Referral of the Bills
1.1
On 3 September 2020, Australia’s Foreign Relations (State and Territory Arrangements) Bill 2020 and Australia’s Foreign Relations (State and Territory Arrangements) (Consequential Amendments) Bill 2020 were introduced into the House of Representatives by the Attorney General, the Hon Christian Porter MP.
1.2
On 3 September 2020, pursuant to the Senate Selection of Bills Report, the provisions of the bills were referred to the Senate Foreign Affairs, Defence and Trade Legislation Committee (the committee) for inquiry and report by 5 November 2020.
Conduct of the inquiry
1.3
The committee advertised the inquiry on its website, calling for submissions by 25 September 2020. The committee also wrote directly to a range of organisations and individuals to invite them to make written submissions. The committee received 91 public submissions, as well as 15 confidential submissions. Submissions received are listed at Appendix 1.
1.4
The committee held two public hearings, in Canberra on 12 and 13 October 2020. Witnesses who appeared at the public hearing are listed at Appendix 2. Published submissions and the Hansard transcript of the public hearing are available from the committee's website: www.aph.gov.au/senate_fadt.
Purpose and scope of the bills
1.5
The bills seek to establish a legislative mechanism to enable Commonwealth engagement with arrangements between State or Territory Governments and foreign governments, as well as related entities such as local governments and public universities.
1.6
The Explanatory Memorandum to the Australia’s Foreign Relations (State and Territory Arrangements) Bill 2020 (the bill) states that the framework established by the bill will ensure that 'arrangements between State or Territory governments and foreign governments, and their associated entities, do not adversely affect Australia’s foreign relations and are not inconsistent with Australia’s foreign policy'. This is intended to 'foster a systematic and consistent approach to foreign engagement across all levels of Australian government'.
1.7
In the Minister's Second Reading Speech for the bills, the Attorney-General, the Hon Christian Porter MP, stated that 'one of the most important roles [of the Commonwealth government] is our exclusive responsibility for setting Australia's foreign policy, negotiating treaties and representing our nation internationally'; however, the Commonwealth government 'does not currently 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'.
1.8
The Attorney-General stated that while the Commonwealth government sets a foreign policy agenda to both protect and promote the national interest, there is no consistent practice or requirement for state and territory entities to consult with the Commonwealth when entering into arrangements with foreign governments. The Attorney-General continued:
This process, or lack of process, creates two very significant challenges.
The first challenge is that, without Commonwealth engagement, there is a very real and significant risk that arrangements may be entered into that are inconsistent with, and in some cases may even undermine, Australia's broader foreign policy objectives.
The second challenge is that, without this visibility, the nation is unable to leverage these relationships to further our national objectives in our international engagements.
This gap in Commonwealth oversight must be remedied, and this bill will create a process where we are all—federal, state, territory and local governments—working effectively together to ensure arrangements are consistent with our national approach to foreign relations.
Overview of the proposed scheme created by the bill
1.9
The oversight scheme created by the bill contains a number of features, broadly summarised as follows.
1.10
Under the scheme to be created by the legislation, States and Territories and their entities, including local governments and Australian public universities, will be required to notify the Minister for Foreign Affairs (Minister) of existing and proposed foreign arrangements. Where the Minister considers that an arrangement, or negotiations towards an arrangement, adversely affects Australia’s foreign relations or is not consistent with Australia’s foreign policy, the Minister can make a declaration to prevent prospective negotiations and arrangements from proceeding, or to cancel or vary existing arrangements.
1.11
The scheme establishes a two-tiered regime—an ‘approval regime’ and a ‘notification regime’.
Approval regime for agreements designated as 'core arrangements'
1.12
Under the approval regime, State and Territory governments will be prohibited from negotiating or entering into arrangements with foreign national governments unless the Minister has given approval. The approval regime applies to these government-to-government arrangements that are more likely to affect Australia’s foreign relations – designated as ‘core foreign arrangements’.
1.13
Under Part 2 of the bill, if a state or territory government proposes to negotiate or enter into a core foreign arrangement, it must first give notice to the Minister (at both the negotiation stage and before entering into an arrangement). The Minister must consider the proposal as soon as practicable, and if the Minister does not make a decision within 30 days of the notice being given, the Minister is taken to have given approval for the negotiation or arrangement to proceed.
1.14
If a core foreign arrangement is entered into without Ministerial approval, a range of consequences are brought to bear depending on the arrangement's legal status.
Notification regime for 'non-core foreign arrangements'
1.15
Under the notification regime, States and Territories and their entities, such as local governments and public universities, will be required to notify the Minister about a proposal to enter an arrangement with certain foreign entities. These foreign entities may include: subnational foreign governments and their departments, agencies, and public authorities; foreign universities without institutional autonomy; and—for local governments and universities—national foreign governments. These are designated as ‘non-core arrangements’.
1.16
Upon notification being made, the Minister has discretion to make a declaration that the State/Territory entity must not negotiate or enter the arrangement. Unlike the approval regime for core agreements, non-core arrangements can be entered into without specific approval from the Minister.
Declarations made by the Minister
1.17
Once an arrangement is in operation, the Minister may make a declaration under Part 4 of the bill that an arrangement is: invalid and unenforceable; not in operation; or required to be varied or terminated (depending on the nature of the arrangement and its legal status).
Ability to alter previous decisions in relation to an arrangement
1.18
Subclause 40(2) specifies that the Minister may make such a declaration irrespective of whether the arrangement was entered into before or after the commencement of the legislation, and irrespective of whether the Minister has previously made a different declaration in relation to the arrangement.
Matters the Minister must consider in making declarations under the bill
1.19
In making a declaration about an arrangement, the Minister must take into account certain matters relating to the relevant State or Territory. Subclause 51(2) outlines that the matters the Minister must take into account include:
the importance of the arrangement in assisting or enhancing the functioning of the State or Territory;
the extent of the performance of the arrangement;
whether the declaration would impair the continued existence of the State or Territory as an independent entity;
whether the declaration would significantly curtail or interfere with the capacity of the State or Territory to function as a government;
whether the declaration would have significant financial consequences for the State or Territory;
whether the declaration would impede the acquisition of goods or services by the State or Territory, including, for example, for the purposes of infrastructure;
whether the declaration would have an effect on the capacity of the State or Territory to complete an existing project that is to be delivered under the arrangement (either at all, or within the intended timeframe); and
any other matter that the Minister considers is relevant.
Compensation for acquisition of property
1.20
Clause 57 of the bill outlines that if the operation of the legislation would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Australian Constitution) from a person otherwise than on just terms, the Commonwealth is liable to pay a reasonable amount of compensation to the person. Beyond this provision concerning the acquisition of property, the bill does not appear to contain any further options for compensation for parties that may suffer financial or other impacts as a result of a Ministerial decision.
Requirements in relation to procedural fairness
1.21
Clause 58 of the bill states that the Minister 'is not required to observe any requirements of procedural fairness in exercising a power or performing a function' under the bill. This means, among other things, that there is no requirement for the Minister to provide a statement of reasons for his or her decisions to affected parties.
Public Register
1.22
The bill (under clause 53) will establish a public register 'to make transparent these arrangements and any ministerial decisions made under the legislation'.
1.23
The public register must include information on each foreign arrangement and subsidiary arrangement, including the parties to the agreement and whether any decisions were made by the Minister in relation to the arrangement. However, some information will be excluded from the public register, including information that the Minister is satisfied: is commercially sensitive; would disclose cabinet deliberations; or affects national security.
Notification to Minister of existing arrangements
1.24
The scheme created by the bills will operate retrospectively in relation to existing arrangements already in place between State/Territory entities and foreign entities, as well as prospectively in relation to future negotiations and agreements.
1.25
Under Schedule 1 of the bill, States and Territories are required to notify the Minister in writing of all relevant existing ‘core foreign arrangements’ within three months of the commencement of the legislation. State/Territory entities must notify the Minister of pre-existing ‘non-core foreign arrangements’ within six months of the commencements of the legislation.
Consequential amendments bill
1.26
The Australia’s Foreign Relations (State and Territory Arrangements) (Consequential Amendments) Bill 2020 (consequential amendments bill) proposes two sets of amendments to other legislation to assist in the implementation of the scheme.
Exempting the scheme from the administrative and judicial review
1.27
The consequential amendments bill seeks to amend the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act) to list the bill as a law to which that Act does not apply. This means that the bill will not be subject to review under the ADJR Act. The Explanatory Memorandum states:
The Minister’s decision-making powers under the Foreign Relations Bill, and determination of whether an arrangement with a foreign entity adversely affects Australia’s foreign relations or is inconsistent with Australia’s foreign policy, involve considerations within the Commonwealth’s remit and discretion. The determination of these matters are at the prerogative of the Commonwealth executive government and the Minister’s consideration as to whether these elements are satisfied is not appropriate for judicial adjudication under the ADJR Act.
As such, the exclusion of judicial review under the ADJR Act for these decisions recognises that decisions relating to sensitive governmental matters, such as whether an arrangement between a State or Territory and a foreign entity is consistent with Australia’s foreign relations and foreign policy, are not suitable for judicial review.
Information sharing with Australia's foreign investment review framework
1.28
The consequential amendments bill would amend section 122 of the Foreign Acquisitions and Takeovers Act 1975 to ensure that information under Australia's foreign investment review scheme can be shared for the purposes of the bill. The Attorney-General's second reading speech states:
This amendment is important, because there may be occasions of intersection or overlap between arrangements subject to the regulatory frameworks in both the foreign relations bill and the Foreign Acquisitions and Takeovers Act.
Effective and efficient information sharing between the ministers and the Commonwealth entities administering these two schemes will support a coordinated approach to managing arrangements between the states and territories and foreign governments.
Proposed application of the scheme
1.29
The Department of Foreign Affairs and Trade (DFAT) stated that in practice, the vast majority of arrangements—including university arrangements—will fall under the notification regime, with the two‑tiered model seeking to ensure that 'much of the routine business of State and Territories, local governments and Australian public universities will proceed as normal'. DFAT expects that 'most arrangements will continue to operate as they always have, just with greater visibility afforded to the Foreign Minister'.
Consideration by the Senate Standing Committee for the Scrutiny of Bills
1.30
The Senate Standing Committee for the Scrutiny of Bills (scrutiny committee) considered the legislation in its Scrutiny Digest 14 of 2020. The scrutiny committee raised a number of issues relating to the bills, including:
the broad and 'unfettered discretionary power' conferred on the Minister;
the power of the Minister to exempt arrangements from the application of the law;
leaving significant matters in the scheme to delegated legislation;
the provisions removing any right to procedural fairness under the bill; and
the retrospective application of the bill.
1.31
The scrutiny committee requested more detailed information from the Minister on each of these points.
1.32
The issues noted by the scrutiny committee were also raised in evidence received by this committee, and are discussed further in Chapter 2.