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Thursday, 1 December 1983
Page: 3202


Mr CHARLES —On behalf of the Joint Committee on Foreign Affairs and Defence, I present the Committee's report entitled 'Australian-United States Relations: the Extraterritorial Application of United States Laws', together with the minutes of proceedings and the transcript of evidence.

Ordered that the report be printed.


Mr CHARLES —by leave-Mr Deputy Speaker, the report I have tabled is the second report of the Joint Foreign Affairs and Defence Committee's inquiry into Australian-United States' relations. It deals with the extraterritorial application of United States laws, an issue which has been of concern in recent years and rose to prominence in what is known as the Westinghouse case. The question of the extraterritorial application of United States laws came before the Committee late in the last Parliament, when it arose during the general reference of Australian-United States relations. On the commencement of this new Parliament, the Committee decided to focus its full attention on this important and complex issue. The inquiry identified this issue as one which could affect the existing close relationship between Australia and the United States. This is not to suggest that the relationship is on the point of breakdown. Rather, Australia's relationship with the United States is basic to Australia's involvement in world affairs. However, the extraterritorial application of United States laws has the potential to obscure the major issues in our relationship. To summarise this complex question it may be appropriate to quote Professor Kevin Ryan, Professor of Law at the University of Queensland, when he stated in evidence before the Committee:

The extraterritorial application of United States law is a matter of serious concern for two rather different reasons. The most obvious reason is its impact on our sovereignty and our capacity to make decisions on matters of national interest. But there is also the impact which it has on individual Australian residents and particularly individual Australian companies. One thing that is clear from the settlement of the Westinghouse litigation is that these two interests may not necessarily coincide . . .

This is a a very comprehensive report on what I believe is a very important subject. The report includes chapters on potential threats by United States extraterritorial legislation, United States anti-trust laws, the Westinghouse case, the Australian-United States' bilateral agreement and responses of foreign governments, thus covering the whole question of the extraterritorial application of the United States laws, including anti-trust matters.

The Committee, after consideration of the issues involved, has reached a number of conclusions and made five comprehensive recommendations. The Committee concluded that the extraterritorial application of United States laws has important potential by prejudicial implications for the Australian Government and Australian business over a broad range of economic and political issues. The Committee also concluded that attempts by the United States to extend the extraterritorial reach of its laws are inconsistent with international law and international comity. International concern at the extraterritorial reach of the United States laws was in response to anti-trust suits against Australian uranium companies. However, as noted in the report, the issue is wider than anti -trust. In the report the Committee has identified a number of Acts which could be of concern to Australia. The most immediate one is the Export Administration Act. However, there are also the Trading with the Enemy Act, the International Emergency Economic Powers Act and the Foreign Corrupt Practices Act. It is appropriate to note that the Australian oil and gas group, Santos Ltd, was seriously affected when the United States Administration used the Export Administration Act to attempt to block construction of the Siberian pipeline in 1982. The Committee was also informed that the United States Trading with the Enemy Act could have, and has had, direct implications for Australia's trade.

Mr Deputy Speaker, perhaps it is a sign of the strength of the Australian- United States alliance that Australia has been able to achieve more in having the United States temper its application of laws extraterritorially than have other countries. In June 1982 the Australian-United States Bilateral Agreement relating to co-operation on anti-trust matters was signed. The Committee has commented at length on this Agreement and has concluded:

It is a significant step towards resolving numerous difficulties that have arisen between the Australian and US Governments in the enforcement of US antitrust laws.

However, the Agreement relates only to anti-trust matters and, as the Committee has concluded, there are other United States laws which have not been affected by the Agreement. Private anti-trust litigation is another concern for Australian businessmen and while that comes under Article 6 of the Australian- United States Bilateral Agreement, it has only restricted application within that Agreement. In the Attorney-General's Department submission to the Committee , Attachment C, it is stated:

The obligation on the United States Government under Article 6 to report to the court on the substance and outcome of the consultations goes much further than did the letter Mr Shenefield sent to court in the Westinghouse proceedings. But Article 6 still falls short of an obligation to inform the court of the possible effect upon foreign relations if the court exercises jurisdiction and grants relief.

Thus Australian businessmen still face the threat of private treble damage suits . Therefore private anti-trust litigation, plus the other Acts I have mentioned, could have the potential for future irritation in our relationship with the United States. Therefore the Committee has recommended the introduction of legislation to protect Australian residents or those doing business in Australia from the extraterritorial application of United States laws. Dissents have been lodged to these recommendations. However, the weight of evidence overwhelmingly supports the Committee's recommendation for the introduction of a complete range of legislative measures to protect Australian business and Australia's sovereign interests. With the exception of one witness, the introduction of such legislation was supported by all witnesses who appeared before the Committee.

The Foreign Affairs Department noted that something like the British legislation, that is, the United Kingdom Protection of Trading Interests Act 1980, is just a sensible piece in a country's defensive armoury. In fact, in evidence Mr Nicholson, representing the Foreign Affairs Department, stated quite clearly that the United States would understand legislation in the terms recommended by the Committee. It is best summarised by quoting one short piece from evidence where in part Senator Hill, when asking Mr Nicholson a question, said: 'Do you believe the Americans are under the impression that the Clawback Bill will not proceed pending that in practice the Agreement is found to work satisfactorily?' Mr Nicholson replied: 'No, I do not think they are under any apprehension of that sort.' All departmental witnesses supported the introduction of legislation.

The Australian Industries Development Association noted that there were no simple solutions to the problem of extraterritoriality. The legislative measures which had been introduced by the previous Government were seen as useful means and the Bilateral Agreement was a welcome addition to the machinery available for Australia to deal with problems arising in this area. The Association recommended passage of the 1981 Bill as a further step in establishing a comprehensive range of options. These options would be available should the need arise in the future.

Let me briefly comment on two aspects of the dissenting report. The dissenting report relies heavily on a press release by the shadow Attorney-General, Senator Durack, released on 29 June this year, which states, in part:

On behalf of the then Australian Government I assured the US Government that we would not proceed with any future blocking legislation unless the Agreement proved less successful than we hoped.

It seems odd that Senator Durack should say this now he is in opposition, as there is no public record, statement, Press release or public comment, within or outside the Australian Parliament, to that effect when he was Attorney-General. On the contrary, Senator Durack at the signing of the Bilateral Agreement, said:

The important matter of United States Government participation in private suits is dealt with in the Agreement and the provision included is significant but it cannot provide a complete answer to the difficulties which may arise from those proceedings. I should say that in regard to those difficulties we remain concerned.

The dissenting report further comments:

The Committee argued that the Bilateral Agreement will prove unsuccessful because previous attempts at such agreements, and the Committee particularly deals with the experience of Canada, have proven unsuccessful.

That statement is wrong in fact. Taken in the context of the whole report, especially the comprehensive chapter on the Bilaterial Agreement, it will become clear to honourable members that the Committee does not argue that the Bilateral Agreement will prove unsuccessful per se and the dissenting report's statement is incorrect. Rather, as I have already stated, the Bilateral Agreement is a significant step forward. However, it does have limitations and, in preparing for the future, legislation to complement the Agreement is only sensible; and that legislation is better introduced now, considering we have a relatively calm atmosphere surrounding these matters.

The Committee has also commented on the need for more effort to be made at the international level. We have concluded that the long term solutions to the problem of extraterritoriality will probably be achieved at the multilateral level and have suggested that the Government give high priority to representation at such negotiations. A further avenue would be a change in the United States laws themselves and whilst such a change is unlikely, it should not be overlooked. The Committee has suggested that wherever possible diplomatic efforts should be maintained and Australia's concern ought to be brought to the attention of the American authorities. Businessmen can also play a role in this matter and I would suggest that the Australian businessmen and their associations continue and strengthen their efforts to seek changes in United States attitudes.

This is a very important and complex issue and I believe the report now before the House will stimulate debate and assist in resolving irritations that may occur from time to time and any future problems that may arise in anti-trust matters and other related United States laws. I have great faith in the friendship that exists between Australia and the United States and it is that relationship and goodwill that should overcome any potential difficulties.

In conclusion, I would like to thank members of the Sub-Committee on the Pacific Basin who conducted the inquiry both in this Parliament and in the previous Parliament, particularly the honourable member for Hume (Mr Lusher), the Chairman of the Sub-Committee of the previous Parliament. I would be remiss if I did not also thank the former Secretary of the Sub-Committee, Dr Andrea Edvi-Illes, for her dedicated work on behalf of the Sub-Committee. Finally, I say a special thank you to our present Secretary, Mr Phil Bergin, for his tireless work, his assistant, Mr Ian Booth, and our specialist adviser, Dr Gillian Triggs whose assistance to the Committee throughout this complex inquiry was invaluable.