Foreign Principals

Not all foreign engagement activities or arrangements will require registration under the Foreign Influence Transparency Scheme (FITS).

While all foreign engagement activity must be declared and documented either as a part of the foreign engagement compliance review process and/or as a part of regular performance development reviews with your line manager, the criteria that define a “foreign principal” are quite specific.

If you are dealing with a foreign entity in your work, you will need to consider whether they are, or may be, a “foreign principal”.

Examples of a foreign principal include:

  • A visiting academic who is not an Australian citizen or permanent resident is employed by a government funded university which requires all staff to be members of a specified foreign political organisation.
  • A research institute located overseas has various private sources of funding but its constitution gives a foreign government the legal right to nominate the majority of appointees to the governing board. 
  • The major shareholder in an innovative international health promotion company is a foreign government.
  • An influential overseas think tank is known to be affiliated with a foreign political party.

For the purposes of the FITS Act,  foreign principals are defined as one of the four following categories:

  • Foreign Governments

    A ‘foreign government’ means:

    • the government of a foreign country or parts of a foreign country (part of a foreign country includes, for example, the foreign equivalent of an Australian State or Territory)
    • an authority of the government of a foreign country (departments, agencies or other entities that act in the name of the foreign government)
    • an authority of the government of a foreign country, or
    • a foreign local government body or foreign regional government body.

    The definition of a foreign government is broad enough to include all levels of government. For example, the Home Office is an authority of England’s government as is the London Borough City Council. Both meet the definition of a foreign government.

    A foreign university’s relationship with government needs to be considered

    Depending on the political system in place, a foreign university may be an authority of a government or part of a government of a foreign country. Relevant considerations may include any legislation establishing or regulating the foreign university, the structure and operation of the government of the country in which the foreign university operates and the relationship between the foreign university and the foreign government.

    Foreign universities in some countries are very unlikely to be foreign principals by reason of independence guaranteed to them under laws governing their operation and regulation (for example, English Universities).

  • Foreign Political Organisations

    A ‘foreign political organisation’ includes:

    • a foreign political party, or
    • a foreign organisation that exists primarily to pursue political objectives.

    An organisation is a foreign political organisation if its primary purpose is to pursue the political objectives associated with governing a foreign country, even if the country does not have a system of registration for political parties.

    The definition of a foreign political organisation is broad enough to include political parties, trade unions and public policy institutes where the principal purpose of the organisation is the political governance of a foreign country.

  • Foreign Government Related Entities

    The term ‘foreign government related entity’ is also broadly defined in the FITS Act. Different considerations apply depending on whether the entity is a company or a non-corporate entity.

    Receiving funding from a foreign government or a foreign political organisation is not sufficient make the entity a foreign principal, but the following criteria should be carefully considered to determine whether a particular entity requires further assessment under the FITS Act.

    Companies

    A foreign company will be deemed a foreign principal where one or more of the following criteria are satisfied:

    • The foreign government or foreign political organisation holds more than 15 per cent of the issued share capital of the company;
    • The foreign government or foreign political organisation holds more than 15 per cent of the voting power in the company;
    • The foreign government or foreign political organisation is in a position to appoint at least 20 per cent of the company’s board of directors;
    • The directors of the company (however described) are accustomed or under an obligation (whether formal or informal) to act in accordance with the directions, instructions or wishes of the foreign government or foreign political organisation; or
    • The foreign government or foreign political organisation is in a position to exercise total or substantial control over the company.

    Non-corporate entities

    A foreign entity that is not a company will be a foreign principal where either of the following applies:

    • The members of the executive committee or governance board are accustomed, or are under obligation, to act in accordance with the directions, instructions or wishes of the foreign government or foreign political organisation; or
    • The foreign government or foreign political organisation is in a position to exercise total or substantial control over the entity.

    A foreign entity that is not a company will also be a foreign principal where all of the following conditions are satisfied:

    1. the entity is not a body politic;
    2. its directors, officers or employees are required to be a member or part of a foreign political organisation; and
    3. the second requirement is contained in a law, constitution, rules or governing documents by which the entity operates.

  • Foreign Government Related Individual

    A ‘foreign government related individual’ means an individual:

    • who is not an Australian citizen or a permanent resident of Australian; and
    • who is related to a foreign government or a foreign political organisation in either or both of the following ways:
      • the individual is accustomed, or under an obligation (whether formal or informal), to act in accordance with the directions, instructions or wishes of the foreign principal;
      • the foreign principal is in a position to exercise, in any other way, total or substantial control over the individual.

    A person is not a foreign government-related individual if the only reason they satisfy the definition is because the individual is under an obligation to obey the laws of a foreign government.