Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Foreign Affairs, Defence and Trade References Committee - 27/04/2016 - Partial suspension of sanctions against Iran

BRAITHWAITE, Ms Justine, Assistant Secretary, Sanctions, Treaties and Transnational Crime Legal Branch, Department of Foreign Affairs and Trade

RALPH, Mr Greg, Acting First Assistant Secretary, Middle East and Africa Division, Department of Foreign Affairs and Trade

SIMPSON, Ms Nardia, Director (Legal), Sanctions Section, Department of Foreign Affairs and Trade


CHAIR: Welcome. I remind the witnesses that the Senate has resolved that an officer of a department of the Commonwealth or of a state shall not be asked to give opinions on matters of policy, and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy; it does not preclude questions asking for the explanations of policies or factual questions about when and how policies were adopted. I particularly draw the attention of officers to an order of the Senate from 13 May 2009 specifying a process by which a claim of public interest immunity should be raised.

The extract read as follows—

Public interest immunity claims

That the Senate—

(a) notes that ministers and officers have continued to refuse to provide information to Senate committees without properly raising claims of public interest immunity as required by past resolutions of the Senate;

(b) reaffirms the principles of past resolutions of the Senate by this order, to provide ministers and officers with guidance as to the proper process for raising public interest immunity claims and to consolidate those past resolutions of the Senate;

(c) orders that the following operate as an order of continuing effect:

(1) If:

   (a) a Senate committee, or a senator in the course of proceedings of a committee, requests information or a document from a Commonwealth department or agency; and

   (b) an officer of the department or agency to whom the request is directed believes that it may not be in the public interest to disclose the information or document to the committee, the officer shall state to the committee the ground on which the officer believes that it may not be in the public interest to disclose the information or document to the committee, and specify the harm to the public interest that could result from the disclosure of the information or document.

(2) If, after receiving the officer’s statement under paragraph (1), the committee or the senator requests the officer to refer the question of the disclosure of the information or document to a responsible minister, the officer shall refer that question to the minister.

(3) If a minister, on a reference by an officer under paragraph (2), concludes that it would not be in the public interest to disclose the information or document to the committee, the minister shall provide to the committee a statement of the ground for that conclusion, specifying the harm to the public interest that could result from the disclosure of the information or document.

(4) A minister, in a statement under paragraph (3), shall indicate whether the harm to the public interest that could result from the disclosure of the information or document to the committee could result only from the publication of the information or document by the committee, or could result, equally or in part, from the disclosure of the information or document to the committee as in camera evidence.

(5) If, after considering a statement by a minister provided under paragraph (3), the committee concludes that the statement does not sufficiently justify the withholding of the information or document from the committee, the committee shall report the matter to the Senate.

(6) A decision by a committee not to report a matter to the Senate under paragraph (5) does not prevent a senator from raising the matter in the Senate in accordance with other procedures of the Senate.

(7) A statement that information or a document is not published, or is confidential, or consists of advice to, or internal deliberations of, government, in the absence of specification of the harm to the public interest that could result from the disclosure of the information or document, is not a statement that meets the requirements of paragraph (1) or (4).

(8) If a minister concludes that a statement under paragraph (3) should more appropriately be made by the head of an agency, by reason of the independence of that agency from ministerial direction or control, the minister shall inform the committee of that conclusion and the reason for that conclusion, and shall refer the matter to the head of the agency, who shall then be required to provide a statement in accordance with paragraph (3).

(d) requires the Procedure Committee to review the operation of this order and report to the Senate by 20 August 2009.

( 13 May 2009 J.1941 )

(Extract, Senate Standing Orders)

Would someone like to make a brief opening statement before we go to questions?

Ms Braithwaite : I would like to begin by thanking the committee for this opportunity to increase awareness and understanding of Australian sanction laws. As we have seen from the submissions and from the hearing so far, views can be divided into two suites of issues: foreign policy decisions, and legal obligations and mechanisms. My colleague Mr Greg Ralph will speak to the foreign policy aspects of the government's decision to partially suspend and then partially repeal Iranian sanctions, which has been the main focus of the inquiry; however, as some of the submissions and views of witnesses today raised concerns about legal obligations and mechanisms, I would like to address briefly some of these legal aspects first.

Turning to the question of what are sanctions. Sanctions are measures not involving the use of armed force applied in response to situations of international concern as a means of both mitigating the adverse consequences of the situation in question and influencing the behaviour of the persons or regime responsible for bringing it about. Situations of international concern range from systematic acts of oppression, abuses of human rights and suppression of democratic freedoms by a government against its own people to internal or international armed conflicts and to the proliferation of weapons of mass destruction.

Australia implements both United Nations Security Council sanctions regimes and Australian autonomous sanctions regimes. All members of the UN, including Australia, are obliged under international law to implement UN sanctions. In addition, the Australian government has decided to implement Australian autonomous sanctions as a matter of Australian foreign policy. Australian autonomous sanctions regimes may supplement UNSC sanction regimes, as in the case of Iran, or be separate from them, as in the case of Syria. Since 2006 Australia has implemented successive rounds of UN Security Council sanctions against Iran, and since 2008 has also implemented autonomous sanctions in line with like-minded jurisdictions such as the European Union.

In terms of UNSC sanctions against Iran, the UN Security Council first expressed its concern about Iran's proliferation activities on 31 July 2006 in its resolution 1696, and it imposed sanctions on Iran later that year in resolution 1737. Australia has implemented this UNSC resolution and all subsequent resolutions through the Charter of the United Nations Act, which gives the authority to implement into Australian law any measure not involving the use of armed force that is the subject of a legally binding UNSC decision. This allows Australia to give full scope and effect to any legally binding UNSC sanction measure. Given international uncertainty around some of the new processes included in the most recent resolution 2231, for example around the establishment of the new procurement channel, we are still incorporating some parts of this resolution into Australian law and we hope that these changes will be finalised in coming weeks.

In terms of Australian autonomous sanctions, in October 2008 in response to Iran's failure to comply with its international obligations in relation to the development of nuclear weapons and their delivery systems, the then Minister for Foreign Affairs announced Australian sanctions in relation to Iran. These autonomous sanctions complement and supplement UN security sanctions against Iran, and Australia subsequently broadened its autonomous sanctions against Iran to further restrict the trade with Iran's energy and financial sectors.

On 20 July 2015, through Security Council resolution 2231, the UNSC endorsed the Joint Comprehensive Plan of Action, or the JCPOA, on Iran's nuclear program. As we know, it was agreed between Iran and the P5+1. The JCPOA forms a very large annexe to the Security Council resolution. The JCPOA is often referred to as a nuclear deal. Australia is not party to the JCPOA and is not bound by its terms per se.

CHAIR: Excuse me, Ms Braithwaite. I am in possession of your submission to this inquiry. Are you reading out another submission, are you?

Ms Braithwaite : No, I am delivering my opening statement.

CHAIR: But it seems to be of a highly technical nature. You are not speaking to this submission that you have provided; you are introducing new matters, are you?

Ms Braithwaite : No, I am seeking to address some of the legal issues that have arisen during the course of today's hearing.

CHAIR: Can we have that tabled?

Ms Braithwaite : Would you like my opening statement tabled? Of course.

CHAIR: I have just looked at your submission again—it is extremely brief—and now it appears as if you are making a submission as we go, so to speak. We want a brief opening statement on the submission you have given us, and then we can go to questions.

Senator BACK: I understood the witness to have said that she was responding to comments that were made by other witnesses earlier today on the legal aspect.

Senator STERLE: But you have not just typed that up today while you have been sitting at the back of the room listening, have you? With the greatest respect, Ms Braithwaite—

Ms Braithwaite : I have been paying close attention to the commentary today.

Senator STERLE: I have no doubt you have. I am with the chair, because unfortunately time will be against us and there will be a number of questions we will want to get to.

Ms Braithwaite : Okay; perhaps if I could briefly finish—

CHAIR: We do always say in all hearings to all witnesses that we would like a brief opening statement. Normally that relates to the submission you have given to the inquiry.

Ms Braithwaite : All right; thank you, Mr Chair. Perhaps if I could briefly finish my opening statement? I was speaking about the issue around whether the JCPOA is binding on Australia. It was an issue that was raised in Mr Danby's submission today. I noted that while Australia is not a party to the JCPOA, the JCPOA is incorporated into the terms of UNSC 2231, and Australia, as a UN member state, is obliged to implement the provisions of UNSC resolutions. Some parts of the JCPOA have been incorporated into UNSC resolution 2231 and, therefore, those parts are binding on all member states, and I think that is why some confusion has arisen.

It is also important to note that the resolution calls on all member states to take such actions as may be appropriate to support the implementation of the JCPOA—that was contained in the department's submission. Therefore, the Australian government accordingly lifted certain autonomous sanctions against Iran and is taking steps to implement UNSC resolution 2231, as is required under international law, to ensure its sanctions regime on Iran is consistent with the internationally agreed consensus reached in the JCPOA. I would be happy to address further issues as you may have questions, but, with your permission, I would like to hand over to my colleague Mr Ralph to address some of the foreign policy issues that have been raised today.

CHAIR: It is a novel approach that you are now—you are not referring to your submission at all; you are referring to evidence heard by the committee. Is that what you are doing?

Mr Ralph : I think it is a mixture of both.

CHAIR: All right, proceed—but please keep it brief.

Mr Ralph : Absolutely. For the benefit of those who cannot see, we have been scribbling furiously during the course of the morning, trying to pick up some information that has come up in other submissions and questions that have come from the committee as well.

It would be useful to cover a little bit of the background about the security context in which the original JCPOA agreement was negotiated, because we have heard different perspectives on that during the course of the morning. It is important to remember that back in 2014 it was assessed that Iran's break-out time—the amount of time it would take to produce enough fissile enriched uranium to create a bomb—was around two to three months. That was the nub of the matter that the JCPOA was designed to address. At the time of the negotiations, Iran had been adding rapidly to its stockpile of enriched uranium.

Today, having implemented the measures required of it by the deal, it would take Iran at least a year to accumulate enough fissile material to produce a nuclear bomb. Iran has ended all its uranium enrichment at the Fordow nuclear facility, it has reduced its stockpile of enriched uranium to less than 300 kilograms, it has removed two-thirds of its centrifuges, which are designed to extract the enriched uranium, and it has poured concrete into the core of its Arak nuclear reactor. In the words of the US Secretary of State, John Kerry,

… each of the pathways that Iran had toward enough fissile material for a nuclear weapon has been verifiably closed down.

While elements of the JCPOA phase out over certain time frames—10, 15, 25 years—the agreement itself is open ended. Some of the measures, including the IAEA inspections, go on in perpetuity. With the 24/7 monitoring mechanisms established by the agreement with the IAEA, the International Atomic Energy Agency, the IAEA would know immediately if Iran ever did decide to pursue the nuclear weapons path. I think that goes to what a lot of people have been saying this morning, and that Rebecca Weisser just mentioned, the worry about Iran moving down the nuclear path is exactly what the JCPOA was designed to address.

We all have our eyes open. We are not under any illusions about the nature of the government we are dealing with—ministers of the government have been very clear about that—but this is the best deal that was available, and that is why it was achieved with the support of the international community, to bring Iran back from the brink of nuclear break-out. Of course, as Justine has mentioned, for Australia that entailed the lifting of the relevant autonomous and UN sanctions.

One of the subjects of some discussion this morning, I think, flowing on from the evidence given by Mr Hudson from the Export Council of Australia, went into the question of advantaging and disadvantaging Australian businesses. As our submission outlines, early and coordinated action to ease sanctions was in Australian interest to ensure that Australian businesses were not disadvantaged in pursuing opportunities in Iran. In anticipation of eventual sanctions relief following the JCPOA agreements signed in July last year, DFAT and Austrade received significant interest from Australian business regarding the Iran market. We got the very clear message from Australian businesses who were looking at the JCPOA that what they wanted was a level playing field to compete with key competitors, particularly from Europe, and the ability to move in quickly, as Mr Hudson noted this morning, was very important. It is worth recording that Australia and Iran have maintained a solid trade relationship, but 20 years ago Iran was Australia's biggest export destination in the Middle East.

Chair, you asked this morning, and Mr Hudson did not have the information to hand but I consulted Austrade during the course of the intermission and they advise that the areas of prospective interest for trade between Australia and Iran going forward post-JCPOA are in agriculture, where wheat, wool and sheepmeat would be the most prospective fields; oil and gas, unsurprisingly, as Mr Hudson mentioned, where Australia has particular expertise and supplies, equipment and technology; similarly in the other extractive sectors, and I think Mr Hudson gave us a bit of detail on those; water sustainability and management is a big sector where Australia can invest in Iran; health care is another one; and of course, education and vocational skills training will all be important. It will be a challenging environment, and as you have heard a number of times during the course of the morning, companies will have to go in with their eyes open—they will have to take legal advice—and that is one of the reasons why the government has decided to reopen the Austrade office in Teheran, which I think, Senator Back, you referred to this morning. That was closed in 2010 having been opened originally in 1968. Mr Ciobo announced a few weeks ago that the plan was to open it again in the second half of this year. We have some locally engaged staff already in place in Teheran, who were working for Austrade prior to the office closure in 2010. Australian based officers have been selected and should be in place shortly. So that process is going forward. That will be an important additional source of information for Australian companies seeking to enter that market. As we have heard from a number of people this morning, that kind of information is going to be very useful.

Bilateral engagement with Iran is something that we have heard a number of people talk about this morning. We have had a number of opportunities recently—

CHAIR: I am really sorry, Mr Ralph, we are not asking you to give a commentary on the proceedings of the day. We are asking you to give a brief opening statement in respect of your position. I did not think we asked you up here to answer every question that was asked this morning. I note that the author of your submission is not present, and you have filled in a lot of gaps in that submission. You are fast on your feet, but it would be preferable to have a properly researched and properly prepared submission. If you were to give a brief opening statement on that, we could proceed to questions. I do not know how it works in other committees, but normally that is how we work—you give us a submission, we ask you to make a brief opening statement and then we proceed to questions. I have not chaired any hearings where people have come to the table and proceeded to answer questions that were not asked of them by this side of the table. So can you bring the opening statement to a succinct close.

Mr Ralph : I am very happy to bring it to a succinct close, and I am glad that it has been helpful. The author of the submission is not here because he too, like one of our other witness this morning, has just had his first child.

Senator BACK: It is a fertile committee!

Mr Ralph : There must be something in the water! I will leave it there. I was going to go into the human rights issue—

CHAIR: You are going to get questions on that, so let's not go over it again.

Mr Ralph : I will leave that to questions, but I was going to go into that in more detail. Another thing I was going to cover, which we might also leave for questions, is a subject that has come up several times today—the banking sector. But why don't I just come to a close.

Senator STERLE: I want to clear up a couple of things quickly because I am having grave difficulty with the smoke and mirrors fantasy out there that there is going to be so much opportunity for Australian industry—and I think of Australian employees—because we are going to drop some sanctions and there are going to be all these opportunities in oil and gas and mining. Where did that fantasy come from? The first witness today, Mr Hudson, from the Export Council of Australia, did not instil any faith in me that this is going to be a great opportunity for Australians in mining, oil and gas. I understand wheat and sheep—which we have already got.

Mr Ralph : Wheat and sheep are very well traversed. There is a lot of scope for expansion. As I said, we are nowhere near back to the levels of 20 years ago. So there is a lot of scope for expansion in those very traditional sectors. Of course, they have not been subject to sanction over all this time, and that is why that trade has continued. In oil and gas, mining and other extractives, which have been subject to sanction—and therefore there has not been investment so far—Iran is extremely prospective. It requires a lot of investment, and the Europeans are certainly looking at that as well. Take gas for example. Look at the fields in what the Iranians call the Persian Gulf—which neighbours on the other side of the gulf call the Arab Gulf—that Qatar is sitting on top of. Qatar has about half of it and is currently the world's largest gas producer. Iran has the other half of it—

Senator STERLE: Tell me where the opportunity is going to come from. Mr Ralph, you are delivering the message—I understand. But in my opinion it is a load of bull that Australians are going to reap fantastic rewards and manufacturing opportunities because the Iranians build cars. As I said earlier, there will be all these Aussies lined up in their fluoros to fly into Tehran for a FIFO job. You touched on it. There might be a few engineering jobs. I do not know. Tell me where you get these figures. Tell me where you get this belief that we should be absolutely wetting ourselves with excitement because we are going to deal with this murderous regime. Their human rights record is disgraceful. I will leave it at that.

Mr Ralph : As I was saying, gas extractives is one prospective field. As you say, there may not be employment for vast numbers of Australians. But for Woodside, whose job it is to go and develop hitherto unprospected or unavailable fields, the opportunities are indeed enormous.

Senator STERLE: There is a little bit of crossed fingers and 'let's fairy floss it up and make it look like fantastic opportunities for Australian companies'. But the truth of the matter is that there we would not have a clue. The truth of the matter is that there are no talks. There is no all of sudden Woodside, that fantastic little Aussie company, is going to balloon and double its return to its shareholders here in Australia and all the suppliers and manufacturers here in Australia. I will leave it at that. I am not convinced.

I want to come back to the sanctions—the US list versus the EU list. Can you talk us through that.

Ms Braithwaite : There has been a lot of discussion today about the differences between the US sanctions system and the Australian sanctions system.

Senator STERLE: The Australian system, or the EU system?

Ms Braithwaite : Sorry, did you ask for the US, the EU or both?

Senator STERLE: Mr Danby mentioned earlier—and I am blind, so I am relying on you guys—that the EU have 91 entities on their list whereas the Americans have 225.

Ms Braithwaite : Sorry, I do not have the exact numbers in front of me. The focus this morning has been on the number of persons and entities listed. We would suggest that the focus should more rightly be on Australia's approach to using sanctions as a foreign policy tool.

Senator STERLE: No, I want to know why the Europeans are so much smarter. Why do we follow the European number, the European Union, and not our close ally the Americans?

Ms Braithwaite : The reason is that the sanction system the US has in place is fundamentally different from Australia's. It is different in every respect. The EU system is much more comparable with Australia's system in terms of the way in which they implement sanctions. I think there has been a discussion that might suggest that an arbitrary choices has been involved here in terms of choosing the EU instead of the US.

Senator STERLE: I think there is. You need to educate me. We are not part of this JCPOA.

Ms Braithwaite : But we are obliged to implement some of its provisions because it has been incorporated.

Senator STERLE: Who said that we had to pick up the EU's listings? Who said we cannot have the American ones? That is what I am trying to establish.

Ms Braithwaite : The American listings are so extensive because America uses sanctions in a fundamentally way than Australia. The US system uses sanctions that are far more broadly defined in terms of a tool of national security. The US applies not just nuclear related sanctions; it also applies sanctions in a whole range of other areas that we do not have—for example, on the grounds of organised crime, counter-narcotics and in response to cyberattacks. Those are just some of the additional areas where the US applies additional sanctions. That could explain the differentiation in numbers.

Senator STERLE: On previous sanctions, have we always been in lockstep with the Americans?

Ms Braithwaite : We look very closely to what all our like-minded partners are doing.

Senator STERLE: So how have we done it previously?

Ms Braithwaite : It varies from regime to regime. In the case of Iran, the Australian government elected to follow very closely what the European Union was doing—the European Union being a party to the JCPOA and having very carefully negotiated all of those lists, including with the United States, at the time. As I said, the EU system is the most comparable to ours ,and the EU apply sanctions in a similar way to Australia. That is why Australia took the policy decision to align ourselves with the European Union. That is not to say we are not in step with the United States. That is not the case; it is just that the United States applies a far broader range of sanctions than Australia has done. Our autonomous sanctions are linked to two criteria: the minister must be satisfied that the person is engaging in an activity connected with WMD programs or their delivery systems; or, the minister must be satisfied that a person or an entity is assisting someone to violate relevant UNSC resolutions. Those are the grounds upon which we apply autonomous sanctions. So you will see that they are much more limited than those of the US.

Senator STERLE: What conversations have we had with the Americans in terms of following the EU sanctions, or our 91? What conversations has the minister and/or any other minister's department had with our American colleagues?

Ms Braithwaite : We have a regular dialogue on sanctions issues with both the US and the EU. We share information around listings. We talk to them regularly about implementation following the JCPOA. The JCPOA is still quite new. There is still a lot of uncertainty, to some extent, around its implementation, although I think that is now beginning to solidify in terms of international consensus. But we work very closely with both the US and the EU on sanctions systems.

CHAIR: If a company is trading with America and Iran, and there are two disparate groups of sanctions potentially, do they run the risk of being okay in the European Union but no good in America?

Ms Braithwaite : That is a very good question, Chair.

CHAIR: It is a pretty obvious question, if you have got two different lists.

Ms Braithwaite : Again, sanctions are a foreign policy tool adopted by states, so it is within the prerogative of states to choose to apply them in whichever way they see fit. So, yes, there could be differences between the US and the EU. I am not aware of any specific examples.

Ms Simpson : I think it goes to the matter of companies needing to undertake their due diligence, and one example that the committee might be interested in is the fact that New Zealand does not have any autonomous sanctions. So if you are looking at comparisons between companies needing to work in different jurisdictions, then that is a common feature, although it does not change the fact that there might be challenges in doing that.

CHAIR: And New Zealand would be doing what with Iran outside of dairy and sheep? Would they be exporting motor cars or something?

Senator BACK: Just very briefly, Mr Ralph, my recollection is that, even with the oversight of the shah, we kept our embassy going in Tehran.

Mr Ralph : That is right, so we established the embassy in 1968 and it has been a continuous presence ever since. Others—of course, notably, the US—closed after the occupation. The Brits pulled out a few years ago but have now reopened. However, for a long time we were about the only traditional like-minded open in Tehran.

Senator BACK: Senator Sterle asked quite rightly—it was 2010 that we stopped the Austrade office, so we would have relatively recent information still from Austrade, would we not?

Mr Ralph : Relatively recent; that is right. As I said, there is a couple of staff still at the embassy—locally engaged staff, Iranian—who worked for Austrade back then. They will come back on to the books and draw on their experience.

The reopening of the office, as much as anything else, is to have a resource there to assist those companies that are coming in. As I said, we have had a lot of interest. We, and our colleagues in Austrade—there are 30 or 40 Australian companies who are kind of queueing at the door. Some have already reopened offices in Tehran and others have expressed interest in doing so. So we actually need a resource at the embassy dedicated to making those contacts.

Senator BACK: Sure. So there has not been a long gap in our knowledge, and we have actually had an embassy running in the meantime anyhow.

Mr Ralph : That is right.

Senator BACK: In the few minutes left, there have been some very compelling pieces of evidence here from witnesses here today in terms of human rights abuses in Iran. The obvious question from the committee would be: what, if anything, more can Australia do to exercise some influence on the administration of that country to cause them to come into line with what we would expect to be normal behaviours by a state?

Mr Ralph : Thank you—a very good question. This is something that we talk about regularly with some of the organisations who appeared this morning, notably, the Baha'i, for example. We have a regular formal and informal contact with them in Canberra.

Human rights fall into two main categories. You take these things up bilaterally with the Iranians, and so we let no opportunity pass to do that. When Foreign Minister Bishop was in Iran last year, she raised these issues with her counterpart Foreign Minister Zarif. When Zarif was in Canberra in March this year, she brought them up again—as did a number of other ministers and indeed other contacts that he talked to. I think Mr Danby, who is still with us, would undoubtedly have brought them up in the meeting that he had with Foreign Minister Zarif that morning.

We bring them up at senior officials' level. Every time an Iranian senior official comes to Canberra, human rights is on the agenda. We go into specifics about the ill treatment of ethnic and religious minorities: Arab Iranians, Baha'is Christians, dervishes, Sufis and Jews. We talk about torture. We talk about the denial of right to a free trial. We talk about discrimination against women and girls; harassment and arbitrary arrest of human rights defenders; and executions, including of minors—we cover the gamut every time we go into this.

We also bring it up in multilateral fora—again, I think our Baha'i friends referred to this this morning. The importance of the multilateral fora for human rights activists in Iran cannot be overstated. The Iranian government is very sensitive to this, so we regularly co-sponsor the UN Third Committee resolution on human rights in Iran in New York. That was most latterly done on 19 November last year. We also took part in Iran's appearance before the human rights commission in October 2014 and, again, in the human rights council in, I think it was, March 2015.

I will not bother reading out some of the comments that we made at that stage but I am happy to provide them to the secretariat, if it would be of interest to the committee to see the sorts of issues that we go through when we are raising these human rights topics with Iran multilaterally.

I think, again, there was a question this morning that we might be pulling our punches on some of these things, because we have other interests with Iran. We do have other interests with Iran, certainly on the security front, but we do not pull our punches on human rights.

Senator BACK: Thank you.

CHAIR: A paragraph in your submission says:

This approach to public consultation was in accordance with similar autonomous sanctions changes including the partial removal of autonomous sanctions in regard to Myanmar in 2015 and the total repeal of autonomous sanctions on Fiji in 2014.

You are linking Myanmar and Fiji to Iran, when there were democratic elections in both Myanmar and Fiji, and there is a fundamental difference to what has happened in Iran. We have had evidence today that neither of those states was involved in state-sanctioned terrorism. Why was there no public consultation, when we are going to do something different with what is clearly a very contentious regime? Why was there no public consultation? How can you link those two events to this?

Ms Braithwaite : Perhaps I can address the issue of the link first. The reason we have mentioned Myanmar and Fiji in this context is not in any way to compare the situations of international concern that led to Myanmar, Iran or Fiji being designated for sanctions. Rather, they were merely included as examples of recent cases where we have lifted, partially or in full, autonomous sanctions. In cases, where we are lifting sanctions or easing restrictions or burdens on members of the Australian community, it has been the practice of the department not to undertake public consultation because we are not imposing obligations. If we were imposing sanctions on new individuals or creating new sanction regimes altogether, then in that circumstance the department would go out to public consultation.

CHAIR: It is unfortunate that that paragraph starts with: 'This approach to public consultation was in accordance with similar autonomous sanctions changes'. I would contend there is no similarity between Myanmar, Fiji and Iran.

Ms Braithwaite : No, not in a policy sense. The only comparison is that we lifted sanctions in those instances. That is the connection. I am sorry for any confusion on that point.

Senator FAWCETT: I would like to go to the issue of risk for Australian business. I think you were all here this morning, when I asked the question about Australia reimposing autonomous sanctions. It is quite clear from the UNSCR 2231 paragraph 12, the conditions under which the UN sanctions will be reimposed. Australia has reserved the right to reimpose autonomous sanctions, but there is no definition or clarification of what thresholds would trigger that. From the perspective of business, if you are going to invest capital or even risk personnel in joint ventures or other partnerships, it is a huge unknown and a deterrent for people wanting to invest if they do not understand the circumstances under which is sanctions may be reimposed. Why is there no clarity around that? What are you doing to engage with Australian business to give them confidence that this is an opportunity worth pursuing?

Ms Braithwaite : I agree entirely that there are very clear provisions within UNSCR 2231 and the JCPOA about snapback and the circumstances under which sanctions could be reimposed in the UN context against Iran. On the threshold for reinstituting Australian autonomous sanctions, I would be hesitant to speculate on the set of circumstances that might lead to that. It would require me to come into some very hypothetical situations. But what I can say is that it would need to be something that we followed the UN very closely on. If the UN were to, for example, reinstitute all the previous UNSC resolutions and 2231 ceased to come into effect, then obviously Iran must have done something quite serious for that circumstance to eventuate. Rather than speculate on hypothetical scenarios, what I can say is that the decision to reinstitute sanctions will be one for the government of the day at a time when there is an activity of concern that would require some form of response. I should also note that sanctions are only one of the available tools in our foreign policy toolbox to respond to situations or developments of concern. My colleague, Mr Ralph, has already mentioned that the Australian government has a very active dialogue with Iran across a range of issues of concern.

In terms of your question about what we are doing with Australian businesses, we have a very proactive relationship with Australian businesses and industry. We go out regularly across all the capitals with Outreach around obligations and sanctions related issues. We talk to companies about the risks involved in entering the Iranian market and we make sure that they are aware of the consolidated list, for example, on our website, and that they have the resources to go to Austrade and ask the questions they need to ask to conduct their due diligence.

In our view, it always comes back to the need for companies to conduct the necessary due diligence before entering into business dealings. There is a whole range of mechanisms and support services that companies can go to with respect to that. Obviously the departmental website is a very useful resource. I should say that we are currently conducting a review of the website. So the feedback that we have had from various submissions today around how we could make that a more user friendly experience for businesses and industry has been very welcome. We would certainly welcome any further feedback from stakeholders who use the website regularly. In our view, it needs to be streamlined and made a lot more accessible for people to be able to get to the information they need quickly. That is part of the reason for this review.

In addition to the department's website, there is Austrade and private consultants. We recommend that companies seek legal advice where they need to do so ahead of business dealings. There is a plethora of steps that companies should and do take before they begin to commence dealings in a business environment such as Iran.

Senator FAWCETT: I am glad you brought up the topic of the review and the feedback on the website. Certainly the overwhelming evidence to us is that the website is not as functional as it could or should be. Could I ask you to take on notice to come back to the committee with your time frame in terms of what consultation you are going to do with industry, what beta releases you are going to have, who you are going to road-test that with and when you plan to have a functioning website up and running? The last thing we want is to have great words today that are lost in the flurry of activity and business still being none the wiser, when you consider the implications for their capital, their shareholders' capital, their staff and the owners of company in terms of potential breaches of sanctions either by Australia or sanctions that are imposed by the UN or the US.

Ms Braithwaite : I would be pleased to take that on notice. I should note that, in addition to reviewing the website, we are also re-examining the online sanctions system. So we are looking at our entire online presence. At the moment, all the information that is needed is on there; we just think it is not very easy for companies and businesses to access it. So the information is there, but we are trying to make it more accessible and more user friendly.

Senator FAWCETT: Can I take you to the issue of finance. Again, you would have heard my questions to previous witnesses about the regulations that have been changed as a result of our lifting of sanctions which open the door to buy-in, partnerships and interactions between our financial services sector and that of Iran. There was no public consultation in this process, but can you outline for the committee what consultation occurred with Treasury, ASIC or APRA to understand what implications this decision may mean for them in terms of their scope of authority, resourcing and capacity to review what international groups, including countries like China and Russia, have identified as one of the world's most corrupt and dysfunctional financial services sectors?

Ms Braithwaite : I am afraid I will have to take that on notice, and the reason is that the Attorney-General's Department is responsible for administering the Financial Action Task Force recommendations and regimes around money laundering and counter-terrorism finance. Some of the measures you are referring to that Australia has recently introduced are a requirement under the FATF.

Senator FAWCETT: My question was on consultation, and that is a process that, as I understand it, DFAT run.

Ms Braithwaite : No, the Attorney-General's Department run consultations around FATF. So I would need to check—

Senator FAWCETT: I am talking about the lifting of sanctions. For you to have taken the recommendation to the minister to lift the sanctions, I would be deeply disturbed if you told me you had not consulted about the implications for our regulatory system in an area such as finance if that specifically is one of the doors that are being opened. What I am asking is: what consultation with other government departments did DFAT do before you presented that recommendation to the minister?

Ms Braithwaite : Our submission notes that the department did indeed consult on all of the sanction related changes after the JCPOA implementation. I will have to take on notice the specifics of that consultation, and I would be happy to do that.

Senator FAWCETT: Did you read the submissions before you came along today?

Ms Braithwaite : Yes, I did.

Senator FAWCETT: So you would have seen that finance, and concerns around that, was a significant elements in a number of submissions?

Ms Braithwaite : Yes.

Senator FAWCETT: Yet you haven't checked to see whether you consulted in that area or not.

Ms Braithwaite : There was extensive consultation around all of the lifting of sanction measures, not just in the economic and financial space. While certainly that is a priority issue, obviously, again, it was part of a much broader conversation.

Senator FAWCETT: Turning to the issue that, from what you have said, may end up needing a response from the Attorney-General's Department, in terms of money laundering and funding of terrorist organisations, answer this if you can but take it on notice if you must, are there specific measures over and above our normal practice, given the state level, almost, of the concerns as opposed to just organised crime or individual non-state actors with information, that Australia is looking at in relation to the prevention of those kinds of transfers of funds.

Ms Braithwaite : There are certainly very robust requirements in place under the Financial Action Task Force regime around the need for financial institutions to conduct enhanced customer due diligence. That is a process that now needs to be conducted by financial institutions themselves. Previously, DFAT was in a situation where it needed to assess all financial transfers to and from Iran over $20,000. That financial transaction limit has now been repealed. Instead, it has been replaced by this FATF requirement for financial institutions to conduct due diligence to specifically address the issue of counterterrorist financing and money laundering. Due diligence includes obviously updating and clarifying identity and beneficial ownership information, obtaining further information on the source of the customer's beneficial owner's funds, clarifying the nature of the customer's business, analysing past and future transactions and seeking senior management approval to process transactions or to continue the business relationship. Those are the types of questions that financial institutions are now obliged to seek information on before supporting those dealings.

Senator FAWCETT: I am sure that process is quite appropriate if we are talking about transferring funds to a country in Europe, for example, where we are dealing nation-state with nation-state and both nation-states have a commitment to reducing the incidence of financing of terrorist organisations, but what we are talking about here is us as a Westphalian nation-state dealing with another nation-state that has been identified through numerous forums of being a state sponsor of terrorism. It is quite a different dynamic. I am interested in the concept that we should place on financial institutions and individual companies the process of doing due diligence when it is a very different scale from what that system is normally set up to deal with, which is that we are dealing with another nation-state that shares our values and our concerns and we are both trying to crack down on crime. Here we are dealing with a nation that sponsors terrorism. What is the government doing, what is DFAT doing, what is A-G's doing to make sure that system is robust?

Mr Ralph : If I might chime in, not wishing to speak for A-G's but just on the subject of Iran itself, maybe somewhat cheeringly they have expressed an interest in engaging with FATF—the Financial Action Task Force—to improve the transparency of their own banking sector. This was the subject of some discussions we had with Foreign Minister Zarif when he was out here. He made the point himself that the Iranian banking sector has been cut off from the outside world from nearly two decades and is a long way behind where it needs to be in terms of openness and transparency. I think it is reassuring that at least elements of the Iranian government are aware of that, and we will do what we can to assist their re-engagement with the FATF process. Anything we can do to push them further down that path can only be to the good in ensuring that no moneys flow from any business engagement that Australia might have to support for other groups in the region which we would not want to see supported.

Senator FAWCETT: I hear that and I welcome that development but we are in a situation where, when we look at the Revolutionary Guards et cetera and their commercial interests, we are essentially talking about a government sanctioned entity and government sanctioned processes to fund terrorism. It strikes me that adopting a process which is designed for a company to do due diligence in a nation-state on nation-state transfer where both parties are seeking to block that, where one government is not necessarily seeking to block that—despite their desire to get up-to-date with transparency, Basel reforms and other things in relation to their overall financial sector—that is a different paradigm. I am happy for you to take it on notice, because we are starting to go in circles now, but I think it is a serious issue that we need to clarify how we are going to deal with that problem.

Ms Simpson : We will take it on notice, but if I might just add that the enhanced customer due diligence that is required in relation to Iran and also in relation to DPRK is above any other requirements required for any other country. It is a different measure, but I take your point. We will take it on notice, given that it is not our departmental responsibility.

Senator FAWCETT: You mentioned before that we try and stay in tune with what the US or the UN do in revisiting their sanctions. In terms of the lists that identify people who currently have sanctions or who have had sanctions removed from them—you explained before that the US has a slightly different approach to defining the requirement or enabling issues that drive sanctions—there appears to be a split between our approach of identifying people who have been removed from sanctions lists and that of some of our international partners. I am wondering whether you could clarify for the committee why that is so and why we would not follow the same approach with the Australian list.

Ms Braithwaite : I think the simplest way to answer is to say that Australia elected to follow the example of the European Union in the lifting of designations of persons and entities. That goes back to the original point I made about the European Union having the most comparable system in terms of the way in which it implements sanctions to that of Australia. I am not sure that I would say there is a split in the international community and the way in which the lifting of sanctions occurs. I think rather individual countries, and blocks in the case of the EU, make their own individual assessments as to the foreign policy merits of retaining sanctions on a particular individual or entity.

Senator FAWCETT: So if I were a company wanting to do business in Iran and I approached DFAT and said, 'Here are three companies or individuals I am looking to do business with. Can you tell me if they have been subject to sanctions in the past?', you would be able to provide that information freely?

Ms Braithwaite : Yes, we would, and we often do. We get many inquiries from companies wishing to engage in business in Iran and we help them where we can or we refer them to Austrade. One of the issues that have come out of this inquiry for me is that companies need to be alert not just to their obligations under Australian sanction laws but also under US and perhaps other countries' sanction laws as well. That is something I would like to look at including on our website so that we can provide that extra layer of assistance.

CHAIR: We are at the appointed time of closure. Thank you for appearing today. The committee asks that questions taken on notice be returned by Friday, 29 April 2016. I now close this public hearing. On behalf of the committee I thank all witnesses who have appeared here today. Thank you Hansard and the secretariat.

Committee adjourned at 14:44