Perceived or real foreign influence on Australia’s political process has been the subject of much discussion in recent years – and including during the recent federal election. As part of the Australian Government’s efforts to address foreign influence, laws were introduced in 2018 aimed at combatting this threat. These laws impose registration obligations on persons and businesses undertaking certain activities on behalf of foreign principals that may influence government and politics in Australia.
As with any change of government following an election, there comes change for many former senior public officials. Often, these officials join the ranks of the private sector. A new role for some of these former senior officials, and their new corporate partners, brings not only the invaluable skills of the individual to the businesses they partner with but also some compliance risk that needs to be managed.
Overview of Scheme
Implemented under the Foreign Influence Transparency Scheme Act 2018 (Cth) (FITS Act), the Foreign Influence Transparency Scheme (Scheme) aims to provide public transparency over the nature, level and extent of foreign influence on Australia’s government and political processes.
Individuals and corporate entities must register under the Scheme if they carry out “registrable activities” on behalf of a foreign principal in Australia for the purpose of “political or governmental influence”, unless they fall under the exemptions in the FITS Act.
Whether or not a person is required to register depends on the identity of the foreign principal, the nature of the activities undertaken, the purpose for which the activities are undertaken, and in some circumstances, whether the person has held a senior public position in Australia.
Registrable activities
“Registrable activities” include parliamentary lobbying, general political lobbying, communication activities and disbursement activity (i.e. distribution of money or things of value).
Former Cabinet Ministers and recent senior Commonwealth public officials have additional registration obligations due to the special nature of their previous positions.
Foreign principals
“Foreign principals” include foreign governments, foreign political organisations, foreign government related entities, and foreign government related individuals. Some of these will be clear-cut but foreign government related entities could include a company in which:
- a foreign principal (e.g. a foreign government or foreign political organisation) holds more than 15% of the issued share capital of the company;
- a foreign principal holds more than 15% of the voting power in the company;
- a foreign principal is in a position to appoint at least 20% of the company’s board of directors;
- the directors of the company are accustomed, or under an obligation (whether formal or informal), to act in accordance with the directions, instructions or wishes of a foreign principal; or
- a foreign principal is in a position to exercise, in any other way, total or substantial control over the company.
Non-companies and non-body politics could also fall under the scope of the FITS Act.
Political or governmental influence
Defined broadly in the FITS Act, “political or governmental influence” includes influence over federal elections or votes, federal government decisions, parliamentary proceedings and decision-making of registered political parties, independent Members of Parliament or independent candidates in a federal election.
Exemptions
The Scheme provides for a range of exemptions to registration. Some of these exemptions include circumstances involving humanitarian aid or assistance, legal advice or representation, diplomatic, consular and similar activities, and the activities of current Members of Parliament and statutory office holders.
Once a person becomes liable to register, they have 14 days to apply for registration. Certain information about registrants and their activities is then made publicly available. Registrants have several responsibilities under the Scheme, including an obligation to ensure that the information on the register is kept current.
The Scheme is not intended to restrict, deter, criminalise or punish these types of activities, provided registration occurs. Rather, it is designed to highlight lawful activities being pursued for the benefit of foreign interests.
Consequences of non-compliance
The FITS Act imposes severe criminal penalties for non-compliance. The maximum penalties are provided below.
| Offence | Penalties |
| Undertaking a registrable activity while not registered | 6 months – 5 years imprisonment, depending on the seriousness of the conduct |
| Failure to fulfil responsibilities under the Scheme | Fine of 60 penalty units – 6 months imprisonment, depending on the seriousness of the conduct |
| Providing false or misleading information or documents | Imprisonment of 3 years |
| Damaging, destroying or concealing records | Imprisonment of 2 years |
What it means for Australian businesses
This is another complex area of compliance for businesses undertaking activities in Australia with ownership that involves foreign state interests. Corporate counsel or risk teams advising clients performing work on behalf of foreign principals should consider whether this work counts as a registrable activity and take steps to comply with requirements of the Scheme.
For further information, please contact:
Jonathon Ellis, Partner, Bird & Bird
jonathon.ellis@twobirds.com
