2 Australian enforcement of United Nations resolutions

2.1 The United Nations was established in 1945 by the Charter of the United Nations. A Security Council was established under the charter and given certain powers under Chapter VII. Those powers include the power to determine the existence of threats to international peace and security (Article 39), the power to require member states to apply certain non-military measures to give effect to the Security Council's decisions (Articles 40 and 41) and the power to enforce Security Council decisions by the use of military force (Article 42).[86]

2.2 By Article 25 of the charter all member states of the United Nations agreed 'to accept and carry out the decisions of the Security Council in accordance with the present Charter'.

2.3 The charter was signed by Australia in 1945 and it entered into force for Australia on 1 November 1945. Section 5 (formerly s. 3) of the Charter of the United Nations Act 1945 provides that the Charter of the United Nations 'is approved'. That provision does not constitute domestic implementation of the charter.

The status of United Nations resolutions under Australian law

2.4 In State of Victoria v Commonwealth of Australia (1996) 187 CLR 416 five Justices of the High Court said, at 481:

… as matters stand in Australia, and as they stood in 1900, the conduct of external affairs by the Executive may produce agreements which the Executive wishes to translate into the domestic or municipal legal order. To do so, it must procure the passage of legislation implementing those agreements if it wishes to create individual rights and obligations or change existing rights and obligations under that legal order.

2.5 That remains the law.[87] It follows that, unless implemented by Australian legislation, UN resolutions have no direct effect under Australian domestic law. Unless so implemented, such resolutions are incapable of creating a new Commonwealth criminal offence.

2.6 Resolutions 661 and 986 were not, by legislation, incorporated in Australian domestic law. It follows that, although under Article 25 of the Charter of the United Nations Australia was obliged to adhere to and implement Resolutions 661 and 986, those resolutions imposed no obligations on companies or persons within Australia. Breach of, or acts inconsistent with, such UN resolutions by companies or persons within Australia does not breach Australian domestic law or have any criminal law consequences under Commonwealth, State or Territory law.

2.7 That does not mean however, as AWB submitted[88], that as part of my report I should not make findings regarding whether AWB's payments to Iraq via Alia were consistent or inconsistent with the United Nations resolutions imposing sanctions. Such findings are essential background. If such payments were consistent with United Nations resolutions and sanctions there could not possibly be a breach of Australian laws seeking to enforce those resolutions and sanctions.

Implementation of United Nations resolutions in Australian law

2.8 Implementation within Australia of the Security Council resolutions restricting dealings with Iraq-in particular, Resolution 661-occurred by amendment in 1990 to the following Regulations:

2.9 Relevant to this Inquiry are r. 13CA of the Customs (Prohibited Exports) Regulations and the exemptions granted under the Banking (Foreign Exchange) Regulations.

2.10 Regulation 13CA of the Customs (Prohibited Exports) Regulations provided as at 31 July 1991 (and was not materially altered thereafter during the period of the Oil-for-Food Programme) as follows:

(1) Except in accordance with a permission granted under subregulation (2), a person must not:

(a) export goods if the immediate or final destination of the goods is, or is intended to be, the Republic of Iraq; or

(b) export goods that originated (wholly or in part) in the Republic of Iraq.

(2) The Minister of State for Foreign Affairs and Trade (in this regulation called 'the Minister') may grant a permission for the exportation of specified goods, or goods of a specified kind, where the exportation without the permission would contravene subregulation (1), if the Minister is satisfied that permitting the exportation will not infringe the international obligations of Australia.

(3) A permission granted under subregulation (2) may specify, in relation to the exportation of goods that it permits:

(a) conditions or requirements, including times for compliance, to which the exportation is subject; and

(b) the quantity of goods that may be exported; and

(c) the circumstances in which goods may be exported.

(4) The Minister may revoke or modify a permission granted under subregulation (2) if the Minister is satisfied on reasonable grounds that:

(a) a condition or requirement of the permission has not been complied with; or

(b) permitting, or continuing to permit, the exportation of goods in accordance with the permission would infringe the international obligations of Australia

(5) The powers of the Minister under this regulation may be exercised by a person authorised in writing by the Minister to exercise those powers.

2.11 The powers of the Minister conferred by the Regulations were exercised by authorised delegates, as contemplated by r. 13CA(5).

The Customs (Prohibited Exports) Regulations 1958

Interpretation of the application of r. 13CA

2.12 A submission from the Honourable Kevin Rudd MP, Shadow Minister for Foreign Affairs [89] , argued that r. 13CA of the Customs (Prohibited Exports) Regulations imposed on the Minister (or his authorised delegate) an obligation not to approve the export of wheat unless, on the material available to the decision maker, he was satisfied that granting such export permission would not breach Australia's obligations under the UN sanctions imposed by Resolution 661 and Article 25 of the UN Charter. Whilst the export of wheat, being foodstuff, might not breach such sanctions, payment of monies directly or indirectly to the Iraqi Government would. If the prohibited payment of money was associated with the permitted export of wheat, then the export of wheat was required to be prohibited in order to prevent the payment of money prohibited by Resolution 661.

2.13 Further, so the argument ran, because of the obligation on the decision maker to be affirmatively satisfied on the material before him that the grant of permission to export did not infringe Australia's international obligations, the decision maker could not rely on a determination by the UN approving authority that the submitted contract was approved for payment from the escrow account, particularly where such approval was granted administratively in the absence of objection from another state.

2.14 The submission did not deny the relevance of the UN decision regarding a submitted contract but contended that, alone, such UN approval would not be sufficient to 'satisfy' the Minister or his delegate, as required by r. 13CA(2).

2.15 This argument has some respectability.

2.16 There is, however, an alternative construction of r. 13CA that is, at the least, as respectable.

2.17 Regulation 13CA(1) prohibited exports to Iraq. This prohibition is qualified by r. 13CA(2), which permits the Minister or his delegate to allow exports of goods of specified kinds if the Minister or his delegate is satisfied that permitting the export will not infringe Australia's international obligations.

2.18 Relevantly, Australia's international obligations flow from Article 25 of the UN Charter, which requires Australia, as a signatory to the charter, 'to accept and carry out the decisions of the Security Council …'

2.19 Resolution 661 prohibited exports of goods to Iraq but permitted the export of foodstuffs to Iraq 'in humanitarian circumstances'. Resolution 986, which established the Oil-for-Food Programme, accepted that by 1995 humanitarian needs were such that Iraq should be permitted to sell oil and use the proceeds to import foodstuffs. The resolution established a mechanism for approving and paying for contracts for the supply, relevantly, of foodstuffs. If the United Nations approved an export contract, the exporter was:

eligible for payment from the Iraq account as the financing arrangements specified in your communication appear to be consistent with the procedures adopted by the Security Council Committee established by Resolution 661 (1990) concerning the situation between Iraq and Kuwait pursuant to Security Council Resolution 986 (1995).[90]

The United Nations determined eligibility for payment after its experts had examined export contracts 'for price and value'.

2.20 Since the only possible source of breach of Australia's international obligations was breach of the UN resolutions restricting trade with Iraq, UN acceptance that a contract, having been examined by UN experts, was consistent with, and not contrary to, the resolutions that permitted limited trade with Iraq provided a sound basis for the Minister or his delegate to grant approval for export.

2.21 Further, the application being considered by the Minister or his delegate did not concern paying money to Iraq directly or indirectly; it concerned the export of foodstuffs.

2.22 For the purposes of this Inquiry, it is unnecessary for me to express a concluded view on which is the correct interpretation of r. 13CA. I do not do so.

Discussion: the Customs (Prohibited Exports) Regulations

2.23 By r. 13CA of the Customs (Prohibited Exports) Regulations 1958, exporting goods to Iraq was prohibited unless the Minister for Foreign Affairs or his delegate had granted a permission to export. Permissions to export were invariably issued by a delegate of the Minister in reliance on an approval to ship goods to Iraq issued by the United Nations. No separate certification was required to be made by suppliers under the Oil-for-Food Programme to the effect that the contract, approved by the United Nations, fully and accurately set out all of the terms of the transaction between the supplier and Iraq. Nor did a legal consequence flow as a result of a permission to export being granted on a false or misleading basis.

2.24 I recommend that the Customs (Prohibited Exports) Regulations 1958 be amended to incorporate a prescribed form that those seeking a permission to export would be required to complete. I further recommend that the Regulations be amended so as to:

2.25 The prescribed form should be required to be signed by a senior executive of the exporting company, who should also be personally liable for knowingly or recklessly signing a form that is false or misleading in a material particular or that knowingly or recklessly omits a material particular. The penalty for so doing should be imprisonment for 10 years.

2.26 In the United Kingdom, article 7 of the Iraq (United Nations Sanctions) Order 2000 provided, 'Any person who, for the purposes of obtaining a licence under article 5, knowingly or recklessly makes any statement or furnishes any document or information which is false in a material particular is guilty of an offence.'

2.27 In Re Morris; Ex parte Adams and Others (1980) 48 FLR 341 the concept of omitting 'a material particular' was discussed. Sweeney J considered the meaning of the phrase 'material particular' and determined that 'a particular which would be relevant to, and might be likely to affect the making of [the relevant] decision, is a material particular'.[91] The question of materiality is determined by reference to whether the particular was material at the time the statement was made.[92]

2.28 In Minister for Immigration, Local Government and Ethnic Affairs v Dela Cruz (1992) 34 FCR 348 the court considered the meaning of the expression 'false in a material particular'. It stated:

The expression 'false in a material particular' appears in many statutes, both in this country and overseas. It has been discussed in R v Lord Kylsant [1932] 1 KB 442; Murphy v Griffiths [1967] 1 WLR 333; [1967] 1 All ER 424; R v Mallett [1978] 1 WLR 820; R v M [1980] 2 NSWLR 195; R v Brott [1988] VR 1. In the last mentioned case, Brooking J pointed out that the concept is well understood. As his Honour said (at 11): 'an assertion that a document is false is to be taken as an assertion that it is false in a material particular.' The term 'material' requires no more and no less than that; the false particular must be of moment or of significance, not merely trivial or inconsequential.

Section 20(1) does not apply to statements that are merely false or misleading; there is the added requirement that the statement must be false or misleading in a material particular. In the context of s 20(1), a statement will be false or misleading in a material particular if it is relevant to the purpose for which it is made: see Jovcevski v Minister for Immigration, Local Government and Ethnic Affairs (unreported, Federal Court, Lockhart J, 12 October 1989). A statement will be relevant to that purpose if it may-not only if it must or if it will-be taken into account in making a decision under the Act as to the grant of the visa or entry permit in respect of which the statement is made.[93]

2.29 AWB's failure to disclose the true arrangements with the Iraqi Grain Board-which required AWB to make a payment to an Iraqi entity-would certainly have constituted the omission of a material particular. That is so particularly in view of the Minister's obligation under the Customs (Prohibited Exports) Regulations 1958 to satisfy himself that the granting of the permission to export would not contravene Australia's international obligations.

The same can be said about Rhine Ruhr's payment to Iraq that formed part of its contract arrangements. The failure to inform DFAT of the obligation to make that payment, whether it was considered by Rhine Ruhr to be an 'Iraqi Engineering Services Fee' or an Iraqi Government surcharge or fee, would have constituted a material omission. As discussed later in the report, the absence of any requirement on a senior executive to certify that the submitted contract fully and accurately set out all terms of the transaction meant that the senior officers of Rhine Ruhr who knew about the payment that Rhine Ruhr was required to make to Iraq as part of its sale, never turned their mind to whether this payment should have been disclosed to DFAT even though it was not referred to in the contract.

2.30 Under the recommended regime, if a permission to export were granted on a materially false or misleading basis, it would be rendered invalid. As a result, any goods exported under such a permission would constitute a 'prohibited export'. This would enliven s. 233(1)(c) of the Customs Act 1901, which prohibits the exportation of prohibited exports. Any such exportation would constitute an offence pursuant to s. 233(1AA) of the Customs Act. The penalty provided by s. 233AB is the greater of three times the value of the goods exported or 1,000 penalty units.

The Banking (Foreign Exchange) Regulations 1959

2.31 The Banking (Foreign Exchange) Regulations 1959 regulate some aspects of currency movements by Australian companies and nationals or involving Australian currency. The Regulations having some possible relevance are rr. 5, 6 and 8(1)(a).

Regulation 5 , as in force until 10 March 2002

2.32 To the extent that it is relevant, r. 5, as in force until 10 March 2002, provided:

(1) Subject to subregulation (3), except with the authority of the Bank:

(a) a person shall not, either on his own behalf or on behalf of another person, buy, borrow, sell, lend or exchange in Australia, or otherwise deal in Australia with, foreign currency; and

(b) a resident, or a person acting on behalf of a resident, shall not buy, borrow, sell, lend or exchange outside Australia, or otherwise deal outside Australia with, foreign currency.

(2) Subject to subregulation (3), except with the authority of the Bank, a person shall not be a party to a transaction that has the effect of or involves a purchase, borrowing, sale, loan or exchange of, or that otherwise relates to, foreign currency, being a transaction that takes place in whole or in part in Australia or to which a resident is a party.

(3) The Bank may authorize an agent of the Bank:

(a) to enter into any transaction prohibited by subregulation (1) of this regulation, or into any transaction included in a class of such transactions and it shall be lawful for the transaction to be entered into accordingly; and

(b) to be a party to any transaction prohibited by subregulation (2) of this regulation, or to any transaction included in a class of such transactions, and it shall be lawful for the agent of the Bank to be a party to the transaction accordingly.

2.33 On 21 June 1984 the Reserve Bank, pursuant to r. 38 of the Banking (Foreign Exchange) Regulations 1959, granted an exemption from the application of subregulation 5(1) in respect of:

(a) any person who, either on his own behalf or on behalf of another person, borrows, lends, or exchanges foreign currency in Australia or who otherwise deals (except by way of buying or selling) with foreign currency in Australia;

(b) any resident, or any person acting on behalf of a resident, who borrow, lends or exchanges foreign currency outside Australia or who otherwise deals (except by way of buying or selling) with foreign currency outside Australia;

(c) any person who, either on his own behalf or on behalf of another person, buys or sells foreign currency in the form of coin in Australia; and

(d) any resident, or any person acting on behalf of a resident, who buys or sells foreign currency in the form of coin outside of Australia.[94]

This exemption came into operation on 25 June 1984.

2.34 The exemption was not revoked or varied until 5 April 2002. It follows that, between 25 June 1984 and 10 March 2002, persons were entitled to 'borrow, lend, exchange or otherwise deal' with foreign currency in or outside Australia, except for a dealing that involved 'buying or selling' foreign currency.

2.35 This exemption may be important because in many instances AWB 'dealt with' foreign currency by using foreign currency funds held overseas to pay fees to Alia. There was no 'buying or selling' of foreign currency in such transactions.

2.36 A separate suite of regulations regulated 'buying and selling' of foreign currency. Relevantly, on 29 June 1990 the Reserve Bank[95]:

… in pursuance of Regulation 38A of the Banking (Foreign Exchange) Regulations hereby grants a general authority to:

1. persons in Australia to sell foreign currency to an authorised dealer in Australia;

2. residents of Australia to sell foreign currency outside Australia;

3. persons in Australia to buy foreign currency from an authorised dealer in Australia;

4. residents of Australia to buy foreign currency outside Australia;

2.37 The authority, dated 29 June 1990, came into operation on 1 July 1990.[96] On 9 August 1990 the Reserve Bank varied the authority so that it would not apply to transactions in connection with the Governments of Kuwait or Iraq, their agencies or nationals; the variation came into operation on the same date.[97] On 5 April 1991 that variation was revoked and replaced with another variation, which applied exclusively to dealings with Iraq, rather than Iraq and Kuwait[98]; this variation came into operation on 5 April 1991.[99]

2.38 Insofar as it is relevant, the variation stated:

Reserve Bank of Australia pursuant to Regulation 39 of the Banking (Foreign Exchange) Regulations hereby varies the general authority to persons and residents of Australia dated 29 June 1990 so that the general authority does not authorise:

1. persons in Australia to buy foreign currency from or sell foreign currency to an authorised dealer in Australia; or

2. residents of Australia to buy or sell foreign currency outside Australia

where the buying or the selling of foreign currency relates to transactions in property, securities or funds in Australia belonging either directly or indirectly to, or other payments to, the Government of Iraq, its agencies or its nationals.

All such transactions are prohibited without the specific approval of the Reserve Bank of Australia.[100]

Thus, up to 10 March 2002, the exemption to r. 5 did not cover the buying and selling of foreign currency (either in Australia or by residents of Australia outside Australia) where the buying or selling related to payments to the Government of Iraq, its agencies or its nationals. The buying and selling of foreign currency in these circumstances in the absence of specific approval was accordingly prohibited by the Regulations.

Regulation 5, as in force from 11 March 2002 to the present

2.39 Regulation 5 was substituted by the Banking (Foreign Exchange) Regulations 2002. As the prohibition in r. 5(1) was repealed on 10 March 2002, the exemption of 21 June 1984 from that prohibition had no prohibition or regulation upon which to operate. The exemption of 21 June 1984, which gave exemption from a prohibition, could not operate on the new r. 5 operative from 11 March 2002 because the new r. 5 did not contain a prohibition. In contrast, it conferred on the Reserve Bank a power to direct that certain transactions not occur.

2.40 The new r. 5 provides:

(1) The Bank may, in writing, direct a person:

(a) not to buy, borrow, sell, lend or exchange foreign currency in Australia (on the person's own behalf or on behalf of another person); or

(b) not to deal with foreign currency in any other way in Australia.

(2) The Bank may, in writing, direct a resident, or a person acting on behalf of a resident:

(a) not to buy, borrow, sell, lend or exchange foreign currency outside Australia; or

(b) not to deal with foreign currency in any other way outside Australia.

(3) The Bank may, in writing, direct a person not to be a party to a transaction if:

(a) either:

(i) the transaction takes place in whole or in part in Australia; or

(ii) a resident is a party to the transaction; and

(b) the transaction:

(i) has the effect of, or involves, a purchase, borrowing, sale, loan or exchange of foreign currency; or

(ii) otherwise relates to foreign currency.

2.41 On 5 April 2002 the Reserve Bank issued a direction that a person or resident must not buy, borrow, sell, lend or exchange foreign currency where the transaction relates to the Government of Iraq, its agencies or its nationals-the 'r. 5 direction'.[101] The direction came into operation on the same date.[102] The exemption of 21 June 1984 and the variation to the general authority of 5 April 1991 were also revoked on 5 April 2002.

2.42 Insofar as it is relevant, the r. 5 direction stated:

The Reserve Bank of Australia pursuant to Regulation 5 of the Banking (Foreign Exchange) Regulations hereby directs that:

1. a person must not, either on the person's own behalf or on behalf of another person, buy, borrow, sell, lend or exchange foreign currency in Australia, or otherwise deal with foreign currency in any other way in Australia;

2. a resident, or a person acting on behalf of a resident, must not buy, borrow, sell, lend or exchange foreign currency in Australia, or otherwise deal with foreign currency in any other way outside Australia;

3. a person must not be a party to a transaction, being a transaction that takes place in whole or in part in Australia or to which a resident is a party, that has the effect of, or involves, a purchase, borrowing, sale, loan or exchange of foreign currency, or otherwise relates to foreign currency

where the transaction relates to property, securities or funds in Australia belonging either directly or indirectly to, or other payments to, the Government of Iraq, its agencies or its nationals.

All such transactions are prohibited without specific prior approval of the Reserve Bank of Australia.

2.43 There is, however, no regulation that makes breach of a direction given under r. 5(1) since 5 April 2002 an offence. Regulation 42 provides, 'A person shall not contravene or attempt to contravene, or fail to comply with, any of the provisions of these Regulations'. A penalty is provided.

2.44 Regulation 42 was not amended in April 2002 to provide that failure to comply with a direction given pursuant to r. 5 constitutes a breach of the Regulations and thus attracts a penalty. A direction is an instrument issued or made pursuant to the power in the regulation: failure to comply with a direction made pursuant to a power in the regulation is not a 'contravention of' or non-compliance with the provisions of the regulation.[103]

2.45 There are thus two areas of difficulty in the implementation of sanctions through the Banking (Foreign Exchange) Regulations:

2.46 On 28 May 2003 the Reserve Bank revoked the r. 5 direction.[104]

Regulation 6

2.47 At the relevant time r. 6 was, and remains, in the following terms:

(1) A person shall not, except with the authority of the Bank, take or send out of Australia any Australian currency or foreign currency, other than foreign currency obtained under the last preceding regulation.

(2) Nothing in this regulation shall apply to a money order issued in Australia and payable outside Australia.

2.48 On 29 June 1990 the Reserve Bank issued an exemption from the application of r. 6(1)-the 'r. 6(1) exemption'.[105] The exemption came into operation on 1 July 1990 and '… exempts from the application of subregulation 6(1) of the Regulations the taking or sending out of Australia by a person of any Australian currency'.

2.49 On 9 August 1990 the r. 6(1) exemption was varied so that it would not apply to dealings relating to the Governments of Kuwait or Iraq, their agencies or nationals[106]; the variation came into operation on the same date. On 5 April 1991 the variation was revoked and replaced by another variation, which applied exclusively to dealings with Iraq, rather than Iraq and Kuwait[107]; this variation came into operation on 5 April 1991.[108]

2.50 On 28 May 2003 the Reserve Bank revoked its variation of the r. 6(1) exemption[109]; the revocation came into operation on 29 May 2003.[110]

Regulation 8(1)(a)

2.51 Regulation 8(1)(a) provides:

(1) Subject to this regulation, a person shall not, except with the authority of the Bank:

(a) make any payment in Australia to, by the order of, or on behalf of, a person who is not a resident or place any sum in Australia to the credit of any such person;

2.52 On 29 June 1990 the Reserve Bank issued an exemption from the application of this regulation-the 'r. 8(1)(a) exemption'.[111] This provided that the Reserve Bank '… exempts from the application of subregulation 8(1)(a) of the Regulations a person who makes any payment in Australia to, by the order of, or on behalf of a person who is not a resident or places any sum in Australia to the credit of any such person'.

2.53 The r. 8(1)(a) exemption came into operation on 1 July 1990.[112] On 9 August 1990 the exemption was varied so that it did not apply to transactions in connection with the Governments of Kuwait or Iraq, their agencies or nationals[113]; the variation came into operation on the same date.[114] On 5 April 1991 the variation was revoked and replaced with another variation, which applied exclusively to dealings with Iraq, rather than Iraq and Kuwait[115]; this variation came into operation on 5 April 1991.[116]

2.54 On 28 May 2003 the Reserve Bank revoked its variation of the r. 8(1)(a) exemption[117]; the revocation came into operation on 29 May 2003.[118]

Penalty for contravention of the Banking (Foreign Exchange) Regulations

2.55 As noted, Regulation 42(1) provides, 'A person shall not contravene or attempt to contravene, or fail to comply with, any of the provisions of these Regulations'.

2.56 The penalty for contravention of r. 42 depends on whether the offence is prosecuted summarily or on indictment. If prosecuted summarily, the penalty is 'a fine not exceeding One thousand dollars or imprisonment for a term not exceeding six months' (r. 42(1)(a)). If prosecuted on indictment, the penalty is 'a fine not exceeding One hundred thousand dollars or imprisonment for a period not exceeding five years' (r. 42(1)(b)).

2.57 Furthermore, r. 42(2) provides, 'Subject to subregulations (3) and (4) where a person has been convicted by a court of an offence against these Regulations, the court may, if it thinks fit, order the forfeiture of all or any of the articles in respect of which the offence was committed'.

2.58 The articles in respect of which the offence was committed 'means the goods, Australian currency, foreign currency or securities in respect of which the offence was committed' (r. 42(6)).

Discussion: the Banking (Foreign Exchange) Regulations

2.59 It is of the utmost importance to Australia as a member of the international community that it implement effectively sanctions imposed by the United Nations.

2.60 The object of the Reserve Bank authority dated 5 April 1991 and of the direction dated 5 April 2002 was to prevent the transfer of funds to Iraq and to make it an offence for an Australian company or person to transfer funds to Iraq, directly or indirectly, howsoever or wheresoever such funds were acquired. The authority and direction did not achieve that objective, principally because of regulatory complexity and drafting deficiencies.

2.61 It is likely that sanctions restricting currency transfers to states will be imposed by the United Nations in the future, obliging Australia to enact provisions, by statute or regulation, preventing Australian companies or persons transferring funds contrary to such sanctions. A simple model to allow rapid implementation of prohibitions is required.

2.62 I gave consideration to the models for implementing financial sanctions adopted by the United States, the United Kingdom and Canada.

2.63 Section 575.210 of the US Code of Federal Regulations provided, 'Except as otherwise authorized, no U.S. person may commit or transfer, directly or indirectly, funds or other financial or economic resources to the Government of Iraq or any person in Iraq'.[119]

2.64 Section 3 of the UK Iraq (United Nations Sanctions) Order 2000 provided:

Making funds available to Iraq

3. Any person who, except under the authority of a licence granted by the Treasury under article 5-

(a) makes any funds available to the government of the Republic of Iraq or any person who is resident in the Republic of Iraq, or

(b) otherwise remits or removes any funds from the United Kingdom to a destination in the Republic of Iraq,

is guilty of an offence.[120]

2.65 Regulation 6 of Canada's United Nations Iraq Regulations provided:

(1) No person in Canada and no Canadian outside Canada shall knowingly send, pay, transfer or remit, directly or indirectly, any money, cheques, bank deposits or other financial resources, or cause any money, cheques, bank deposits or other financial resources to be sent, paid, transferred or remitted, directly or indirectly, to any person in Iraq or to any other person on the direction or order of any person in Iraq.

(2) No person in Canada and no Canadian outside Canada shall knowingly send, transfer, remit or assign any money, cheques, bank deposits or other financial resources held by, on behalf of or on account of the Government of Iraq or any agencies of or bodies controlled by Iraq.

(3) No person in Canada and no Canadian outside Canada shall knowingly make available to or permit the use by the Government of Iraq or any commercial, industrial or public utility undertaking in Iraq of any funds, monetary resources, credit, extension of credit or deposit facilities.

(4) No person shall knowingly transfer, sell, assign, dispose of, export, endorse or guarantee the signature on any security held by, on behalf of or in the name of the Government of Iraq or any agencies of or bodies controlled by Iraq.

(5) No person shall knowingly transfer, pay for, export, dispose of or otherwise deal with any property or any interest in property held by the Government of Iraq or any agencies of or bodies controlled by Iraq.

I recommend the simple US or UK models. The difference between them is only one of drafting.

2.66 Since 1993, when Part 3 of the Charter of the United Nations Act 1945 was introduced, there has existed a standing power for the Governor-General to make Regulations to give effect to decisions of the Security Council made under Chapter VII of the charter, which Article 25 of the charter requires Australia to carry out. That power was not used to give effect to the Oil-for-Food Programme established by Resolution 986, which was an exercise of the Chapter VII power. No doubt that was because there was already in place r. 13CA of the Customs (Prohibited Exports) Regulations, as well as the Banking (Foreign Exchange) Regulations.

2.67 The concept of prohibiting conduct by Regulations under a standing statute has the attraction of simplicity. However, the potential damage to Australia's trading reputation and international standing is so great if Australian companies or residents act in breach of sanctions that breaches should no longer be regarded as mere breach of Regulations attracting minimal penalties-currently 50 penalty units (A$5,500) under s. 12(1) of the Charter of United Nations Act 1945.

2.68 Conduct in breach of sanctions that Australia has agreed to uphold should be regarded as serious criminal conduct and should attract severe penalties of imprisonment in the case of individuals and deterrent fines in the case of companies. It must be recognised that the harm caused by such conduct extends far beyond that to the company or individuals concerned and affects the national interest. The prohibitions against offending conduct should be found in the Commonwealth Criminal Code. The proscribed conduct should include both transfer of funds and export of goods to the subject state or its residents. The statute should create an offence of strict liability. Penalties for breach should include imprisonment for up to 10 years and monetary penalties equivalent to three times the value of benefits transferred or goods exported, similar to the Customs Act model.

Power to compel production of documents and information

2.69 Under the domestic regime implemented to give effect to Resolution 661 there was no mechanism for investigating suspected breaches or evasion of sanctions. The Minister for Foreign Affairs and several officers of his department correctly pointed out that the Department of Foreign Affairs and Trade had no powers to investigate suspected breaches of sanctions or to require production of relevant documents. Such a power should be conferred on an appropriate body-be it the Minister, the Secretary of his department, the Australian Customs Service, the Australian Federal Police or another entity.

2.70 In the United Kingdom, under the Iraq and Kuwait (United Nations Sanctions) Order 1990 provision was made for obtaining evidence and information for the purpose of securing compliance with, or detecting evasion of, the Order.[121] Article 7 of the Order provided:

The provisions of the Schedule to this Order shall have effect in order to facilitate the obtaining, by or on behalf of the Secretary of State or the Commissioners of Customs and Excise, of evidence and information for the purpose of securing compliance with or detecting evasion of this Order and in order to facilitate the obtaining, by or on behalf of the Secretary of State or the Commissioners of Customs and Excise, of evidence of the commission of an offence against this Order or with respect to any of the matters regulated by this Order, of an offence relating to customs.[122]

2.71 The Schedule to the Order provided:

1. -(1) Without prejudice to any other provision of this Order, or any provision of any other law, the Secretary of State (or any person authorised by him for that purpose either generally or in a particular case) or the Commissioners of Customs and Excise may request any person in or resident in the United Kingdom to furnish to him or them (or to that authorised person) any information in his possession or control, or to produce to him or them (or to that authorised person) any document in his possession or control, which he or they (or that authorised person) may require for the purpose of securing compliance with or detecting evasion of this Order; and any person to whom such a request is made shall comply with it within such time and in such manner as may be specified in the request.

…

2. -(1) If any justice of the peace is satisfied by information on oath given by a person authorised by the Secretary of State or the Commissioners of Customs and Excise to act for the purposes of this paragraph either generally or in a particular case-

(a) that there is reasonable ground for suspecting that an offence against this Order or, with respect to any of the matters regulated by this Order, an offence against any enactment relating to customs has been or is being committed and that evidence of the commission of the offence is to be found on any premises specified in the information, or in any vehicle, vessel or aircraft so specified; or

(b) that any documents which ought to have been produced under paragraph 1 of this Schedule and have not been produced are to be found on any such premises or in any such vehicle, vessel or aircraft,

he may grant a search warrant authorising any constable, together with any other persons named in the warrant and any other constables, to enter the premises specified in the information or, as the case may be, any premises upon which the vehicle, vessel or aircraft so specified may be, at any time within one month from the date of the warrant and to search the premises, or, as the case may be, the vehicle, vessel or aircraft.

(2) A person authorised by any such warrant as aforesaid to search any premises or any vehicle, vessel or aircraft may search every person who is found in, or whom he has reasonable ground to believe to have recently left or to be about to enter, those premises or that vehicle, vessel or aircraft and may seize any document or article found on the premises or in the vehicle, vessel or aircraft or on such person which he has reasonable ground to believe to be evidence of the commission of any such offence as aforesaid or any documents which he has reasonable ground to believe ought to have been produced under paragraph 1 of this Schedule or to take in relation to any such article or document any other steps which may appear necessary for preserving it and preventing interference with it-

Provided that no female shall, in pursuance of any warrant issued under this paragraph, be searched except by a female.

(3) Where, by virtue of this paragraph, a person is empowered to enter any premises, vehicle, vessel or aircraft he may use such force as is reasonably necessary for that purpose.

(4) Any documents or articles of which possession is taken under this paragraph may be retained for a period of three months or, if within that period there are commenced any proceedings for such an offence as aforesaid to which they are relevant, until the conclusion of those proceedings.

(5) In the application of this paragraph to Scotland any reference to a justice of the peace includes a reference to the sheriff.

2.72 Paragraph 4 of the Schedule to the Order provided that the information or documents produced or seized could not be disclosed except:

2.73 By paragraph 5 of the Schedule to the Order a person was guilty of an offence against the Order if they:

or

2.74 By Article 8 of the Order, a person guilty of an offence against the Order was liable to:

or

2.75 It is noteworthy that this Schedule encompassed two mechanisms by which information or documents could be obtained for the purpose of securing compliance with the Order or detecting evasion of the Order. The first mechanism, set out in paragraph 1 of the Schedule, was essentially a power to compel the production of documents. The only condition precedent to the exercise of the power was that the request be for information or documents that the person authorised to make the request required for the 'purpose of securing compliance with or detecting evasion of [the] Order'.[123] Failure to comply with a request to produce certain information or documents constituted an offence punishable by imprisonment or fine, or both.

2.76 The second mechanism provided for a justice of the peace to issue a search warrant if they were satisfied by information on oath that:

or

2.77 In contrast with the first mechanism, the second mechanism required that a higher evidentiary threshold be satisfied before the power to issue a search warrant could be exercised. On the first limb on which a search warrant could be issued, the justice of the peace needed to be satisfied that there were reasonable grounds for suspecting an offence against the Order. On the second limb, a justice of the peace needed to be satisfied that a request had already been made under paragraph 1 of the Schedule for particular documents or information, that the request was sufficiently broad to capture documents the subject of the proposed search warrant, that the documents had not been produced in accordance with a request made under paragraph 1, and that the documents were to be found on the premises specified in the proposed search warrant.

2.78 Although there did exist at the time sanctions were in force against Iraq a power under the Commonwealth Crimes Act 1914 to apply for a search warrant, there did not exist a provision comparable to paragraph 1 of the Schedule to the UK Iraq and Kuwait (United Nations Sanctions) Order 1990. I recommend that a power similar to that in paragraph 1 of the Schedule be incorporated in the domestic regime intended to give effect to United Nations sanctions.

Notes