Labor Position
Labor committee members support the Government’s stated objectives of the legislation. It is important that Australia speaks with one voice internationally and we recognise the need for greater transparency in arrangements between subnational entities and foreign government entities and capacity for the Federal Government to regulate such arrangements.
Our view is that this legislation should form part of the suite of existing legislation and guidelines that work to safeguard Australia’s sovereignty, build domestic institutional resilience and regulate international engagement—including foreign investment legislation, countering foreign interference legislation, defence exports controls, the Security of Critical Infrastructure Act 2018, the Foreign Influence Transparency Scheme, and the Universities Foreign Interference Taskforce (UFIT).
The government has failed to explain how this bill interacts with or complements these existing schemes.
Labor committee members accept that greater Commonwealth visibility of subnational arrangements is necessary, that Australian universities and subnational governments may not have a full understanding of certain risks associated with foreign arrangements, and that DFAT is well-placed to understand risks and opportunities of arrangements with foreign governments. However, DFAT does not engage systematically with Australian entities covered by this bill – it does so on an ad hoc basis only. State and territory governments were advised of the bill the day before it was announced and universities were not consulted beforehand.
The bill provides the foreign minister with broad discretionary powers and no oversight of the regime. A large number of witnesses raised concerns that this lack of oversight and wide definitions of key terms would make it difficult to assess whether proposed arrangements would be consistent with Australia’s foreign policy with certainty. This opaque process and lack of certainty risks limiting international engagement by Australian entities.
The bill does not define ‘arrangements’, potentially widening the intended scope of activities to be captured by this legislation. As Professor George Williams noted on 13 October, this could even include email exchanges between universities. The bill would benefit from a clear definition of ‘arrangement’ to ease the regulatory burden of the legislation and provide Australian entities with a greater level of certainty on their own compliance. Nor does the bill define ‘institutional autonomy’. The Law Council of Australia stated that the definition should be included in the bill itself rather than in the rules, which are not subject to the same level of public or parliamentary scrutiny. UWA said the lack of definition meant it was impossible for Australian universities to make a meaningful assessment on what would be within the Bill’s scope. Professor Williams raised concerns that this would jeopardise arrangements with US and UK governments and affiliated universities. All universities bar one that made submissions contended that the bill would significantly impact their ability to maintain productive international partnerships and sustain Australia’s world-class research capacity.
The bill does not require the minister to provide reasons for decisions and does not allow for any process of review or appeal by affected entities of ministerial decisions. The bill excludes procedural fairness, the operation of the Administrative Decisions (Judicial Review) Act 1977, and any form of merits review. Judicial review of ministerial decisions would have limited use without a requirement for the minister to provide reasons for decision making. This has led to concerns raised about the bill’s lack of transparency, particularly given the broad definitions of key terms. It also limits the ability of Australian entities to comply with the legislation.
Questions were also raised about the constitutionality of the bill. Professor Williams stated that the Constitution does not vest exclusive responsibility in the Commonwealth for foreign affairs and that it is held concurrently by both the Commonwealth and the states. This could limit the ability of the foreign minister to deem invalid arrangements between state and foreign governments if they undermine the ability of state executives to function. While DFAT has claimed that, based on advice from the Commonwealth Solicitor-General, it is confident of the constitutional basis for the legislation, no evidence has been provided to the Committee to support that claim.
The bill imposes a significant regulatory burden on Australian public universities.
The government failed to consult with universities about their inclusion in the regime and has even refused to say when the decision was made to include universities in this bill.
DFAT is not a departmental member of the UFIT and the Department of Home Affairs did not appear at the public hearings or make a submission to the Inquiry. University representatives raised concerns about the potential overlap of the bill with these multiple processes and schemes, rather than strengthening transparency requirements through the existing UFIT process.
This bill has a significant regulatory gap, in that it does not apply to private universities or other educational bodies, whose international engagement would remain unregulated and will fail to meet the government’s stated objective of ensuring Australia speaks with one voice internationally. In addition, it creates potential disadvantages for public universities who will face additional regulatory burden. This is in contrast to the UFIT, which applies to all universities in Australia and raises questions about whether DFAT is the appropriate government agency to regulate university international engagement and manage risks of foreign interference.
Some witnesses raised concerns about the commercial risks associated with the bill, and the vagueness of the definition of subsidiary arrangements. The NSW Government stated that the bill would render uncertain the status of a large number of commercial arrangements. Commercial arrangements and sovereign risk are not usually areas within the policy responsibilities of DFAT. This lack of experience, along with a lack of clarity about the interaction of this regime with foreign investment legislation, presents sovereign risk concerns and will introduce commercial uncertainty putting Australian jobs at risk across industries, employer groups and a range of businesses from small to large.
The Northern Territory Government stated that the bill potentially leaves ‘state and territory government exposed to significant loss and damages’ and that the bill should provide compensation for state and territory governments beyond acquisition of property.
Despite the bill excluding corporations that operate on a commercial basis, commercial arrangements that meet the broad definition of ‘subsidiary arrangement’ are within the scope of the bill. DFAT has not provided sufficient clarity on how the relationship between subsidiary and head arrangements determines whether they are subject to the bill, an estimation of how many potential private commercial projects would be subject to the bill, and the process by which this bill supplants or augments existing FIRB processes.
DFAT has failed to provide evidence that the sale of the Port of Darwin would not be captured by this Bill. Despite initially providing evidence that the sale would not be captured, DFAT conceded that would depend on the nature of any pre-existing foreign arrangements entered into by the Northern Territory Government. The Government should provide clarity on how the sale of the Port of Darwin will be treated under the bill before it proceeds.
The principal Australian entities that are likely to be impacted by this bill under the definition of ‘core arrangements’—state and territory governments—have given limited evidence to this inquiry. The NT and NSW government have raised concerns about the impact of the bill—including jeopardising commercial projects, the administrative burden and lack of certainty and the waiting period for ministerial declarations. The lack of state and territory government perspectives on the record have severely limited the committee’s ability to assess the impact and practicality of this bill on affected entities. Consideration of a redrafted bill by this committee should provide the opportunity for appearances by all state and territory governments.
Recommendations:
That the government redraft the Bill and re-present it to the Parliament at the earliest opportunity.
Establish an oversight mechanism.
Subject to appropriate arrangements to protect national security, requires the minister to provide reasons for decisions, and a process for review of a minister’s decision.
Addresses the lack of clarity in the definition of ‘arrangements’ and ‘institutional autonomy’.
Requires an annual report to the Parliament by the Minister, outlining engagement with entities covered by the Bill to articulate and explain Australia’s foreign policy and how entities should engage with foreign entities in Australia’s national interest.
Addresses the regulatory gap of private universities.
That the government make clear how this regime will interact with the existing legislation and guidelines that work to safeguard Australia’s sovereignty including FIRB processes, UFIT Guidelines and the FITS and provide confidence that the Bill does not present a sovereign risk that will undermine investment and cost Australian jobs.
That the Government engage in genuine consultation with Australian entities covered by the Bill on the design of the regime.
Senator Kimberley Kitching
Deputy Chair
Senator for Victoria