Foreign Influence Transparency Scheme

Guantao Australian Law Series is prepared by its Sydney Office for the benefit of our existing clients in Australia and clients who are coming to Australia to start their businesses.

On 29 June 2018, the Foreign Influence Transparency Scheme Act 2018 (the Act)[1] received Royal Assent. This Act will commence on 30 June 2019 unless Proclaimed by Notice on an earlier date.

Section 3 of the Act provides that the object of the Act is to 'provide for a scheme for the registration of persons who undertake certain activities on behalf of foreign governments and other foreign principals, in order to improve the transparency of their activities on behalf of those foreign principals' (the Scheme).

When the Act received Royal Assent, there was not significant media coverage. Earlier February 2019, The Age and Sydney Morning Herald confirmed that real estate developer and billionaire Mr. Xiangmo Huang’s Australian citizenship application had been turned down and his permanent resident visa was cancelled. The above administrative decision was not based on the Act, but it was considered, by the Australian media, as closely relevant to the political donation made by Mr. Huang to both of the major political parties in Australia. It appears that an analysis of the Act is of crucial importance to all the persons and entities involved in the business activity between China and Australia. [2]

At the time of preparing this article, we referred to the Act, Foreign Influence Transparency Scheme Rules 2018,[3]the Foreign Influence Transparency Scheme (Disclosure in Communications Activity) Rules 2018[4]and 17 Fact Sheets released by the Attorney General’s Department (the Department)[5].

A.Rationale and legislative Intention

The Foreign influence Transparency Scheme was not established to rule out all the foreign influence activity as it appears. Foreign influence and political donation are not necessarily negative. [6]The primary purpose of the Act is to enhance transparency of the Australian federal government and political process. In other words, the Scheme aims to eliminate 'hidden or not transparent' activities conducted by an intermediary with the objective of influencing governmental and political processes in Australia on behalf of a foreign principal.

From the legislator’s point of view, it is important for the general public to be able to see the underlying interest of a particular political communication. [7]

B.The Scope of the Scheme

a. Undertaking activity on behalf of a foreign principal

Under the definition of the Act, foreign principal means: [8]

(a) a foreign government: including an authority of the government, a foreign local government body or foreign regional government body;

(b) a foreign government related entity:

If it is a company –

i. foreign principal holds more than 15% of the issued share capital of and/ or 15% of the voting power in the company;

ii. foreign principal is in a position to appoint at least 20% of the company’s board of directors;

iii. the company is accustomed or obliged to act in accordance with the directions, instructions and wishes of the foreign principal; or

iv. the foreign principal is in the position to exercise substantial control over the company.

(c) A foreign political organization: a foreign political party or a foreign organization that exists primarily to pursue political objectives.

(d) A foreign government related individual:

i. an individual who is accustomed to or under an obligation to act in accordance with the directions, instruction and wills of the foreign principal; or

ii. the foreign principal is in a position to exercise total or substantial control over the individual.

b. Registrable Activity  

Section 12 of the Act provides examples of political or governmental influence [9] while later sections prescripts specific activities:

(a) Any Parliamentary lobbying by foreign government;[10]

(b) Parliamentary lobbying for the purpose of political or government influence by any foreign principal except for foreign government; [11]

(c) General Political lobbying in Australia for the purpose of political or government influence by any foreign principal; [12]

(d) Communicate or distribute information or material to the public in Australia for the purpose of political or government influence, [13]with the exception of disseminators, e.g. publisher;[14]

(e)  Disbursement activity in Australia for the purpose of political or governmental influence; [15]

(f)   Any activity that is undertaken by a Former cabinet minister;[16]

(g)  Any activity that is:

i. undertaken by a recent designated position holder which includes:

Ministers,

members of the Parliament,

staff of a Minister whose position is at or above the level of Senior Advisor,

Agency Heads and deputy agency head; or

Ambassador or High Commissioner whether in Australia or overseas.

ii. that person contributes experience, knowledge, skills or contacts gained in their former position.[17]

Please note that for activity under the category of (a), (f) and (g), the purpose of the activity is irrelevant.

c. Registrable Arrangements

The registrable arrangements between a person and a foreign principal include a contract, agreement, understanding or other arrangement of any kind, whether written or unwritten.[18]The foreign principal and the person must have intended or expected that the person might or would undertake the registrable activities on behalf of the foreign principal.

d. Exemption 

The exemptions under the Act includes:

(a)   Humanitarian aid or assistance[19]

(b)  Legal advice or representation: the Act also provides, at s 9A, that the Act will not affect legal professional privilege

(c)   Members of Parliament and statutory office holders[21]

(d)  Diplomatic, consular or similar activities[22]

(e)  Religion[23]

(f)  Foreign government employees and commercial or business pursuits:[24]this exemption does not apply to former Cabinet Ministers or recent designated position holders and their activities captured by ss 22 and 23 of the Act

(g) Industry representative bodies formed in Australia undertaking activities on behalf of a foreign principal[25]

(h)  Registered charities[26]

(i)  Artistic purpose[27]

(j)  Organisations registered under the Fair Wok (Registered Organisations) Act 2009 and the activity is apparent to or disclosed to the public[28]

(k)  Activities of a tax agent, customs broker and aliquidator or receiver undertaking their ordinary course of his or her practice of the profession[29]

c.Obligations under the Scheme

a. If a person is captured by the Scheme, he or she is required to register within 14 days after the Act commences or after the person undertakes a registrable activity or enters into a registrable arrangement.[30]

b. After the registration, the person must comply with the following further obligations:

(a)  Notice of any disbursement activity by spending money or giving gifts for the purpose of political influence totalling over the $13,500 threshold and again each time the amount disbursed reaches a multiple of the threshold.[31]

(b)  Keeping records of any registrable activities and registrable arrangements for 10 years.[32]

(c)  Renew the registration annually [33]and notify the Department of any changes in circumstances.[34]

(d)  When leading up to a federal election, referendum or other vote designated by the government, the obligations will increase and the notice periods will beshorter.[35]

D.Notices

The Secretary of the Department has the power to issues the following notice:

a. Information Notice: Under ss 45 and 46 of the Act, the Secretary may issue an information notice to produce information and documents if the Secretary reasonably suspect a person is liable to register or believes that a person has information relevant to the operation of the Scheme. The recipient must comply with the notice.

b. Transparency Notice: Under s 14A of the Act, the Secretary may issue a provisional transparency notice declaring that a personis a foreign government related entity or a foreign government related individual. The recipient has 28 days to make application to the Administrative Review Tribunal to review the provisional transparency notice.[36]

E.Consequences of Non-compliance

The major criminal penalties for the non-compliance with the Scheme include:

a.  Failure to apply for registration or renew registration – imprisonment of up to 5 years[37]

b. Provision of false or misleading documents to the Secretary in response to an information notice – imprisonment of up to 3 years[38]

c. Destruction of relevant records – imprisonment of up to 2 years[39]

d. Failure to comply with a transparency notice – imprisonment of up to 6 months

e. Failureto comply with an information notice – imprisonment for 6 months[40]

F.Impact on China-Australia Relations 

It is clear that the Scheme will impact on China-Australia relationship and business activities. However, it is unclear as to the gravity of the impact.

For most of the Chinese corporation, there are certain connections with the government or governmental agencies. The questions of whether a particular connection should be interpreted as a registrable arrangement or a particular activity should be considered as a registrable activity are likely to be determined in a case by case basis considering the individual circumstances.

It is clear that the Scheme is not intended to hinder international business activities. We also note that an exemption applies to “foreign government employees and commercial or business pursuits”[41]and there are references such as “an activity undertaken by a company incorporated in Australia is not undertaken on behalf of a foreign principal merely because it is a subsidiary of a foreign principal”[42]and no disclosure of commercially sensitive information[43]. However, the above indications do not necessarily mean that all activities conducted by a subsidiary of a foreign State-Owned Enterprises should deem to be free from the Scheme.

At this stage, we await the Department to provide further guidance and we will look closely to the case study after the commencement of the Act.

[1] Foreign Influence Transparency Scheme Act2018(Cth). https://www.legislation.gov.au/Details/C2018A00063

[2] Nick McKenzie and Chris Uhlmann, Canberra strands Beijing's manoffshore, denies passport, (5 February 2019) Sydney Morning Herald ;Amy Remeikis, Political donor HuangXiangmo blocked from returning to Australia, (6 February 2019), The Guardian .

[3] Foreign InfluenceTransparency Scheme Rules2018 (Cth). https://www.legislation.gov.au/Details/F2018L01696

[4] Foreign InfluenceTransparency Scheme (Disclosure in Communications Activity) Rules2018 (Cth). https://www.legislation.gov.au/Details/F2018L01701

[5] See also https://www.ag.gov.au/Integrity/foreign-influence-transparency-scheme/Pages/Resources.aspx.

[6] Foreign InfluenceTransparency Scheme Factsheet 2 (December 2018)

[7] Attorney-General’s Department, Foreign Influence Transparency Scheme Factsheet 1 (December 2018).

[8] s 10 Foreign Influence Transparency Scheme Act2018; Attorney-General’s Department, Foreign Influence Transparency Scheme Factsheet 5 (December 2018).

[9] Attorney-General’s Department, Foreign Influence Transparency Scheme Factsheet 14 (December 2018).

[10] s 20 Foreign Influence Transparency Scheme Act2018;Attorney-General’s Department, ForeignInfluence Transparency Scheme Factsheet 3 (December 2018) at page 2.

[11] s 21 Foreign Influence Transparency Scheme Act2018.

[12] ibid.

[13] ibid; Attorney-General’s Department, Foreign Influence Transparency Scheme Factsheet 3 (December 2018)at page 3.

[14] See also Attorney-General’s Department, Foreign Influence Transparency Scheme Factsheet 16 (December 2018).

[15] ibid.

[16] s 22 Foreign Influence Transparency Scheme Act2018;Attorney-General’s Department, Foreign Influence Transparency Scheme Factsheet 7 (December 2018).

[17] s 23 Foreign Influence Transparency Scheme Act2018;Attorney-General’s Department, Foreign Influence Transparency Scheme Factsheet 7 (December 2018).

[18] Attorney-General’s Department, Foreign Influence Transparency Scheme Factsheet 4 (December 2018)

[19] s 24 Foreign Influence Transparency Scheme Act2018; Attorney-General’s Department, Foreign Influence Transparency Scheme Factsheet 8 (December 2018).

[20] s 25 Foreign Influence Transparency Scheme Act2018.

[21] s 25A Foreign Influence Transparency Scheme Act2018.

[22] s 26 Foreign Influence Transparency Scheme Act2018.

[23] s 27 Foreign Influence Transparency Scheme Act2018.

[24] s 29 Foreign Influence Transparency Scheme Act2018.

[25] s 29A Foreign Influence TransparencyScheme Act2018.

[26] s 29C Foreign Influence Transparency Scheme Act2018.

[27] s 29D Foreign Influence Transparency Scheme Act2018.

[28] s 29E Foreign Influence Transparency Scheme Act2018.

[29] s 29F Foreign Influence Transparency Scheme Act2018.

[30] ss 16 – 18 Foreign Influence Transparency Scheme Act2018; for information to be supplied to the Department at the time of application, see Attorney-General’s Department, Draft Foreign Influence Transparency Scheme Factsheet 17 (December 2018) and Attorney-General’s Department, Draft Foreign Influence Transparency Scheme Factsheet 9 (December 2018).

[31] s 35 Foreign Influence Transparency Scheme Act2018.

[32] s40 Foreign Influence Transparency Scheme Act2018; Attorney-General’s Department, Foreign Influence Transparency Scheme Factsheet 11 (December 2018).

[33] s 39 Foreign Influence Transparency Scheme Act2018.

[34] s 34 Foreign Influence Transparency Scheme Act2018.

[35] ss 36-37 Foreign Influence Transparency Scheme Act2018; Attorney-General’s Department, Foreign Influence Transparency Scheme Factsheet 10 (December 2018).

[36] Attorney-General’s Department, Foreign Influence Transparency Scheme Factsheet 6 (December 2018)

[37] s 59 Foreign Influence Transparency Scheme Act2018;Attorney-General’s Department, Foreign InfluenceTransparency Scheme Factsheet 13 (December 2018)

[38] s 60 Foreign Influence Transparency Scheme Act2018.

[39] s 61 Foreign Influence Transparency Scheme Act2018.

[40] s 59 Foreign Influence Transparency Scheme Act2018.

[41] s 29 Foreign Influence Transparency Scheme Act2018; Attorney-General’s Department, Foreign InfluenceTransparency Scheme Factsheet 15 (December 2018).

[42] s 11 Foreign Influence Transparency Scheme Act2018.

[43] s 43 Foreign Influence Transparency Scheme Act2018; Attorney-General’s Department, Foreign Influence Transparency Scheme Factsheet 12 (December 2018).

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