Australia follows a mixed government type. It is a constitutional monarchy, meaning the presence of a ruler (King or Queen) but the powers of the monarch are kept in check by the provisions of a Constitution. The powers granted to the Monarch are through the Constitution itself and are just representative powers of the country. Australia also follows the Federal form of Government, which abides by the Doctrine of Separation of Powers between the Legislature, Executive and Judiciary. Other than the Doctrine of Separation of Powers, Australia also includes a three-tier government- Federal or Central level Government, State Level Government and Local Government. The Local Government functions in the community level and does not remain completely autonomous. The establishment of Local Governments is done by way of legislation which is enacted and implemented by the State Legislature and the acts of the Local Government can be over-ridden by the State Government or the State Parliament. The existence of States, unlike the Local Government, is autonomous. The powers of the States are not mentioned in the Constitution of Australia and may be termed as residual, which means that the powers of the Federal or Central Government are specifically mentioned in the Constitution of Australia. The powers that have not been mentioned in the Constitution and have not been appointed as powers of the Federal Government are swept down and included within the powers of the State. The powers of the Commonwealth have been specified in the Constitution and the States are not allowed to execute or implement rules which are in contrary to the rules of the Centre. If any law is passed by the State Parliament that is in contradiction with the Federal Parliament, the law will be considered void till the level of inconsistency. Under the provisions of the Constitution, the Federal Government does not possess the powers to pass a law such as the Foreign Corporations Interference and Other Measures Act 2020 (Cth). It only has the powers to decide the custom duties and duties related to Trade and Commerce. The Federal government has acted more than its powers and has enacted a statute on a topic which resides within the powers of the State Government. The reason of national security put forward by the Federal Government is not convincing enough as the Foreign Corporations Interference and Other Measures Act 2020 (Cth) only caters to transactions that are entered into by the State Government and no other body which is contracting with foreign bodies are brought within the purview of this Act. Does that mean only the transactions entered into by the State Governments pose a threat to the national security of Australia?
The basis of the statute in question is claimed to be the General Agreement on Tariffs and Trade and the United Nations Charter. It may be noted here that the aim and objective of GATT were to regularize international trade and create an environment of peace among all the nations through Trade and exchange of Goods and Services. By way of enacting the Statute, Australian Parliament is not only restricting direct trade between its states and the Governments of other nations but is also restricting International trade by including some lengthy procedures to be followed each time before any trade has ensued between the State or Local Government and the Government of any other country. The provisions of GATT strictly prohibit these kinds of restrictions as they strain relations between nations. Article XI of the GATT, 1994 provides that no signatory may impose any restriction or trade barriers other than restrictions on duties, charges or taxes. The Preamble of GATT, 1994 specifies the indirect language that the Agreement aims to reduce trade barriers, removal of discrimination and reduction on the costs of international trade. The statute executed by Australian Parliament thus, violates the provisions of GATT, 1994, of which it is a signatory. The Foreign Corporations Interference and Other Measures Act 2020 (Cth) does not fulfil the basic aims of the GATT and on the contrary, has no connection what-so-ever with the provisions of the GATT agreement. The foundation on which the Bill has been made is wrong and being signatories to GATT and the UN makes no connection with the execution of the Bill in question.
Article XXI of GATT has no relevance with the Foreign Corporations Interference and Other Measures Act 2020 (Cth) as it provides that any contract, when entered between two parties (need not be two governmental bodies of different countries) has obligations, which when performed, would meddle with the peace and security of national at an international level. The trade transactions entered into by the State Government of different states in Australia would only be for trade purposes and no Government, including those of the states in Australia, would enter into any agreement with another foreign government, the performance of which could create unrest at an international level. It may be noted here that with the implementation of the Foreign Corporations Interference and Other Measures Act 2020 (Cth), the Federal Government chooses to lay down rules and regulations only concerning the transactions that are entered into by the State Government. If the basic aim of the Act is to protect the Australian population from interference that may be caused by foreign governments and their transactions, then private entities and organisations who are entering into contracts of trade with foreign private entities should also be included in the provisions of the Act.
The main aim of the UN Charter is to maintain international peace and security. The UN Commission on International Trade law harmonizes relations between Nations by building strong trade relations between them. The execution of the Foreign Corporations Interference and Other Measures Act 2020 (Cth) would create added trade barriers on the international level as all the foreign governmental bodies which are in trade relations with Australia would either prefer executing similar protective measures for themselves or would enter into trade transactions for the same items with other countries whose process of trade would be faster. This will cause the individual states to lose out on income generated through trade.
The Foreign Corporations Interference and Other Measures Act, 2020 (Cth) is legislation that interferes with the basic Right of the States and the Local Government to Trade. The basic features of the statute that render the mentioned sections unconstitutional are discussed below.
The rights that are granted to citizens under the provisions of Section 92 of the Constitution of Australia may be extended to the State Government too. In Pilkington v. Frank Hammond Pty. Ltd, the provisions of Section 92 were provided to a party involved in an intra-state transaction which extended from Tasmania to Melbourne and then to London. This right may be extended to the States of Australia.
The Constitution of Australia contains 8 chapters which included within themselves 128 sections. Section 90 of the Australian Constitution given the power to the Commonwealth to decide custom and excise duties. The power to legislate on the topic of inter-state trade and commerce as well as foreign trade resides with the Federal Parliament as per the provisions of sections 90 and 91 of the Constitution of Australia. No other power with relation to trade with Foreign nationals or government is mentioned in the Constitution and as a residual power, the remaining powers are conferred on the States. The residual powers which include the powers to legislate on intra-state commerce and trade automatically are given to the State Parliament under the provisions of section 51 and 107. Thus, the Federal Parliament does not have the power to pass a statute which governs the policies of intra-state trade and as a result, the statute of Foreign Corporations Interference and Other Measures Act 2020 (Cth) is null and void. In the landmark Railway Servants Case, the wide powers conferred to the Federal Parliament under the provisions of section 51(1) were restricted to those which had a direct and substantial influence on the inter-state trade and commerce. This rule was subsequently over-ruled in Huddart Parker v. The Commonwealth, where the legislative powers were widened for the Federal Government. In the landmark case of O'Sullivan v. Noarlunga Meat Ltd, the powers were further extended and held that goods which would be exported later on could still enjoy the freedom provided in section 90 till the time they were within the territory of the country and were being transported in-between states.
According to the speech that was delivered by the Minister of Foreign Affairs on the second reading of the Foreign Corporations Interference and Other Measures Act 2020 (Cth) it was mentioned that the Federal Government has a responsibility to regulate the corporate activities in a manner that ensures the protection of the Australian citizens. It may be pointed out that Trade transactions between Governments of the two nations cannot be termed as a corporate activity. The essential elements for any corporate activity to take place would be the presence of corporate bodies that are registered. The governmental bodies are considered constitutional bodies and do not fit into the purview of corporate entities indulging in corporate activities.
Concerning Section 2 of Foreign Corporations Interference and Other Measures Act 2020 (Cth), the establishment of State Foreign Interference Trade Boards is well within the powers of the Federal Parliament to keep monitoring the working of the State Parliament to protect the interests of the nation and prevent the interference of any foreign bodies, however, Section 2 (c) may be termed unconstitutional as State Parliaments are autonomous bodies and the expenditure of these bodies may be on a variety of items which do not include any relevance to security or trade-related interference from foreign bodies. The Federal Government does not have the power to inquire into the expenditure made by each state.
Trade between nations, when done through Governmental bodies are usually on mutual understanding or contractual basis. International trade relations with foreign bodies, when done through private corporate entities may pose a threat to the security of the nation. Instead of regulating trade relations between bodies, the Parliament can choose to limit the information that is shared between the parties in a trade relation and monitor it. The parliament would find it much easier to monitor international communication between governmental bodies.
The very basic constitutional right, which grants a position of autonomy to the States is being hampered through the action of the Federal Government and it is in direct violation of the Constitution of Australia. The reason this type of Government was chosen to be followed in Australia was- there is a large expanse of the area within the country and it is impossible for a single government at the Central level to look into the needs of all the people at the lowest levels. Thus, the States were given specific powers to maintain the basic welfare of the citizens while the Central took on the complex issues that were common to all the States. With the passing of the Foreign Corporations Interference and Other Measures Act 2020 (Cth), the very basic identity and freedom of the States is being taken away by the Federal Government. The States entered into contracts according to the needs of the public. Now that regulations are being implemented into place to monitor every move of the State Government, there is not only going to be an extra burden to comply with all the additional regulations implemented by the Act but will also face hindrance when they are not able to enter into agreements freely and are made answerable to the Federal Government for every expenditure made, be it related to trade, or not.
Thus, the Foreign Corporations Interference and Other Measures Act 2020 (Cth) may be challenged as unconstitutional and may be struck down.
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