Senate Foreign Affairs, Defence and Trade Legislation Committee, , 1:17:18 to 1:30:25
ANU researchers identify legal gaps in the Australian sanctions regime, specifically regarding the definition of indirectness and the handling of sovereign assets.
Topics: Law reform, International law
Speakers: Baran Morkoc, Hon Sarah Henderson, Janindu Chith Weliamuna, Raff Ciccone, Benjamin Main, Senator Raff Ciccone
I'll now move to the AU law reform and social justice research hub and welcome representatives uh from that organization. I understand that information on parliamentary privilege and the protection of witnesses giving evidence to Senate committees has been provided I'm just pausing while you make your way to the table. Thank you very much. For the hands record, could you please state your full name and the capacity in which you appear today? Starting with you, Mr. Maine.
>> Oh. Um, I'm from the A&U Law Reform and Social Justice Research Hub as a student researcher. >> Oh, I'm sorry. I'm Benjamin Peter Maine.
Valyama and I'm appearing as the co-lead of the AU LSJ research hub. I'm
>> just sorry could you just say I just couldn't hear say that bit closer. Oh, we might get the microphone lifted.
>> Yeah, sure thing. Um my name is Chit Valamina and I'm appearing as the co-lead of the A&U law reform and social justice research hub.
>> Thank you so much.
>> My name is Baron Morot and I'm appearing as a student researcher for the AU law reform and social justice research hub.
Thank you. I will now ask if you have an opening statement before we go to questions from senators.
>> Yes, we do. >> The au law reform and social justice research hub welcomes the opportunity to provide this submission to and appear before this committee. Uh we fall within the AU uh law school's LRSJ program which supports the integration of law reform and principles of social justice into teaching uh research and study across the law school. Uh we are students at the AU law school uh who are engaged with a range of projects uh with the aim of exploring law's complex role in society and the part lawyers um play in improving that. Our submission focuses on four key points elaborating on the freezing uh confiscation debate uh clarifying indirect ownership uh the receipt of payment from sanctioned entities and the scope and effectiveness of sanctions and aluminina. Uh my my colleagues will elaborate on these points and we welcome uh questions on matters in our submissions. Uh the confiscating of Russian sovereign assets and liquidating them into uh to aid Ukraine's war effort has been muted since 2022. At present we have only frozen Russia's assets uh and calls to unilaterally confiscate them could raise potential legal challenges. But the focus of this debate has since shifted uh with the EU exploring mechanisms to back Ukraine through issuing bonds secured by frozen Russian sovereign assets with contingent pathways to repay those bonds if and when Russia provides reparations to Ukraine. And second, despite the overall soundness of Australia's sanctions regime compared with other jurisdictions, statutory limitations exist. Uh for example, our sanctions regime does not define indirectness and it does not prohibit the receipt of payment from sanctioned persons. And finally, Australia's aluminina sanctions in conjunction with the removal of Ukrainian supply damage Russell financial operations uh but it failed to limit aluminium production. Uh thank you again for this opportunity to appear before you and we welcome your
Uh thank you so much. So look, I um you've obviously been doing an enormous amount of research into this very serious issue. How much of a concern is the current sanctions regime
>> Chair, could you repeat the question,
>> You've obviously been doing a great deal of work in into this issue. Uh how much how how much are you concerned about the current sanctions regime?
>> We think that the current sanctions regime is holistically sound but there are some gaps in it which could potentially be exploited which is where our concern
And could you just um expand on what you believe those gaps are and how the government how you know whether it's the government that needs to address them or any other party if you could just expand on your concerns.
>> Certainly. So for instance receiving receipt of payment from sanctioned persons is not banned at present whereas in comparative jurisdictions such as the United States or United Kingdom it is. So there's nothing preventing someone who's sanctioned from sending money to an Australian citizen in our current uh framework. Additionally, um our sanctions act and regulations make mention of indirectness regarding ownership, but that has not been defined. There was a case in the federal court which construed it to be expansive in effect and we believe that raises concerns because it's a broad definition and it puts a strong strong due diligence burden on regulated entities for what is a strict liability offense.
>> Right. Okay. And and where does the responsibility lie? This is squarely in the hands of the Australian government.
Yes.
Do you think the um based on your research, do you think the government understands the the way in which uh these sanctions are failing to combat uh I guess the way that Russian money, Russian oil is flowing into this country. Do you think there because the evidence we've heard today in the submissions is indirectly there's an enormous amount of investment which of course is supporting Russian activities and effectively uh defying the the sanctions regime.
I think as a whole the architecture of the sanctions regime is sound but the lack of guidance on indirectness I think is a source of concern. Yes.
>> Yep. And so could I ask in your from your research what is international best practice? So which countries should Australia be looking at to model our
practices on? I think on the issue of indirectness, the United Kingdom issued a guidance note on what constitutes indirectness, um, examples of it in practice, tips for regulated entities in their due diligence, conduct to look out for and things of that sort. So I think the United Kingdom's guidance zone is quite effective because the um sanctions officers guidance note of which I think was published 2025 mentions indirectness briefly in passing with respect to issue of ownership but it makes no broad um it it doesn't look at it it's very broad it doesn't look at granular issues as United Kingdom's issue does as to the issue of indirect payment I think that that same note makes mention of the um government won't regulate it because there are legitimate payments from sanctioned entities such as banks for things like pensions. I think early United States practice around 2022 through their office of foreign asset control is best where they had a policy of exemption licenses for legitimate payments such as pensions to Russian citizens in the United States.
>> Okay. As we heard, we've just heard some pretty damning evidence in relation to the activities of superanuation funds for instance, including IFM investors. Have you had a look at what's going on in the superanuation sector? >> We have not. >> No. No. And so in relation to the indirect investments, uh what else has your research discovered? Can I just I guess ask you to flag where you think there are some other opportunities for the government
>> I think the broad issue of indirectness is the federal court case which defined indirectness in the context of our sanctions regime as you know broad expansive the government hasn't done anything thus far with that. It's been a sort of area where further guidance would be appreciated. I think because it's sort of just been a sort of blank space where this case defines it as an expansive issue from there the government hasn't done anything with it by the nature of case law it's adaptive to a particular situation circumstances but breaching our sanctions regime is a strict liability offense meaning if you've breached it you are guilty is so guidance for regulated entities on that issue would be >> good I would suggest
>> okay I am going to go to other senators who have questions. Uh, and I give the call to the deputy chair, Senator
>> Thanks a lot, Chair. Uh, good morning to our witnesses. Look, I just following on a couple of just questions, so I won't be long, but just wanted to ask firstly, you had a step through um whether the Australian government can currently lawfully confiscate sovereign assets.
>> Thank you, Senator. I think could you um tell me what you mean by confiscate in like a
>> well given the discussions that we're having right now about seizing assets, confiscating assets. >> Just wanted to get from your from your perspective, >> what your understanding is about the federal government's ability under current law.
>> I think the federal government's ability under current law is one question, but international practice on it is another. So for instance in the European Union there's been a shift to a debate on um sending the windfall from um Russian sovereign assets held at Euro Clear to Ukraine and if and when Russia ceases their war they will be reimbured with European bonds. I think that's the international debate currently in Australia. If it's a question of can we confiscate them, I think there are constitutional barriers to that particularly with respect to section 51 subsection 31 of the constitution.
>> Yeah. which is my next question really which is what if any legal or constitutional changes there would be required in order to enable the government to seize or confiscate sovereign assets.
>> I think the issue is one of the um foreign state immunities act which we have ratified in Australia and how that protects um sovereign assets of states in particular from suit and courts. So one way of looking at the issue would be the federal government can't unilaterally seize assets for sovereign assets because that is a sort of punitive measure. Now there is an exception to that constitutional provision for criminal forfeitures and that requires a judging of criminality by a court. The issue I think is that state immunities protections apply to the Russian central bank. So it we're at a sort of impass where the federal government could issue legislation whereby there would be a criminal for uh proceeding against the central bank. If they found to have been criminal then you could seize their assets but that would be protected by state immunities law at international law and domestically within Australia. So anywhere you go around our hands I think
>> And apart from the EU, is there anywhere around the world that you you've come across that you believe um a government a national government has come close to being able to seize or confiscate sovereign assets?
>> The United States passed the peace for strength act in I think 2024. Yep. 2024, which gives the uh US government the ability to seize assets. Whether under the current Trump administration that has been done, I'm unsure.
>> Okay. And do you know if it's been tested in their courts?
>> No, I don't believe it's been litigated
>> All right. Thanks a lot, gentlemen. I'll leave it there, chair.