BY GEORGIE CLOUGH

Introduction 

On 21 April 2021, the Commonwealth Minister for Foreign Affairs (the Ministerannounced the cancellation of two memoranda of understanding between the Victorian state government and the Chinese government with respect to the latter’s Belt and Road Initiative (the Belt and Road agreements). The power to cancel the agreements was conferred on the Minister by the Australia’s Foreign Relations (State and Territory Arrangements) Act 2020 (Cth) (the Foreign Relations Act).  

It was generally assumed at the time the Foreign Relations Act came into effect in December 2020 that the Belt and Road agreements were at least its immediate targets. The Victorian government’s decision to enter into the agreements had been subject to sustained criticism by the Commonwealth in the lead up to their cancellation, set also against the backdrop of deteriorating relations between Australia and China. The Commonwealth cancelled two other agreements under the legislation at the same time, both of them also entered into by Victorian government departments (one with Iran and another with Syria, both relating to education), but it is the Belt and Road agreements that have been most closely associated with the legislation. For a time, it was unclear how the legislation would be used, if at all, in the future. 

The Foreign Relations Act is back in the news in late 2021, following the Commonwealth Department of Foreign Affairs and Trade’s (DFATreported decision to require five state and territory governments to withdraw their signatures from a memorandum of understanding authored by the ‘Under2 Coalition’ (the Under2 memorandum): a global network of subnational governments committed to action on climate change, including by meeting the temperature goals of the Paris Agreement. The decision was ostensibly made on the basis of a failure of the state and territory governments to comply with a procedural aspect of the legislation, rather than a substantive ruling by the Commonwealth on the memorandum itself. Nonetheless, the incident demonstrates that the Foreign Relations Act is about more than just the Belt and Road agreements.  

This post describes how the scope of the Foreign Relations Act, and the broad and relatively undefined nature of the powers that it confers on the Minister, creates the potential for its application to a wide range of international dealings of states and territories, local governments, and universities.  

The legislative scheme 

The Foreign Relations Act creates a scheme under which any Australian state, territory or local government, or public university (a state or territory entity), must notify the Minister before entering into any written arrangement with a foreign national or subnational government, or a foreign university lacking ‘institutional autonomy’ (a foreign arrangement) (ss 23, 34). In the case of an arrangement between a state or territory government, and a foreign national government (a core foreign arrangement), the Minister must also be notified before negotiations are commenced (s 14). The Minister must give approval before a core foreign arrangement can be negotiated or entered into (ss 15, 22). The consequence of entering into a core foreign arrangement without approval is its deemed cancellation (ss 30–2). There is no requirement for approval prior to negotiation of or entry into any other type of foreign arrangement (non-core foreign arrangements), but the Minister has the power to prohibit such arrangements (ss 35–6).  

The legislation also requires state and territory entities to notify the Minister of any foreign arrangement already in existence at the time the Foreign Relations Act came into effect (sch 1, cl 2–3). All arrangements notified to the Minister are to be made available on a public register (s 53(1)). A failure to notify the Minister of an existing foreign arrangement within the timeframe specified in the Act will result in the arrangement’s deemed cancellation (sch 1 cl 4–6). This provision apparently explains the fate of the Under2 memorandum. The Minister has an additional power under the legislation to cancel arrangements already in effect, including arrangements which they have previously approved, or which have been in effect for some time prior to the legislation’s introduction (s 40). This was the power used to cancel the Belt and Road agreements.  

The test that the Minister is to apply in deciding whether to approve, prohibit or cancel any foreign arrangement asks whether the arrangement would adversely affect, or would be likely to adversely affect, Australia’s foreign relations, or would be, or would be likely to be, inconsistent with Australia’s foreign policy (ss 17, 24, 35, 36, 40). The term ‘Australia’s foreign relations’ is not defined in the legislation. The term ‘Australia’s foreign policy’ is defined as follows (s 5(2)): 

Australia’s foreign policy includes policy that the Minister is satisfied is the Commonwealth’s policy on matters that relate to: 

(a) Australia’s foreign relations; or 

(b) things outside Australia, 

whether or not the policy: 

(c) is written or publicly available; or 

(d) has been formulated, decided upon, or approved by any particular member or body of the Commonwealth. 

According to the Explanatory Memorandum to the Australia’s Foreign Relations (State and Territory Arrangements) Bill 2020 (Cth) (the Bill) this definition is intentionally broad to reflect that it is within the complete discretion of the Minister to determine Australia’s foreign policy at any given time. A number of the entities regulated by the legislation have suggested that such a broad definition will make it very difficult for them to assess whether arrangements they propose to enter will be subject to a declaration by the Minister. The Senate Standing Committee for the Scrutiny of Delegated Legislation has also questioned the Minister’s decision to designate ‘exempt arrangements’ in the Australia’s Foreign Relations (State and Territory Arrangements) Rules 2020 (Cth) (the Rules) rather than specify exemptions in the primary legislation, which would enhance parliamentary scrutiny and provide increased certainty for state and territory entities. 

There are other aspects of the Foreign Relations Act that widen its reach and give the Minister the ability to direct most state and territory foreign engagement. The legislation applies to any written arrangement, whether or not it is legally binding, and whatever its subject matter. It will therefore apply to arrangements such as memoranda of understanding, strategic partnerships, and joint initiatives. State and territory entities commonly enter into arrangements of these kinds. There are limited avenues for challenging adverse decisions. The legislation does not provide for review of decisions made under it, and such decisions are excluded from judicial review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (s 3(1) and sch 1(zh) of that Act). There is also no requirement that the Minister observe procedural fairness under the legislation, meaning that they do not need to provide reasons for their decisions (s 58 of the Foreign Relations Act). 

The Commonwealth has described the Foreign Relations Act as a scheme to ensure consistency of foreign policy across all levels of government. Its application to public universities is therefore somewhat incongruous, and has been the subject of sustained media coverage and debate. The Foreign Relations Act imposes a particular administrative burden on universities, which enter into any number of arrangements with foreign institutions relating to research collaboration and academic exchange. Some changes have been made to the scheme to accommodate the concerns of universities, including the insertion of a definition of ‘institutional autonomy’ to apply to foreign universities. To reduce the administrative burden, the Rules also now exempt arrangements dealing with ‘minor administrative or logistical matters’ such as travel arrangements for conferences or visa paperwork. In any case, the legislation has not yet been used to make a declaration in respect of a university arrangement. 

A ‘command-and-control’ approach to foreign relations 

According to the Prime Minister and the Explanatory Memorandum, the fundamental purpose of the Foreign Relations Act is to ensure that foreign arrangements entered into by state and territory entities are consistent with Australia’s foreign policy. The government has pointed, in the first instance, to a risk that state and territory entities may be unable to manage foreign interference and other security risks associated with their international dealings. It has also justified the legislation on the basis that identifying and acting upon Australia’s national interest, particularly in the face of an ‘increasingly complex and challenging global environment’, must remain the role of the Commonwealth. 

However, it is not immediately apparent that the Foreign Relations Act’s top-down approach to managing these concerns is the only one available. There are examples of legislation in other jurisdictions directed at a similar purpose that are designed to ensure collaboration between different levels of government on matters of foreign policy. For example, two Bills introduced into the United States Congress and Senate in 2019 would establish an Office of Subnational Diplomacy within the State Department to coordinate federal support for state and local government engagement with foreign governments. The Office would work to align the activities of state governments with national foreign policy objectives, but would not have a right of veto. The proposals accept the security concerns created by the decentralisation of diplomacy, but their solution is to increase the capacity of state governments to deal with these concerns.  

The regime created by the Foreign Relations Act lacks many of these characteristics. It does not create any processes of consultation between the Commonwealth and the relevant entities. By virtue of an amendment introduced by the opposition, the Minister is required to report annually to the Parliament on the operation of the Foreign Relations Act, including an outline of engagement that has occurred with state and territory entities (s 53A). However, the legislation does not specify how such engagement should occur. There is no specific requirement for the Minister to consult with state and territory entities about decisions that they propose to make under the legislation.  

By removing the requirement that the Minister observe procedural fairness in making decisions under the legislation, the Foreign Relations Act also removes any obligation for the Minister to put to state and territory entities matters they propose to rely on in making their decision. This enhances the opacity of decisions made under the legislation, and denies regulated entities the ability to learn about the concerns that may inform the Commonwealth’s position on the arrangements to which the legislation applies.  

So far, some non-legislated processes have developed to facilitate consultation between the Commonwealth and regulated entities. A dedicated taskforce has been established within DFAT to vet foreign arrangements and engage with state and territory entities as required. In her first Annual Report on the operation of the legislation (from 27 August to 31 December 2020) the Minister relayed that DFAT and her office had engaged with 91 stakeholders, including 69 entities with specific obligations under the legislation. Nonetheless, the nature and extent of consultation undertaken by the Commonwealth remains a matter within the discretion of the Minister. 

The foreign arrangements of subnational governments 

State, territory and local governments enter into many arrangements with foreign governments. While the Commonwealth government is the only government with the constitutional power to enter into treaties, it is generally accepted that the states and territories at least can enter into arrangements of other kinds with foreign governments. They have longstanding practices of doing so, without any requirement for approval from the Commonwealth. Most of these arrangements relate to areas within their traditional spheres of responsibility, such as education, tourism, and environmental management. Local governments enter into arrangements of their own, including Sister-City agreements. At the time of writing, there were 3,400 foreign arrangements listed on the public register. 

In the Bill’s Second Reading Speech, the Attorney-General acknowledged the ‘important contribution that state, territory and local government entities make to advancing Australia’s foreign policy’. According to the Explanatory Memorandum, the Foreign Relations Act is not intended to ‘prohibit, restrict or discourage State/Territory entities from engaging with foreign governments’, but is designed to ‘support the States and Territories in undertaking effective, appropriate and informed international engagement.’ It describes the Act principally as a ‘legislative scheme for Commonwealth engagement’ with state and territory foreign arrangements. However, as explained, the legislation itself does not create any mechanisms for such engagement.  

The chances of subnational governments engaging with political issues in their international dealings in ways that challenge the Commonwealth government may be on the rise. Much attention has been paid globally to the phenomenon of city or sub-state diplomacy, particularly with respect to climate policy and governance, as networks of cities and regional governments collaborate on issues of international and domestic significance. Their output not infrequently includes written arrangements, such as memoranda of understanding. The Under2 memorandum is one such example. These arrangements are ‘foreign’, but they may also place the states and territories at odds with the Commonwealth on matters of domestic policy. The Victorian Minister for Energy, Environment and Climate Change labelled the requirement to withdraw her state’s signature to the Under2 memorandum an ‘egregious’ decision taken by ‘vandals’. 

The participation of the relevant state and territory governments (Victoria, South Australia, Queensland, the Northern Territory and the Australian Capital Territory) in the Under2 memorandum was apparently automatically cancelled due to a failure to notify the Minister of the arrangement as required by the Foreign Relations Act, and at least some governments have indicated their intention to apply for approval to remain signatories. New South Wales, the Australian state government to sign the Under2 memorandum most recently, has reportedly not been required to withdraw. The reason for this is unknown, but it may be that it has complied with the stipulated legislative processes. However, given the way that the legislation operates, it will be difficult to understand how decisions about such arrangements are being made. The New South Wales, Victorian, Australian Capital Territory, and South Australian governments have also signed a COP26 pledge on the sale of electric vehicles despite the Commonwealth government’s decision not to do so. It has been reported that the arrangement, at least in respect of New South Wales, was approved by DFAT.  

The Foreign Relations Act has been positioned as part of a series of legislative measures taken to address a perceived threat of foreign interference in Australia, introduced in the context of a diplomatic row with China, and a shifting global and regional security environment. However, as its application to the thousands of arrangements already notified to the Minister demonstrates, its reach may exceed this underlying purpose. 

Conclusion 

The Foreign Relations Act addresses legitimate concerns about the potential implications of dealings between subnational governments and foreign governments. It has been justified on the basis that the Commonwealth is the level of government best placed to coordinate the development of a foreign policy that avoids threats to the nation’s security and protects and furthers its interests. However, given the number and variety of arrangements to which the Foreign Relations Act applies, a scheme that more overtly facilitates coordination between governments, or at the very least provides for transparency and certainty in the decisions to be made under it, may be a preferable approach to achieving such ends. 

This post draws in part on the author’s PhD research, which is supported by an Australian Government Research Training Program Scholarship. 

Georgie Clough is a PhD candidate at Melbourne Law School. 

Suggested citation: Georgie Clough, ‘The Australia’s Foreign Relations Act and the international dealings of state and territory governments’ on AUSPUBLAW (8 December 2021) <https://auspublaw.org/2021/12/the-australias-foreign-relations-act-and-the-international-dealings-of-state-and-territory-governments/>