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12.1 The Department of Foreign Affairs and Trade played a significant role in relation to the participation of Australian companies in the Oil-for-Food Programme. That role arose for three related reasons.
12.2 First, the legislative regime that gave domestic effect to the Security Council resolutions that imposed sanctions on Iraq and established the Oil-for-Food Programme directly involved the Minister for Foreign Affairs. It was the Minister for Foreign Affairs who was empowered by r. 13CA of the Customs (Prohibited Exports) Regulations to grant permission for the exportation of goods to Iraq. That permission was to be granted only if the Minister was satisfied that 'permitting the exportation will not infringe the international obligations of Australia'. Interpretation of r. 13CA and the obligation it imposed on the Minister is discussed in Chapter 2. It is sufficient here to observe that, in satisfying himself that an exportation would not infringe Australia's international obligations, it might reasonably be expected that the Minister (or his delegate) would rely on the knowledge and advice of his department in relation to the proposed terms of the exportation and compliance with the sanctions regime.
12.3 Second, because the Oil-for-Food Programme involved international affairs, liaison with the United Nations and compliance with Australia's international obligations in connection with the sanctions imposed on Iraq, the Programme naturally fell within DFAT's administrative domain. It was DFAT that was primarily involved in providing advice and assistance to Australian companies in relation to the sanctions regime and the requirements of the Programme.
12.4 Third, the UN agencies responsible for administering the Programme would not communicate directly with companies seeking to be involved in the Programme.[263] The procedures the United Nations adopted provided that communication with the United Nations was to take place via the permanent or observer missions of the exporting states. Accordingly, during the operation of the Programme DFAT was involved in communicating with and transmitting relevant documentation to the Office of the Iraq Programme via Australia's permanent mission to the United Nations in New York.
12.5 A consideration of DFAT's role in the Programme, and the systems and procedures it established to seek to ensure that participation by Australian companies complied with the UN sanctions, is relevant to a consideration of whether the actions of AWB, BHP Petroleum, Tigris, Rhine Ruhr, Alkaloids or any persons associated with those companies might have constituted a breach of any Commonwealth, State or Territory law. There are several reasons for this.
12.6 First, it is necessary to consider DFAT's role so that the actions of each of those companies can properly be considered in context. To understand the communications between, for example, AWB and DFAT, it is necessary to understand why it was that AWB was required to communicate with DFAT and to what one might reasonably expect the communications would relate.
12.7 Second, the information and advice available from DFAT and the systems and practices it established in relation to the Programme are of importance in considering the knowledge and intention of these companies; in particular, whether they knew or ought reasonably to have known that their actions involved, or might have involved, a breach of the sanctions.
12.8 Third, a number of the offences that might have been committed by the companies that participated in the Oil-for-Food Programme concern the making of statements or the provision of information to DFAT that might have been misleading or deceptive, or the withholding of information from DFAT that was material to the decisions and actions its officers took in relation to the Programme.
12.9 Broadly, there were four ways in which DFAT played a role in the Oil-for-Food Programme and interacted with companies that exported goods to Iraq during the period of the operation of the sanctions:
12.10 DFAT also liaised with the United Nations regarding delays and problems associated with payment from the UN escrow account. As this generally occurred after approval had been given by the United Nations and permission to export was granted by the Minister, this aspect of DFAT's involvement is of limited relevance.
12.11 In December 1996 DFAT produced a pamphlet entitled Exporting to Iraq.[264] It may be inferred that the pamphlet was disseminated to, or at least available to, prospective exporters. A copy of it was sent to AWB.[265] It included the following:
EXPORTING TO IRAQ-CURRENT PROCEDURES
The export of goods to Iraq is monitored by the United Nations Sanctions Committee, also known as the '661 Committee'. All Member States of the UN are obliged to ensure that exports are undertaken only in accordance with the UN sanctions regime … The resolutions pertaining to trade with Iraq are implemented in Australia through Sections 4QA of the Customs (Prohibited Imports) Regulations (and amendments) and 13CA of the Customs (Prohibited Exports) Regulations (and amendments). Applications made under the above-mentioned provisions are processed by the Department of Foreign Affairs and Trade and provided as a free service on behalf of Australian exporters.
The Minister for Foreign Affairs and Trade (or his delegate) must be satisfied that the export of goods to Iraq will not infringe the international obligations of Australia, before he may grant a permission for the export to proceed.
Export of Goods to Iraq Under 'Oil-for-Food' Resolution 986
The UN Security Council adopted UNSCR 986 in 1995 as a temporary measure to provide for the Iraqi population's immediate humanitarian needs until such time as Iraq fully complies with the relevant UNSCRs. UNSCR 986 allows Iraq to export up to US$2 billion of oil every six months in return for a UN-monitored distribution of imported humanitarian aid to the Iraqi populace. On 20 May 1996 Iraq signed an agreed Memorandum of Understanding (MOU) with the UN Security Council which provides a framework for the implementation of UNSCR 986. This MOU is now operational under a set of guidelines comprising Expedited Procedures and a Distribution Plan …
The itemised list of supplies and Distribution Plan for the initial six month period (January to June 1997) as agreed between the UN and the Government of Iraq may be obtained from the Department on request …
There are two avenues for Australian exporters to pursue commercial benefits from the provisions of UNSCR 986-direct procurement of supplies through Iraqi Government Ministries and importing agencies, and multilateral procurement programs administered by the UN's Inter-Agency Humanitarian Program.
Australian traders proposing to export approved items to Iraq under UNSCR 986 should:
Experts in the UN Secretariat will examine each contract on a case-by-case basis, including the details of price and value, and whether the items to be exported are for humanitarian purposes and are on the 986 Distribution List. The expert panel will also check the availability of funds in the Iraq account (established by the UN at the New York branch of Banque Nationale de Paris [BNP] into which all proceeds of oil sales will be paid and from which all payments to exporters will be made) and will inform the Sanctions Committee of its findings … When UN Sanctions Committee acknowledgment or 'no objection' approval is provided through our mission in New York, the Department of Foreign Affairs and Trade will issue a 'Permission to Export' under Section 13CA of the Customs (Prohibited Exports) Regulations. Permissions to export to Iraq are presently issued on a shipment-by-shipment basis.
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Disclaimer
In assessing the commercial viability of entering into contracts for export to Iraq of foodstuffs or materials and supplies for essential civilian needs, Australian exporters should take careful note of the conditional nature of approvals provided under Regulation 13CA. The Australian Government has an obligation under the UN Sanctions regime to ensure that its nationals do not indirectly breach sanctions by being party to a transaction involving direct breaches by others. Should a permission to export be revoked, or the provisions of UNSCR 986 become inoperable due to action by the UN or the Iraqi Government, the Australian Government would not accept any liability for losses caused to any party, either directly or indirectly.
Attachments:
Methods of Payment and Import restrictions
UN Notification or Request to Ship Goods to Iraq form
UNSCR 986 Expedited Procedures (on request)
UNSCR 986 Distribution Plan (on request)[266]
12.12 The attached 'methods of payment' document included the following warning:
When filling out the authorisation request form you should clearly indicate the nature of the proposed transaction (at no. 15) ensuring that it complies with normal commercial practice and is not designed to contravene the sanctions regime.[267]
12.13 DFAT updated the information in this pamphlet at least once. A version of Exporting to Iraq dated January 2001[268] contained a number of changes and included some information additional to that contained in the 1996 version. The 2001 version was also placed on DFAT's website. At the beginning of that 2001 version, the following note or disclaimer appears:
The following information on United Nations policy and procedures regarding exports to Iraq is for the convenience of Australians considering exporting to Iraq and is a guide only. The information below is largely sourced from the UN's Office of the Iraq Program web site (www.un.org/depts/oip), and persons wishing to export to Iraq must consult this site for comprehensive advice and instructions before proceeding.[269]
12.14 The following additional information was provided in relation to relevant UN Security Council resolutions that had been passed since 1996:
UNSCR 1284 (which in itself did not initiate a new phase) altered the terms of earlier Resolutions (normally rolled-over without change) in a number of ways including the lifting of the oil-for-food ceiling on revenues and streamlined procedures for the approval of selected basic humanitarian exports to Iraq. The selected items listed for streamlined (also known as accelerated) approval procedures are sourced from the existing UN Distribution Plan. The complete lists of categories of goods eligible for accelerated processing are located at on the UN's Office for the Iraq Program (www.un.org/depts/oip/cps/000719acc.html). The categories are food, education, agriculture, health, oil (spare parts), and water & sanitation.
UNSCR 1284 enables the '661' Sanctions Committee Secretariat to approve applications for exporting selected items listed under the approved categories without the application being circulated to the Sanctions Committee proper.
Regardless of whether an item is eligible for accelerated procedures, under the 'oil-for-food' program, only items listed on the UN's Distribution Plan may be exported to Iraq. That is to say, the items on the lists for accelerated procedure are in themselves sourced from the Distribution Plan.
UNSCR 1330 re-states the key elements of UNSCR 1284, namely the streamlined processing amendments and the allocation of cash for the purchase of certain humanitarian goods and services locally within Iraq. UNSCR 1330 also created lists of specific items approved for streamlined processing in the housing and electrical sectors.
The itemised list of supplies and the current Distribution Plan for 'phase IX' (UNSCR1330) is available on the Office of the Iraq Program web site (www.un.org/depts/oip/dp8pdf/sg8.html).
Suppliers should be aware that the signing of contracts and the preparation and submission of applications for goods which may qualify for expedited processing should be carried out in the normal manner outlined below. Based on the criteria set out in Resolution 1284 (2000), the Office of Iraq Program will determine which applications are eligible for clearance under the new procedures. Applications will continue to be circulated to the '661 Committee' for approval if they contain any items not on the lists approved by the Committee, including any spare parts, accessories or consumables specifically mentioned in the lists. Applications will also continue to be circulated if they are deemed to contain any items to which resolutions 1051 (1996) may apply (see below).[270]
12.15 The outline of the processes in the 2001 version of the document was similar to that in the 1996 version. There were, however, some important differences. The relevant passage appearing in the 2001 version was as follows:
Outline of the process required to export to Iraq under UNSCRs 986/1330
Australian traders proposing to export approved items to Iraq under UNSCRs 986 to 1330 should:
DFAT, once satisfied that the form has been properly completed and that the transaction does not appear to infringe the UN sanctions regime, will submit the form and documentation to the UN Sanctions Committee in New York. Experts in the UN Secretariat will examine each contract on a case-by-case basis, including the details of price and value, and whether the items to be exported are for humanitarian purposes and are on the UNSCR 986 Distribution List.
…
Important note : A contract that follows the sample provided by the UN Sanctions Committee (see the Office of Iraq Program), and which is straightforward, transparent and market-priced has a better chance of gaining rapid approval …
When [the] UN Sanctions committee provides an acknowledgement or 'no objection' approval for the export, and also approves the issue of the letter of credit, the Department of Foreign Affairs and Trade will issue a 'Permission to Export' under Section 13CA of the Customs (Prohibited Exports) Regulations.[271]
12.16 The extent to which these publications reflected the procedures and systems implemented by DFAT in relation to the processing of applications to the United Nations and the granting of permissions to export is discussed in detail later in this chapter. The following may be noted here:
12.17 DFAT's 2001 Exporting to Iraq publication referred potential exporters to the UN Office of the Iraq Programme website for more comprehensive advice and instructions. If requested DFAT also provided more specific advice and assistance to exporters in relation to the operation of the Programme.[274]
12.18 Officers from the Middle East Section provided advice about the scope and operation of the Oil-for-Food Programme by telephone and sometimes in writing.[275] The Middle East Section had an 'information pack' consisting of a set of guidelines and the UN application form that was provided to potential exporters by mail, email or fax on request.[276] Exporters were also often referred to the UN website.[277] If officers in the Middle East Section were unable to answer a specific query or request for advice, they sought the advice of Australia's mission to the United Nations or DFAT's Legal Branch.[278] The advice so obtained was then conveyed to the exporter by the Middle East Section. On occasion, exporters or potential exporters sought advice directly from Australia's mission.[279] When its advice was sought, the mission would approach the UN Office of the Iraq Programme or the 661 Committee if it required guidance or advice before it could answer the request.
12.19 Officers in the Middle East Section and the mission were in relatively frequent contact with officers and employees of AWB in relation to aspects of AWB's participation in the Oil-for-Food Programme and regularly gave advice to AWB.[280]
12.20 The following two examples are illustrative of DFAT's response to requests for advice during the currency of the Oil-for-Food Programme. They demonstrate DFAT's willingness and ability to respond to AWB requests for advice in relation to the operation of the Programme and compliance with the sanctions.
12.21 On 7 August 2000 Mr Hogan of AWB sent a facsimile to DFAT, to the attention of Mr Bowker, then Director of the Middle East Section.[281] In the facsimile Mr Hogan asked for DFAT's advice in relation to proposed changes in the terms of AWB's wheat contracts and a proposed change in the way contracts were submitted to the United Nations. The proposed changes to the contract terms related to certification of weight and quality, and despatch and demurrage. Mr Hogan sought DFAT's advice about whether the proposed changes would be accepted by the United Nations. The proposed change to the contract submission procedure was that AWB would submit one contract signed by both parties, rather than separate contracts from each party; again, the advice sought was whether this was likely to be acceptable to the United Nations.
12.22 Although Mr Bowker had no recollection of receiving the letter from Mr Hogan, it appears that he referred the request for advice to Ms Courtney, who at the time was a director-level officer assigned to the Middle East Section as a 'Special Projects' officer.[282] Either Mr Bowker or Ms Courtney sought advice from the DFAT Legal Branch in relation to AWB's proposals.
12.23 On 25 August 2000 Ms Simm, a solicitor in DFAT's Legal Branch, prepared a minute to Mr Bowker, recording her advice in relation to Mr Hogan's facsimile of 7 August 2000.[283] Ms Simm advised that the proposed contract term relating to weight and quality and the proposed change in the procedure relating to the submission of contracts to the United Nations were matters that could be negotiated with the United Nations, and that it was a policy question for the Middle East Section whether it would ask the mission to negotiate these matters with the United Nations on behalf of AWB. In relation to the proposal concerning despatch and demurrage, Ms Simm's advice included the following:
The AWB states that it currently incurs substantial demurrage bills due to delays in unloading wheat shipments at the Iraqi port of Umm Qaser. It proposes establishing a type of trust account, controlled by the AWB and held for the benefit of Iraq, into which the AWB would pay despatch (a bonus where shipments are unloaded ahead of time) and presumably, although it does not state this, demurrage (a fine when shipments are unloaded late). The AWB proposes to use these funds to provide grain handling equipment and technical training to Iraq.
The proposal to establish a type of trust account for Iraq controlled by the AWB would breach UN sanctions. Money paid to Iraq must be paid into an escrow account established by SCR 707 and 712 or in accordance with SCR 986. The sale or supply of grain handling equipment is prima facie prohibited by SCR 661 OP 3(a) and (b) and would need to be approved by the 661 sanctions committee.[284]
12.24 On 28 August 2000 Ms Courtney sent a facsimile to Mr Hogan, attaching a copy of Ms Simm's minute to Mr Bowker.[285] In the facsimile Ms Courtney stated:
I have left the document [the minute] in its internal form as I think it will give you an informal steer as to possibilities. Our understanding in MEA is that you wish to deal directly with the Iraqi Grain Board to negotiate these possibilities that should be consistent with oil-for-food provisions but should you wish to have us talk to our mission in New York or have them run administrative options past the Secretariat and/or Sanctions Committee, we would of course be happy to discuss this further with you.[286]
12.25 On 23 March 2001 Ms Moules, First Secretary of Australia's permanent mission to the United Nations, was contacted by Mr Snowball, manager of AWB's US office. Mr Snowball sought DFAT's advice in relation to the payment of port fees in Iraq. [287] Ms Moules recorded the terms of this request for advice in a cable she sent to DFAT in Canberra on 26 March 2001:
AWB (USA) Ltd (Snowball) contacted us on the evening of 23 March to seek our advice about the payment of port fees in Iraq. In relation to its latest shipments of wheat under the Oil-for-Food Program, AWB has been advised by the Iraq State Port Agents that it cannot discharge its vessels until a port fee of U.S.50 cents per tonne is paid in cash to the port agents. The Iraq State Port Agents have told AWB that the port fees will be applied retrospectively back to 11 March 2001, and to all future shipments.
AWB Ltd asked us if we could clarify whether these port fees were permissible under the sanctions regime. They also noted their concern that, if applied, the port fees would amount to considerable sums given the quantities of wheat AWB exports to Iraq (as you know, the two most recent contracts for which AWB has received UN approval to export to Iraq cover, in total, one million tonnes of wheat).[288]
12.26 Ms Moules subsequently spoke with the Office of the Iraq Programme and the Norwegian mission in its capacity as Chair of the 661 Committee. Ms Moules was advised that, whilst a full answer could not be given, a legal opinion obtained in relation to the discharge and transportation of humanitarian supplies in Iraq was to the effect that such fees were not inconsistent with the sanctions regime, provided they were a 'reasonable' amount and provided they were paid in Iraqi dinars, not US dollars.[289] Informal advice received from the Norwegian mission was to the same effect. Both the OIP and the Norwegian mission acknowledged to Ms Moules that this was not a 'practical solution' because dinars were difficult to purchase outside Iraq and could not be purchased in Iraq without breaching the sanctions. They also advised that the 661 Committee was looking further into the matter, but that it would take some time to develop a response.[290] On 26 March 2001 Australia's Ambassador to the United Nations, Ms Wensley, wrote to the Chairman of the 661 Committee, seeking 'guidance on how the Australian Mission should advise AWB Ltd to proceed' in relation to the demand for the payment of port fees.[291]
12.27 On 26 March 2001 Ms Moules conveyed to Mr Snowball the substance of the advice she had received from the Office of the Iraq Programme and the Norwegian mission.[292] Part of the advice conveyed was that any payments in US dollars to Iraq would breach the UN sanctions[293] and that the 661 Committee was aware of the problem concerning port fees and was looking into the matter.[294] In a cable to DFAT Ms Moules recorded the advice she gave to Mr Snowball in the following terms:
We conveyed the preliminary information provided by OIP and the Norwegian Mission to AWB (USA) Ltd (Snowball) today, emphasising that, for the moment, the only advice we could provide was that port fees could only be paid in Iraqi dinars. Snowball mentioned that the Master of vessels carrying AWB shipments to Iraq had, until now, been paying USD 1,500 per shipment direct to the port agents as port fees, and asked if this too would be inconsistent with sanctions. We reiterated the advice that port fees should only be paid in dinars. AWB said that, pending any further advice from the sanctions committee-which, AWB is aware, could take some time-they might take up the matter directly with their Iraqi contacts, since, even if there were an easy means to make payments in dinars, AWB considered the US 50 cents per tonne port fees too high. We noted that the negotiation of the amount of ports fees was a matter for the supplier and purchaser.[295]
12.28 On 27 March 2001 Mr Snowball emailed Mr Rowland:
Mark
Bronte Moules came back to me with the following:
Iraq has the ability to charge port fees, but payment of these fees need to be in Iraq currency. Any payments in USD to Iraq are breaching sanctions. The USD15.00 the vessel has been paying on past shipments is therefore technically in breach of sanctions. The sanctions committee has actually been aware that these types of payments have been happening but have been turning a blind eye if the amounts are not excessive. If the USD amounts are quite large, there has been cases where the sanctions committee has put contracts on hold, even if the amounts are included in the actual contract. The only way around this is to pay in Iraq currency, not USD, but this is obviously quite difficult.
The sanctions committee are aware of the problem we have with the USD0.50/mt charge and they have promised to look into it. This would be expected to take 1-2 weeks.
What is the Iraq Grain Board saying about this? We have just agreed a 1.0 mmt contract and had it approved by the UN, and now Iraq is asking for a USD0.50/mt discount that is also retrospective against old business.[296]
It is unlikely the expression 'blind eye' was used by Ms Moules. Mr Snowball's contemporaneous note made no mention of such an expression[297], and Ms Moules had no recollection of using words to that effect.[298]
Both accounts of the discussion make clear that Ms Moules told Mr Snowball that payments of any kind to Iraq in US dollars breached sanctions, and Mr Snowball understood that.
12.29 AWB subsequently advised DFAT that it had been permitted to discharge two shipments without having to pay port fees. In a cable to DFAT in Canberra on 10 April 2001 Ms Moules reported as follows:
Further to reftel, concerning AWB Ltd's inquiry about the payment of port fees to the Iraq State Port agents, AWB Ltd has now informed us that the two shipments in question (which were not being allowed to take berth until a port fee of U.S. 50 cents per tonne was paid in cash to the port agents) have been allowed to discharge their cargo without insistence on the payment of the port fees. AWB Ltd told us it was not clear, however, whether the port fee would be applied to future shipments, and therefore intended to discuss the issue with the Iraqi Grain Board. We reiterated that the advice from the sanctions committee was that port fees can only be paid in Iraqi Dinars, not U.S. Dollars.
…
The Iraqi Mission has, very informally, raised the issue of port fees with us. While waiting to receive a briefing on a recent sanctions committee meeting (the meeting itself is closed to non security council members, though the Chairman generally provides a briefing to interested delegations following each meeting) a member of the Iraqi delegation approached us in the corridors at the UN to ask why Australia had sought advice from the sanctions committee on the question of port fees. The Iraqi delegate suggested it would be better for the Australian company to talk to other suppliers, since 'they know how to deal with this', and that the sanctions committee could 'complicate' the matter. We said we were simply responding to a request for clarification from an Australian supplier.
The current environment of increased scrutiny of the operation of the Oil-for-Food program and heightened awareness of attempts by Iraq and by some suppliers to circumvent the sanctions regime underlines the importance of AWB adhering closely to the current regulations concerning the payment of port fees. It is not yet clear whether AWB will be placed under further pressure by Iraqi agents to pay port fees in a manner inconsistent with sanctions, and AWB New York has said it will stay in touch with us if needed regarding forthcoming shipments. Iraq's interest in keeping port fees outside the Oil-for-Food Program appears self-evident from the Iraqi delegation's approach to us, though we would note that there was no suggestion in the casual nature of Iraq's approach that the issue of port fees is being linked to AWB's securing of future wheat contracts.[299]
12.30 These examples illustrate the capacity of AWB to consult with and seek advice from DFAT and the United Nations concerning the operation of the Oil-for-Food Programme and the propriety of contemplated dealings with Iraq. They also illustrate the willingness of DFAT to give advice to AWB concerning those matters, and where necessary to obtain the view of the United Nations about such matters. The examples make clear that there was nothing to prevent AWB from seeking the advice of DFAT concerning the payment of trucking fees, or the payment of the 10 per cent after-sales-service fees to Iraq via Alia. AWB never sought such advice from DFAT.
12.31 DFAT's first direct involvement in a transaction under the Oil-for-Food Programme occurred when, in accordance with the instructions contained in its Exporting to Iraq publication, it received from potential exporters a completed 'Notification or request to ship goods to Iraq' form together with the relevant contractual documentation.
12.32 The notification form was a UN form and represented the first formal step in the UN approval procedure. Although notification forms invariably related to a specific contract entered into by an individual or corporate exporter, the 661 Committee procedures provided that applications for the export of humanitarian supplies were to be submitted by the 'exporting States'.[300] This was a requirement of the Memorandum of Understanding signed by the United Nations and Iraq implementing Security Council Resolution 986.[301] Notification forms submitted on behalf of Australian exporters were certified by affixation of the seal of the Australian mission to the United Nations. The reason the form was certified and submitted by the exporting country rather than the exporter itself was that the United Nations eschewed any direct contact with individual exporters. There is nothing in Resolution 986, the UN 'notification' form, the UN instructions for its completion, or the UN procedures document which suggested that 'certification' by a member state constituted a finding or determination by that state that the contracts the subject of the application complied with UN sanctions.
12.33 DFAT's instruction on its website envisaged that the prospective exporter would complete the form and forward it to DFAT with the contract documentation. AWB generally followed this instruction[302], although it appears that in some instances DFAT altered or supplemented the particulars on the notification form submitted to it[303] and in other instances DFAT completed the form using information in documents provided by AWB.[304] Both Rhine Ruhr[305] and Alkaloids[306] prepared the notification forms that were lodged in respect of their contracts.
12.34 Once DFAT received a notification form and the accompanying contract documents, the next step was submission of the documents to the UN 661 Committee. A number of AWB officers or employees claimed they believed or understood that DFAT 'approved' the contracts before sending them on to the United Nations.[307]
12.35 It is not clear what various AWB executives meant when they spoke of DFAT 'approving' AWB's contracts.
12.36 'Approving' could mean one of at least three things:
12.37 If they meant that DFAT checked the details in the UN Notification form to see that the information there shown accorded with that in the accompanying contracts, that is in substance what DFAT did. The product wheat was known to be on the permitted list of exports to Iraq: that required no checking or approval. There remained to check only formal details-quantity, price, seller, purchaser, origin and distribution. That was mechanical checking, not approval.
12.38 Regarding price, DFAT had no expertise to determine if the price shown in the contract was reasonable or inflated. No doubt DFAT assumed that the price shown was that which was commercially negotiated, and it knew that price would be checked by the United Nations. It is to be remembered that exports to Iraq were of more than wheat. Rhine Ruhr exported valve trays for a stabiliser tower, and Alkaloids of Australia exported hyoscin-N-butyl bromide. To expect DFAT to be aware of the reasonable prices for such products, commercial shipping and air freight costs, and insurance charges for the wide variety of products able to be exported is unrealistic. DFAT no doubt approached its task on the basis that it did not expect Australian companies, particularly those of good repute, to be attempting to deceive or mislead it by submitting to it contracts that did not reflect the true price of the goods sold or other arrangements in the accompanying contracts. DFAT had no way of determining whether the contracts reflected the true contractual arrangements between buyer and seller.
12.39 If by 'approving' it was meant that DFAT was certifying or warranting that it had checked the contracts as submitted, and found that such contracts were consistent with United Nations sanctions, that occurred only if officers of DFAT had cause to suspect that they were not being provided with the true arrangements in the accompanying contracts. Submission to them repetitively of apparently standard wheat contracts-wheat being a known permitted export-reasonably did not invite suspicion.
12.40 Nothing in the Customs (Prohibited Exports) Regulations, or any other domestic legislation or subordinate legislation, provided that DFAT or the Minister was required to approve the contents of a notification form or the accompanying contract documentation before it was submitted to the 661 Committee. No domestic statutory provision obliged DFAT or the Minister to check the notification form and the accompanying documentation for the purpose of confirming or certifying that the contract was one properly within the Oil-for-Food Programme or that its terms did not contravene the terms of the Programme or the UN sanctions. There was no specific box or question on the notification form that required such a confirmation or certification.
12.41 Neither DFAT nor the Minister issued any, or any detailed or comprehensive, policy directive, guideline or instruction to DFAT officers about what, if anything, DFAT was to do with notification forms and contract documents before forwarding them to the United Nations. The only written indication of DFAT's approach to the notification form and contracts submitted to it was in the Exporting to Iraq pamphlet first published in December 1996 and subsequently updated and placed on DFAT's website. The updated pamphlet and the website were published by at least January 2001.
12.42 The December 1996 version of the pamphlet provided that, on receipt of the notification form, DFAT would submit it and the contract documentation to the 661 Committee 'once satisfied that the form has been properly completed, and that the transaction does not infringe the sanctions regime'. The impression gained from this statement is that, prior to sending the documents to the United Nations, DFAT would form a view that the contract the subject of the application did not infringe the sanctions. One would expect that this would require, at the very least, an examination of the contract terms. There is, however, no explicit statement to this effect in the pamphlet. Nor is there any other elaboration of what, if any, action DFAT would take in order to reach the requisite state of satisfaction.
12.43 The January 2001 version of the pamphlet restated DFAT's approach to the submission of documents to the United Nations. It stated that DFAT would submit the documents to the United Nations once it was satisfied that the form had been properly completed and that the transaction did not appear to infringe the UN sanctions regime. The impression to be gained from the January 2001 version of the instruction is that DFAT's scrutiny of the transaction was limited to seeing if anything in the documentation obviously suggested that the transaction was in breach of the sanctions. The instruction suggests that it was unnecessary for DFAT to positively satisfy itself that the transaction did not infringe the sanctions, only that it did not appear to do so. There is no evidence that identifies who at DFAT was responsible for this change in the published document or how or, importantly, when it came about, other than that it was some time prior to February 2001. It is, however, apparent that someone at DFAT made a decision prior to February 2001 to change the description of DFAT's scrutiny of the transaction. There is no evidence to suggest the change flowed from any policy change by Minister Downer or within the Department. The predominance of evidence suggests the change may have been made administratively to more accurately reflect the process actually followed within DFAT.[308]
12.44 The instructions in both the 1996 and 2001 versions of the pamphlet simply directed prospective exporters to 'return' the form and contractual documents to the relevant DFAT desk officer. This was ordinarily done under cover of a letter from the prospective exporter.[309] There was no requirement to provide any certification of the truth and accuracy of the particulars in the notification form. Nor did DFAT's instructions or systems require any officer of the prospective exporter to verify or certify the correctness and completeness of the notification form and contract documents. As the notification form was certified not by the exporter but by the Australian mission to the United Nations, it follows that the procedures did not require any officer of the exporting company to verify or certify the accuracy and completeness of the notification document and the accompanying contract documents. The existence of such verification would be of assistance were it to become necessary for an applicant to be prosecuted for providing false or misleading information to the Commonwealth.
12.45 A number of current and former DFAT officers gave evidence about their understanding of, and belief about, DFAT's systems and procedures in relation to the submission of notification forms and contracts to the United Nations. None of them understood that DFAT was required to scrutinise or approve the terms of the contract before submitting the documents to the 661 Committee.
12.46 Mr Pierce was Assistant Secretary of the Middle East and Africa Branch from February 1996 to November 1997, during the initial phases of the Oil-for-Food Programme. Mr Pierce's evidence was that DFAT did not scrutinise the price in AWB's wheat contracts.[310] He understood that DFAT's view at the time was that no scrutiny of prices was required for three reasons: first, because the department relied on the fact that under international legal arrangements applying to the Programme the United Nations, not the Australian Government, was responsible for checking and vetting the price and value of contracts; second, because his understanding was that DFAT had no mandate to seek review of prices charged in commercial transactions by another statutory authority which was part of the Australian government at that time, and which was operating as a statutory authority pursuant to the Wheat Marketing Act 1989; and, third, because officers of DFAT did not have the necessary technical capacity, expert skills or specialised background to assess the pricing of wheat contracts.[311] The key matter for Mr Pierce was that under Resolution 986 the United Nations had for the first time established a system where it had experts who were capable of and authorised to assess price and value in contracts.[312]
12.47 Mr Skelly was Director of the Arabian Peninsula, Iran, Iraq Section of the Middle East Branch from July 1994 to March 1997. His recollection was that it was the role of his section to provide information on Programme guidelines to exporters and to 'undertake initial vetting of applications with the guidelines before submitting these to the UN Security Council Sanctions Committee for approvals'.[313] Mr Skelly did not suggest that the 'initial vetting' involved scrutiny of the price or any other term or terms of the contract.
12.48 Mr Feakes worked in the Middle East and Africa Branch and was responsible for sending AWB's applications to Australia's mission in New York for submission to the United Nations and for informing AWB of the results of the United Nations' consideration of the application.[314] He recollected that DFAT was concerned to ensure that it was acting in accordance with the requirements of the Oil-for-Food Programme. He did not suggest that this involved scrutinising the terms of the applications or the contracts.
12.49 Mr Bowker was a Director in the Middle East Section during the period January 1995 to July 1996 and 8 February 1999 to 5 January 2001.[315] He occasionally acted as Assistant Secretary of the Middle East and Africa Branch. Mr Bowker's understanding of the ambit of DFAT's obligations in relation to the Programme was as follows:
I understood our obligations to be to assist the Australian entity, or entities, wishing to do business with Iraq to conduct their activities within the framework of UN Security Council Resolutions. That entailed giving them accurate advice as to what the policies of the Australian government were, what the requirements of the Security Council were and how the UN Office of the Iraq Program conducted its activities and what information it required. I did not see a wider obligation on the part of DFAT than that.
I was also conscious that from the period where I had some contact with these issues in '95, and again in 2000, the legal basis for the department to investigate the commercial affairs of Australian companies was very severely limited, and we would be reliant upon the advice and information provided by Australian companies in determining whether, for example, the product which was being proposed for export was a permissible export or not.[316]
12.50 Mr Bowker considered that DFAT's obligation to investigate the commercial terms on which an export was being proposed was very limited:
Q: Would you have regarded it as part of DFAT's responsibility in 1995 and 1996 to ensure that the payment terms disclosed on any contract which was forwarded to the UN and which contract was approved by the UN were in fact the real payment terms as between the contracting parties?
A: The approach we took in 1995 was to determine whether the approach being proposed was consistent with policy-policy of the government and policy of the United Nations sanctions committee. In other applications for export, particularly where a process was well established, such as, for example, in regard to wheat exports, we did not regard it as an obligation to investigate the commercial terms upon which the export was being proposed.[317]
12.51 From late 1995 to mid-1996, officers of BHP Limited and AWB put a series of proposals to DFAT that involved, in general terms, an AWB shipment of wheat to Iraq that was to be financed by a long-term (five-year) letter of credit that AWB would subsequently assign to BHP. This was a precursor to what later became know as the Tigris transaction. It was not a transaction under the Oil-for-Food Programme. DFAT officers gave lengthy and detailed consideration to the proposals and ultimately briefed the then Ministers for Trade and for Foreign Affairs about them. In a draft ministerial submission prepared by Mr Feakes or Mr Skelly in late 1995 the following passage appears after reference is made to r. 13CA of the Customs (Prohibited Exports) Regulations:
Thus, a permission to export could be denied if the Minister or his delegate was of the view that the method of payment would not be compatible with Australia's obligation under the UNSCRs [UN Security Council resolutions] which imposed sanctions on Iraq. In this regard we assess that our obligations under the domestic legislation would require us to ensure that in all future AWB applications to the UN Sanctions Committee the existence of third party payments should be made explicit. We also believe that in order to acquit our obligations under the domestic legislation we need to ensure that AWB, and any other commercial entity seeking to export humanitarian goods to Iraq, reveals to DFAT sufficient information to enable us to ensure that such transactions do not involve the unfreezing of Iraqi assets or the repayment of a debt before the lifting of sanctions.
…
We are also concerned to ensure that our reputation with the UN for frankness and transparency is maintained. We believe that a failure by DFAT to ensure that applications put forward by us comply fully in all respects with the relevant Resolutions could jeopardise our standing within the UN and with individual Committee members, and also put at risk future applications both by the AWB and by other [exporters].[318]
12.52 In a ministerial submission prepared on 7 May 1996 Mr Pierce canvassed whether it would be permissible for DFAT to submit to the 661 Committee an AWB application that specified the payment terms as being by letter of credit without disclosing that the term of the letter of credit was five years and therefore not normal commercial terms. Mr Pierce wrote:
Since the imposition of sanctions against Iraq (the first and most substantial sanctions resolution, UNSC 660, dates from August 1990, with 30 following that), the AWB has continued to ship wheat to Iraq, at about one tenth the level prevailing before the Gulf War ($40 million worth).
The wheat sales, like all food shipments, have been classified as 'humanitarian goods' for the purposes of the sanctions resolutions, and therefore qualify as a permitted export (as would medicine). Nonetheless, the shipments still require approval through the UN sanctions committee, and we are obliged (not least because the sanctions have been adopted into domestic law, through the Customs (Prohibited Exports) Regulations) to vet the applications carefully. The wheat has been shipped on a cash on delivery basis, in order to avoid giving the Iraqis credit, allowing them to postpone payment until sanctions are lifted, giving them any opportunity illicitly to offer oil in return for food, or assisting Iraq in using frozen assets as collateral.
…
In summary, if we put up to the UN sanctions committee documentation which accurately and fully reflected the terms of the deal, we do not think it would be approved. We could not collude in presenting deliberately incomplete documentation (not specifying the period for the letter of credit, for instance). In addition, any suggestion that we were abetting a breach of sanctions would damage our standing, including for our candidacy for the body, the UNSC, which regulates the application of the sanctions.
…
We have consulted ILD [International Legal Division], which notes that the proposed transaction is not categorically prohibited by the wording of the sanctions resolutions, but understands that the transaction does not conform with the likely judgments of the sanctions committee itself. That committee has made it clear that the responsibility for determining whether a given transaction complies with the sanctions regime lies with exporting countries but the Security Council reserves the right to disapprove of transactions …[319]
12.53 Both Mr Feakes' and Mr Pierce's submissions acknowledged that responsibility for determining whether a transaction complied with the sanctions regime lay with the exporting country, rather than the United Nations, and that DFAT was obliged to 'vet the applications carefully'. That being said, the circumstances discussed in the submissions were unusual because DFAT had been specifically put on notice by AWB and BHP of aspects of the proposed transaction that may have been contrary to the sanctions, and DFAT was specifically considering whether it was acceptable to send the 661 Committee documentation that did not fully reveal the nature of the relevant contract. That distinguished the circumstances addressed in the ministerial submissions from the usual case whereby AWB simply forwarded a notification form and contract to DFAT. Ms Moules explained the matter in the following terms:
Q: That memo [the ministerial submission of 7 May 1996] would seem to make plain an acknowledgment within DFAT in May of 1996 that the responsibility for determining whether a transaction complied with the sanctions regime lay with, in this case, Australia. Was that as you understood the situation whilst you were at the UN mission?
A: It does to the extent that we would not have put forward an application if we had any concerns about any aspect of it or if we knew that an aspect of it were inconsistent with the sanctions regime.
Q: But you would say, at least to the extent that you understood the practice of DFAT at that time, it did not extend to DFAT digging into material behind the contracts unless it was aware of information that indicated that it ought to?
A: I would-yes, I would say unless it was aware of information that it ought to. If the contract appeared to be something relatively straightforward and there appeared to be no grounds for digging into it, then my understanding is that we wouldn't have. In this particular instance I can see why there would have been-there was a complexity here that needed to be explored, but as-if there appeared to be a standard contract which conformed to a pattern of contracts that had been submitted before, and in the absence of any other information or any reason to query it, then I would say an additional independent examination wasn't done, because there wouldn't have been a need to do so. But were there any questions regarding any aspect of it or any queries or anything that appeared to be potentially inconsistent with sanctions, then, yes, that examination would have been done before Australia or the Australian mission would have submitted the application to the UN.
Q: In '95-'96 it appears that DFAT was on notice of a possibility that wheat might be provided to Iraq in circumstances where DFAT and the UN might be told that this was a provision of wheat where the arrangement was cash to be provided by third parties, but where the real arrangement was one where the wheat was provided under the cover of a letter of credit for deferred payment. Against that background, DFAT instituted the regime that we have seen in those minutes. Is it in that context that you say, where DFAT might be on notice, that it would dig deeper?
A: Yes, if there appeared to be a reason to.[320]
12.54 In later phases of the Oil-for-Food Programme, including in the years 1999 to 2002, the process of receiving notification forms and contracts from AWB and forwarding them to the Australian mission to the United Nations for submission to the 661 Committee became an essentially routine procedure performed by lower level DFAT officers-so much so that DFAT's role came to be described as nothing more than a 'post box'.
12.55 Ms Moules' understanding of the procedure by which the contract approval process operated in respect of Australian companies was as follows:
a. The company or person wishing to export goods to Iraq ('the exporter') sent to DFAT Canberra a one page pro-forma application to the UN Security Council's 661 Committee ('the 661 Committee') and a copy of the contract that the exporter had negotiated with the then Iraqi Government. The pro-forma application form was a document that had been prepared and issued by the 661 Committee entitled 'Notification or request to ship goods to Iraq.'
b. When DFAT Canberra received an application and contract, they examined the documents for the purposes of ascertaining that the application had been completed in accordance with its terms, so that it included the information for which the 661 Committee had asked in the application, and that the goods that were the subject of the application and contract appeared to be within the scope of the humanitarian items permitted under the OFFP.
c. When it had completed this preliminary examination of the application and contract, DFAT Canberra faxed a copy of both documents to the UN Mission. The fax was usually directed in the first instance to a locally employed staff member at the UN Mission.
d. The UN Mission checked again that the pro-forma application was filled in in accordance with the requirements of the 661 Committee, gave it a UN Mission reference number, and affixed the stamp of the UN Mission.
e. A UN Mission cover sheet was then attached to these documents, all of which were then sent to the UN Office of the Iraq Programme (OIP) for processing.[321]
12.56 Ms Moules' evidence was that neither DFAT in Canberra nor the mission in New York had any role in checking or considering whether the pricing or any of the other conditions in the contracts were appropriate.[322] The mission performed essentially a 'post box' function with respect to contract processing.[323] The evidence of Ms Hamilton, who was posted to the mission from early 1995 to late 1998, Ms Wensley, Australia's Ambassador and Permanent Representative to the United Nations from 1997 to 2001, and Mr Stephens, who was posted to the mission from January 2002 to January 2005, was to the same effect.[324]
12.57 Ms Drake-Brockman was Assistant Secretary of the Middle East and Africa Branch between April 1999 and December 2000. She did not personally examine any notification forms or contracts. That process was handled by junior to mid-level staff in her branch. Her understanding was that, apart from checking that the goods to be supplied under the contract were not obviously outside the Programme, the DFAT officers did not examine the detailed terms of the contract because responsibility for contract approval lay with the United Nations[325]:
Q: Well, what did the process involve so far as your understanding was concerned?
A: My understanding is that the company which had obtained a contract would then download the UN request form, complete it and send to us that form plus a copy of the contract. In effect, my branch provided a free service, if you like, to Australian companies, in that we assisted with the processing of that documentation through to the UN for approval. We were required to ensure that the contract at least looked like a genuine contract and that the information that the company had provided on the UN form was consistent with the contract, that the documentation was properly filled out. And there may have been an additional requirement to satisfy ourselves that it was a bona fide company-the Australian one-but that's not an element that ever arose when I was in the branch. So we had a … we were an initial sieve through which the documentation went to see that there wasn't obviously anything that was outside the sanctions regime; in other words, that the product to be exported from Australia fell within the definition of 'humanitarian'.[326]
12.58 The statement on DFAT's website that DFAT would send the notification form and contract to the United Nations if it did not 'appear' to infringe the sanctions regime was consistent with Ms Drake-Brockman's understanding of the role of DFAT's office in Canberra. She understood that DFAT only considered whether the contract 'appeared to' infringe the sanctions because ultimately it was up to the United Nations to determine whether there was an infringement:
Q: By 'not appear to infringe the UN sanctions' what did you understand that to include?
A: It means that we were only the first sieve, we're not undertaking, in forwarding it, that it doesn't infringe; we've satisfied ourselves, but the UN may yet determine that there's an infringement, may yet identify one. So we satisfied ourselves that it was consistent with the regime, but we didn't undertake or promise to any Australian company that, in forwarding it to the UN, we were guaranteeing in any way that it didn't infringe the UN sanctions regime, in terms of their being able to proceed with the export.[327]
12.59 Mr Cuddihy was the Iraq Desk Officer in the Middle East and Africa Branch from early 2000 to early 2003.[328] His duties included dealing with the application forms and contracts submitted by prospective exporters.[329] For him, the 'most important first step was to get the contract and the application form off to the UN mission as soon as possible'.[330] His understanding was that DFAT in Canberra had no role in approving the applications and that his scrutiny of the documentation was limited to checking that all sections of the application form had been completed and that the form was accompanied by the appropriate contract and any relevant supporting material.[331] DFAT's role was that of a 'post box'[332] or conduit for information flowing between the United Nations and specific companies.[333]
12.60 Mr Cuddihy did not check whether any of the terms of the contract might be in breach of the UN sanctions.[334] He did not believe that he had the competence to perform such a check: that was the job of the UN Security Council.[335] If Mr Cuddihy saw anything in a contract that caused him 'discomfort' or that did not accord with his understanding of the Oil-for-Food Programme, he would seek advice from his supervisor[336] but only if it was obvious or stood out. His focus was not on satisfying himself that the transaction did not appear to infringe the sanctions:
Q: Well, did you have in mind to perform the task that's set out on page 9 of 15 from the [DFAT] website? Once satisfied that the form had been properly completed, would you satisfy yourself that the transaction did not appear to infringe the UN sanctions regime?
A: I must admit I can't say I really read the stuff on the website closely, and I certainly hadn't focused on that particular paragraph in the past.
Q: So it may be that when you actually dealt with these applications and the contracts, you never had in mind to satisfy yourself that the transaction did not appear to infringe UN sanctions?
A: Well, certainly I didn't see that I had the competence to know that. I mean, I understood that the UN went through the contracts on a line-by-line basis. They probably had their commercial lawyers who could say whether this was a standard sort of thing that you'd have in a contract or whether there was something unusual about it. We certainly didn't have the competence, and it was never explained to me that that was our role. Our role was to make sure that all the documentation which the UN had requested was given to them in a clear and readable form. So I was looking for anything obvious. If there was something that really stood out, I'd probably talk to the boss and say, 'What do we do about this?'[337]
12.61 In relation to AWB, the first step in the procedure was that Mr Cuddihy would receive from AWB a facsimile that included a copy of the notification form and a copy of the signed AWB contract with the Iraqi Grain Board. Following is a typical example of a facsimile received by Mr Cuddihy from AWB. [338]
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12.62 Mr Cuddihy would then check that the notification form had been completed. Following is a copy of the notification form that accompanied AWB's facsimile of 22 January 2002.[339]
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12.63 Mr Cuddihy would check that each of the fields on the form had been completed. He would also check the particulars of the point of delivery and that the name of the exporter appeared to be correct.[340] Because he knew that wheat was on the distribution list, he did not check the particulars provided in relation to the sector item code.[341] He would also check to see that the quantity and price disclosed in the contract were the same as the value disclosed in the form.[342]
12.64 In relation to the AWB contracts, Mr Cuddihy was aware that AWB was an experienced 'user' of the Programme and so knew the process to be followed.[343] As a result, he tended to give AWB contracts less scrutiny and simply passed them on to the United Nations. He did not really read the contracts[344]:
Q: … the summary of your statement to the IIC investigators … records that you said-and I want to ask you about it:
Because the AWB had been contracting regularly with Iraq since 1996 and had great familiarity with the program, DFAT simply passed the contracts to the UN.
Is that a true reflection of the way in which you processed the contracts?
A: Pretty well. I mean, I took the view that they probably knew more about the way the Oil-for-Food Program operated than I did; they were very experienced users. They probably didn't certainly need advice on filling out the form or the general process, but I would, nonetheless, just quickly check that they hadn't inadvertently forgotten to fill in the form, sent in a wrong form, attached a contract for, you know, trade with Iran instead of Iraq, and that the numbers in the contract seemed to match the numbers on the form. I mean, everyone can make a mistake. Even if you know what you should be doing, you can always, you know, inadvertently send the wrong contract or make a typo, so I checked for those sorts of things very quickly.[345]
12.65 Mr Cuddihy was unable to nominate any specific instructions or any written policy issued by DFAT or the Minister that had informed his view of DFAT's role in processing the applications under the Programme. Rather, he had learnt about the role and picked up the procedures from his colleagues in the course of his duties.[346]
12.66 Mr Grenenger and Ms Brodtmann were both officers in the Middle East Section, of similar standing to Mr Cuddihy. Their evidence about their role in relation to the processing of applications and contracts was to the same effect as Mr Cuddihy's. Mr Grenenger described his role as being of a routine nature, which could be described as a 'post box'.[347] His responsibilities did not include checking the documents he transmitted to the Australian mission and he had no recollection of ever looking at contracts or considering their terms.[348] Ms Brodtmann's scrutiny of contracts was similar: with AWB contracts, she would simply transmit them by facsimile to the Australian mission[349]; with other contracts, she would check that the goods the subject of the contract were on the Programme's distribution list and then transmit the documentation to the mission.[350]
12.67 Ms Courtney's role in relation to the applications and contracts was also very limited. She occasionally received notification forms and contracts. When she did, she would simply pass them on to someone else, without reading them, with instructions to transmit them to New York.[351] She understood and believed that DFAT's role in relation to the documents did not involve any scrutiny and was essentially procedural.[352]
12.69 Regulation 13CA of the Customs (Prohibited Exports) Regulations empowered the Minister for Foreign Affairs and Trade, or a person authorised in writing by the Minister, to grant a permission to export goods to Iraq. In practice, the power was invariably exercised by a delegate of the Minister. Table 15.2 in Appendix 15 lists details of all permissions to export to Iraq granted to AWB from late 1999 until early 2003. The permissions granted to Rhine Ruhr and Alkaloids were signed by delegates on 22 January 2002 and 20 June 2002 respectively.[353]
12.70 Both the 1996 and the 2001 versions of DFAT's Exporting to Iraq publication convey the impression that permission to export would be granted as a matter of course once the United Nations had approved payment of a contract under the Programme. The January 2001 version of the document (which also appeared on DFAT's website) made this explicit:
When [the] UN Sanctions committee provides an acknowledgement or 'no objection' approval for the export, and also approves the issue of the letter of credit, the Department of Foreign Affairs and Trade will issue a 'Permission to Export' under Section 13CA of the Customs (Prohibited Exports) Regulations.[354]
12.71 The fact that the granting of permission followed automatically once the United Nations had approved the contract was confirmed by a number of former and current officers of DFAT.
12.72 Ms Drake-Brockman, who, as Assistant Secretary of the Middle East and Africa Branch, was a delegate of the Minister for the purpose of r. 13CA[355], described the procedure in the following terms:
9. When UN approval had been obtained, the next step in the process was a domestic step, namely the issuing of an export permit under the Customs (Prohibited Exports) Regulations 1958. There had to be a specific export permit for each separate shipment of goods within any given contract.
10. Draft export permits were prepared in MAB [the Middle East and Africa Branch] by junior to mid-level staff. The practice I adopted in relation to the signing of the export permits was that I asked the staff member who presented the draft export permit to me for signature whether the shipment had been approved by the UN. If the officer informed me that the shipment had been approved by the UN, I would sign the permit.[356]
12.73 The evidence of other delegates who signed permissions to export was to the same effect.[357] Signing of such permissions came to be regarded as a routine administrative task.[358] A number of officers who acted as Assistant Secretary of the Middle East and Africa Branch for brief periods and signed permissions as delegate in those circumstances recalled little other than that they signed the permissions on the basis of an assurance from a staff member that it was normal procedure and part of an ongoing program.[359]
12.74 As Iraqi Desk Officer during most of the period 2000 to 2002, Mr Cuddihy was responsible for preparing and submitting permissions to export to a number of delegates, including Ms Drake-Brockman, Mr Bowker, Mr Atkin, Ms Owen and Mr Quinn.[360] Mr Cuddihy described the procedure adopted by him in the following terms:
… When a contract was approved by the UN, we would typically get a copy of the United Nations letter of approval by facsimile from the Australian UN mission and the original would follow by diplomatic bag. Where possible, the relevant company would then be provided with a copy of the approval by facsimile. The original would be sent to the company by mail once it arrived in Canberra.
10. Typically, the next part of the process was that the company concerned would request export permission(s) to fill the contract. The export permission document was prepared within the Middle East Section and sent to the delegate for his or her signature. Typically, no submission or memorandum addressed to the delegate accompanied the export permission document. I do, however, recall that Mr George Atkin asked for a minute explaining the export permission document when he was first asked to sign an export permission.[361]
12.75 Permissions to export were applied for and granted to AWB regularly during the currency of the Oil-for-Food Programme, including during the period in which Mr Cuddihy was Iraqi Desk Officer. As a result, the procedure adopted by Mr Cuddihy and the staff who assisted him became a routine clerical task. Mr Cuddihy would first receive from Mr Lister of AWB a facsimile that requested a permission to export and contained some basic contract details. Following is a copy of such a request from Mr Lister in relation to a planned shipment under AWB contract A1111, that being the contract that was the subject of the facsimile and notification form shown earlier in this chapter.[362]
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12.76 On receipt of Mr Lister's request for a permission to export, Mr Cuddihy would first check that the contract referred to (in this case contract A1111) had been approved:
Q: All right. How would you do that?
A: Well, we'd usually retain a copy of the approval. We also used to set up, from memory, I think it was Deb Watson who-that was Jane's [Drake-Brockman] PA at the time-who would do this. We'd have a spreadsheet, one for each contract. Once the contract was approved, we'd set up the spreadsheet with the total tonnage listed there. As each shipment was issued, we'd keep a running total so that we could be sure that we hadn't issued 600,000 tonnes of approval for a 500,000 tonne contract.
Q: Is it fair to say, then, that the process undertaken by you was one driven by information contained in and the fact that you had a UN approval document?
A: Oh, without the approval document, we couldn't-you know, we wouldn't issue an approval-an export permission.
Q: With the approval document, and after having ensured that the tonnage was within the approved tonnage, you would then prepare a permission to export for signature by the delegate; is that correct?
A: Correct. These were essentially a template document. We'd just change the relevant name of the ship, the tonnage, the relevant dates and the name of the delegate. I think several people had delegation or could be acting delegates, so you would change that, print it out and submit it for signature.
Q: You would then take the permission to export document, or template, to the delegate for signature; would that be part of the responsibility?
A: Well, whoever prepared the document. We tried to do these pretty quickly. We were aware that AWB-you know, they might have had a boat sitting at the dock. We didn't want to delay it. So whoever spotted the fax from Rex on the fax machine usually did it pretty promptly.[363]
12.77 The permission to export that was signed by a delegate of the Minister in relation to the shipment referred to in the documents extracted is reproduced below.[364]
12.78 Mr Grenenger's evidence in relation to the preparation and signing of permissions to export was in substance the same as Mr Cuddihy's.[365] Preparation of a permission to export was essentially a clerical task that Mr Grenenger performed on receiving a copy of the UN approval documentation.[366]
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12.79 The terms of r. 13CA(2) of the Customs (Prohibited Exports) Regulations permitted the Minister to grant permission to export if he was satisfied that permitting the exportation would not infringe the international obligations of Australia. Regulation 13CA(4) also provided that the Minister could revoke or modify a permission that had been granted if he was satisfied that permitting or continuing to permit the export of goods in accordance with the permission would infringe Australia's international obligations. It follows that, if DFAT became aware of circumstances that suggested that a specific export or proposed export of goods to Iraq by an Australian company contravened or would contravene the sanctions, the Minister could refuse to grant permission to export the goods or could revoke the permission already granted.
12.80 Apart from r. 13CA, no other domestic legislation or delegated legislation required DFAT to consider or investigate whether the conduct of any Australian company amounted to a breach of the sanctions or whether the company had breached the sanctions in the past. Nor did any legislation confer on DFAT any specific powers to investigate such matters. In these circumstances, if DFAT did become aware of an allegation or information suggesting that an Australian company was contravening or had contravened the sanctions in some way, DFAT had limited options in relation to investigation of the matter. This was a point made by the Hon. Alexander Downer MP, Minister for Foreign Affairs, in the context of questions concerning the extent of the investigations DFAT officers conducted in response to the so-called Canadian complaint. Mr Downer's evidence was as follows:
Q: But it does appear that nobody up to this point in time did any more than accept denials from AWB?
A: Well, with the greatest of respect, the department doesn't have legal authority to-and it is important to make this point: the department doesn't have the legal authority to go into AWB Limited and access all of their files and information. The only scope that would have been available to the department would be to refer the matter to the Federal Police, and to refer the matter to the Federal Police requires substantial evidence.[367]
12.81 A similar point was made by Mr Bowker, again in the context of the Canadian complaint and DFAT's response to it:
Q: Now if, as you suggest may be a possibility, the OIP had no ability to judge the accuracy [of the allegation], that was one thing you could do wasn't it?
A: The operation of the program was based upon the United Nations investigating concerns and it had the inspection arrangements in place to do that. The capacity of the Australian government to investigate such allegations was limited essentially to the advice that would be forthcoming from the Australian company or companies concerned.[368]
12.82 Ms Armstrong, Director of the Iraq Rehabilitation Unit within DFAT's Iraq Task Force from March 2003 to May 2004, also referred, in a different context, to the fact that DFAT was not empowered to investigate alleged breaches of the sanctions. In early 2003 she became aware of allegations by officers in the Coalition Provisional Authority that prices in contracts for the supply of humanitarian goods under the Programme had been inflated. Ms Armstrong conducted a 'layman's'[369] assessment of the prices in some of AWB's contracts, and this indicated to her that AWB's contract prices were within the range of prices in other countries' wheat contracts under the Programme. Ms Armstrong's evidence was:
Q: What would you have done if you had found something on your assessment of the contracts which did raise your suspicions?
A: I possibly would have gone back to AWB to ask for a more detailed exposition of the figures, but I wasn't empowered to conduct any investigation.[370]
12.83 DFAT, and specifically the Australian mission to the United Nations, was the only contact point with the 661 Committee or the Office of the Iraq Programme to raise any concerns in relation to the actions of Australian companies participating in the Programme. As noted, the United Nations did not deal directly with any of the companies participating in the scheme but instead liaised with the mission of the country of the participating company. DFAT's role undoubtedly included liaising with the United Nations and investigating matters raised with it in relation to the conduct of Australian companies participating in the scheme. Its actions in connection with the Canadian complaint demonstrate that DFAT did assume the role of or responsibility for making inquiries about allegations or information conveyed to it by the United Nations.
12.84 Although DFAT did not have any specific investigatory powers conferred on it, one avenue open to it in the event that it received information suggesting a breach or potential breach of sanctions was to request specific information from the relevant exporting company. If the information was not forthcoming, it would be open to the Minister to refuse to grant permission to export or to revoke an existing permission on the basis that, without the information, he could not be satisfied that the exportation would not infringe Australia's international obligations. This was potentially a powerful threat that could have been effectively used by DFAT in order to investigate allegations had its suspicions been aroused that AWB was acting in breach of United Nations sanctions. However, the occasion to consider the exercise of such a power did not arise during the Oil-for-Food Programme. The only occasion when any suggestion of such conduct was made during the Oil-for-Food Programme was the Canadian complaint. AWB unequivocally denied to DFAT that it was acting in breach of sanctions or outside the Programme.
12.85 DFAT played a pivotal role in relation to Australian companies' participation in the Oil-for-Food Programme. It was the principal, if not the sole, point of contact both for companies that participated in the Programme and for the UN 661 Committee and the Office of the Iraq Programme. It provided general and, on request, specific advice to companies in relation to participation in the Programme. Companies, including AWB, that participated in the Programme were able to, and on occasion did, seek DFAT's advice about whether their actions or proposed actions were within the terms of the Programme and whether they did or did not amount to a breach of the sanctions. Such advice was not sought by AWB in relation to the payment of 'inland transportation fees' or 'after-sales-service fees'.
12.86 More significantly, DFAT was directly involved in domestic implementation of the sanctions regime. It was DFAT, through Australia's mission to the United Nations, that submitted to the United Nations applications for Australian companies to participate in the Programme. These applications were certified not by the participating companies but by the mission, as required by the United Nations. Before granting permission to export wheat, the Minister or his delegate, who acted on the advice of DFAT, was required to be satisfied that the export of wheat did not infringe Australia's international obligations. DFAT, and thus the Minister's delegate, was so satisfied if the United Nations approved the contracts submitted to it as being permissible under Resolution 661 and approved for payment under the Oil-for-Food Programme.
Notes
[263] T 4463.19-34; Ex 543, DFT.0013.0225 at 0225_01, para. 9.
[264] Ex 972, AWB.0106.0020-0026.
[265] Ex 972, AWB.0106.0028.
[266] Ex 972, AWB.0106.0020 at 0021, 0024, 0025.
[267] Ex 972, AWB.0106.0020 at 0026.
[268] Ex 49, RRP.0001.0048; Ex 69, AOA.0001.0732.
[269] Ex 49, RRP.0001.0048; Ex 69, AOA.0001.0732.
[270] Ex 49, RRP.0001.0048 at 0053-0054; Ex 69, AOA.0001.0732 at 0735-0736.
[271] Ex 49, RRP.0001.0048 at 0005-58; Ex 69, AOA.0001.0732 at 0737-0738.
[272] Ex 574, DFT.0013.0149, para. 5.
[273] There were instructions for the completion of the notification form on the UN website: see Ex 969, UNO.0013.0002-0006.
[274] Ex 578, DFT.0013.0157_R, para. 6; Ex 823, DFT.0023.0051_R at 0052_R, paras 5-9; Ex 588, DFT.0013.0140_R at 0141_R, para. 8; Ex 596, DFT.0013.0196, para. 3; Ex 597, DFT.0013.0202-0203, paras 5-6; Ex 843, DFT.0013.0479 at 0480, para. 5; Ex 863, DFT.0020.0169_R at 0170_R-0171_R, paras 6, 8.
[275] Ex 578, DFT.0013.0157_R, para. 6.
[276] Ex 574, DFT.0013.0149, para. 5.
[277] Ex 823, DFT.0023.0051_R at 0052_R, para. 8.
[278] Ex 574, DFT.0013.0149, para. 5.
[279] Ex 543, DFT.0013.0622 at 0626, para. 13.
[280] Ex 811, DFT.0020.0548 at 0551, paras 16-17; Ex 823, DFT.0023.0051_R at 0054_R, para. 13; Ex 575, DFT.0013.0616 at 0617, paras 9-15; Ex 578, DFT.0013.0157_R at 0158_R, paras 11-12; Ex 597, DFT.0013.0202 at 0204-0205, paras 16-19; Ex 543, DFT.0013.0225 at 0225_01, paras 11-14; Ex 624, DFT.0013.0602 at 0603, para. 6.
[281] Ex 149, AWB.0013.0127-0128.
[282] Ex 588, DFT.0013.0140_R, para. 3.
[283] Ex 152, AWB.0106.0100.
[284] Ex 152, AWB.0106.0100 at 0102.
[285] Ex 152, AWB.0106.0099.
[286] Ex 152, AWB.0106.0099.
[287] The genesis of Mr Snowball's request for advice was an email he received from Mr Rowland on 23 March 2001: Ex 383, WST.0001.0054 at 0059, para. 25 ; Ex 384, SNO.0001.0068.
[288] Ex 552, DFT.0001.0161.
[289] Ex 543, DFT.0013.0225 at 0225_01, para. 11.
[290] Ex 543, DFT.0013.0225 at 0225_01, para. 11; Ex 552, DFT.0001.0161.
[291] Ex 393, DFT.0001.0458.
[292] Ex 543, DFT.0013.0622 at 0625, para. 10.
[293] T 3078.46 - T 3079.1
[294] T 3102.11-20.
[295] Ex 552, DFT.0001.0161 at 0163.
[296] Ex 391, AWB.5044.0331.
[297] Ex 391, SNO.0001.0115.
[298] Ex 543, DFT.0013.0622 at 0626.
[299] Ex 394, DFT.0001.0193.
[300] Section III, para. 30, of 661 Committee procedures, S/1996/636, 12 August 1996.
[301] Memorandum of Understanding, S/1996/356, para. 22, 20 May 1996; Section III, para. 30, 32 of 661 Committee procedures, S/1996/636, 12 August 1996; see also Ex 554, UNO.0009.0334 at 0339.
[302] Ex 687, WST.0027.0082_R at 0102_R, para. 77 III; Ex 76, WST.0004.0063 at 0082, para. 62.
[303] Ex 729, AWB.0061.0250 (copy of application prepared within the Australian mission); compare with Ex 729, AWB.0061.0254 (copy of application AWB sent to DFAT and the Australian mission). Both forms relate to AWB contract A0430.
[304] Ex 729, AWB.0058.0245, AWB.0058.0247 and AWB.0058.0248, being the application forms for contracts A4653, A4654 and A4655 respectively; See also the evidence of Ms Moules to the effect that she understood that the notification forms were completed either by DFAT in Canberra or by the Australian mission to the UN (T 4494.37 - T 4496.24).
[305] Ex 52, RRP.0005.0570 at 0571, para. 8.
[306] Ex 69, AOA.0001.0444; Ex 66, AOA.0007.0003 at 0015, para. 29.
[307] See, for example, the evidence of Mr Rogers at T 568 - T 569; Evidence of Mr Long at T 1594 - T 1596; Evidence of Mr Stewart at T 4071, T 4075; Evidence of Mr Hockey at T 5852, T 5855-6.
[308] Ex 771, DFT.0028.0001 at 0008; T 4615; Ex 625, DFT.0020.0177, para. 4.
[309] See above.
[310] Ex 625, DFT.0020.0177, para. 4.
[311] Ex 625, DFT.0020.0177, para. 4.
[312] T 5082.8-18.
[313] Ex 911, DFT.0013.0474, para. 4.
[314] Ex 843, DFT.0013.0479, paras 4-7.
[315] Ex 566, DFT.0013.0076 at 0088, para. 34(d).
[316] T 4604.23-41.
[317] T 4605.16-28.
[318] Ex 544, DFT.0013.0509 at 0510.
[319] Ex 535, DFT.0010.0101.
[320] T 4474.3-47. See also T 4469.36 - T 4470.1; Ex 863, DFT.0020.0169_R at 0171_R, paras 9-10.
[321] Ex 543, DFT.0013.0622, para. 2.
[322] Ex 543, DFT.0013.0225 at 0225_01, para. 8. See also Ex 586, DFT.0017.0039.
[323] Ex 543, DFT.0013.0225 at 0226, para. 10.
[324] Ex 850, DFT.0013.0642_R, para. 6; Ex 940, DFT.0020.0002 at 0004, para. 11; Ex 917, DFT.0013.0565_R, para. 3.
[325] Ex 578, DFT.0013.0157_R, para. 7.
[326] T 4820.10-30.
[327] T 4821.3-14.
[328] T 4638.12-41.
[329] T 4641.43-6.
[330] Ex 574, DFT.0013.0149, para. 7.
[331] Ex 574, DFT.0013.0149, para. 7.
[332] T 4710.46 - T 4711.15
[333] T 4714.3-16.
[334] T 4642.10-16.
[335] T 4642.10-16; T 4642.31-8.
[336] T 4643.32 - T 4644.18.
[337] T 4648.30 - T 4649.8.
[338] Ex 729, AWB.0111.0316_R.
[339] Ex 729, AWB.0111.0317_R.
[340] T 4647.29-40.
[341] T 4647.29-40.
[342] T 4648.10-20.
[343] Ex 574, DFT.0013.0149, para. 7; T 4652.9-17.
[344] T 4654.1-5.
[345] T 4651.28 - T 4652.7.
[346] T 4642.40 - T 4643.4; T 4707.14-21; T 4708.8 - T 4709.7; T 4710.16-32.
[347] Ex 596, DFT.0013.0196, para. 2; Ex 597, DFT.0013.0202 at 0203, para. 10; T 4903.31-5.
[348] T 4903.5-12.
[349] Ex 823, DFT.0023.0051_R at 0053_R, para. 10(a).
[350] Ex 823, DFT.0023.0051_R at 0053_R, para. 10(b). See also Ex 937, DFT.0023.0312, para. 7.
[351] T 4765.38-9.
[352] Ex 588, DFT.0013.0140_R at 0141_R, para. 8.
[353] Ex 49, RRP.0001.0126; Ex 69, AOA.0001.0146.
[354] Ex 49, RRP.0001.0048 at 0057; Ex 69, AOA.0001.0732 at 0739.
[355] T 4816.47 - T 4817.5.
[356] Ex 578, DFT.0013.0157_R at 0158_R, para. 9.
[357] Ex 982, DFT.0037.0006 at 0013, paras 33-39; Ex 811, DFT.0020.0548 at 0549, paras 9-12; Ex 566, DFT.0013.0076 at 0088, para. 34(d); Ex 890, DFT.0023.0074, paras 6-10.
[358] Ex 982, DFT.0037.0006 at 0008 and 0014, paras 10 and 38.
[359] Ex 983, DFT.0037.0021_R at 0024_R, paras 19-22; Ex 980, DFT.0037.0029 at 0031, para. 12-15; Ex 987, DFT.0037.0047_R at 0049_R, paras 15-16; Ex 818, DFT.0013.0646, para. 3(a) and 6.
[360] Ex 575, DFT.0013.0616 at 0618, para. 17.
[361] Ex 574, DFT.0013.0149 at 0150, paras 9-10.
[362] Ex 729, AWB.0062.0173_R.
[363] T 4676.10-45.
[364] Ex 729, AWB.0062.0171_R.
[365] The only difference of substance between Mr Grenenger's account of the procedure and Mr Cuddihy's was the sequence of the documentation. Mr Cuddihy's account was consistent with the dates of the relevant documents and the evidence of AWB witnesses in relation to the sequence.
[366] T 4903.47 - T 4906.27.
[367] T 6541.40 - 6542.2.
[368] T 4623.13-21; See also, in a different context, the evidence of Ms Armstrong at T 4940.3-8.
[369] T 4939.27; T 5007.27-8.
[370] T 4940.3-8; See also T 4955.2-4.
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