Written by Monique Carroll and Corrina Virtanen.
On 7 December 2017 the Foreign Influence Transparency Scheme Bill 2017 (Bill) was introduced by the Australian Government. The passage of the Bill will establish the Foreign Influence Transparency Scheme (Scheme). By introducing registration and ongoing disclosure requirements in relation to certain activities involving foreign principals, the Scheme is intended to provide transparency for the Federal Government and Australian public in relation to the sources of foreign influence in Australia. The Scheme will apply to individuals and entities, including corporations, partnerships and associations.
Companies with arrangements in place with individuals or entities that constitute foreign principals should consider the extent to which their current operations may be caught by the Scheme and the registration and disclosure requirements which may apply. Companies may also wish to seek advice clarifying whether their commercial activities fall within either of the two commercial or business pursuits exemptions. Greater certainty as to the scope of these exemptions may be particularly important for companies whose commercial activities relate to national security, defence or public infrastructure and for Australian subsidiaries of foreign companies.
Whether an individual or entity is required to register under the Scheme is dependent upon who the foreign principal is and the purpose of the activity in question.
Activities that will require an individual or entity to register will include:
- lobbying a Member of Parliament (MP) or the staffer of a MP on behalf of a foreign government;
- lobbying, in Australia, any MP or staffer of an MP, Commonwealth public official, department, agency, political party or candidate on behalf of a foreign public enterprise, political organisation, business or individual, for the purpose of political or governmental influence;
- communicating or distributing, in Australia, information or material on behalf of a foreign government, public enterprise, political organisation, business or individual, for the purpose of political or governmental influence;
- distributing, in Australia, money or other items of value on behalf of a foreign government, public enterprise or political organisation for the purpose of political or governmental influence (donor activity); or
- performing any activities for a foreign government, public enterprise, political organisation or business where the individual undertaking the activities was a Cabinet Minister, Minister, MP or holder of a senior Commonwealth position within the last 3 years (registerable activities).
Individuals or entities will also be liable to register if they enter into an arrangement with a foreign principal to undertake registerable activities (regardless of whether the activities are actually performed).
Individuals and entities who are required to register under the Scheme must:
- disclose material changes affecting registration;
- disclose donor activity in Australia undertaken on behalf of a foreign principal;
- review and update registration information when a federal election voting period begins; and
- disclose activities undertaken on behalf of a foreign principal at any time during a federal election voting period.
Disclosure must be provided upon registration and on an ongoing basis. Certain information disclosed will be made public, including the name of the foreign principal and the nature of the activities engaged in.
The Bill proposes a number of exemptions from the registration requirements for activities undertaken on behalf of foreign principals. The key exemptions which may apply to companies are those relating to commercial or business pursuits.
Employee or subsidiary exemption
The Bill provides a broad exemption for entities conducting activities solely for the purposes of commercial or business pursuits, where the individual or entity is undertaking the activity under the name of a foreign public enterprise or business. This exemption also applies to employees of foreign businesses. The Explanatory Memorandum states that the intention of this exemption is to exclude activities conducted by Australian subsidiaries of a foreign parent company, where the same or similar business name already provides sufficient transparency.
The Explanatory Memorandum also states that "commercial or business pursuit" is to take its ordinary meaning and may include a broad range of activities including those relating to trade, commerce, buying, selling, dealing and marketing. In light of this broad interpretation, most commercial activities would likely be caught by the exemption.
The Explanatory Memorandum provides the example of undertaking lobbying activities on behalf of a foreign business by appearing before a Parliamentary committee as a scenario where this exemption would apply.
Commercial negotiations exemption
If an entity is not a subsidiary of a foreign entity with the same or similar name, it must come within the commercial negotiations exemption. Under this exemption, an individual or entity will be exempt in relation to an activity if it is solely for the purposes of pursuing bona fide commercial or business interests relating to the negotiation or conclusion of a contract for the provision of goods and services.
According to the Explanatory Memorandum, "negotiating or concluding" a contract is intended to cover all stages of contractual negotiations including preliminary steps leading up to negotiations. Therefore, requests for tender processes and soliciting interest are likely captured by the exemption.
However, activities relating to national security, defence or public infrastructure will not be captured. National security and defence are not defined in the Bill and the Explanatory Memorandum to the Bill states that they are to be given their ordinary meaning. Public infrastructure is defined to include any infrastructure, facility, premises, network or electronic system that belongs to the Commonwealth or any infrastructure, facility, premises, network or electronic system (including an information, telecommunications or financial system) that belongs to a constitutional corporation and that provides public utilities or services.
An exemption will also apply if the activity is solely for the purposes of:
- humanitarian aid or assistance;
- legal advice or representation;
- reporting news or current affairs;
- acting in accordance with a religion; or
- diplomatic, consular or other privileges or immunities apply in relation to the activity.
There are several penalty provisions which may apply for failure to comply with the Scheme.
Significant penalties of up to 7 years imprisonment for individuals or $88,200 for companies, may apply for committing offences under the Scheme, including failing to apply for or renew registration, providing false or misleading information and destruction of records.
In addition, strict liability offences with penalties of up to 60 penalty units or $12,6000 may apply for a failure to adequately report, disclose information and to keep appropriate records in accordance with the Scheme.
Current status of the Scheme
The Bill has been referred to the Parliamentary Joint Committee on Intelligence and Security. The Committee is due to report on the Bill in February 2018.