House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Foreign Affairs, The Hon Alexander Downer MP)

OUTLINE

The Foreign Affairs and Trade Legislation Amendment Bill 1997 (Bill) is an omnibus Bill which makes substantive amendments to the following four Acts administered within the portfolio:

a.

Chemical Weapons (Prohibition) Act 1994 (Chemical Weapons Act);

b.

International Organizations (Privileges and Immunities) Act 1963 (International Organisations Act)

c.

Nuclear Non-Proliferation (Safeguards) Act 1987 (Nuclear Safeguards Act); and

d.

Passports Act 1938.

The change in spelling to Organ isation from Organ ization in the International Organisations Act also requires consequential amendments to the Administrative Decisions (Judicial Review) Act 1977, the Consular Privileges and Immunities Act 1972, the Fringe Benefits Tax Assessment Act 1986, the Income Tax Assessment Act 1936, and the Migration Act 1958.

Chemical Weapons Act

The amendment to the Chemical Weapons Act allows for privileges and immunities for observers to "challenge inspections" which may be conducted under the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction (CWC). Observers are representatives of a country requesting an on-site challenge inspection for the purpose of resolving questions of possible non-compliance with the CWC. This amendment rectifies an oversight in the original Act.

International Organisations Act

Amendments to the International Organisations Act update a nearly 35 year old Act. They are necessary to keep pace with the increasing number and diversity of international organisations and to allow for sales tax exemptions for international organisations which have their headquarters in Australia. The amendments make up the bulk of the Bill and fall into three categories.

The first of these comprise general administrative and policy amendments. The definition of an international organisation which can be eligible for privileges and immunities is tightened. A related amendment closes a potential loophole by limiting to 12 months the life of any regulation under which standard diplomatic privileges and immunities can be conferred on persons who are engaged on specified missions or attending specified conferences in Australia. At the same time, the issue of recognition as legal persons for domestic law purposes of international organisations is separated from eligibility for privileges and immunities. The new provision allows organisations satisfying much broader criteria to be recognised without according them privileges and immunities. The unrelated change in spelling to "Organisation(s)" brings the Act into conformity with Government legislative drafting practice.

A second category of amendments overcomes a specific legal difficulty created by the interaction of the International Organisations Act with the Acts Interpretation Act 1901. Frequently the precise date of entry into force of the treaty establishing an international organisation cannot be predicted in advance. In such situations, the regulations relating to the new organisation generally cannot validly be made until the treaty is already in force for Australia. This may put Australia in technical breach of its international obligations until the regulations are in force. The amendment provides an alternative mechanism whereby the regulations can be made as soon as Australia's obligations are known. Another amendment removes particular transitional difficulties encountered in the infrequent cases when an organ of an existing international organisation becomes a new organisation in its own right. It provides for the new organisation to succeed to the privileges and immunities of the existing one for a period of up to a year.

The third category of amendments gives effect to certain specific international obligations. First, it allows privileges and immunities to be conferred on international law tribunals, their members and staff and persons appearing before them. Secondly, it allows for exemptions from sales tax on goods sold to international organisations with their headquarters in Australia, as provided for in the headquarters agreements negotiated with the organisations concerned.

Nuclear Safeguards Act

Changes to the Nuclear Safeguards Act strengthen nuclear safeguards by implementing the provisions of a Protocol to the Agency Agreement between the International Atomic Energy Agency (IAEA) and Australia. The Protocol provides for expanded declarations and increased access in relation to locations where nuclear material is customarily used.

Passports Act 1938

The Passports Act 1938 amendment tightens the provision relating to the offence of making false statements in relation to passport applications. It includes recklessness as a mental element in forming the intention to commit the offence.

Financial Impact Statement

Chemical Weapons Act

The amendment to the Chemical Weapons Act is not expected to have any financial impact. Theoretically, the standard diplomatic exemptions from taxes and customs duties accorded to an observer would be revenue foregone. However, such an inspection is unlikely. In any event, under the challenge inspection regime an observer may be in Australia for only a few days and would not be in a position to claim significant exemptions. It is not appropriate for these potential taxation concessions to be provided by direct outlays as the CWC prescribes the standard diplomatic exemptions for observers.

International Organisations Act

The tightening of eligibility criteria for privileges and immunities of ordinary international organisations will marginally reduce revenue forgone in future years. The financial impact of the extension of such eligibility to tribunals will be small and sporadic. It is dependent on the number of such tribunals that come into existence and contingent on their members visiting Australia or holding hearings in Australia. Such occurrences are expected to be rare and brief.

The authorisation of sales tax exemptions for international organisations headquartered in Australia will have an impact. The net effect for the revenue of any international organisations attracted to Australia in future wholly or partly by the availability of this exemption is positive. Indirectly, the revenue forgone would be considerably outweighed by the income tax paid by Australian residents employed at the organisations' headquarters, together with the additional revenue generated at the margin by the injection of substantial additional demand into the Australian economy by the headquarters' presence in Australia and consequent consumption of goods and services. In general, it is not appropriate for the revenue directly forgone to be provided by way of outlay. This would involve an unprecedented negotiation (or renegotiation) of the relevant treaty. This is invariably a resource intensive process with uncertain prospects of achieving an acceptable outcome.

Partial sales tax exemptions are an integral part of the headquarters agreements negotiated with the two international organisations already headquartered in Australia. There is an existing tax ruling in respect of one of these, therefore, any additional impact on the revenue would be limited. For the existing headquarters, there would be an estimated one-off direct cost to revenue of between $5 000 and $10 000, depending on when this exemption comes into force. This reflects delayed establishment costs of the recently arrived organisation. Thereafter, the net annual cost would be of the order of $2 000 - 5 000.

Nuclear Safeguards Act

Increased resources (being equipment and domestic travel) will be required to implement the expanded inspection regime under the Nuclear Safeguards Act. The Australian Safeguards Office (ASO) expects to absorb these increased requirements within its current budget.

Passports Act 1938

The amendment to the Passports Act 1938 will impose no direct or indirect cost. It should improve compliance with the Act and, if necessary, improve chances of successful prosecution for breach of the Act. This would reduce compliance costs.

Consequential Amendments

The only financial impact of the consequential amendments of the change in spelling of Organisations in the other Acts will be administration and reprinting costs.

Glossary

The following abbreviations are used throughout this Explanatory Memorandum:

ASO means the Australian Safeguards Office

Chemical Weapons Act means the Chemical Weapons (Prohibition) Act 1994

CWC means the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction

IAEA means the International Atomic Energy Agency

International Organisations Act means the International Organizations (Privileges and Immunities) Act 1963

Nuclear Safeguards Act means the Nuclear Non-Proliferation (Safeguards) Act 1987

OPCW means the Organization for the Prohibition of Chemical Weapons

Protocol means the Protocol additional to the Agreement between Australia and the IAEA for the Application of Safeguards in connection with the Treaty on the Non-Proliferation of Nuclear Weapons