AUKUS: a snapshot of Australia’s law reform in 2024

The Australian Parliament has passed a number of key pieces of legislation relating to AUKUS this year, marking an important step in the reform necessary to support Australia’s acquisition of conventionally armed, nuclear-powered submarines.

In September 2021, the leaders of Australia, the UK, and the US announced the creation of AUKUS, an enhanced trilateral security partnership to address the security challenges in the Indo-Pacific. This partnership outlines two ‘pillars’ of collaboration:

Pillar 1 – Submarines. The first line of effort focuses on the design and construction of conventionally armed, nuclear-powered submarines (SSN-AUKUS) which will replace the retiring fleets of the UK’s Astute class and Australia’s Collins class submarines.

Pillar 2 – Advanced capabilities. The second line of effort focuses on the development of joint advanced military capabilities, including undersea capabilities, quantum technologies, artificial intelligence and autonomy, advanced cyber, hypersonic and counter-hypersonic capabilities, and electronic warfare, among others.

In December 2023, the US Congress passed a suite of AUKUS legislation which conditionally:

• authorises the sale of at least three American nuclear-powered Virginia class attack submarines (SSNs) to Australia. The condition for the sale of the Virgnia class SSNs is that it must not result in the degradation of the US undersea capabilities. This law would, in effect, prohibit the US from selling submarines to Australia if the US does not have sufficient submarines of its own to maintain its strategic advantage or operational underseas capabilities; and
  
  
• exempts Australia and the UK from the International Traffic in Arms Regulations (ITAR) licensing requirements, to ease transfer of controlled goods and technology from the US to Australia and the UK. This exemption is subject to Australia and the UK implementing a comparable export control framework and reciprocating with similar export exemptions.

Snapshot of Australia’s AUKUS regulatory reform

The AUKUS partnership has been the catalyst for a series of law reforms in 2024, starting with the passage of two amendment Acts in March 2024 comprising the Defence Trade Controls Amendment Act 2024 (Cth) (DTC Amendment Act) and the Defence Amendment (Safeguarding Australia’s Military Secrets) Act 2024 (Cth) (SAMS Act).

In October 2024, the Australian Parliament passed two additional pieces of AUKUS legislation, the Australian Naval Nuclear Power Safety Act 2024 (Cth) (ANNPS Act) which is a new principal Act, and the Australian Naval Nuclear Power Safety (Transitional Provisions) Act 2024 (Cth).

The Defence Trade Controls Amendment Act 2024

The Defence Trade Controls Act 2012 (Cth) regulates the export of two categories of controlled goods and technology listed in the Defence Strategic Goods List (DSGL). By default, the export or supply of controlled goods and technology requires a permit unless an exemption applies.

We discuss the details of the DTC Amendment Act, which came into force in September 2024, in our earlier article. In short, the DTC Amendment Act:

1. Facilitates technology transfer between AUKUS nations by creating an AUKUS licence-free environment. The DTC Amendment Act removes the red tape in defence trade and streamlines Australia’s export control regime by introducing an export control framework that is comparable to that of the US.
   
   
2. Creates new categories of offences with an expanded definition of ‘supply’. This has an impact most notably with the introduction of the ‘deemed export’ provision. Whilst the export control regime has traditionally been used to govern cross-border transactions, the new section 10A captures the supply of DSGL technology to a foreign person in Australia. With the expanded definition of ‘supply’ – which now includes ‘providing access’ to DSGL technology and captures the ‘supply’ by an employer to an employee – it is envisaged that the first scenario could capture an Australian presenting information constituting DSGL technology at a public forum or presentation where a foreign person is in attendance, and the second scenario could capture an Australian company disclosing information constituting DSGL technology to its employee who is not a citizen or permanent resident of Australia, the UK, or the US.

The Defence Amendment (Safeguarding Australia’s Military Secrets) Act 2024

The SAMS Act amends the Defence Act 1903 (Cth) by inserting a new Part IXAA. This aims to protect Australia’s military knowledge by restricting former defence staff members from performing any work (including providing training) for, or on behalf of, a military organisation or government body of countries other than the Five Eyes nations, in the absence of a ‘foreign work authorisation’.

These amendments are consistent with the DTC Amendment Act which also creates an exemption for the provision of assistance (including training) to a Five Eyes partner in relation to certain dealings involving Part 1 DSGL goods or technology.

The Australian Naval Nuclear Power Safety Act 2024

The new ANNPS Act will set up a new ‘fit-for-purpose’ regulatory framework for responsible nuclear stewardship. This will require licence holders to comply with nuclear safety duties when conducting regulated activities in a designated zone (at the time of writing, HMAS Stirling at Garden Island in Western Australia and Osborne Naval Shipyard in South Australia are designated), or in relation to an Australian SSN-AUKUS.

Only a Commonwealth-related person (being the Commonwealth or a Commonwealth entity or company, or a contractor to the Commonwealth or Commonwealth entities for a regulated activity) can apply for a licence.

The ANNPS Act also establishes a new regulator, the Australian Naval Nuclear Power Safety Regulator, who is tasked with regulating Australian naval nuclear power safety. Non-compliance with the ANNPS Act may attract civil penalties or even imprisonment in some circumstances.

Certain ‘facility licences’ and ‘source licences’ which are currently administered under the Australian Radiation Protection and Nuclear Safety Act 1998 (Cth) will be transitioned to be administered under the ANPPS Act as a naval nuclear power safety licence, to the extent the licence relates to a regulated activity.

The future of AUKUS

On 12 August 2024, an amended AUKUS Agreement was tabled before the Australian Parliament which, among other things:

• permits any AUKUS party to terminate the submarine project with one year’s notice; and
  
  
• requires Australia to indemnify the UK and US against any liability arising out, related to, or resulting from nuclear risks connected with the design, manufacture, assembly, transfer, or utilisation of any material or equipment including the naval nuclear propulsion plants or parts except to the extent that the UK or the US have received indemnity from a third party.

There is some uncertainty as to whether the SSN-AUKUS will be delivered on time as intended, which depends on America’s budget for the procurement of the Virginia class submarines. A defence budget Bill for 2025 is currently before the US Senate and is expected to be passed before the end of the year. The budget Bill will determine whether the US procures one or two Virginia class submarines in 2025.

Implications for defence industry participants

With the strengthened regulatory framework and the range of risks and liabilities, it is important for defence industry participants to:

• understand the context of the risks and liabilities, and ensure that their supply contracts allocate risks appropriately as between the parties, with suitable indemnity, liability and termination provisions;
  
  
• understand the range of new obligations that have come into force recently and the circumstances that will give rise to a requirement to obtain a permit or authorisation;
  
  
• when undertaking a regulated activity to which nuclear safety duties apply, implement a nuclear safety management system, and establish appropriate workplace health and safety policies that document proper operating conditions, ways to prevent or minimise accidents, steps to mitigate consequences of such accidents, and how to report incidents;
  
  
• review insider threat policies and ensure that employees are aware of their obligations in relation to the handling of controlled goods or technology particularly where a foreign individual is involved; and
  
  
• ensure that there are technical and organisational measures in place to restrict access to controlled goods or technology for employees or subcontractors who are not a citizen or permanent resident of Australia, the UK, or the US.