Australia's Foreign Influence Transparency Scheme Act

Out-Law Guide | 25 Mar 2019 | 10:21 am | 6 min. read

The Foreign Influence Transparency Scheme Act  requires businesses and individuals to register details of their activities where those activities are undertaken on behalf of a foreign principal seeking to exercise influence over Australian political and governmental decision-making and processes.

This guide was last updated in March 2019

Businesses with links to state-owned enterprises, including those from China, may be impacted by the Act, although its provisions apply more broadly too. As of 22 March 2019, close to 80 registrations involving foreign principals from China, Norway, South Korea, Japan and a number of other countries have been published. Fines or even imprisonment are potential sanctions for those that fail to comply with the requirements of the Act.

The Foreign Influence Transparency Scheme (FITS) Act

The FITS Act came into effect on 10 December 2018 and imposes registration obligations for individuals and entities that undertake certain activities on behalf of foreign principals. These include activities that are undertaken for the purpose of "political or governmental influence". That term is broadly defined in the Act and includes any influence over matters such as federal elections or votes, or the decision making processes of federal governments. Communications to the public or financial support for the purpose of influencing governmental decision making processes may also be caught by the Act.

The FITS is not intended to restrict, deter, criminalise or punish lawful activities but it will serve to highlight lawful activities being pursued for the benefit of foreign interests.

Foreign principals

Generally speaking, any person who undertakes registrable activities on behalf of a 'foreign principal' in Australia is required to register under the scheme, unless they are exempt.

A 'foreign principal' is defined as:

  • a foreign government,
  • a foreign political organisation,
  • a foreign government-related entity, or
  • a foreign government-related individual.

A company will fall within the meaning of a ‘foreign government-related entity’ if the foreign principal is a foreign government or a foreign political organisation and one or more of the following applies:

  • the foreign principal holds more than 15% of the issued share capital of the company;  
  • the foreign principal holds more than 15% of the voting power in the company;
  • the 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 the foreign principal; or
  • the foreign principal is in a position to exercise, in any other way, total or substantial control over the company.

The secretary of the attorney general’s department has the power to issue a transparency notice confirming that a person is a foreign government-related entity or foreign government-related individual. If a transparency notice is issued, the person or entity named is considered to be a foreign principal under the scheme and persons undertaking registrable activities on their behalf must register.

Registrable activities

Whether an activity is registrable depends on who the foreign principal is and the purpose of the activity, and in some cases on the person’s former status.  

Registrable activities include:

Parliamentary lobbying

Any parliamentary lobbying undertaken on behalf of a foreign government, for whatever purpose, is a registrable activity unless an exemption applies. Parliamentary lobbying undertaken on behalf of other foreign principals for the purpose of political or governmental influence is also registrable.

General political lobbying – for the purpose of political or governmental influence

This covers lobbying activities directed towards Commonwealth public officials; departments, agencies or authorities of the Commonwealth; registered political parties; or candidates in federal elections.

Where lobbying activity is undertaken on behalf of a foreign principal for the purpose of political or governmental influence, it must be registered unless an exemption applies.

Communications activity– for the purpose of political or governmental influence

Communications activity covers all circumstances in which information or material are disseminated, published, disbursed, shared or made available to the public. A communications activity is registrable if the activity is undertaken for the purpose of political or government influence. The communication must also include a disclosure about the foreign principal’s identity.

Disbursement activity – for the purpose of political or governmental influence

Disbursement activity includes the distribution of money or things of value on behalf of a foreign principal. This activity must be registered under the scheme if the person, or the recipient of the disbursement, is not required to disclose the activity under Part XX of the Commonwealth Electoral Act 1918 and the activity is undertaken for the purposes of political or governmental influence. In other words, disbursement activity must be revealed under either the Electoral Act or the FITS Act.   

Former cabinet ministers

Former cabinet ministers have a lifetime obligation to register any activity they undertake on behalf of a foreign principal unless an exemption applies. This extends beyond the aforementioned categories of ‘registrable activity’ – parliamentary lobbying, general political lobbying, communications activity or disbursement activity.

Recent designated position holders

A recent designated position holder is any person who, within the last 15 years, has been:

  • a member of the Australian parliament;
  • a member of staff in a parliamentarian’s office who has held the position of senior advisor or above;
  • a Commonwealth agency head, deputy agency head or statutory office holder equivalent to an agency head or deputy agency head; or
  • the holder of a Commonwealth office outside of Australia, such as an ambassador or high commissioner.

A recent designated position holder must register any activity they undertake on behalf of a foreign principal where, in undertaking the activities, the person contributes experience, knowledge, skills or contacts gained in their former position. This also extends beyond the aforementioned categories of ‘registrable activity’ – parliamentary lobbying, general political lobbying, communications activity or disbursement activity.

Connection

A connection between the actions of the person and the foreign principal must be established before the registration obligations under the Act apply.

The scheme applies where the person undertakes registrable activities:

  • under an arrangement with the foreign principal;
  • in the service of the foreign principal;
  • on the order or at the request of the foreign principal; or
  • under the direction of the foreign principal.

Both the person and the foreign principal must have intended or expected that the person might or would undertake the registrable activities on behalf of the foreign principal. If a person undertakes an activity without the foreign principal’s knowledge or expectation, then there is no obligation to register under the scheme.  

Exemptions

There are a number of exemptions to the registration requirements under the FITS Act, including in cases of humanitarian aid or assistance, legal advice or representation, diplomatic consular and similar activities. There are two categories of exemptions in particular that may concern foreign state-owned enterprises.

Individual employed by foreign government-related entity

An individual, other than a former cabinet minister or a recent designated position holder, is exempt in relation to an activity that the individual undertakes on behalf of a foreign principal, if the following requirements are met:

  • the foreign principal is a foreign government related entity;  
  • the activity is a commercial or business pursuit undertaken by the individual in the individual’s capacity as a director, officer or employee of the foreign principal; and
  • it is apparent in the circumstances that the individual is undertaking the activity in that capacity.

For example, according to the website of the Attorney-General's Department, in the situation where a person works for foreign government-related entity and arranges a meeting with an Australian Department official to discuss a transaction involving goods and services, as it is clear that the person is undertaking the activity in their capacity as an employee of that entity, the person does not need to register under the scheme. 

Person operating under name of foreign government-related entity

A person, other than a former cabinet minister or a recent designated position holder, is exempt in relation to an activity the person undertakes on behalf of a foreign principal if:

  • the foreign principal is a foreign government related entity; and
  • the activity is a commercial or business pursuit undertaken by the person in or under the name of the foreign principal or under a substantially similar name.

For instance, the Australian branch of foreign government-related company undertakes activities at the direction of the parent company. The Australian branch of the company will not need to register under the scheme provided they operate under the same or a substantially similar name.

When to register

Once a person becomes liable to register, the person has 14 days to apply for registration.

Penalty for non-compliance

The Act contains offences for non-compliance under the scheme. These offences include:

  • undertaking registrable activities while not being registered under the scheme;
  • failure to fulfil responsibilities, such as reporting and disclosure obligations, under the scheme; and
  • providing false or misleading information or documents in relation to an individual’s registration.

Registrants are also required to maintain appropriate records, both during the registration and for a further three years after the registration period ends. Records are not required to be kept for more than 10 years after the date the record was created.

Failure to maintain records or the act of destroying, damaging or concealing records is an offence which carries a sentence up to two years imprisonment.