Posted on March 2, 2021 by Lindsay Taylor and Lachlan Penninkilampi

Council Obligations under the Australian Foreign Relations Scheme

Local governments play an important role in Australia’s foreign relations.

Indeed, the Australian Local Government Association noted in its submission to a recent Senate inquiry (‘Senate Inquiry‘) that there are at least 37 arrangements between councils and foreign entities, as well as nearly 600 sister city affiliations (at [2.80]).

Now, all of these relations are subject to new oversight under the Australian Foreign Arrangements Scheme (‘AFR Scheme‘).

A product of Australia’s Foreign Relations (State and Territory Arrangements) Act 2020 (Cth) (‘AFR Act‘) and Australia’s Foreign Relations (State and Territory Arrangements) Rules 2020 (Cth) (‘AFR Rules‘), the Foreign Arrangements Scheme is designed to allow greater Commonwealth regulation of the relationships between foreign governments and associated entities, on one hand, and State and territory governments and associated entities, including local governments and public universities, on the other. The object is to give the Commonwealth more power to manage Australia’s foreign relations and to maintain the consistency of its foreign policy (AFR Act, s 5).

Readers will recall the controversy created by the Victorian Government signing a memorandum of understanding with China under its Belt and Road Initiative, as well as ongoing allegations of foreign interference in Australian public universities. The AFR Scheme was arguably motivated by these controversies, but it is also designed to go much further.

Applying the AFR Scheme to local government

Councils are parties to foreign arrangements when they enter arrangements with foreign entities (AFR Act, s 6(2)), which are typically Sister City deals and similar cooperative arrangements. The terms are are defined broadly:

  • arrangements‘ are any written arrangements, agreements, contracts, understandings, or undertakings, whether or not they are legally binding, made in Australia, or entered before, on, or after the commencement day, ie 10 December 2020 (AFR Act s 9(1)),
  • foreign entities‘ include not only national governments but also councils, government departments, and public universities, among others (AFR Act s 8(1)), with the exclusion of corporations operating on a commercial basis (AFR Act s 8(1)(k)).

These definitions have been drafted broadly enough to capture all capture most, if not all, Sister City deals and other cooperative arrangements made between councils and foreign entities.

The AFR Scheme creates a distinction between ‘core‘ foreign arrangements and ‘non-core‘ foreign arrangements. Because a council is not a ‘core State/Territory entity‘ under the AFR Act, only the provisions related to non-core foreign arrangements are relevant to local government. This is the case no matter the foreign entity with which a council might enter an arrangement (even if it is, for example, a foreign national government).

How does the AFR Scheme work?

Councils are required to give a notice to the Minister for Foreign Affairs (‘Minister‘) of any pre-existing or prospective arrangements with foreign entities, as well as any entry into non-core foreign arrangements (AFR Act, ss 34, 38).

Importantly, for pre-existing foreign arrangements, councils’ notices must be given within six months of the commencement date, ie by the end of 10 June 2021 (AFR Act, Sch. 1 cl. 3(2)(b)).

Councils can give notice by using the online portal administered by the Department of Foreign Affairs and Trade (‘DFAT‘). The notice requirements differ depending on where in the negotiation process the arrangements sit. For example, if councils are at the stage of entry into the foreign arrangement, then notice must be given within 14 days (AFR Act, s 38(1)).

Notices will then appear on the Public Register. A quick look at the Register reveals that some councils have already give notices of their foreign agreements, although no ministerial decision has yet been published about them.

Once notified, the Minister may make a declaration prohibiting councils from negotiating or entering the arrangement (AFR Act, ss 35(2), 36(2)). This power is available to the Minister if the Minister is satisfied that the negotiation or agreement:

  • would adversely affect, or would be likely to adversely affect, Australia’s ‘foreign relations‘, or
  • would be, or would likely be, inconsistent with Australia’s ‘foreign policy‘ (AFR Act, ss 35(1)(c)–(d), 36(1)(c)).

Foreign policy‘ is defined extremely broadly, including, for example, policy which the Minister is satisfied is Commonwealth policy even if it isn’t written, isn’t publicly available, or has not been formulated, decided upon, or approved by any member or body of the Commonwealth (AFR Act, s 5(2)). Meanwhile, no definition of ‘foreign relations‘ appears in the AFR Act whatsoever. Arguably, the consequence is that the Minister has significant power and is subject to very little transparency when it comes to interfering with councils’ foreign arrangements.

The Minister can also make declarations with respect to foreign arrangements that are ‘in operation‘ (AFR Act, Pt, 4, Div 2), as well as ‘subsidiary‘ arrangements—for example, contracts made ‘under the auspices‘ of a foreign arrangement (see AFR Act, ss 12, 45–9). This means that councils’ pre-existing Sister City and other foreign arrangements, including agreements made in contemplation of those arrangements, can be terminated by the Minister if the Minister thinks they are adverse to Australia’s foreign relations or inconsistent with Australia’s foreign policy. And given it makes no difference, legally, how long those arrangements have been in force, councils should consider the prospect of having even their most enduring international ties cut by the Minister.

Councils can expect to receive Ministerial decisions about any declarations (and revocations of declarations) in writing as soon as practicable after they are made.

Variations to arrangements

The AFR Act generally applies in the same way to variations to arrangements as it does to arrangements (AFR Act, s 13(1)).

Are any arrangements exempt?

The exemption relevant to councils is for foreign arrangements which deal solely with ‘minor administrative or logistical matters‘ (AFR Act, s 4; AFR Rules, r 5(1)). The  AFR Act lists flights, accommodation, submitting paperwork or visa applications, and the timing of conferences or conference sessions as examples of such matters.

How does the Minister ensure compliance?

The Minister’s declarations under the AFR Act are enforceable by injunction (AFR Act, s 52). This means that if councils continue to negotiate or enter a foreign arrangement in spite of a prohibition then the Minister can seek a court order to stop the activity. Continuing thereafter would amount to contempt of court.

If the Minister makes an adverse declaration, what are councils’ options for review?

DFAT suggested that most routine business and foreign arrangements will proceed as normal under the AFR Act and continue to operate (Senate Inquiry at [1.29]).

However, should a council’s foreign arrangement be subject to an adverse declaration by the Minister, the avenues for review are restricted. For example, the Minister is not required to observe procedural fairness (AFR Act, s 58). Moreover, because the AFR Act has been excluded from the simplified judicial review mechanism created by the Administrative Decisions (Judicial Review) Act 1977 (Cth) (per sch. 1(zh)), complainants must rely on the more complex (and expensive) remedial model under the common law, Australian Constitution, and Judiciary Act 1903 (Cth).

A pending constitutional challenge?

The Commonwealth relies on the external affairs power contained in s 51(xxix) of the Australian Constitution for its authority to pass the AFR Act and Rules (see Revised Explanatory Memorandum at [187]). The law, if valid, prevails over State laws to the extent of any inconsistency (Australian Constitution, s 109).

Some have questioned the constitutional validity of the legislation. For example, Professor George Williams—one of Australia’s leading constitutional law experts—suggested in the Senate Inquiry that the AFR Act may infringe upon a prohibition known as the intergovernmental immunities doctrine (see Senate Inquiry at [2.20]–[2.25]). This operates to prevent Commonwealth laws from impairing or adversely affecting the existence of a State or its capacity to perform its constitutional functions. Because local government is a creature of State statute, this doctrine likely extends to councils as well.

As such, the AFR Act may see a constitutional challenge in future.

Further information

DFAT maintains a Frequently Asked Questions page for the AFR Scheme and is available for contact at this email address: foreignarrangements@dfat.gov.au

Moreover, due to the complexity of the AFR Scheme, including the information required to given in a notice to the Minister, we recommend councils seek appropriate legal advice.

If you have any questions about this article, please contact Dr Lindsay Taylor on (02) 8235 9701.