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Economics References Committee
Foreign investment review framework

RICHARDSON, Mr Dennis AO, Secretary, Department of Defence

THOMAS, Rear Admiral Clint, Commander Joint Logistics, Department of Defence


CHAIR: I now welcome Mr Dennis Richardson, Secretary of the Department of Defence, and Rear Admiral Clint Thomas. I remind senators 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 and does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted. Officers of the department are also reminded that any claim that it would be contrary to the public interest to answer a question must be made by a minister and should be accompanied by a statement setting out the basis for the claim.

Thank you for appearing before the committee today. I now invite you to make a brief opening statement, should you wish to.

Mr Richardson : I will make a few brief opening comments. Clearly, we take our responsibilities in respect of foreign investment and our own input into that seriously. We are paid to look at proposals hard-headedly and we are paid to look at them unemotionally and to provide rational advice. In respect of the port of Darwin, which is the subject of most discussion, any claim that we did not exercise due diligence is based upon ignorance not on fact. This is an issue which we looked at very, very carefully.

For the convenience of the committee, I will divide our consideration of the issue into three parts. The first part is between early 2014, when we first advised by the Northern Territory government that they were considering possible privatisation of the port, through to 13 May 2015, when we signed a deed of licence with the Northern Territory government, which specifically related to our own interests in the port narrowly defined but also taking into account broader issues. The deed of licence is the most extensive deed of licence that we have with any port in Australia, precisely because the port of Darwin, as others have indicated, is strategically important. Precisely because of that, we exercised great care with the deed of licence.

Our negotiations for the deed of licence were led by Rear Admiral Clint Thomas. It involved other senior people across Defence. It goes to the point of access. It specifically recognises contingencies and Defence's rights in the event of contingencies. It specifically recognised defence emergencies under the Defence Act. It also involves right of inspections. It involves three to four meetings—formal meetings—a year, in respect of the operation of the port.

I should also add a point that you might wish to pursue with the Northern Territory representatives, later. There is also, in the Northern Territory, a Utilities Commissioner. This is a regulator who sits over the port operator and can, ultimately, determine access for commercial shipping, if there is an issue there. We negotiated that deed of licence without regard to who might have the lease or who might buy the port. Therefore, we negotiated certain conditions in it that took account of any potential lessee. That phase took place between early 2014 and 13 May 2015.

The second phase is from 13 May 2015 to 15 September 2015. In that period, potential bidders were identified, narrowed down and, in early July 2015, asked by Treasury to specifically assess Landbridge. At that point, in July, the Treasury was of the view that the Landbridge investment would require further approval. Therefore, the Treasury went out to all relevant government departments and agencies as part of a formal third process. It was not until 15 September 2015 that Treasury advised the investment did not require formal further approval. And the request for formal—

Senator CONROY: Treasury changed its mind.

Mr Richardson : Treasury advised, as they went along, that they were still examining the investment proposal. They sent out formal advice, in July, asking us to make a formal assessment of Landbridge as though it was part of FIRB.

Senator XENOPHON: What date did it formally go out?

Mr Richardson : The Treasury representative will be able to tell you that, later on, but it was about 8 July.

Senator CONROY: I am just trying to confirm that. On about 8 July Treasury said FIRB approval is necessary.

Mr Richardson : That is right.

Senator CONROY: But on 15 September they said it was not.

Mr Richardson : It was rescinded. In the meantime, relevant government departments and agencies—

Senator CONROY: Are you aware of why that decision was taken?

Mr Richardson : Yes.

Senator CONROY: I appreciate the officers will be here later, but what is your understanding?

Mr Richardson : It is because of the nature of the investment and—

Senator CONROY: Being a lease rather than a sale.

Mr Richardson : They will have to go through that but, in broad terms, my understanding is that it is because of the Foreign Acquisitions and Takeovers Act 1976, which excludes FIRB consideration from the sale or lease of a state or territory owned enterprise being sold to a foreign private entity.

Senator CONROY: It was a state asset; therefore, FIRB was not required.

Mr Richardson : Because it was being sold to a foreign private entity. Again, Treasury can go over this with you. They are the experts, in this area, not me. The point I am making is that in July, August and the first half of September we in Defence went through a formal process, as did a range of other government departments and agencies, as though it was FIRB required. We advised the Treasury, specifically looking at the Landbridge arrangement, that we did not have an objection to it.

The third period was from 15 September on. I would note that on the 6 October 2015 the Landbridge arrangement was mentioned at the National Security Committee. Specific attention was drawn to the fact that even if departments and agencies had objected there was nothing the Commonwealth would have been able to do about it because of the 1976 Foreign Acquisitions and Takeovers Act. As a result of that, the Prime Minister asked the Treasurer and the Attorney-General to review that aspect of the legislation to see whether it should be changed. So the initiative to review that part of the legislation came from within government, by government.

I was in Washington at the time of the announcement by the Northern Territory government in respect of Landbridge on 13 October. I got a phone call around midnight to advise that the Northern Territory government had advised that later that day they were going to make a public announcement in respect of Landbridge. I got onto relevant people in Defence to specifically confirm that we did not have any issues. I ensured that certain people, including the Chief of the Navy, were specifically consulted to confirm that our previous advice and position still stood. That was done.

Within 36 hours or so of the announcement, I was having a pre-arranged meeting with the Deputy Secretary of the Department of Defense, Bob Work, about cost-sharing arrangements in respect of the Marine presence in Australia. I used part of the time to brief him on the Landbridge deal. I drew his attention specifically to the fact that it had given rise to the identification of an apparent systemic issue in the legislation which the Prime Minister had asked be reviewed.

Senator WHISH-WILSON: Mr Richardson, was that the first time that anyone in the US defence establishment had been briefed on this?

Mr Richardson : On Landbridge, yes. I would note that the US had certainly been aware for some time that the port of Darwin was going to be privatised. I would also note that there was speculation in The Financial Review on 26 September or 28 September that Landbridge was going to get the lease. But it was the first time the US had been specifically briefed in the manner in which I did it.

There followed a lot of public commentary about the Landbridge deal by ASPI and others. After a couple of weeks of it, I personally thought, 'Gee, have we missed something? With all our due diligence, have we missed something?' So I asked the Director of the Defence Intelligence Organisation to bring together people from other intelligence agencies to go over it again and see whether we had missed anything, specifically from an espionage but also other perspectives. The written advice I received on that was that there were no significant implications and it was fine. So that is the process we have been through.

I might mention something about two other things that have been stated today. Mr Jennings mentioned intelligence risks in respect of naval vessels and what they emit. I would like to put on the record that no Australian or American naval vessel that I am aware of enters a commercial port, whether it be New York, Sydney, Shanghai, London or Darwin, without turning off key emitters. The notion that you would enter a commercial port regardless of the operator and leave yourself exposed to possible collection is absurd. When you enter a commercial port, you do not know what other shipping is there. You must assume that there may be people seeking to collect things, and you take the appropriate steps. So I am surprised that that would be given as an example of one of the intelligence risks.

Comments have also been made about this being part of a broader Chinese strategy. You hear references to a string of pearls, silk roads and all that. To the extent that it is commercially based, I think that is a good thing. However, it has been implied in more sinister terms, as it was by a writer for ASPI who was at the ANU, Geoff Wade. He wrote a piece on 18 November, 'Sabah, the PLA Navy and Northern Australia,' where he talked about an arrangement that had been entered into between the Malaysians and the PLA Navy. He talked about what China was doing elsewhere in Pakistan et cetera and visits by PLA Navy vessels. He finished off by saying:

In the light of these visits and increasing PRC maritime assertiveness, only the most innocent would, on observing the location of Darwin between the South China Sea and the Indian and South Pacific Oceans, conclude that the PLA Navy would not likewise be interested in securing access to and facilities in the port of Darwin. Particularly if it was under the control of a Chinese enterprise for the coming century.

That is alarmist nonsense. It is without foundation in any way. Anyone who knows the ABC knows that it is not in the gift of the operator of a port to invite foreign naval vessels to visit. The visit of foreign naval vessels anywhere around the world requires diplomatic clearance. That power resides within the federal government. Specifically in Australia, it resides with the Department of Defence. It resides with the Minister for Defence or her delegate. So, again, the notion that Landbridge's lease in Darwin somehow or other is part of a broader strategic play by China, and this gives the PLA Navy access to Darwin, is simply absurd. It does not. It is not factually based. Finally, I simply note the following. On the—

CHAIR: I would ask you to bring this to a close, Mr Richardson.

Mr Richardson : Yes, but these are important points on which things have been challenged, and I think it is essential that I get the facts on the record.

CHAIR: Sure.

Mr Richardson : Paul Barnes and Peter Jennings, on 13 November, stated in an article:

An essential check-list for FIRB evaluation should include assessing the extent to which an element of critical infrastructure, if sold, might risk:

being shut down or sabotaged in a time of heightened tension—

that was addressed—

be subject to cyber-attack—

that was addressed. Indeed, I specifically advised Senate estimates a few weeks ago that ASD, the Australian Signals Directorate, had been specifically consulted in relation to this lease. So that had been done. The next is:

be used as a proxy for intelligence gathering …

We did our due diligence on that. The next is:

have intellectual property stolen …

We did that. As far as Defence goes, we did that more narrowly. The list ends with:

and, by asymmetric means, be used to degrade key elements of Australia’s national security system.

We did our due diligence on that.

Finally, on 19 November, Allan Behm, writing for Lowy, said:

The issue is essentially one of control: how are access priorities set; how are berth and mooring allocations decided; do particular cargoes, carriers or trade destinations have priority; how are port charges levied; how are improvements treated at the end of the lease? There are myriad questions that should be dealt with before a major strategic asset is removed from Australia's direct control.

All of that was addressed, Chair.

In summary, we did our due diligence very carefully over an extended period of time in respect of the Port of Darwin. Nothing that has been said since the announcement has given us pause for thought.

CHAIR: Thank you, Mr Richardson. Senator Conroy?

Senator CONROY: I wanted to come back to the time line for a moment. Why were you in Washington on 13 October?

Mr Richardson : Why? There had been a meeting of AUSMIN in Boston either that day or the day before.

Senator CONROY: What were the dates for AUSMIN?

Mr Richardson : AUSMIN, I think, was 12 October, but I stand to be corrected. It was either 12 or 13 October.

Senator CONROY: The 12th in Boston?

Mr Richardson : Yes.

Senator CONROY: So AUSMIN had finished, and you went on to Washington?

Mr Richardson : Yes.

Senator CONROY: Which American Defense officials were present at AUSMIN?

Mr Richardson : At AUSMIN, there was Secretary Carter, there was the chairman of the joint chiefs—yes, I think the chairman of the joint chiefs—and there were a number of other officials whose names I forget.

Senator CONROY: So Mr—I cannot think of the name of the gentleman you mentioned that you spoke with in Washington.

Mr Richardson : Bob Work. He was the deputy secretary.

Senator CONROY: Bob Work, sorry. He was not there?

Mr Richardson : He was not there.

Senator CONROY: He was not in Boston?

Mr Richardson : No.

Senator CONROY: Now, with the time difference, we are about a day ahead—

Mr Richardson : Yes, roughly.

Senator CONROY: in Australia.

Mr Richardson : Yes.

Senator CONROY: So when you got the phone call on the evening of 13 October, Washington time, what time was it in Australia?

Mr Richardson : No, it could have been the evening of—

Senator CONROY: That would have been the 14th.

Mr Richardson : It could have been on the evening of the 12th; I am not quite sure. I got the call around 12, 12.30 at night—

Senator CONROY: On one of those evenings you were in Boston and then on one of those evenings you were in Washington. They are two very distinct and different places.

Mr Richardson : I know that.

Senator CONROY: So you received the phone call in Washington?

Mr Richardson : I received the phone call in Washington.

Senator CONROY: And you were not in Washington the previous evening. You have just described that after the completion of AUSMIN you went to Washington.

Mr Richardson : That is right.

Senator CONROY: So the night before, presumably, you were in Boston.

Mr Richardson : On the night of the 11th.

Senator CONROY: The 12th?

Mr Richardson : No. I think you will find the announcement was on 13 October Australian time. Yes. So the announcement was made by the Northern Territory government on 13 October. If made on 13 October—

Senator CONROY: Which was still the 12th in Boston.

Mr Richardson : That would make it the evening of the 12th in Washington. We went up to Washington the same day as AUSMIN.

Senator CONROY: After it concluded?

Mr Richardson : After it concluded yes.

Senator CONROY: So you received the phone call around midnight?

Mr Richardson : That is right.

Senator CONROY: On the 13th in Washington?

Mr Richardson : Yes, on the 13th Canberra time I was in Washington.

Senator CONROY: That is what I am trying to ascertain. Was it midnight in Washington or midnight in Canberra?

Mr Richardson : Midnight in Washington.

Senator CONROY: And that was the first you knew of the decision to appoint Landbridge even though you had been vetting them?

Mr Richardson : No, it was the first time I was aware that an announcement was going to be made.

Senator CONROY: But you knew that Landbridge had won prior to that presumably?

Mr Richardson : Yes. Well, I assumed that from discussions I had in Australia in October. I cannot say I knew as of fact, but I certainly assumed that.

Senator CONROY: You mentioned earlier that you had done you due diligence on questions around sabotage.

Mr Richardson : Yes.

Senator CONROY: What does that involve?

Mr Richardson : That involves consultation with the Australian Signals Directorate. I think ASIO were separately approached by the Treasury and, of course, they have statutory responsibility in that area. It involved consultation with the Australian Defence agencies and it involved consultation with the three services. Then, as I said, after it became public and there was a lot of criticism of it, I became concerned that we might have missed something. So as a backstop, I specifically tasked the directors of the Defence intelligence agencies to bring together some people from different parts of the intelligence community to make sure we had not missed anything.

CHAIR: What prompted your concern that you might have missed something?

Mr Richardson : I was reading the string of criticism. People are entitled to their views. I respect Peter Jennings.

CHAIR: You told us that you did a very thorough due diligence.

Mr Richardson : Yes.

CHAIR: Having done a thorough due diligence, why would you form the view that you needed to—

Mr Richardson : Why wouldn't I? I am a rational person. I respect Peter Jennings. I respect other people. We make a decision. We have gone through a due diligence. It is heavily criticised. Why wouldn't a rational person pause and say, 'Have we got this right? Have we missed something?' That is what I did.

Senator CONROY: I want to go back to sabotage. Are we talking about concerns that a bomb could disable the port? What are the issues around sabotage?

Mr Richardson : No. A bomb is an issue that goes beyond a lease operator.

Senator CONROY: So what is the concept of sabotage that you investigated when it comes to the operation of a port?

Mr Richardson : Concept of sabotage—is there capability? Is their activity that could be compromised as a result of the lease operator? Intelligence gathering was, I think, more of a focus than sabotage. What opportunity for intelligence gathering would the Landbridge lease provide to the Chinese over and above the intelligence gathering opportunities they would have in any case? You would need to work that through very, very carefully, and we did that.

Senator CONROY: I was going to come to intelligence, but I wanted to stick with the sabotage—the capacity to disable the operations of the port.

Mr Richardson : There was far more of a focus on intelligence gathering than sabotage, simply because intelligence gathering is a higher risk in normal circumstances than actual sabotage, particularly given that, when Australian naval vessels visit any commercial port, regardless of the port operator—whether they visit Sydney, Melbourne or whatever, if they are visiting a commercial port—they take certain precautions in relation to the security of the vessel.

Senator CONROY: I am hoping you can explain. I am not in any way an expert on a port and how it operates. If you want to disable the facility—

Mr Richardson : What facility?

Senator CONROY: The port facility. What would you be looking for as a danger sign that the port could be disabled or made to not work efficiently or correctly or to not work at all? I wanted to understand—would a bomb go off and could it have been planted—but what are the other ways that you would want to prevent a capacity to sabotage? I am conscious that the bureau of met has just been penetrated. That is a hack, but—

Mr Richardson : There are security requirements in relation to sensitive areas of ports around Australia. People working in certain parts of ports around Australia require a security clearance which is vetted by ASIO. So there are a range of layers that you have.

Senator CONROY: So no Chinese nationals could be at a point of critical decision making under the agreement that you have reached? I am just seeking to understand what you have put in place.

Mr Richardson : Any Chinese national working at the port in Darwin would require a visa and would require a security clearance. So you do your due diligence in that context.

Senator CONROY: Many automated processes now have been digitised.

Mr Richardson : Yes.

Senator CONROY: In the same way, the bureau of met has just been hacked badly. You might think: why would anyone want to bother hacking the weather report? I am trying to understand the degree of ability to render a port less efficient or less operable through software tampering, which does not have to be a hack by definition if the owners are the ones who do it.

Mr Richardson : Sure. I would make a couple of points. First of all, whoever got into the Bureau of Meteorology did not have a lease on the building and did not employ people, but they were still able to do it. That is one of the risks you carry when it comes to cyber-penetration, which a lot of people forget.

Senator CONROY: But it would be a heck of a lot easier if they did own that building or were running it.

Mr Richardson : I will make no comment on that except that is not the way the world now works.

Senator CONROY: As I said, I am seeking to understand that there is no capacity to disable the port.

Mr Richardson : I am just saying you do not need to own a physical structure in order to engage in cyber penetration.

Senator CONROY: I totally understand that.

Mr Richardson : And your protections in respect of cyberattack are helped by physical security. Quite clearly, physical security does help that. However, your most important defences are the cyber defences, and not your physical defences.

Senator CONROY: But if the owner is the perpetrator, it must be an awful lot easier if you own the system to sabotage the system than to hack it from a building in Beijing?

Mr Richardson : Of course.

Senator CONROY: I just wanted to make sure we are on the same page.

Mr Richardson : But then you have got to be rational. You have got to keep going down that path. You just cannot just stop there and leave that up in the air. If you keep pursuing that down the path, there are some things you can do; there are some things you cannot do. However, a port operator would be unlikely to be sabotaging a the port that they make money out of in a vacuum. That is hardly likely to happen.

Senator CONROY: I am not suggesting we are talking about circumstances that you describe as a vacuum.

Mr Richardson : There would be a build-up. There would be the development of an environment and you can take steps as you move on.

Senator CANAVAN: If my questions are repetitive then please let me know and I can read the transcript. In your assessment of this proposed or now concluded arrangement, did you to overseas in other countries about arrangements with ports there? Is there another example of a port being privately owned where our Navy or the U.S. Navy use as a facility?

Mr Richardson : Virtually every port that we and the U.S. Navy visit is owned by someone.

Senator CANAVAN: Obviously many ports are government owned.

Mr Richardson : There are privately owned ports around the world.

Senator CANAVAN: Did you look at that in your analysis?

Mr Richardson : No we did not. We were aware of other instances. Dubai ports were mentioned earlier. I was Ambassador to Washington at the time of the Dubai ports and I can tell you that was anything but a rational process. Indeed, a decision had been taken to sell it to Dubai ports and it became a big political issue. It ended up being a political decision rather than any other sort of decision.

Senator CANAVAN: You did say that it does not really matter who owns the port and that we can manage our security needs without having to own the port. I am just trying to get to the bottom of how you came to that conclusion if you did not look at the arrangements that exist around the world.

Mr Richardson : First of all, we have lots of experience around the world. We do not have to make inquiries. We have a navy that visits overseas regularly. We have a navy that is very familiar with what it needs and what the security arrangements need to be in respect of the visit by its vessels so we have that expertise in-house. In terms of our own intelligence agencies, we are consulting regularly with our partners in respect of intelligence gathering and the like. We did not need to specifically consult in relation to Darwin port given the range of consultative arrangements we have across government and with a range of countries.

Rear Adm. Thomas : Can I just add something? As the secretary said, we are well aware of many other—particularly our key allies—organic arrangements, where they own a section of a port. But our assessment is: the deed of licence that we constructed in Darwin far exceeds any of our key allies in a commercial port.

Senator CANAVAN: Could you just repeat that? I could not quite hear you.

Rear Adm. Thomas : We believe it far exceeds our key allies and their relationships with a port in preparation for a privatised port.

Senator CANAVAN: I apologise. What far exceeds? What is the element—

Rear Adm. Thomas : The deed of licence—

Senator CANAVAN: Sorry. That got a bit of a miss.

Rear Adm. Thomas : which is, effectively, our Department of Defence arrangement that we struck over an extended period of time with the Northern Territory government.

Senator CANAVAN: Is there another example of where the US Navy has an ongoing use of a port which is owned by a company, or leased in this case, of course—

Mr Richardson : We would need to take this on notice, but there would be tens of examples.

Senator CANAVAN: Sorry, could I just finish my question? A lease by a company connected to the Chinese government?

Mr Richardson : I can advise that the United States Navy has at times been in situ at Changi Naval Base in Singapore at the same time as PLA submarines have been visiting.

Senator CANAVAN: That was not quite my question, though, Mr Richardson.

Mr Richardson : But I am just making a point.

Senator CANAVAN: Can I just return to my question?

Mr Richardson : Yes.

Senator CANAVAN: Is there another example in the world of where the U.S. Navy has an ongoing need and use of a port, which is owned by a company connected to the Chinese government?

Mr Richardson : We would need to take that on notice.

Senator CANAVAN: I presume some of this next question may have been asked by Senator Conroy, so the same proviso applies: if it has been asked, let me know. You were obviously asked to provide advice on the arrangements. Given the U.S. Navy's interest and given there is obviously at least a prima facie reason why you were asked, why didn't you ask the US military, the US Defense, for their views?

Mr Richardson : We certainly did not need to consult. As I have stated publicly, it would have been the sensible thing to do to advise them in advance. That was an oversight for which I take responsibility—no-one else. The US was certainly aware that the Port of Darwin was going to be privatised. It was public knowledge. I would also note that The Financial Review on 26 September, or 28 September, of this year reported that Landbridge was going to get the lease of the Port of Darwin. That is no excuse for not advising them in advance. That was an oversight which I have publicly acknowledged.

Senator XENOPHON: I have a number of questions. I just want to put this to you, Mr Richardson. In February, a Defence submission to parliament's Public Works Committee stated:

Darwin is strategically vital for supporting ADF maritime operations across Australia’s northern approaches, particularly in mounting operations that involve the RAN’s amphibious capability.

Mr Richardson : That is right. That is absolutely right.

Senator XENOPHON: So that is pretty axiomatic?

Mr Richardson : Is absolutely accurate, which is why we took great care with the deed of licence. It is why we took great care in looking at Landbridge.

Senator XENOPHON: Can I ask you about the deed of licence? It is publicly available, I take it?

Mr Richardson : No.

Senator XENOPHON: It is not publicly available?

Mr Richardson : No.

Senator XENOPHON: Do we know, broadly, the terms of that deed of licence?

Mr Richardson : We can talk about—

Senator XENOPHON: You told us you negotiated it at length. Is that something that you would be prepared to provide to the committee in confidence?

Mr Richardson : We can answer whatever questions you want to put to us in respect of the deed of licence.

Senator XENOPHON: It is a bit difficult to ask without seeing the primary document. It puts us at a disadvantage, I would have thought.

Mr Richardson : No. It is a commercial-in-confidence document, but we are very happy to provide briefings.

Senator XENOPHON: And you are aware of a committee's powers to request documents that it thinks are necessary in order to undertake its inquiry.

Mr Richardson : I would need to take that on notice in terms of the government, but we are very happy—

Senator XENOPHON: But it is a commercial-in-confidence document; that is the primary consideration. Therefore, public interest immunity would not apply to such a document.

Mr Richardson : I just am not an expert in those areas. I am sure you are.

Senator XENOPHON: I am not suggesting that I am. I thought you would be more of an expert than I.

CHAIR: I would suggest here that, if the concern is in relation to public disclosure, the document can be provided to us in camera.

Mr Richardson : I would then seek advice, Chair.

CHAIR: Thank you.

Senator XENOPHON: I put to you, Chair, that I think it is very important that we see that deed of licence because much has been made of it in the context of this inquiry.

CHAIR: Can the witness come back to us on that?

Senator XENOPHON: I think it is important that we see it because it does raise those issues. I am just trying to understand it in terms of the issue of due diligence. Mr Richardson, you were fortunate enough to be in Washington at the time of the Dubai Ports deal and when that was knocked back. I think the Bush administration agreed to the deal, but it was knocked back by Congress, effectively, and it went through a fairly tortuous process in the Committee on Foreign Investment in the United States, which was, in fact, set up by Gerald Ford in 1975 post the flexing of OPEC's powers. Is it your view that that blocking of the Dubai Ports deal was a political rather than a strategic decision?

Mr Richardson : I will not say any more than what I have already said on that. I was there at the time, and I would describe it as something of a firestorm. I think it broke on a Sunday.

Senator XENOPHON: You said in your evidence today, 'we are consulting regularly with our partners … We did not need to specifically consult in relation to Darwin port' lease, although we have a situation here where the President of the United States raised with our Prime Minister the fact that it appeared to be a concern, if not an admonishment, that the United States was not told about the transaction. That seems to be a fair categorisation of the matters raised by the United States President.

Mr Richardson : Can I say a couple of things on that. First of all, any criticism that we should have, just as a matter of common sense, advised the US in advance I think is fair criticism.

Senator XENOPHON: I think Richard Armitage also made comments along those lines, didn't he?

Mr Richardson : As I have said, I think that is fair criticism, and I take accountability for that. Right? So I cannot do any more than that. Secondly, I would also note that the US does have an embassy in Australia, and I know something about the responsibilities of embassies, and I would assume, given the fairly extensive coverage in parts of the Australian media, particularly in the Northern Territory, of the proposed privatisation of the port, that the US would have been aware of the fact that it was going to be privatised. Indeed, I am aware that they were advised of the proposed privatisation. They were not advised, however, of Landbridge, and I believe it would have been the sensible thing to have given them prior advice of that.

Senator XENOPHON: Notwithstanding the role of embassies, you cannot outsource the responsibility of the Australian government or the Department of Defence in respect of these particular matters, can you?

Mr Richardson : It is a two-way thing. If the shoe was on the other foot and I was the Australian ambassador to Washington, I do not think you would be accepting that it was the responsibility of the US. You would be pointing your finger at me as the ambassador and asking: why was I not up with what was happening publicly in the country to which I was accredited?

Senator XENOPHON: This could be a circular argument.

Mr Richardson : I am just making the point that it is not quite a black-and-white thing.

Senator XENOPHON: It is a circular argument. What I am trying to understand and in the point raised by Mr Jennings and others at ASPI, we are just trying to establish what information was requested of the Northern Territory government and what information was imparted by the Northern Territory government in relation to this deal, once it emerged that Landbridge was the frontrunner, was the successful bidder for the port.

Mr Richardson : There are two issues here, Senator.

Senator XENOPHON: Sorry. Can I clarify, so that it is not out of context, what Mr Jennings said. He said it was unclear as to what the interaction was. In other words, what questions were asked and answered in the context of this? I just want to be fair to Mr Jennings.

Mr Richardson : First of all, as I mentioned in my introduction, there was a period between early 2014 and 13 May 2015 when the question of privatisation was on the table and it was in that context that we negotiated a deed of licence, which you have inquired about—I am very happy to provide a briefing on that and I will follow up in terms of providing a copy. That specifically looked at the question of firstly, our access; secondly, our powers in the event of a contingency; thirdly, our powers under the Defence Act; fourthly, it had reference to security; and finally, it concerns governance arrangements in terms of our own interests and equities.

Landbridge came into play—as I said, they were one of the potential bidders and we were specifically asked to look at Landbridge by Treasury in early July this year. It was in that context that we then looked specifically at Landbridge. Leaving aside the deed of licence, we looked specifically at Landbridge and it was in that context that we consulted the three services, we consulted the Australian Signals Directorate, we consulted the Australian Defence security agency and it was also in that context that Treasury consulted a range of other departments and agencies including ASIO.

Senator XENOPHON: I am concerned about time so I will rush through this. I would like to know, and I am sure some of my colleagues would like to know, the nature of the questions asked and the extent of the answers given in respect of that because you say that due diligence was carried out in respect of this but you do acknowledge that there needs to be a change in the framework because the current legislative framework does not allow for scrutiny of deals of the sale of key infrastructure by state and territory governments.

Mr Richardson : There are two separate issues—they are linked but they are separate. I most certainly acknowledge that that gap in the law, which has existed since 1976, needs to be pursued and the parliament will no doubt make its own decision on that.

Senator XENOPHON: But you acknowledge that because of the controversy around this deal, it seems that there will be changes to the foreign investment review framework. It is being looked at by the Treasurer, is it not?

Mr Richardson : Yes, and as I advised in my opening statement, the government initiated a review of that before Landbridge became public.

Senator XENOPHON: But he was aware of Landbridge presumably at the time?

Mr Richardson : Yes. It is simply a matter of fact that it is not because of the public controversy and public commentary that the Foreign Acquisitions and Takeovers Act 1976 is being reviewed because of Landbridge.

Senator XENOPHON: It initiated the inquiry when it became aware of Landbridge.

Mr Richardson : That is right.

Senator XENOPHON: Maybe the government was being prescient at least in respect of that.

Mr Richardson : As you rightly say, Senator, it highlighted the fact that, even if we had had concerns, there would not have been anything we could have done about it.

Senator XENOPHON: In terms of the sale or lease of the port of Fremantle, does that mean that that deal will be looked at differently in the context of what has occurred in respect of the port of Darwin?

Mr Richardson : Not from the perspective of Defence. We will look at Fremantle in the same way as we looked at Darwin. What has happened in respect of Darwin, and the controversy there, is irrelevant in terms of what we will do in respect of Fremantle.

Senator XENOPHON: But there could well be a different framework if the government—

Mr Richardson : That is a matter for the government and the parliament.

Senator XENOPHON: And when could you let us know about the deed of licence?

Mr Richardson : We can let you know about that pretty quickly. If it is okay, if it is agreeable to the committee, I will see whether if would be possible to sit down with the committee with a copy of the deed of licence and go through it. In terms of providing a copy permanently to the committee, I would have some hesitation about that. But I will certainly make every effort to see whether the committee can get the access that you legitimately require in order to do your job.

Senator XENOPHON: Although there are rules about the confidentiality of documents that are quite strict.

Mr Richardson : Yes, sure.

CHAIR: Senator Whish-Wilson, do you have any questions?

Senator WHISH-WILSON: Yes, Chair.

CHAIR: Just noting the time, could you try to get down to the important ones?

Senator WHISH-WILSON: Yes, Chair—and perhaps you could put me first for questions next time so that we do not have this problem! Mr Richardson, you have provided some rational explanations, to use your own words, as to why you did not have concerns. Could you explain why the US had concerns, or was that just their initial reaction to not being advised or consulted?

Mr Richardson : No. I hesitate to speak on behalf of the US. I simply note that nothing that has been said to us by any US official would give us pause for thought in terms of our decision in respect of Landbridge.

Senator WHISH-WILSON: Okay. That was going to be my next question: have they raised any specific issues with you, following your meeting with them in the US? But it does not sound like it.

Mr Richardson : There were some issues raised, all of which I believe we were able to address, as has been stated by the US ambassador.

Senator WHISH-WILSON: Okay. That is fine for me, thanks, Chair.

CHAIR: Senator Conroy, I think you had a few further questions.

Senator CONROY: I am sorry to labour this, but I am confused and I do not like being confused. It is just after 11 am on 15 December right now, here in Australia. The time in New York, Washington and Boston, is about 7 pm on 14 December, a day behind us. If it was midnight in Washington right now, it would be 4 pm here in Australia—

Mr Richardson : Yes.

Senator CONROY: where midnight is moving into the 15th.

Mr Richardson : Sure.

Senator CONROY: You said you received the phone call at midnight in Washington, and I appreciate that—

Mr Richardson : I said 'around midnight'.

Senator CONROY: Yes. I appreciate that there is a time difference because daylight saving kicks in in both directions, going back to then. But I do not think it changes the substance of what I am trying to understand.

Mr Richardson : Sure.

Senator CONROY: So if you received the call about midnight—around midnight, and then there is daylight saving, so it is not an exact science—in Washington, midnight of the 13th—

Mr Richardson : Around midnight.

Senator CONROY: Around midnight of the 13th, which is—

Mr Richardson : No, no. I think it was—

Senator CONROY: AUSMIN was on the 13th—

Mr Richardson : No, no—

Senator CONROY: in Boston. You then travelled to Washington that afternoon and you received the call in Washington—

Mr Richardson : That is right.

Senator CONROY: that night.

Mr Richardson : That is right.

Senator CONROY: So that is the 13th in Washington. Well, AUSMIN was on the 13th. It was not on the 12th, it was not on the—

Mr Richardson : Well, whenever it was.

Senator CONROY: Yes. It was the 13th. I have here the remarks, with Secretary of Defense Ash Carter, Australian foreign minister Julie Bishop, Australian defence minister Marise Payne; Boston, Massachusetts; 13 October.

Mr Richardson : Right.

Senator CONROY: So we are clear?

Mr Richardson : Yes.

Senator CONROY: So midnight in Washington on 13 October is the 14th in Australia.

Mr Richardson : Yes.

Senator CONROY: The press release issued and the media coverage for the announcement—The Fin Review ran the story in Australia on 13 October at 6 pm. That makes it 12 October that, if you like, the story would have broken in the US if anyone had been watching, because it is the day before on the time line.

Mr Richardson : Whenever, yes.

Senator CONROY: So it is announced in Australia on the 13th; that is 12 October in America. You are in Boston on 12 October.

Mr Richardson : I received the phone call when I was in Washington. I was staying at The Jefferson hotel and I was speaking to Chris Birrer, who is sitting behind me.

Senator CONROY: I am not doubting any of that; I am just trying to clarify the time line, because there is about a 24-hour gap here that does not make sense to me, and that is what I am trying to understand. So it was announced in the Australian press on 13 October; it was up online at 6 pm on 13 October. It is 12 October. So I am trying to understand. You have said that you did not speak with any of those senior officials—Ash Carter or any of the other officials—at AUSMIN.

Mr Richardson : Yes.

Senator CONROY: Even though what it looks like—and I am happy for this to be corrected—is that the announcement was actually prior to AUSMIN, American time. You may not have been notified. I am accepting absolutely that you may not have been notified. Your first phone call was midnight in Washington on the 13th.

Mr Richardson : Yes.

Senator CONROY: You then briefed Mr—sorry, I keep forgetting his name—

Mr Richardson : Work.

Senator CONROY: Presumably you did not phone him at midnight in Washington; you waited until you saw him the next day at a prearranged meeting. So that is the 14th in Washington, because it is midnight on the 13th that you received the call. So you saw him the next day?

Mr Richardson : I saw him on 14 or 15 October.

Senator CONROY: Let us assume it was the 14th, sequentially, although it may have been the 15th—I am not trying to pin you to that. On the 14th, that was the first the US knew about it?

Mr Richardson : About Landbridge, yes.

Senator CONROY: And you did not raise it with anybody at AUSMIN on the 13th in Boston?

Mr Richardson : I did not, no.

Senator CONROY: Did you attend all meetings with Minister Payne?

Mr Richardson : I attended meetings, but there were obviously occasions when Minister Payne and Secretary Carter—

Senator CONROY: You did not let her wander off by herself, did you? I am teasing you—it is all right.

Mr Richardson : There obviously would be occasions when Minister Payne and Secretary Carter were speaking privately and together, and it was none of my business.

Senator CONROY: I accept that. So you are confident that you notified the American administration. You were the first person to notify them, and you were not present when Minister Payne advised them?

Mr Richardson : I did not say, 'I am confident that I was the first person to notify the US.' I simply advised you of when I spoke to the US.

Senator CONROY: Did you tell the minister? When you received the phone call at around midnight, you did not phone the minister and say, 'Hey, this has happened'?

Mr Richardson : I did not need to.

Senator CONROY: You did not need to?

Mr Richardson : No.

Senator CONROY: Why not? I am not saying you should have phoned her at midnight; I am just asking—you did not phone in the morning?

Mr Richardson : But why would I—I was not going to ring someone and wake them up.

Senator CONROY: I am accepting that there is no need to make a phone call at midnight, but did you tell her the next day?

Mr Richardson : Yes.

Senator CONROY: Did she say, 'It's okay—I already knew about that'?

Mr Richardson : I cannot recall the precise words we exchanged.

Senator CONROY: But you did tell her?

Mr Richardson : Yes.

Senator CONROY: You are not aware that Minister Payne discussed it at AUSMIN the day before?

Mr Richardson : I am not aware, no.

Senator CONROY: But, from what it sounds like to me, Minister Payne did not say to you, 'It's all right, Dennis, I already know about that'?

Mr Richardson : Know about?

Senator CONROY: The Landbridge decision?

Mr Richardson : I think by the next morning she might have been aware of the public announcement.

Senator CONROY: I am trying to understand why it is claimed that Minister Payne did discuss the matter with her counterparts at AUSMIN.

Mr Richardson : I do not know whether—has Minister Payne said that?

Senator CONROY: I am trying to understand why it is claimed that is the case.

Mr Richardson : By whom?

Senator CONROY: The foreign minister.

Mr Richardson : Well, I cannot speak for the foreign minister.

Senator CONROY: But it is claimed that Minister Payne spoke to counterpart ministers at AUSMIN. But you are not aware of that at all?

Mr Richardson : I cannot speak on behalf of the two ministers.

Senator CONROY: But you were present in most of the meetings where this might have come up.

Mr Richardson : No. I would say this, and I think it is very important to get this precise. I was present for the duration of AUSMIN. As you know, through your own personal experience as a minister, in a meeting like that there are a range of occasions when ministers are talking to their direct counterparts without the presence of officials—over coffee, over lunch, whatever. So it would be wrong to suggest that I was present in the company of the two ministers on every occasion when it is possible they might have talked about other things.

Senator CONROY: But, by definition, as you only found out at midnight after you had left AUSMIN, you did not brief the Minister Payne during or before AUSMIN about the Landbridge decision?

Mr Richardson : Again, two things here. We are talking about the public announcement by the Northern Territory. As I said before, it was evident before that that it was Landbridge. I mentioned to you the discussion that had taken place at the NSC on 6 October. So, clearly, both ministers would have been aware in respect of Landbridge.

Senator CONROY: That was the leadership change? I cannot remember the exact date.

Mr Richardson : Of what?

Senator CONROY: The new Prime Minister.

Mr Richardson : I do not know. It was mid-September, I think, but I cannot tell you precisely when.

Senator CONROY: So, by definition, as you were only informed at midnight after you had left AUSMIN—

Mr Richardson : Of the public announcement.

Senator CONROY: We have accepted that, because of your involvement in the process, you were familiar with the likely outcome, though you said earlier you did not have a formal—

Mr Richardson : Certainly by AUSMIN we were familiar—the assumption was it was Landbridge.

Senator CONROY: I think you indicated that, without anyone formally telling you that it was definitely—

Mr Richardson : That is right.

Senator CONROY: you had come to the conclusion, logically, through the discussions you had had.

Mr Richardson : That is right.

Senator CONROY: But you did not provide any brief to the minister, going into AUSMIN, to advise—

Mr Richardson : No.

Senator CONROY: That is what I am trying to ascertain—and then your first formal knowledge of the announcement. So, when you saw Mr Work, did he say, 'It's all right, Mr Richardson—I already know about it'?

Mr Richardson : No. We had a meeting already set up to discuss cost-sharing arrangements in relation to the Marines. As a result of the announcement, I suggested through the embassy will that we should also discuss Darwin.

Senator CONROY: But that was the next morning, as we have agreed.

Mr Richardson : Yes, that is right.

Senator CONROY: The morning of the 14th, the day after AUSMIN.

Mr Richardson : That is right.

Senator CONROY: I understand how these things work. Both sides say: 'Here is the agenda. Is there anything we both want on?' et cetera.

Mr Richardson : Yes.

Senator CONROY: So you notified them that it would be on the agenda for the meeting of the 14th of the 15th?

Mr Richardson : Yes, and they wanted it on the agenda also.

Senator CONROY: I am sure they did by then. When you went to that meeting, Mr Work would have been aware of the decision because you had requested that it be placed on the agenda?

Mr Richardson : That is right, precisely.

Senator CONROY: He would have looked it up by then. So, when you went in and sat down with him, it was not like you were breaking the news to him on the spot—

Mr Richardson : That is right.

Senator CONROY: because you had already advised that should be added to the agenda?

Mr Richardson : That is right.

Senator CONROY: But Mr Work indicated they were unaware up until the announcement, and you had notified them.

Mr Richardson : That is right.

Senator CONROY: You have indicated that you were the first to tell them, and I accept the point you make. You have taken responsibility. I am not being in any way pejorative. You have taken responsibility. You should have advised them earlier. I accept that.

Mr Richardson : Yes. I was the first to advise them in respect of the FIRB issue.

Senator CONROY: So you have no idea why the foreign minister would claim that Minister Payne briefed or discussed the matter with her counterparts at AUSMIN?

Mr Richardson : As I said, I certainly was not present on all occasions with the two ministers.

Senator CONROY: But, when you were present, there was no discussion. You had not asked for it to be listed on the agenda for AUSMIN. It was not part of a formal brief.

Mr Richardson : That is right.

Senator CONROY: As you have just described, when you are going to have a conversation about these things, you put them on the agenda first. It was not on the agenda at AUSMIN; you were not aware that it was raised at AUSMIN; you were not aware that Minister Payne raised it at any point that you were present?

Mr Richardson : It was not formally on the agenda. Issues can be discussed informally which are not on the agenda, and that sometimes does happen. I simply cannot be drawn into what either of the two ministers may or may not have discussed with their counterparts.

Senator CONROY: By definition you were not there; you cannot say whether it was or it was not?

Mr Richardson : That is right.

Senator CONROY: But you did not brief the minister to raise it?

Mr Richardson : No.

CHAIR: We might have to wind it up there, Senator Conroy. Thank you very much, Mr Richardson and Rear Admiral Thomas. Answers to questions on notice are due on 11 January 2016. The committee is running over time, but we recognise the importance of having a brief break.

Mr Richardson : Chair, we will come back to you this afternoon in relation to the deed of licence, because I know you want to have this inquiry done in a pretty tight time, so we will do that quickly.

Senator XENOPHON: If the only consideration is commercial-in-confidence, you could point out what your particular concerns are.

Mr Richardson : We just need to get certain approvals, Senator.

CHAIR: We will now take a short break. I apologise to our friends at ASIO for the delay.

Proceedings Suspended from 11:23 to 11:32