and publicly funded institutions greater confidence to enter into arrangements, there is a chance that if left unamended the Bill may actually restrict and hinder sub-national governments and publicly funded institutions efforts to engage internationally.
The Tasmanian Government submitted:
[S]ome of the Bill’s provisions may impact the independence of states and territories. It is important the Bill protects the national interest without impacting the decision making of states and territories.
An unintended consequence of the Bill may be that it disadvantages the government sector in comparison with the private sector. The Bill places an administrative burden on the government sector and increases the level of regulation to which it is subject. In doing so, the Bill may unintentionally hamper the ability of states and territories to engage with programs and relationships which directly benefit them.
The Tasmanian Government stated that the bill ‘creates an additional layer of bureaucracy and uncertainty for what would often be considered uncontroversial activities and arrangements’:
This is particularly true of non-legally binding arrangements between parties which symbolise an intent to further objectives together as such arrangements impose no obligations on signatories and present no risks to Australia’s sovereignty.
It is also important to note that opportunities to develop such arrangements often arise through chance meetings at marketing events or during general visits, not through formal processes. This means the requirement to consult the Minister before making arrangements may unnecessarily hamper Tasmania’s ability to enter into mutually beneficial arrangements with foreign government entities.
The ACT Government stated that it supports the Australian Government's objective of 'ensuring that arrangements with foreign governmental entities serve Australia’s national interest', and noted that in developing international arrangements, the ACT consults with DFAT to ensure that its international arrangements align with Australia’s foreign policy objectives.
The ACT Government submitted, however, that the proposed role of the executive arm of the government in determining which arrangements between state and territory governments and foreign governmental entities adversely affect, or are inconsistent with, Australia’s foreign policy 'goes against key features of the treaty and the international agreement making process in Australia':
Parliamentary scrutiny over treaty-making in Australia; analysis of the impact of treaties and the use of the external affairs power on the federation; and the provision of information to the public to assess the merits of treaties have been features of Australia’s treaty and international agreement-making processes since the mid-1990s.
The Australian Parliament Joint Standing Committee on Treaties should be asked to review and report on the Commonwealth Government’s proposed approach to state and territory international arrangements, as they arise, in the same way it does with proposed treaties and other international agreements. This will help ensure there is a consistent and transparent approach to international agreement making in Australia.
Stakeholders expressed a range of views in relation to the inclusion of local governments under the bill, with sister city arrangements a particular focus of discussion.
Some submitters emphasised the importance of 'subnational diplomacy', interactions and arrangements between cities and local governments internationally. For example, the Connected Cities Lab at the University of Melbourne submitted:
City diplomacy, twinning and membership in networks are all now well understood advantage points for national executives to leverage foreign influence and cooperation beyond the national government level and are fundamental to a modern, multilayered diplomatic strategy. These partnerships also offer strategic opportunities to engage with regimes and contexts where local authorities present more progressive and democratic bases than their national counterparts.
The Connected Cities Lab argued that the bill is almost certain to disincentivise local governments from entering into these types of arrangements:
The intent of the legislation is at odds with global trends toward ‘city diplomacy’ and will negatively impact the momentum local governments in Australia have in engaging internationally in ways that bring tangible social and economic benefits to the country.
The legislation is [also] at odds with trends amongst our key allies to harness the value of subnational diplomacy, for example the bi-partisan ‘City and State Diplomacy Act’ which has been introduced into the United States Congress.
Conversely, Professor Hamilton argued that the legislation is necessary in respect of local governments in order to counter growing foreign interference through sister city agreements and other arrangements that operate at the local government level:
For the CCP, sister-city and sister-state agreements have been effective avenues for gaining influence in municipalities and states or provinces around the world. The point to grasp here is that, in the case of China, sister-city agreements are not spontaneous expressions of the desire for cultural and economic exchange between two cities. While in the West a decision to enter a sister-city partnership is made by a council or city government, in China the process is coordinated by the Chinese People’s Association for Friendship with Foreign Countries (CPAFFC), an official organisation masquerading as an NGO. The CPAFFC forms an integral part of the CCP’s united front network of covert overseas influence agencies. Its task is to win friends under the banner of “people-to-people diplomacy”.
Most municipal governments lack even a rudimentary understanding of the CCP’s political goals in these arrangements.
The Australian Local Government Association (ALGA) submitted that to its knowledge, there are at least 37 agreements entered into by local governments that will be scrutinised under the scheme created by the bills, as well as almost 600 sister city affiliations between local councils in Australia and overseas cities. It commented further:
It has long been apparent to ALGA that there is very little understanding at the Australian Government level of the role local government plays internationally through sister cities and other alliances. With the exception of two policy papers released during the Rudd/Gillard era…government policies at both national and state/territory levels have been for the most part largely indifferent to local government engagement in establishing international relationships, as long as these remain broadly consistent with the priorities of these governments.
Councils want to work with the Federal Government and DFAT in the best interests of our communities and our country and recommend that an effective way to ensure this is for the Government to issue clear guidelines to councils to help their assessment of which agreements/arrangements are covered under the new legislation and also guidelines around issues to be considered and/or avoided in negotiating non-core foreign arrangements.
Issues raised in relation to public universities
Universities established under state or territory law are included as State/Territory entities under paragraph 7(e) of the bill. The Australian National University (ANU) is also specifically included under clause 55 of the bill. The EM to the bill explains these inclusions as follows:
Australian universities generally have a significant international posture, and may enter arrangements with foreign entities that may adversely affect Australia’s foreign relations or be inconsistent with Australia’s foreign policy. This definition will cover universities to the extent that they are established by, or under, a State or Territory statute, but it is not intended that private universities will be covered.
… ANU is treated like other universities covered by paragraph 7(e), despite the fact that it is established by Commonwealth legislation. This recognises that ANU is a public university equivalent to other public universities, regardless of the fact that it is not established by a law of a State or Territory.
A university is included within the definition of 'foreign entity' under paragraph 8(1)(i) of the bill if it: is located in a foreign country; and 'does not have institutional autonomy'.
The EM states that to the extent that a university that is primarily located and established in a foreign country maintains campuses within Australia, those campuses would fall within the scope of the bill (as long as the university also meets the criteria of not having institutional autonomy), recognising that 'Australian campuses of foreign universities, although not located in a foreign country, form part of, and are controlled by, the founding university'.
The bill does not define 'institutional autonomy'; rather, subclause 8(2) of the bill indicates that the rules will prescribe circumstances under which a university is taken not to have institutional autonomy.
Concerns from the university sector about impacts of the bill
The committee received extensive evidence from the tertiary education sector on how public universities could be impacted by their inclusion under the bill. The overall position expressed by the university sector is that public universities should not be included in the legislation; or if they are to be included, amendments are required to limit the impact on the sector.
Universities Australia listed the key impacts identified by the sector as follows:
The Bill has the potential to significantly reduce Australia’s capacity for global engagement.
As drafted, the Bill will create a significant regulatory burden for both universities and government.
The Bill provides a disproportionate response to a problem. The policy intent of increased transparency could be served through other, much simpler means.
There is a lack of coordinated response across government, with the Bill appearing to duplicate existing government processes.
There is an urgent need for further consultation, particularly in relation to the development of the rules.
A number of universities questioned why the university sector had been included within the definition of State/Territory entity at all. For example, Queensland University of Technology submitted:
It is not clear what problem the Government is trying to solve by including university international agreements in a Commonwealth oversight function relating to foreign policy. University agreements are not geopolitical in nature, but go to collaborative arrangements around specific activities within teaching and research. They much more closely resemble business agreements, which the Government has excluded from the remit of the proposed regime.
In evidence to the committee, DFAT responded to concerns about the inclusion of universities in the scheme as follows:
The university sector has suggested that universities should not be included within the Bill. However, the inclusion of universities recognises that publicly funded Australian universities are institutions established by state and territory law with a fundamental role in international research and partnerships…The status of Australia’s public universities and their international posture, means their foreign arrangements have the potential to impact Australia’s foreign relations and foreign policy. However, it is also the case that university arrangements present a lower degree of risk to Australia’s foreign relations than State and Territory arrangements with foreign national governments. As a consequence, there are fewer requirements and a lesser degree of scrutiny afforded to university arrangements under the Bill [than for 'core arrangements'].
Implications for relations with partner universities and Australia's international engagement
Universities contended that the bill would significantly impact their ability to maintain productive international partnerships and sustain Australia’s world class research capacity, in a highly competitive global environment. Universities Australia submitted:
The Bill will impose constraints on the sector’s ability to engage with international partners. There are many ways universities, academics and students interact with overseas institutions and colleagues. If every interaction is subject to disallowance or amendment, this is highly likely to limit the ability of Australia’s researchers and students to engage effectively in the ways that are essential for both researchers’ and students’ development.
La Trobe University commented:
Our chief concern is that the legislation, as currently drafted, is so wide in scope that it could pose a serious threat to the free exchange of ideas and Australia’s contribution to open science, which are central features of universities’ raison d'être. The risk that existing agreements could be voided or that prospective agreements could be vetoed and/or delayed could cause hundreds of thousands of dollars to be lost, opportunities to lapse and cause immeasurable harm to Australia’s world-renowned universities and global research reputation. This would have ripple effects on the attraction of the country to international students, researchers, industry and foreign investment.
UNSW was among several universities that noted the bill would put Australian universities at a competitive disadvantage globally:
Regarding future arrangements, the commercial uncertainty created by the Bill will act as a disincentive for foreign partners to collaborate with Australian universities in securing commercial opportunities with industry, in accessing international research funds and in the intensely competitive global higher education marketplace. Universities will be obliged to structure commercial negotiations and transactions around the possibility of a declaration prohibiting the (proposed) arrangement. The practical impact of this commercial risk cannot be overstated and will expose universities to an incomparable competitive disadvantage.
RMIT University commented on the potential implication for campuses of Australian universities located overseas:
This is not just a question of global agreements entered from Australia. RMIT’s Vietnam campuses, for example, are deeply integrated into the local communities and have partnerships with industry, government and universities. They are significant investments – in our case, RMIT Vietnam is the largest Australian services investment in Vietnam and works in partnership with the Australian Government on the ground to build Australia’s soft power influence. Governments offshore may consider reciprocity and develop similar arrangements in response to Australia’s policy shifts.
The Australian Technology Network of Universities (ATN) submitted that the regulation of universities proposed under the bill 'is out of step with the other liberal democracies that are our key political and economic partners and allies'. It stated that the bill 'goes beyond what Australia’s other Five Eyes alliance partners have legislated and would diminish Australia’s relative advantage in the globally connected and competitive area of research'.
Professor Clive Hamilton took a strong contrary view about the possible impact on Australian universities' international agreements:
Universities claim that the legislation will have a “chilling effect” on their extensive program of international alliances and agreements. If certain agreements are inconsistent with or undermine Australia’s foreign policy then they should be put on ice. However, other than those with Chinese entities where thorough due diligence ought to be performed as a matter of course, the vast majority of agreements, current and future, will require nothing more than transparent reporting. Surely it’s not beyond the wit of our university administrators to understand what this proposed law is aimed at.
Issues concerning 'institutional autonomy'
The EM to the bill states that the intention of the legislation is 'to cover foreign universities that lack institutional autonomy, as distinct from the levels of institutional autonomy enjoyed by Australian public universities'. Noting that the circumstances in which a foreign university does not have institutional autonomy are to be prescribed in the rules, the EM states:
By way of example only, a lack of institutional autonomy may include a government or a political party exerting control or influence over the university management, leadership, curriculum, and/or research activities.
Submitters expressed concern that a definition of 'institutional autonomy' has been left to be prescribed under the rules, rather than being contained in the bill itself. The Law Council of Australia stated:
Given the critical nature of this definition, the Law Council’s position is that the primary legislation should clearly provide such criteria. From a rule of law perspective, leaving substantive matters to subordinate legislation is unsatisfactory, given that such legislative instruments, and any subsequent amendments, are not subject to the same level of parliamentary or public scrutiny.
Professor Williams concurred with this assessment, stating that it is 'somewhat inexplicable that this term of significance has not been defined in the legislation'.
The university sector stated that this uncertainty around the definition of institutional autonomy creates significant issues. For example, UWA submitted:
The definition of ‘institutional autonomy’ has a huge impact on the application of the Bill to Australian universities, and a faulty definition in the rules would completely transform the meaning of the Bill. This makes it impossible for Australian universities to make a meaningful assessment on what would be within scope until the Rules are promulgated.
The ATN stated that 'at a minimum, these definitions and guidelines need to be circulated and open for consultation' prior to the passage of the bill.
Effect of the bill on Australian universities' institutional autonomy
The National Tertiary Education Union submitted that the bill may erode the institutional independence of Australia's universities:
[A] major concern is that the Bill would effectively require universities—which are non-government, independent and autonomous organisations—to be in step with the foreign policy of the Government of the day. This could potentially bind universities to the Government’s political agenda and undermine institutional independence. While this alone should cause great concern, the Bill further exacerbates these issues in that it does not allow for transparency, procedural fairness or avenues for appeal for those institutions that are subject to a Ministerial decision to amend or veto arrangements under the Bill’s provisions.
Need to maintain engagement with a range of types of overseas universities
In considering the impact of the bill on Australian universities’ relations with universities overseas that may not have institutional autonomy, ANU stated that ‘it is vitally important to maintain engagement with countries that have different higher education systems from ours, while being fully aware of the risks and having processes in place to mitigate those appropriately’.
The Australia Myanmar Institute (AMI) submitted that it is engaged in work advocating for, and working towards, universities in Myanmar progressing from the absolute government control (which has bound them since 1964) to forms of autonomy consistent with the understanding of countries like Australia. AMI noted that the bill could hamper these efforts, particularly if the requirements around ‘institutional autonomy’ in the bill make it more difficult for Australian universities to engaging with counterparts in Myanmar. It summarised these issues as follows:
AMI considers that the use of the term “institutional autonomy” in the Bill and in the Explanatory Memorandum will prove destructive to AMI’s work to build university research and student relationships with universities in Myanmar. As in Australia, Myanmar universities are formed under legislation and all would be at risk under the institutional autonomy test in the Bill… AMI urges the Parliament to remove all the institutional autonomy language from the Bill.
AMI’s overarching point is that we seek to contribute to relationships between institutions in Australia and Myanmar which are designed to help Myanmar rebuild its education sector as one which operates with academic freedom and integrity. The proposed legislation is likely to damage our ability to achieve these objectives, even if we had the resources to manage the bureaucratic load the legislation would introduce. We ask that this be taken into serious consideration[.]
DFAT comments on the definition of 'institutional autonomy'
DFAT stated that the bill 'will not apply to bilateral arrangements between Australian universities and foreign universities that enjoy the institutional autonomy with which we are familiar in Australian universities':
For example, the Bill will not require notification of arrangements between Australian public universities and universities like the ‘Russell Group’ of UK universities, the ‘Ivy League’ in the US, or comparable institutions. Australian universities’ arrangements with the vast majority of foreign universities will remain unaffected by the Bill.
Mr Simon Newnham, Chief Legal Officer at DFAT, stated however that the department would not be seeking to 'make lists' of particular institutions or countries under the rules, and commented further:
[W]hat is clear here is that the benchmark in many respects for what is and isn't institutional autonomy is the way in which Australian universities operate. Where it is clear already from open sources where foreign universities match that sort of standard—and we expect that in multiple countries—with a degree of certainty we're able to talk to the certainty that they would not be caught. However…it will be important for the department—and the foreign minister, as the decision-maker—to work its way through individual circumstances about case-by-case examples that come forward as part of this scheme and need to have decisions made. It would be inappropriate to prejudge, on any level, the way in which those rules will be applied to individual circumstances.
Mr Newnham told the committee that the rules would be released in time for the Parliament’s final consideration of the bills.
Administrative workload created by the scheme
The university sector argued that an extremely broad range of agreements between Australian universities and foreign universities could be captured under the bill as it is currently drafted. The sector estimated that more than ten thousand existing agreements could come under the scope of the bill, ranging from major international partnership agreements through to student and staff exchanges, cultural activities and scholarship programs.
Notification requirements for pre-existing and prospective arrangements
Universities Australia noted that implementation of the Bill will require all universities to inform the Minister of their existing arrangements with foreign entities that meet the criteria outlined in the bill within six months of the legislation being brought into effect.
Noting the large number of pre-existing arrangements that may be covered under the scheme, the Group of Eight universities recommended that a longer period of 12 months be prescribed for initial notifications to the Minister. Similarly, the Australian Local Government Association recommended that consideration be given to extending the deadline for councils to complete a stocktake of current arrangements and notify the Minister.
Universities expressed concern about the dual notification process established under the bill for non-core arrangements (such as arrangements relating to universities). Under subclause 34(1), the Minister must be notified about proposals to enter non-core foreign arrangements (i.e. at the negotiation stage), with the Minister able to make a declaration stopping those negotiations; separately, under subclause 38(1) the Minister must be notified within 14 days when a State/Territory entity enters a non-core foreign arrangement.
Universities Australia stated that this dual notification requirement creates 'a two-step process that will essentially double the regulatory burden' for universities negotiating and entering into arrangements.
UWA recommended several possible means of ameliorating the administrative compliance burden for universities under the scheme, including:
changing the requirement for all 'non-core arrangements’ to be reviewed by DFAT so that only legally-binding written agreements are covered;
including in the bill exemptions for administrative correspondence, teaching agreements and research agreements; or
providing additional financial resources for universities to meet the compliance requirements of the commencement of the legislation.
Universities Australia recommended that if the bill includes universities, the Australian Government 'should include in it a list of exclusions to narrow the scope of arrangements to focus only on agreements of interest'.
The Group of Eight stated that the bill would be enhanced by a streamlining process 'to focus attention only on those arrangements of genuine national concern', thus reducing administrative burden of the scheme. It recommended the introduction of a reporting matrix that classifies arrangements by level of potential interest, to allow departmental and university resources to be better utilised in administering the scheme.
Addressing foreign interference at Australian universities
Submitters and witnesses from the university sector drew attention to the fact that there are already a range of mechanisms that purport to address concerns around national security and foreign interference as they relate to the university sector. La Trobe University identified requirements across a range of legislation and other mechanisms including:
the University Foreign Interference Taskforce (UFIT) Guidelines, which were developed in 2019;
the establishment of an Integrity Unit within TEQSA to manage UFIT recommendations and their implementation;
the Foreign Influence Transparency Scheme Act 2018;
the Autonomous Sanctions Act 2011; and
the Defence Trades Control Act 2012.
In particular, universities argued that significant progress has been made in addressing concerns around foreign interference in Australian universities through the UFIT taskforce and guidelines. RMIT University commented:
A core element of the joint regulatory regime for the Australian Government and Universities is the Universities Foreign Interference Taskforce (UFIT), established by the Minister for Education just on 12 months ago.
UFIT…is an extensive and collaborative process, that has introduced significant new safeguards for the sector and partnerships with Government. This has been a significant advance in an evolving work program to protect the University sector and Australian interests.
The resulting Guidelines to Counter Foreign Interference in the Australian University sector (the guidelines) protect against foreign interference, through supporting an environment of trust and guiding decision making, based on potential risks, so Australian universities can continue to produce world-class international collaborations.
The Group of Eight stated that the UFIT process, which involved collaboration between the university sector, government departments and security agencies, 'has been globally recognised as truly world leading'.
It was also noted that the Parliamentary Joint Committee on Intelligence and Security is conducting an inquiry into foreign interference in Australian Universities, which is due to report in July 2021 and may result in recommendations leading to further compliance processes for universities.
Innovative Research Universities (IRU) commented:
IRU members are concerned the various laws and initiatives on foreign interference are becoming increasingly numerous and disjointed, potentially leading to additional complexity and confusion in an already complex area of public policy. We urge the Government to take a more holistic approach to this issue and to work with universities through the UFIT to identify and fix any perceived gaps in the current laws and regulations. UFIT is a more appropriate and likely more effective vehicle for dealing with such concerns than further laws.
Universities Australia argued that the government should 'consider existing processes for collecting information on international partnerships that are already in place, and, with some adjustment, could supply the transparency that seems to be the policy intent' of the bill. UNSW and others submitted that if universities are to be subject to the bill, universities 'should be subject to a disclosure regime only'.
Concern about ongoing foreign interference in the university sector
A number of submitters expressed concern about ongoing foreign interference in Australian universities, even in light of initiatives such as UFIT. For example, Professor Clive Hamilton submitted:
The universities have mounted a coordinated attack on the proposed legislation, making a string of unfounded and hyperbolic claims about the likely impact of the new measures. Unfortunately, they have responded in the same way each time the federal government has introduced a policy responding to foreign interference or theft of intellectual property. The fact that the universities repeatedly argue that the measures would violate their academic freedom shows that they simply do not accept that the problem exists. When they emerge from the age of innocence, they will understand that the measures already taken and now proposed are aimed precisely at protecting academic freedom on campus.
There is now a mountain of evidence that Australian universities have been the target of a sustained and effective campaign by the Chinese Communist Party and its various agencies to use them to exert political pressure, to shape the national conversation and to open themselves to the purloining of advanced scientific and technological knowledge.
Several troubling examples were raised during the inquiry where Australian universities have failed to uphold expected standards in relation to academic freedom, freedom of speech, and ethical research practice in the face of interference from foreign actors:
An academic's tweet in relation to democracy in Hong Kong was intentionally deleted by their university, which subsequently put out a statement on the matter in English and a foreign language which didn't seem to match. The university dismissed this as a mistake rather than a deliberate action.
Student protestors supporting democracy in Hong Kong were violently attacked on an Australian campus by pro-CCP activists, with none of the culprits for the violence disciplined or otherwise held to account.
An Australian university allowed a job advertisement to be placed on its website for a position in the Hong Kong Police Force, which has actively supressed the pro-democracy movement there.
Artificial Intelligence research conducted by a foreign academic in Australia has now allegedly been utilised to surveil minority Uyghurs in China.
Particular concerns were raised in relation to agreements with researchers from countries where there is a fusion of civil and military research efforts, whereby a doctrine of the 'civil military' dictates that any research of a civil nature can be commandeered for military use. It was suggested that greater Commonwealth oversight in these kinds of cases could be particularly helpful.
Professor Hamilton argued that Australian universities have engaged in 'wilful naivety' on matters of foreign interference, and highlighted key areas of concern, including:
engaging in research collaborations with Chinese companies closely linked with the Chinese government’s military and security forces and hosting Peoples Liberation Army scientists in Australian laboratories;
hosting Confucius Institutes that censor the politics and history of China in their language and cultural teaching, exert political influence on administrators, and aid in the monitoring of Chinese students;
tolerating the violation of free speech on campus due to the activities of Chinese students and CCP proxies;
exerting 'subtle but unmistakeable pressure' on China scholars to self-censor when it comes to comments on China and China-Australia relations.
Professor Hamilton and other witnesses expressed the view that universities' financial reliance on international students and research partnerships creates significant pressure to allow concerns around foreign interference to go unaddressed.
Dr Chongyi Feng, Associate Professor in China Studies at the University of Technology Sydney and President of the Australian Values Alliance, commented on the risks associated with institutional agreements with Chinese government-affiliated entities:
I emphasise that the institutional arrangements could compromise the autonomy and the integrity of Australian educational institutions when you allow a branch of the Chinese government to operate within the universities, right on the campus. Of course, in terms of the curriculum delivered in Confucius Institutes, the rhetoric include in the textbook comes from China. All those textbooks in China have been censored and purified by the Chinese propaganda department, so how can you allow that propaganda material to be taught in Australian schools and universities?
Dr Mark Harrison of the University of Tasmania commented:
The university sector opposes the legislation on two grounds: there are too many agreements for universities to assess and subject to oversight and universities are now working with Commonwealth agencies to manage foreign agreements and partnerships. The universities are in fact describing what has gone wrong. They have devoted huge resources to establishing foreign partnerships as an aspirational policy and only a fraction of that to risk assessment, especially political risk. Having achieved what they set out to do, they now have countless thousands of agreements they cannot manage and in working with Commonwealth agencies as they describe they are effectively outsourcing the policy capacity that they have not developed internally.
The legislation is a very big stick for this problem but one could imagine a scenario in which instead of submitting every individual agreement for review by the Commonwealth, universities demonstrate that categories of agreements have been subject to an internal process to the satisfaction of the Commonwealth, so creating incentives to rebalance their internationalisation policies.
Professor Hamilton argued:
The submissions to this inquiry by the universities and their representative bodies show that they do not accept that this legislation responds to any identifiable problem and, to the extent that foreign influence might be a problem, they believe they can deal with it themselves. The fact that they have permitted the problem to flourish betrays an institutional blindness and arrogance. Although some universities have begun to make progress, overall the sector cannot be trusted to take account of Australia’s national security in its decision-making. Cultural change is needed. Holding the hands of university administrators as they learn to practice proper due diligence, as this bill promises, will help bring about that cultural change.
Applicability to other educational institutions
The National Tertiary Education Union (NTEU) questioned why public universities are included under the bill, while other educational bodies are not:
Given that universities are not an arm of government and are acknowledged as being autonomous institutions, the NTEU questions why the legislation does not apply to arrangements entered into by other organisations, should these adversely affect Australia’s foreign relations or be inconsistent with Australia’s foreign policy.
If the rationale for including universities is because it is the nature of what universities do, the question must be asked as to why are other educational or research institutions or organisations not covered?
The NTEU noted that in 2017 there were 172 registered higher education providers in Australia, of which only 43 were universities. It stated that non‑university higher education providers 'could potentially enter into agreements that do not follow the Government’s foreign policy of the day' and submitted:
We therefore question the reasoning which would make it illegal for a university to enter into a collaborative research arrangement which the Minister might determine to be inconsistent with Australian foreign policy, but exactly the same arrangements between a non-university research organisation and a foreign entity would be exempt. Leaving aside any national security concerns, at the very least such provisions could put universities and their staff at a major competitive disadvantage in pursuing international research collaboration, noting the potential of the Bill to create a chilling effect (or even self-censorship) for researchers.
Application of the bill to the vocational education sector
TAFE Directors Australia (TDA) submitted that the bill would have a detrimental impact on the vocational education sector’s ability to operate partnership programs outside of Australia:
The model outlined in the Bill is anticipated to be a drag on the responsiveness, and therefore, effectiveness of TAFE services offshore, especially considering the scope of the scheme. While there is an undertaking for decisions on core agreements to be made within 30 days, lack of specificity for turnaround of non-core arrangements risks lengthy waiting times, simply due to volume of arrangements that will need to be processed.
These arrangements, especially the potential for Ministerial over-ride, may result in some TAFEs and other entities reducing international cooperation and trade. This has the potential to dampen otherwise strong ties between countries and peoples.
Many agreements, and MoUs in particular, are often reached at the point of a visit as this is accepted practice in many countries. In this regard a principles, rather than an in-process and post event approval process, may be worthy of consideration. That is, the principles of engagement are agreed and established at the onset.
TDA also noted that the bill could create an uneven playing field between TAFEs, who are to be covered under the bill, and non-TAFE Registered Training Organisations (RTOs):
There are also broad market issues at stake…[T]he bulk of TAFE arrangements relate to delivery of formal VET qualifications or part-qualifications. Under national policy arrangements for vocational education and training these qualifications are endorsed centrally as national qualifications for delivery by registered training organisations (RTOs). To the extent that this element of TAFE offshore arrangements triggers the need for approval under the scheme calls into question whether non-TAFE RTOs arrangements offshore also need approval. Otherwise, a two track process – a reporting and approval process for TAFEs and no oversight of other RTOs - distorts competition arrangements for international trade.
Corporations that operate on a commercial basis
A 'corporation that operates on a commercial basis' is excluded from the definition of 'State/Territory entity' under paragraph 7(g) of the bill. Similarly, subparagraph 8(1)(k) excludes corporations that operate on a commercial basis from the definition of 'foreign entity'.
The EM states that these exclusions will ensure that any commercial operation, even one that is wholly or partly owned or controlled by a state or territory or by a foreign government, is not covered by the scheme established under the bill. This recognises that this scheme 'is not intended to regulate State/Territory entities entering purely commercial head arrangements'. By way of example, the EM notes that state or territory-owned corporations, such as water corporations or port authorities, and foreign government-owned corporations, are not covered under the bill.
The NSW Government submitted that it supports the intent of this exclusion as articulated in the EM, but 'it is unclear whether the definition [in the bill] achieves the objective':
As the [EM] acknowledges, foreign states structure their governments in a variety of different ways. Many foreign State-owned (or controlled) enterprises may not be strictly constituted as “corporations” or operate on a purely “commercial basis” as typically understood under Australian law. Yet the arrangements they enter into will be commercial in nature. Since foreign arrangements are classified on an entity basis, and neither “corporation” or “commercial basis” is defined, there is a risk that purely commercial arrangements will be captured and regulated in apparent contradiction to the Bill’s intent.
In addition, an ambiguous definition will force States and Territories to seek clarification from the Commonwealth Government on whether certain commercial partners, negotiating purely commercial arrangements, are captured by the Act. This will not only introduce uncertainty and delay into commercial negotiations but also increase the administrative burden on both Commonwealth and State bureaucracies.
The NT Government expressed the same concerns in relation to this definition. The NSW Government recommended that the Australian Government consider amending the bill 'to ensure that arrangements which genuinely operate for commercial purposes are excluded from the scope of the Bill, as intended'.
Conversely, some submitters argued that the bill should be extended to cover commercial arrangements, or a subset of commercial arrangements. For example, VOICE Australia submitted:
There are Communist Party of Vietnam wings in not only state-owned corporations, eg. Vietnam Electricity EVN1, but also in many commercial corporations.
We believe that the key test is whether an arrangement with a foreign commercial corporation impacts on Australia's foreign relations or foreign policy. If it does then it should be in scope of the Bill, even if that corporation is not formally associated with a foreign government.
Other entities excluded from the bill
Some submitters who were strongly supportive of the bill advocated for the inclusion of other types of arrangements under the bill. For example, the Falun Dafa Association of Australia submitted:
We also recommend the Bill includes agreements that are proposed by Australian public-funded organisations, such as public schools, public‑funded media, think tanks and other institutions, with countries reported to have records of severe human rights abuses, including lack of freedom of expression and freedom of belief.
Some submitters also argued that hospitals should be included under the bill's coverage, to mitigate risks associated with arrangements in place with foreign partners where unethical practices, such as forced organ harvesting, may be occurring. Doctors Against Forced Organ Harvesting noted that hospitals are specifically excluded from the definition of 'State/Territory entities' under the bill, and commented:
It would be remiss to not include hospitals in the list. There are known cases of Australia’s major research hospital facilities entering into agreements with foreign entities that were suspected to violate Australian ethical guidelines on medical practices and research.
This exemption may have serious implications, such as Australian government-funded research facilities, hospitals, and state health departments, which have entered into arrangements with Chinese hospitals. The most serious concern, in this case, is that there have not been due diligence checks regarding the vast number of unethical transplantation practices. This compromises Australia’s notable medical and ethical standards, thus directly undermining the very nature of Australia’s sovereignty.
Arrangements to be exempted under the rules
The Minister may exempt certain arrangements through the rules from the obligations that would otherwise be placed on those arrangements under the bill (for example, there would be no requirement to notify the Minister of an exempt arrangement).
DFAT submitted that this 'provides flexibility to limit the application of the scheme as considered appropriate'. DFAT stated that the Minister’s power to prescribe exempt arrangements may include prescribing:
thematic types of arrangements, such as certain types of research arrangements;
arrangements entered into during particular time periods, such as arrangements entered into prior to a certain date; and
arrangements necessary to address emergency situations, such as arrangements in relation to disaster management or urgent public health matters.
The NSW Government expressed strong support for exempting certain categories of arrangements from the scope of the bill, and submitted that if properly utilised, this mechanism 'will ensure States can maintain a flexible approach to negotiating and entering into low risk arrangements'. It stated that this flexibility 'is particularly important during ministerial visits and trade missions where arrangements must be negotiated within a matter of days'. Further:
To work optimally, it is important that categories of exempt arrangements properly align with commercial and practical needs. This means exemptions could also extend to specific entities similar to exemption arrangements under the Foreign Acquisitions and Takeovers Act 1975 (Cth).
The NSW Government recommended that the Australian Government consult with states and territories 'to ensure that exempt arrangements are meaningfully defined and there is a clear and certain process for seeking exemptions', and expressed support for publication of the rules 'to ensure clarity for all parties'.
TAFE Directors Australia argued that ‘principles-based exemptions to the scheme could be put in place without compromising the national sovereignty and foreign affairs objects’ of the bill. TDA suggested principles which could be considered, including:
using pre-approved templates for similar agreements - such as establishing model agreements TAFEs may replicate with surety;
thresholds on the financial value of the agreement;
excluding less-formal arrangements which do not entail fiscal consideration between the signatories such as MoUs;
exemption for education and training services and associated professional services; or
exemption of countries where there are key diplomatic and security alliances.
TDA also suggested that arrangements made under free trade agreements or other similar agreements could be exempted:
Many Free Trade Agreements and other government-to-government economic agreements often entail cooperation in areas of skills and education and mutual recognition arrangements. The scheme could consider whether arrangements under cover of these agreements are exempt. For example, the Indonesia-Australia Comprehensive Economic Partnership Agreement entails close cooperation on vocational education and training, showing the centrality of VET to Australia’s national interest and its regional engagement.
Measures to support the implementation of the bills
Stakeholders commented on several matters relating to the implementation of the bills, including the operation of the public register and the necessary resourcing for implementation.
Operation of the public register
In relation to the public register created under the bills, the NSW Government submitted:
Section 53(3) of the Bill provides that information must not be included on the Public Register where the Minister is satisfied that information is commercially sensitive or must otherwise be excluded.
NSW supports the appropriate protection of commercially sensitive and other confidential information. Maintaining commercial confidentiality of certain discussions preserves the integrity of negotiations between States and their international partners.
NSW welcomes further clarification of how aspects of the Public Register will operate. For instance, it is unclear to what extent details of exempt arrangements will be recorded on the Public Register. Similarly, the Bill should clarify whether exempt variations of arrangements must be recorded if the original arrangement has been disclosed.
The Tasmanian Government noted that since 2014, it has published all MoUs and agreements with international partners that it is signatory to, except where these are considered commercial-in-confidence, on its webpage. Further, ‘trade and investment mission programs, budgets and outcome reports are also published through routine disclosures’. The Tasmanian Government ‘is therefore already committed to transparency regarding its arrangements with foreign government entities’.
Resourcing requirements for implementation
Some submitters raised concerns about the administrative burden that would be placed upon DFAT in having to review all pre-existing arrangements, and evaluate new negotiations and agreements into the future.
In this context, it was noted that the 2020-21 Budget, delivered on 6 October 2020, included $25 million in initial funding over two years from 2020-21 to DFAT 'to support the review of existing and prospective arrangements between state and territory governments and foreign governments to ensure consistency with Australia’s foreign policy'. This consists of $15 million in 2020-21 and $10 million in 2021‑22.
DFAT stated that this funding is being used to establish a dedicated task force unit to implement the scheme created by the bill, and stated:
DFAT is establishing a unit to implement the scheme established by the Bill. It is developing written guidance material to assist with understanding of the Bill’s provisions, and to provide clarity on the processes that underpin its new requirements. This material will include publicly available fact sheets and address frequently asked questions. It will also provide additional information on matters such as the means for notifying the Minister of arrangements, and the mechanism for doing so.
DFAT will also develop an ICT system to administer the scheme and provide an online platform for State and Territory entities to give notification or seek approval of an arrangement. These resources are expected to be in place ahead of the scheme’s entry into force.
Mr Simon Newnham, Chief Legal Officer at DFAT, informed the committee that DFAT is expecting its implementation unit to consist of around 25 to 30 staff. Mr Newnham stated that 'the expectation is that a vast amount of the work will be front-loaded as part of this process' in setting up the arrangements for the scheme.
Need for resourcing to support state and territory entities
Several stakeholders argued that resources would need to be made available to assist state and territory entities to develop and deepen their capacity to engage with issues around foreign interference and their new obligations under the bills. Dr Mark Harrison of the University of Tasmania submitted:
By reframing the political meaning of MOUs and other agreements, there is a risk that the [bill] will overly suppress them as state and local policy instruments that can benefit the national interest. This could mean missed opportunities for the Commonwealth to mobilise state and local governments and public institutions as a vector for its foreign relations…
Therefore, while legislative tools for oversight and review of state and local agreements with foreign governments and entities are needed, the overall policy impetus at the level of the Commonwealth could also require the need for greater Commonwealth support for policy capacity building at the state and local level. The Bill could be supported by Commonwealth policy to promote a substantive policy capacity for state and local government and public institutions to understand the risks and opportunities of international agreements and for the Commonwealth to promote a more coherent overall foreign relations policy frame that more actively includes states and local government and public institutions.
Ms Penny Burtt, Group CEO at Asialink, stated that the implementation phase of the legislation would be crucial in assisting state and territory entities to act appropriately in relation to foreign arrangements:
You've got to get the right legislation, but then you have to work to ensure that people understand it—and that's really tough implementation work. There's a parallel there with free trade agreements, for example. We can quote free trade agreements, but getting business to understand and execute them requires a lot more than the written agreement. I think that that's also the case here. Notification doesn't in itself condition all the behaviours.
ALGA submitted that councils 'welcome clarity and support from the Australian Government and [DFAT] to ensure that our national interests are protected, and any foreign relationships are transparent':
However, we wish to ensure that the implementation of the Act is not an undue burden on Councils or the Department. To this end we recommend that the Government properly resource DFAT to ensure timely assessment of proposed agreements/arrangements and Ministerial decisions.
Professor Clive Hamilton submitted that the bill and associated resourcing will help state and territory entities to develop appropriate expertise in this area:
Subnational governments and universities in Australia are not equipped to do proper due diligence on Chinese entities. When they emerge from their state of innocence, they will see the new law not as a regulatory burden but as a framework in which they can cooperate with the federal government to carry out due diligence on their foreign partners. Commonwealth expertise and resources will be devoted to assisting entities lacking the skills or resources to evaluate foreign partners. The government has already allocated $25 million over the next two years to carry out this work, and more will undoubtedly follow. Working with the Commonwealth in this way will give subnational governments and universities the confidence that they are not exposing themselves to foreign influence risks or linking themselves unwittingly with covert military and intelligence agencies.
The committee welcomes the government's focus on combatting foreign interference in Australia's institutions and ensuring that Commonwealth oversight in this area is consistent and robust. The committee considers that the intention of the bill to allow greater visibility of arrangements between state and territory entities and foreign entities is well-founded. It is incumbent on all levels of government to engage internationally in ways that further the national interest, with full awareness of both the opportunities and risks in this area.
Rationale and scope of the bills
Some evidence to the committee questioned whether new, standalone legislation is required to monitor state and territory arrangements, rather than augmenting other existing regimes that serve to protect Australia’s interests in dealings with foreign entities. The committee notes DFAT's view that while there may be overlap in some circumstances, each of these regimes has a particular focus and target. Articulating how these regimes can work together in a complementary fashion should be a focus of the implementation phase of this legislation.
In terms of entities covered under the bill, the committee is of the view that the government should give further consideration to including hospitals under the scheme, noting recent concerns in relation to Australian research hospitals entering into agreements with foreign entities suspected of breaching Australian ethical guidelines. The committee also has reservations about the exclusion of corporations from the legislation, given that some foreign enterprises lack corporate autonomy. The committee considers there would be benefit in the government clarifying how any potentially problematic arrangements between state and territory entities and foreign corporations can be managed.
The committee notes the evidence of Professor George Williams that there may be constitutional questions relating to some aspects of the bill. While DFAT stated that it is confident in the constitutional basis for the legislation, it declined to address the substance of the concerns raised by Professor Williams. When asked to articulate the legal advice it had received on these issues, DFAT deferred to the Attorney-General, who lodged a formal public interest immunity claim. This has been a long established practice of successive Australian governments to not disclose privileged legal advice.
In these circumstances, the committee cannot form a considered judgement on the constitutional questions raised in the evidence before it. It will be a matter for the Senate as a whole to weigh these issues during its deliberations on the bills.
The committee notes that stakeholders raised some significant concerns in relation to the scope and drafting of the legislation, in particular in relation to the definition of key terms including 'foreign policy' and 'institutional autonomy'.
The committee notes DFAT's assurances that the vast majority of arrangements entered into by the university sector are not intended to be captured under the bill.
The committee considers that would be helpful to include a definition of 'institutional autonomy' in the bill itself. Beyond this, the committee considers that a workable solution to the other issues raised is able to be met by the rules. At a minimum, it would be helpful for the rules supporting the legislation to be released prior to debate on the legislation in parliament, and following consultation between DFAT and affected stakeholders. This will allow the Senate and stakeholders to assess with more accuracy how aspects of the scheme are likely to operate in practice.
The committee notes that DFAT has been allocated an initial $25 million in funding over two years to establish the scheme and commence implementation.
The committee considers it is important that this scheme be utilised to build the capacity of state and territory entities to engage in international arrangements with all necessary expertise. Consideration should be given to ensuring that resourcing for this scheme helps to achieve this aim.
The committee recommends that the definition of 'institutional autonomy' be included in the bill itself (e.g. in the definition of ‘foreign entity’ in section 8), rather than as a disallowable rule.
The committee recommends that the government consider including a definition of corporate autonomy in the bill to clarify the operation of the legislation in relation to corporations.
The committee recommends that the rules exempt minor administrative or purely logistical matters (e.g. flights, visas etc) and minor alterations of arrangements that do not alter their substance.
The committee recommends that the government consider broadening the scope of the legislation to include hospitals.
The committee recommends that DFAT consult with stakeholders on the proposed rules, and that the rules be released publicly before the consideration of the bills by the Parliament.
The committee recommends that, subject to consideration of the above recommendations, the bills be passed.
Senator the Hon Eric Abetz