Cowed by American regulations, local courts have allowed arms manufacturers significant exemptions from human rights law. By Debra Jopson.

US arms suppliers overrule courts in Australia with ITAR

Late last year a United States law framed in the name of world peace quietly reached its long arm into a small Melbourne tribunal, persuading it to let a large armaments manufacturer override Australian human rights legislation.

In a decision that went largely unremarked upon, the Victorian Civil and Administrative Tribunal (VCAT) agreed to let Thales Australia Ltd and its subsidiary ADI Munitions discriminate racially against their employees, job applicants and contract workers.

The companies won a five-year exemption from six sections of the Equal Opportunity Act so they could comply with stringent US export laws that describe who can and who cannot have access to American military technology and know-how.

Simon Rice, an Australian National University law professor, could only sigh. He is an almost lone voice against the Americans’ capacity for such strongarm tactics in Australian courts.

“It’s legal imperialism,” says Rice, who chairs the ACT Law Reform Advisory Council. “It’s the US saying to everybody in the world: You will deal with us on the terms we will dictate to you.”

There have been scores of such decisions in small courts across the nation since at least 2003, when the Queensland Anti-Discrimination Tribunal granted Boeing Australia Holdings some of the first such exemptions.

Because the Australian government relies heavily on US military technology, the big defence manufacturers operating here have, for more than a decade, made a practice of applying for exemptions from our equal opportunity laws so they can stay sweet with the US State Department. All applications, except one in Queensland, have been granted, allowing the companies to bar access to certain employees and contractors to positions where they would have access to sensitive US military goods and services.

This means the workforce is segregated, so that the “wrong” people are not given certain positions, as spelt out by the US International Traffic in Arms Regulations (ITAR), according to Rice, who advises our federal parliamentary human rights committee.

Because the ITAR, which governs the terms with which an importing country can use American defence technology, requires companies to discriminate on the basis of birth or nationality, it conflicts directly with Australian state and territory human rights legislation. Companies either persuade our legal authorities to let them off the hook or they don’t get US State Department clearance to access exported US defence technology.

“It is easier for the companies to get a local exemption than to get this clearance,” explains Rice.

Some people are outright denied access to sensitive American defence exports because their country of birth or dual nationality is on an ITAR list of “proscribed” nations.

The list changes from time to time and barred nations currently include Afghanistan, China, Cuba, Cyprus, Fiji, Iran, Iraq, Lebanon, Sri Lanka, Syria and Vietnam – the ancestral homes of many Australian migrants.

1 . Competitive advantage

There was a salient reminder this week of the reasons for US nervousness over technology security. Whistleblower Edward Snowden revealed via German magazine Der Spiegel that Chinese spies had stolen design plans for the Joint Strike Fighter, the aircraft meant to reinforce US aerial dominance. Australia is spending billions of dollars on the same planes.

American lawyers specialising in export laws have described the ITAR as unparalleled in scope, as it reaches across the entire globe. It’s not just about arms, but a whole gamut of hardware and software used for military purposes or space research. It includes ships, planes, lasers and satellite technology, and “export” can simply mean transferring information – even, possibly, according to one analyst, sending an email.

Australia’s foremost specialist in space law, Professor Steven Freeland of the University of Western Sydney, sees extra benefits beyond national security for the US as it enforces the ITAR to regulate who can use American satellite technology.

“In the area of space technology, the US are still the superpower and they want to stay there, despite developments in China and Russia, so they’re very sensitive about their weapons technology going to other countries,” he tells The Saturday Paper. “In its simplest terms, space technology is regarded as akin to missile technology.”

While the ITAR has a benevolent motive in wanting to stop sensitive technology falling into the wrong hands, it also has the effect of enabling the US to retain a competitive advantage, he says.

“You won’t find that motivation explicitly in the official documents,” Freeland says.

However, he is less worried than Rice about ITAR’s reach.

“It’s quite common where people are dealing with national security issues to say: Sorry, but we get to choose the sort of people who work there because we don’t want them to have access,” he says.

Rice argues that the state department is dictating the private behaviour of individuals and companies outside the US, causing them to act unlawfully in their own countries.

2 . Fines and jail terms

The state department can fine offending individuals and businesses up to $US1 million per violation for breaching ITAR requirements. It can ban companies from using American military exports and jail offenders for up to 10 years.

In a case that sent a message to universities, John Reece Roth, a former Tennessee professor of electrical engineering, was jailed for four years in 2009 for breaching the ITAR by providing information on drone technology to students from Iran and China.

Boeing was fined $US3.8 million in 2001, $US15 million in 2006 and $US3 million in 2008 for ITAR breaches and other companies have also been hit hard.

By comparison, breaches here of Australian anti-discrimination and equal opportunity law may lead to an apology or “small value financial compensation”, Australian defence industry lawyer Jane Elise Bates pointed out in the journal Security Challenges in 2012.

“From an economic perspective the balance is certainly in favour of continuing the status quo and seeking exemptions as required to permit the conduct of racial discrimination,” Bates wrote.

In the latest decision granting Thales Australia exemptions in November, VCAT member Anna Dea said the company’s work for the Australian Defence Force, including ship, aircraft, vehicle and munitions manufacture, generates more than $861 million in annual sales. It employs 871 people in Victoria, with an estimated $2 billion worth of projects lined up over the next eight to 10 years.

Dea listed the same reasons that have persuaded nearly every Australian decision-maker in her position for the past decade or so to grant exemptions, faced with the brutal reality of the US ITAR. The company’s work is important to Australia’s defence capability, the state economy and jobs that could otherwise go elsewhere, she said. She noted that no employees or union representatives made any submissions to the tribunal.

But it was not always so.

When Thales and ADI sought similar exemptions in the State Administrative Tribunal of Western Australia in 2005, the commissioner for equal opportunity, the WA Trades and Labour Council, the state’s Ethnic Communities Council and Western Australians for Racial Equality all objected.

The companies won a five-year exemption anyway.

As Australia negotiated a new defence treaty with the US in 2008, judges and decision-makers for a while bridled at having to bow to American law, after a parliamentary committee recommended the federal government seek exemptions from the ITAR.

In 2007, the then VCAT president, Justice Stuart Morris, voiced his concern about being asked by Boeing Australia Holdings to depart from local legislation to provide jobs.

“Such a departure is only sought because important aerospace technology is subject to an American law which places American security ahead of this human rights standard. One might ask: why should not the Americans give way?” he said.

“One suspects that the ITAR is misconceived … But then, I rather doubt that the United States government will back down from ITAR in the face of a decision of the Victorian Civil and Administrative Tribunal.”

VCAT deputy president Cate McKenzie described the nationality-based prohibitions in the ITAR as a “blunt instrument” when she granted a partial exemption to BAE Systems Australia Limited in 2008.

“Assessment of individuals on a non-stereotyped basis, or training and education about the importance of the obligation of secrecy, would seem to me to be a better approach,” she said.

3 . Little choice for legal bodies

At the end of 2008, the president of the Queensland Anti-Discrimination Tribunal, Douglas Savage, refused exemptions sought by the Boeing group. The companies’ opportunities should not be at the expense of employees or potential employees, said Savage, whose decision still stands.

He doubted that refugees who had risked their lives to flee nations whose regimes they opposed were a security concern. Any concern could equally apply to US or Australian citizens, he said.

Rice sees such opposition as having faded. In particular, although they have appeared in past hearings, he is disappointed at unions’ failure to take this on as a cause.

“They haven’t been very effective or strategic in their arguments,” he says.

Four years ago, Rice argued in The Canberra Law Review that courts and tribunals in reality “have had little real choice, in the face of employers’ (poorly substantiated) claims that without the exemption the defence contracts will be breached with serious consequences, including the loss of jobs.”

There have been at least 25 more decisions allowing exemptions since he wrote that. Thirteen were in New South Wales, where there are no public hearings and exemptions are gazetted by the attorney-general. Two were in the ACT, two in Victoria, six in South Australia and one in Western Australia.

“I’ve been waiting for one tribunal to break ranks,” says Rice. “It seems to me they’re spooked. They’re between a rock and a hard place. You have to have sympathy. This is a political issue. The tribunals are being asked to decide it and they shouldn’t be.”

However, tribunals should be more rigorous in making these self-interested businesses spell out the exact consequences if they complied with local human rights laws, Rice says.

4 . Canadian example

The tough US laws are unpopular around the world, particularly with close allies such as Canada, and the Obama administration recently tweaked them. But as VCAT’s Anna Dea explained in her most recent Thales decision, “it remains the case that information about a workforce member’s nationality and national origin is still required”.

Freeland acknowledges the role of US domestic politics. “Americans are very good at protecting US interests. It’s what you pay your politicians for, in one sense,” he says.

“We may not like it, but if the American administration were not seen to protect US interests, it wouldn’t last long in government. Americans have a particularly patriotic or provincial view that the US is the centre of the universe.”

Canada, accustomed to its gigantic pushy neighbour, has over the past few years negotiated changes with the US State Department that allow companies to comply with the ITAR as well as Canadian privacy and human rights legislation.

The Canadian government acted following public controversies, including a ruckus when General Motors Canada sent immigrant workers home with pay after the company was fined $US20 million for breaching the ITAR when it manufactured certain military vehicles.

There is no such outcry here. Instead, Freeland says, Australian governments continue to tolerate the ITAR’s workings because of the trade-off of lucrative business investment.

This article was first published in the print edition of The Saturday Paper on January 24, 2015 as "US arms suppliers overrule courts in Australia".

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Debra Jopson is a Sydney-based investigative reporter.

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