Proposed Foreign Influence Transparency Scheme to shine light on foreign interests lobbying

In brief

The Federal Government has introduced into Parliament legislation that, if passed, will create the Foreign Influence Transparency Scheme, which will require persons and entities who have arrangements with, or undertake activities for, foreign principals to meet certain registration obligations. The scheme is intended to enhance transparency around the foreign influences on Australian politics and has been introduced alongside a suite of reforms in relation to national security. Partner Rachel Nicolson, Associate Katie Gardiner and Lawyer Jamil Diu report.

Who is affected by the Bill?

The Foreign Influence Transparency Scheme (the Scheme) (created by the passing of the Foreign Influence Transparency Scheme Bill 2017 (the Bill)) will be imposed on persons and entities, which includes companies, and requires registration and ongoing disclosure. Whether or not someone must register depends upon the type of foreign principal involved, the nature of activities performed, the purpose of the activities and whether the person has held a senior public position in Australia.

Australian subsidiaries of foreign companies who share the same business name are unlikely to be caught up in the regime where they are conducting commercial activities.

However, Australian subsidiaries who have a different business name to their foreign parent and which conduct activities related to security, defence or public infrastructure on behalf of that parent should be aware of registration requirements under the scheme and may face penalties where they fail to register.

Parliamentary lobbying on behalf of a foreign government

Persons or entities who lobby any Member of Parliament (MP) or the staffer of an MP, on any issue for any purpose, on behalf of a foreign government, will be required to register.

A number of exemptions apply, including:

• activities relating to a commercial or business pursuit conducted by an employee or person under the name of a foreign public enterprise or foreign business. The Explanatory Memorandum of the Bill has noted that the intention of this exemption is to exclude activities conducted by Australian subsidiaries of a foreign corporation from the Scheme, where a shared business name provides sufficient transparency to avoid registration;
• activities conducted on behalf of either a foreign business or individual relating to the pursuit of a bona fide business or commercial interests relating to a contract for goods and services, except activities relating to security, defence or 'public infrastructure'. Public infrastructure is defined under the National Security Legislation Amendment (Espionage and Foreign Interference) Bill 2017 and, once passed, will be defined at division 82 of the Criminal Code 1995 (Cth) to include 'any infrastructure, facility, premises, network or electronic system that belongs to the Commonwealth' as well as 'any infrastructure, facility premises, network or electronic system (including an information, telecommunications or financial system)'. The definition as currently worded is very broad and may capture a number of industries including banks, energy and telecommunications, where an Australian subsidiary trades under a different business name than its foreign parent company and is not subject to the exemption listed above;
• activities performed for the purpose of humanitarian aid;
• providing legal advice or representation;
• activities by diplomats and consular officials; and
• religious pursuits.

Activities for the purpose of political or government influence

Persons or entities who, in Australia, and for the purpose of influencing a political process:

• lobby any MP or staffer of an MP, Commonwealth official, department, agency, political party or candidate;
• distribute any kinds of information or materials; or
• distribute money or other items of value;

on behalf of a foreign public enterprise, business, political organisation or individual, will be required to register.

The same exemptions apply as for those listed under 'Parliamentary lobbying on behalf of a foreign government' above, as well as the following:

• private news media activities; and
• private business activities such as negotiating contracts.

Activities of a former Cabinet Minister, former Ministers, MPs or senior Commonwealth officials

A person who was a Cabinet Minister within the past three years who performs any activities for a foreign government, public enterprise, business or political organisation will have to register. The only exemptions available are in relation to activities for the purpose of humanitarian aid and the provision of legal advice or representation.

A person who was a Minister or MP within the past three years, or the head or deputy head of an agency in the previous 18 months who performs any activities using skills, knowledge, experience or contacts from their previous role, will have to register. The same exemptions apply as for former Cabinet Ministers above.

Disclosure requirements

Persons and entities who must register are required upon registration and on an ongoing basis to provide details about the nature of the relationship with the foreign principal and the activities performed under that relationship. This includes ongoing reporting in relation to any:

• material changes in circumstances;
• donor activity being undertaken on behalf of a foreign principal;
• updates to a person's registration when a voting period begins for a federal election; and
• activity relating to a federal election undertaken on behalf of a foreign principal at any time in the voting period.

Penalties and charges

The Bill proposes a number of offences for non-compliance.

Strict liability offences (requiring no fault element such as intention or recklessness to be proven) carry a maximum penalty of 60 penalty units ($12,600) and include failing to:

• keep adequate records required under the Scheme;
• disclose a communications activity; and
• comply with reporting obligations to the Secretary of the Attorney-General's Department.

More serious offences under the Scheme include circumstances where:

• a person fails to either register or renew their registration under the Scheme (up to seven years' imprisonment for individuals, 175 penalty units ($36,750) for companies);¹
• a person provides notice of an end of liability to register under the Scheme when a registrable arrangement still exists (up to seven years' imprisonment for individuals, 175 penalty units ($36,750) for companies);
• a person knowingly provides false or misleading information to the Secretary (up to five years' imprisonment for individuals, 125 penalty units ($26,250) for companies). A number of defences are available, including where the person advises the Secretary of an error in the information;
• a person fails to provide information relating to whether they are liable to be registered or information relevant to the Scheme to the Secretary when requested by notice (up to six months' imprisonment for individuals, 150 penalty units ($31,500) for companies). There is a defence available where the person does not provide the information complying with the notice but has taken reasonable steps to provide it and will provide the relevant information as soon as practicable; and
• a person, through act or omission, damages, conceals or prevents the keeping of scheme records (up to three years' imprisonment for individuals, 45 penalty units ($9,450) for companies).

It is proposed that the costs of making an application for registration and a renewal of registration will constitute a charge under the Bill which is currently being considered by the House of Representatives. The charges will be used to assist with establishing, administering and maintaining the scheme.

Existing lobbying laws to remain on foot

Existing state and territory lobbying laws and ministerial codes of conduct are not intended to be affected by the Scheme. The Bill contains a similar, broad, definition for 'lobby' as for 'lobbying activities' found in the Commonwealth Lobbying Code of Conduct.

The new regime will also have extraterritorial application and the EM notes that this is to cover circumstances such as where a person makes an agreement with a foreign principal outside of Australia.

Conclusion

The Scheme is currently under review by the Parliamentary Joint Committee on Intelligence and Security. Submissions are open until midday on Monday, 22 January 2018. The Committee has indicated that it will report on the Scheme by February 2018.

The Scheme, if passed, will commence on the date of proclamation or 12 months after it receives royal assent, whichever occurs sooner, to allow the Government further time to make regulations in relation to disclosure and in what circumstances information from the Scheme can be shared.

Companies who anticipate being affected by the Scheme should consider making a submission. They should also begin investigating formal and informal lobbying or politically motivated arrangements in place with any persons or entities who meet the description of a foreign principal under the act, with a view to disclosure requirements coming into effect as soon as 2018.