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Client Update: The Foreign Influence Transparency Scheme – from Bill to Law

10 September 2018

In brief: The Federal Government recently passed the Foreign Influence Transparency Scheme Act. This is an entirely new regulatory scheme that will require persons who undertake activities on behalf of a foreign government or political organisation to register with the Attorney General's Department if those activities are intended to influence Australian governmental or political decision-making. The scheme is designed to enhance transparency around the nature and extent of foreign government influence on the Australian political process. Partner Rachel Nicolson (view CV), Senior Associate Clare Bradin, Associate Owen Nanlohy and Law Graduate Eugene Twomey report.

Background

The Foreign Influence Transparency Scheme Act (the Act) received Royal Assent on 29 June 2018 and will come into effect once formally commenced. The Act was significantly amended during the last three months of its passage, and has substantially departed from the earlier iteration of the legislation that we reported on last year.

The specific commencement date of the Act is presently unclear, as it will commence on 30 June 2019 unless Proclaimed by Notice in the Government Gazette on an earlier date.1 However, there are several factors that suggest the Act will not commence for at least another few months:

  1. the Attorney General's Department (the Department) needs to supplement the Act with several regulations, which have not yet been published;
  2. the Department needs to create a register that allows persons who are required to register to make relevant disclosures; and
  3. the Department has committed to providing further information and guidance prior to the commencement of the Act.2 

This update will address: (i) the purpose and scope of the Act; (ii) the further obligations that flow from registration under the Act; (iii) the Secretary's power to issue notices under the Act; (iv) the penalties for non-compliance; and (v) the areas of uncertainty still present in the Act.

 Are you captured by the Scheme?

Purpose of the Scheme

The Foreign Influence Transparency Scheme (the Scheme) is established by the Act, and is designed to complement the introduction of new foreign interference offences in the Commonwealth Criminal Code. The Scheme creates a registration and reporting framework that is intended to reveal when a foreign government or political organisation is seeking to influence Australian governmental or political decision-making, whether or not the attempted influence is: (i) perceived to be beneficial or harmful; or (ii) actually successful in achieving the outcome sought.

The Scheme does not operate to prevent any foreign influence on Australian political and governmental decision making. Rather, it specifically targets covert foreign influence. The view of the Australian government, as reflected in the Scheme, is that influence by foreign governments on Australian policy can be legitimate, but it needs to be open and transparent.3 This is particularly important where foreign persons are seeking to achieve their influence in Australia through intermediaries and it is difficult for decision makers and members of the public to understand the underlying interest behind a particular communication.

Scope of the registration requirement

In practical terms, the Scheme seeks to achieve this purpose by creating a register of individuals and companies that undertake specified activities with the objective of influencing a broad range of governmental and political processes in Australia, on behalf of 'foreign principals'.4

Speaking generally, a person (company or individual) becomes liable to register under the Scheme when the following criteria are met.

  1. There exists a foreign principal, being:
    1. a foreign government;
    2. a foreign political organisation; or
    3. a foreign government related entity or individual.5
  2. The person acts on behalf of that foreign principal.6
  3. The action on behalf of the foreign principal constitutes a registrable activity within the meaning of Division 3 of the Act, such as parliamentary lobbying, general political lobbying, communications activity or disbursement activity.7
  4. The person undertakes the registrable activity for the purpose of political or government influence, such as an activity undertaken for the sole or primary purpose, or a substantial purpose, of influencing a Federal election process, a Federal government decision, proceedings of a House of Parliament, or a process in relation to a registered political party.8
  5. The person is not entitled to an exemption from registration under Division 4 of the Act, for example:
    1. a director, officer or employee of a foreign principal undertaking an activity for the purpose of commerce or business, and clearly in the name of the foreign principal;9 or
    2. a registered charity undertaking an activity for a charitable purpose that discloses the relationship with, and identity of, the foreign principal, and the activity is not 'disbursement activity'.10

The following table summarises the seven key scenarios that may trigger the obligation to register under the Act (subject to considering any applicable exemptions).

No. Nature of activity Purpose of activity Type of foreign principal
1 Parliamentary lobbying in Australia N/A (purpose is irrelevant) Foreign government only
2 Parliamentary lobbying in Australia Political or government influence Any except foreign government
3 General political lobbying in Australia Political or government influence Any
4 Communicate or distribute information or material to the public in Australia Political or government influence Any
5 Disbursement activity in Australia Political or government influence Any
6 Any activity undertaken by a former Cabinet Minister N/A (purpose is irrelevant) Any
7 Any activity that is: (i) undertaken by a recent designated position holder; and (ii) that person contributes experience, knowledge, skills or contacts gained in their former capacity as position holder N/A (purpose is irrelevant) Any

What further obligations flow from registration?

A person who is liable to register has only 14 days to do so (following commencement of the Act).11  The regulations will confirm the precise information that will need to be disclosed to the Secretary of the Department (the Secretary) at the time of registration.

Following registration, a person must comply with a number of further obligations. Key obligations are summarised in the following diagram.

Notices of the Secretary

The Act gives the Secretary the power to issue notices in relation to the Scheme.

Information Notices

Transparency Notices

The Secretary can issue a person with an 'information notice' to produce information and/or documents under sections 45 or 46 of the Act, if the Secretary reasonably: (i) suspects that a person is liable to register but has not done so; or (ii) believes that a person (whether or not a registrant) has information relevant to the operation of the scheme.

The recipient must comply with the terms of the information notice or may face possible criminal prosecution.

The Secretary can also issue a 'transparency notice' under section 14A of the Act, declaring that a person is a foreign government related entity or a foreign government related individual.

Initially, the Secretary will issue a provisional transparency notice; if it is not revoked within 28 days (through the process of inviting and receiving submissions from the subject of the notice) then it becomes a final transparency notice.12

Although the Secretary is not required to follow any general rules of procedural fairness when issuing the transparency notice, the recipient of the notice may seek review of the decision to issue the notice in the Administrative Appeals Tribunal.13

Penalties for non-compliance

Part 5 of the Act sets out the criminal penalties for non-compliance with the Scheme. Key examples include:

Offence Criminal Penalty
Failure to apply for registration or renew registration. Imprisonment of up to 5 years.14
Provision of false or misleading documents to the Secretary in response to an information notice. Imprisonment of up to 3 years.15
Destruction of relevant records (which the person is required to keep under section 40 of the Act). Imprisonment of up to 2 years.16
Failure to comply with a transparency notice. Imprisonment of up to 6 months.17

Uncertainties remain

The Foreign Influence Transparency Scheme is an entirely new regulatory regime that seeks to achieve a purpose never-before deemed necessary in the Australian legal and political landscape.

There are a number of areas of uncertainty in the legislation that cast doubt on whether particular individuals and entities are required to register under the scheme. For instance, the definition of 'foreign government' is defined to include 'an authority of the government', which raises the question of whether the definition of foreign government is intended to extend to state-owned enterprises.

Further, determining whether or not a particular company will be deemed to be a 'foreign government related entity' is difficult in circumstances where it has a relationship with a state-owned entity that could be variously described as both a foreign government and a foreign government-related entity under the Act. Determining whether or not your company (or a related company) is a foreign government-related entity will likely become a question of fact that turns on individual circumstances, particularly those relevant to whether there exists a culture of informal governmental control.

There is also uncertainty on the intended scope of the required nexus between the foreign principal and the person acting on their behalf. In the absence of further guidance on the meaning of 'arrangement', there could be several potential types of relationships that may be sufficient to enliven this limb of the registration obligation.18

We await the Department's further information and guidance prior to the commencement of the Act for further clarity on these matters.

Footnotes
  1. Foreign Influence Transparency Scheme Act 2018 (Cth) s 2.
  2.  See e.g. https://www.ag.gov.au/NationalSecurity/EspionageForeignInterferenceandForeignInfluence/Pages/default.aspx
  3. See e.g. Second Reading Speech, Commonwealth Attorney General, The Hon Christian Porter MP (26 June 2018) p 44.
  4. Foreign Influence Transparency Scheme Act 2018 (Cth) s 42.
  5.  Foreign Influence Transparency Scheme Act 2018 (Cth) s 10.
  6.  Foreign Influence Transparency Scheme Act 2018 (Cth) s 11.
  7.  Foreign Influence Transparency Scheme Act 2018 (Cth) ss 20-23.
  8.  Note: this requirement does not apply to all types of registrable activities.
  9.  Foreign Influence Transparency Scheme Act 2018 (Cth) s 29.
  10. Foreign Influence Transparency Scheme Act 2018 (Cth) s 29C.
  11.  Foreign Influence Transparency Scheme Act 2018 (Cth) s 16.
  12. Foreign Influence Transparency Scheme Act 2018 (Cth) ss 14B and 14C(4).
  13. Foreign Influence Transparency Scheme Act 2018 (Cth) s 14G and 14H.
  14. Foreign Influence Transparency Scheme Act 2018 (Cth) s 57.
  15. Foreign Influence Transparency Scheme Act 2018 (Cth) s 60.
  16. Foreign Influence Transparency Scheme Act 2018 (Cth) s 61.
  17. Foreign Influence Transparency Scheme Act 2018 (Cth) s 59.
  18. Foreign Influence Transparency Scheme Act 2018 (Cth) s 11(1)(a)(i).

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