Australia's Foreign Relations (State and Territory) Arrangements Bill 2020

Introduction

The geopolitical landscape continues to shift rapidly across the globe, and this has been intensified by the ongoing economic, financial and social impact of the COVID-19 pandemic. Individual countries are becoming much more focused on national security and self-sufficiency as global supply chains and regional diplomacy are re-evaluated on a macro and micro level.

In Australia, the prioritisation of national interests from the Commonwealth Government has seen new commitments, through policy and diplomacy, to:

• Changes to the Foreign Investment Review Board framework.
• A review of the Security of Critical Infrastructure Act 2018 (Cth) and the August 2020 consultation paper flagging a potential expansion of “critical infrastructure” to include banking and finance, communications, data and the Cloud, defence industry, education and research, energy, food, health and space.
• Establishing a new unit in the Attorney-General’s Department that will enforce the foreign influence transparency scheme and work closer with ASIO and the AFP in its efforts to enforce the scheme.
• An announced Federal Parliamentary inquiry set to probe alleged foreign interference at public universities.
• The introduction on 3 September 2020 of the Australia's Foreign Relations (State and Territory) Arrangements Bill 2020 (Foreign Relations Bill).

In this update, we take you briefly through the Foreign Relations Bill and its implications for governments and other bodies such as public universities, including some of the practical considerations that might need to be considered in dealing with foreign government entities.

In brief

• The Foreign Relations Bill has broad implications for government to government arrangements (including subsidiary commercial arrangements giving effect to those arrangements) and will result in a significant new level of oversight and control.
• The Foreign Relations Bill is currently being reviewed by the Senate Foreign Affairs, Defence and Trade Legislation Committee, and a report is due by 5 November 2020.
• The Federal Government’s 2020-2021 Budget announced on 6 October provided a commitment of $25 million in funding over the next two years to support the review of existing and prospective arrangements between state and territory government entities and certain foreign entities to ensure consistency with Australia’s foreign policy.

Overview

In the Second Reading Speech, the Attorney-General noted that the Commonwealth Government has exclusive responsibility for setting Australia's foreign policy, negotiating treaties and representing Australia internationally and reflected that:

• The Commonwealth Government does not have visibility of all the arrangements which state, territory and local governments, and related entities including public universities, have made, or intend to make, with foreign governments.
• While the Commonwealth Government sets the foreign policy agenda to both protect and promote the national interest, there is currently no consistent practice or requirement for state, territory and local governments and universities to consult with the Commonwealth Government when entering into arrangements with foreign governments.

To address this, and in an effort to foster a regulated and consistent approach to managing foreign relations and the Commonwealth Government’s foreign policy agenda, the Foreign Relations Bill introduces a framework that will apply to existing or future arrangements where those arrangements:

• Have been entered into between state and territory entities and foreign government entities; or
• Are “subsidiary arrangements” made under the auspices of those government to government arrangements.

What arrangements are covered?

The Foreign Relations Bill will require all state and territory entities to notify the Foreign Affairs Minister (Minister) of all pre-existing arrangements within certain time frames after the commencement date of the Foreign Relations Bill (three months for core foreign arrangements, and six months for non-core foreign arrangements and all subsidiary agreements). Further, the state or territory entity must then advise the Minister, and in core foreign arrangement cases must seek the Minister’s approval, in order for the state or territory entity (including public universities) to commence negotiations or enter into future arrangements.

By way of summary, the affected entities and arrangements are outlined below:

• Core foreign arrangement: means an arrangement between a “core State or Territory entity’ and a ‘core foreign entity”.
• Non-core foreign arrangement: means all other arrangements between core and non-core State or Territory entities and core and non-core foreign entities.
• Subsidiary arrangements: are those entered into under the auspices of a foreign arrangement. A subsidiary arrangement can flow from a core or non-core foreign arrangement that is entered to as a consequence of the arrangement. Types of subsidiary arrangements are arrangements which arise directly from or directly implement an arrangement (such as a construction contract which was planned under a foreign arrangement related to infrastructure).
• An “arrangement” is very broadly defined as a written arrangement, agreement, contract, understanding or undertaking, whether or not it is legally binding, made in Australia or elsewhere and whether entered into before or after the Foreign Relations Bill commences. It also includes written variations to those arrangements.

It is important to note that the arrangements covered by the Foreign Relations Bill are not limited to those where the parties to them are solely the relevant government entities and it will apply where such arrangements include other public or private sector entities.

What are the direct impacts of the Foreign Relations Bill?

If an arrangement is caught by the Foreign Relations Bill:

• The Minister is required to maintain a public register of all such arrangements (excluding certain information such as commercially sensitive information).
• The affected arrangements must be notified to the Minister within the prescribed timeframes, as well as proposing to negotiate or enter into such arrangements.
• Negotiation or entry into core foreign arrangements without the Minister’s approval is prohibited. The Minister has a 30 day timeframe to give approval or refuse, failing which the Minister will be deemed to have approved. If an approval is provided, the Minister has powers to revoke this prior to the actual arrangement being entered into.
• The Minister has a range of powers, including:

• Prohibiting a state or territory entity from negotiating or entering into an arrangement; or
• Declaring as invalid and unenforceable, not in operation or varying or terminating any arrangements that are inconsistent with Australia’s foreign policies or arrangements that adversely affect Australia’s foreign relations.

• Compliance with the Foreign Relations Bill is supported by:

• The ability of the Minister to obtain an injunction to enforce the declarations or ensure compliance with certain provisions of the Foreign Relations Bill.
• Limiting review rights for decisions of the Minister by expressly excluding the requirements for procedural fairness applying to the Minister exercising a power or performing a function under the Foreign Relations Bill.
• Recognising that if the operation of the Foreign Relations Bill would result in the acquisition of property (within the meaning of the Constitution) from a person otherwise than on just terms, the Commonwealth will be liable to pay reasonable compensation to that person.

• The Minister may make rules for the purposes of the Foreign Relations Bill, as well as providing for approved forms and approved ways of providing notices.

Are there any exemptions?

There a few notable exclusions from the application of the Foreign Relations Bill:

• A state or territory entity does not include: (a) a corporation that operates on a commercial basis; (b) a hospital; or (c) an entity that is prescribed by the rules as being excluded.
• A foreign entity does not include: (a) a university that has “institutional autonomy”; (b) a corporation that operates on a commercial basis; or (c) an entity that is prescribed by the rules as being excluded.
• The subordinate rules to the Foreign Relations Bill may exempt certain arrangements or variations to those arrangements.

At this point, there are no draft rules introduced but this will need to be monitored in light of the current Senate Committee review.

Practical considerations

While it remains to seen what will come of the Senate Committee review, it is prudent for state, territory and local governments, as well as universities, to have regard to the Foreign Relations Bill in its current form and its impact on existing and future arrangements with foreign government and relevant entities. Practically, this includes:

• Undertaking certain internal “housekeeping” by identifying all arrangements, and variations to those arrangements, that could be caught by the Foreign Relations Bill and having a central register of those arrangements. This includes “subsidiary arrangements” where private sector entities may be directly affected.
• Seeking advice on those arrangements that might be “called in” by the Minister as a priority to understand the implications of Foreign Relations Bill and what measures may need to be taken to address any inconsistencies with foreign policy.
• Identifying information that is exempt from being on the public register, including commercially sensitive information, cabinet documents or deliberations, information subject to legal professional privilege or public interest immunity. For future arrangements, all information should be carefully scrutinised and identified upfront to enable quick identification and quarantining of exempt information.
• Considering the extent to which counterparties to those arrangements are kept informed as to the steps that are proposed to be taken and, if the Foreign Relations Bill is passed and commences, what will need to done to comply with the legislation.
• Updating relevant policies and procedures in place to ensure compliance with the requirements of the Foreign Relations Bill and rules, including training of relevant personnel.
• Recognising the need for approval of the Minister as conditions precedent to agreements and having mechanisms under affected arrangements to deal with any declarations from the Minister (including possible termination rights).

Final thoughts

While Australia remains “open for business” for foreign investment and engagement, the regulation of arrangements with foreign entities is rapidly changing and will involve greater scrutiny about what is in the ‘national interest’ as that concept continues to evolve. For the time being, governments, universities and other affected public and private sector entities need to monitor the progress of the Foreign Relations Bill and other regulatory and policy changes. We will continue to provide regular updates on these issues.

For a more detailed discussion on these matters and how to manage the impacts, please contact any of our team below.