We have previously outlined the general requirement for both Australian and foreign companies with Australian employees to consider whether their personnel providing training with potential military application outside Australia or who are ex-ADF staff need a Foreign Work Authorisation (FWA). See our previous insight: "Safeguarding Australia’s Military Secrets: Who’s Captured and What Employers Must Ask".
A crucial part of the FWA assessment is identifying whether the Australian employee will be dealing with a foreign government body. The meaning of foreign government body is broader than simply a government-related body but extends to foreign “public enterprises”. This is where businesses may be caught out by Australia’s FWA regime.
What is a public enterprise?
Identifying whether the work or training is for a foreign government body is not as simple as you might think. This is because “public enterprises” are treated as a foreign government body. A public enterprise is any body that is both subject to foreign government control and consequently enjoys benefits under law.
It may not be immediately apparent whether an enterprise is, in fact, a public enterprise. Due diligence is therefore essential.
Foreign government control and benefits
Foreign government control can be official (equity interest) or unofficial (de-facto control). Unofficial or de-facto control may be difficult to ascertain.
An entity is a public enterprise if a foreign government has any of the following:
holds more than 50% of either issued share capital or voting power
power to appoint more than 50% of the board of directors
de-facto control over the board of directors/management
is in a position to exercise control over the company
The entity must also enjoy special rights, status, benefits or privileges conferred by law. The advantage does not need to be directly due to its control or relationship. These benefits could be exclusive government subsidies or rights (e.g. resource rights) or preferential procurement in government contracts.
By way of an obvious example, the company Saudi Aramco would be a public enterprise. The Saudi Arabian government holds a majority shareholding (even after its recent public listing) and Saudi Aramco holds special privileges in relation to extraction rights in Saudi Arabia.
Because unofficial control may not be readily apparent, careful inquiry will be warranted. It will be better for a business to ascertain whether public enterprise status applies to a customer rather than to be told that in the course of an inquiry by the Department as to compliance by the business or employee with the SAMS regime.
Key takeaway
Businesses whose personnel undertake work in countries outside of the Five Eyes alliance must undertake careful due diligence to identify any customers within those countries that may be public enterprises. If the customer is a public enterprise, the business must then assess whether its Australian employees are performing work for the public enterprise that is captured by the SAMS regime. If yes, the relevant employees will require an FWA.
Cowell Clarke, in cooperation with its strategic software solutions partner, Verimus, has developed an intuitive digital solution that streamlines FWA assessments. We are also able to provide tailored advice as to the requirement for, and scope of, FWAs when dealing with foreign entities.
If you have any questions in relation to the above, please contact Brett Cowell, Leah Cowell or Alex Dorrington in our Defence Team.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.