Opinion Number. 1889

Subject

TRADE AND COMMERCEWHETHER IMPORTATION OF MERCHANT SHIPS FROM THE UNITED KINGDOM MAY BE PROHIBITED: WHETHER ANY INCONSISTENCY BETWEEN REFUSAL OF LICENCE FOR IMPORTATION OF BRITISH SHIP AND AUSTRALIA’S INTERNATIONAL OBLIGATIONS: WHETHER AN INCONSISTENCY WOULD AFFECT VALIDITY OF MINISTER’S REFUSAL OF LICENCE: GENERAL AGREEMENT ON TARIFFS AND TRADE: MEANING OF ‘APPLY … TO THE FULLEST EXTENT NOT INCONSISTENT WITH EXISTING LEGISLATION’: MEANING OF ‘TRAFFIC IN ARMS, AMMUNITION AND IMPLEMENTS OF WAR’: STATUS OF UNDERTAKING BY AUSTRALIAN GOVERNMENT TO UNITED KINGDOM GOVERNMENT WITH REGARD TO IMPORT RESTRICTIONS

Key Legislation

CUSTOMS ACT 1901 s 52(g): CUSTOMS (IMPORT LICENSING) REGULATIONS regs 3, 10, 11, 15: INTERNATIONAL TRADE ORGANIZATION ACT 1948 s 4(2): SUPPLY AND DEVELOPMENT ACT s 4: GENERAL AGREEMENT ON TARIFFS AND TRADE done at Geneva on 30 October 1947 arts xi, xii, xviii, xxix, xx, xxi: PROTOCOL OF PROVISIONAL APPLICATION OF THE GENERAL AGREEMENT ON TARIFFS AND TRADE done at Geneva on 30 October 1947: HAVANA CHARTER FOR AN INTERNATIONAL TRADE ORGANIZATION done at Havana on 24 March 1948

Date
Client
The Honourable Howard Beale, M.P., Minister for Supply

I refer to the discussions which took place last week concerning the legal availability of the Customs (Import Licensing) Regulations to prohibit the importation of merchant vessels, and to your request that I should prepare a statement of my opinion on the legal position affecting this question.

(2)  I ought to say at the outset that since our conference took place the Comptroller-General of Customs has drawn my attention to certain provisions of the General Agreement on Tariffs and Trade which were not raised for consideration during the conference itself. These provisions throw some further light on the extent of Australia’s international legal obligations in relation to that Agreement, and render at least doubtful one of the propositions which, on the material discussed at our conference seemed reasonably clear. It will however be convenient to deal with this matter in its due logical sequence.

(3)  As I understand it, my opinion is desired on the following questions of law:

1.  Can the Minister for Trade and Customs apply the Customs (Import Licensing) Regulations to the importation of ships from the United Kingdom, and refuse a licence for such importation?

2.  If so, would his action be inconsistent with any international legal obligation by which Australia is bound?

3.  If so, would any such inconsistency impair the legal validity, in Australian domestic law, of the proposed action by the Minister?

(4)  Broadly stated, my answers to these questions would be:

1. Yes, if the Minister first revokes the existing exception from the Regulations of ships built in Britain;

2.  It is arguable, but not clear beyond dispute, that the refusal of a licence for the importation of a British ship would be consistent with Australia’s international legal obligations under the General Agreement on Tariffs and Trade;

3.  Inconsistency with the General Agreement, if it existed, would not impair the validity in Australian domestic law of the Minister’s refusal of a licence; though it would of course expose Australia to the international procedures provided for in the Agreement.

(5)  I shall now deal in turn with the matters raised by each of the three questions above.

Question 1:  the Customs (Import Licensing) Regulations.

(6)  The Customs (Import Licensing) Regulations (being Statutory Rules 1939, No. 163) were made by the Governor-General in pursuance of the powers granted by section 52(g) of the Customs Act. Under that section, prohibited imports includes ‘all goods the importation of which may be prohibited by regulation’.

(7)  Regulation 3 provides that the importation of any goods shall be prohibited unless—

(a)  a licence to import the goods is in force and the terms and conditions (if any) to which the licence is subject are complied with (regulations 10 and 11); or

(b)  the goods are excepted from the application of the Regulations (regulation 15).

(8)  It is understood that the Minister has, in pursuance of regulation 15, excepted merchant ships manufactured in the United Kingdom from the application of the Regulations. But the Minister has power under regulation 15(3) to vary or revoke any exception made in pursuance of that regulation. Upon the revocation of the exception, the Regulations would again become applicable to merchant vessels.

(9)  In accordance with the powers conferred on the Minister by regulations 10 and 11, it would be legally competent, so far as these Regulations are concerned, for him to refuse an import licence for the importation of merchant vessels if and when the exception abovementioned is revoked. (The ground that a refusal of a licence was necessary for the protection of Australian industry is plainly relevant to the purposes of the Regulations.)

Question 2:  Australia’s international legal obligations in this field.

(10)  Attention must be directed to the provisions of the Havana Charter of the International Trade Organization and of the General Agreement on Tariffs and Trade (which for convenience I shall refer to by the ordinary abbreviation ‘G.A.T.T.’). The point is that both of these instruments prohibit, subject in each case to certain specified exceptions, any quantitative restrictions of the trade with other contracting parties.

(11)  By way of making this point clear, I quote paragraph 1 of Article XI of G.A.T.T.:

No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.

(12)  By the International Trade Organization Act 1948, the Parliament approved the acceptance by Australia of both G.A.T.T. and the Havana Charter. By section 4(2) of that Act however acceptance by Australia was not to be approved unless and until the relevant agreement had been accepted by both Britain and the United States. I am advised that neither country has yet accepted either of these agreements. It follows that Australia has not been able to deposit a formal instrument of acceptance of either the Charter or G.A.T.T.

(13)  The consequence might appear to follow that Australia is in no legal sense bound either by the Charter or by G.A.T.T. So far, indeed, as concerns action under the International Trade Organization Act 1948, that is the true position. There is however an additional factor to be taken into account. This is the signature by Australia in October 1947, along with the United Kingdom and other countries, of a Protocol in which the parties undertook to apply G.A.T.T. provisionally, subject however to withdrawal on sixty days’ notice. This Protocol was not mentioned by Parliament in the International Trade Organization Act 1948, but is in present operation, as an ordinary international agreement. It is therefore necessary to consider whether the proposed use of the Customs (Import Licensing) Regulations would be in breach of the obligations imposed by G.A.T.T.

(14)  In passing, I mention that by Article XXIX of G.A.T.T. the parties undertake to ‘observe to the fullest extent of their executive authority’ the general principles of the Charter, pending their formal acceptance of the Charter. In effect, therefore, the Charter is incorporated, by reference, in G.A.T.T. I do not think however that this fact has any substantial effect on the scope of Australia’s legal obligations, so far at any rate as the subject in hand is concerned. The present question must, in effect, be answered under G.A.T.T.

(15)  The vital provision of G.A.T.T. is Article XI, quoted above. This Article is contained in Part II of the Agreement. The Protocol of Provisional Application obliges the parties to ‘apply provisionally’ Part II of the Agreement ‘to the fullest extent not inconsistent with existing legislation’.

(16)  The Customs (Import Licensing) Regulations were made in 1939, and in my opinion they should probably be regarded as ‘existing legislation’ within the meaning of the Protocol.

(17)  The phrase ‘apply … to the fullest extent not inconsistent with existing legislation’ is capable of at least two different meanings. It may mean either:

(a)  that, notwithstanding the terms of G.A.T.T., a contracting Government is free to do anything which it was authorized to do by legislation existing at the time of signing the Protocol; or

(b)  that the requirements of G.A.T.T. must be complied with unless to do so would bring the contracting Government into conflict with existing legislation.

(18)  On the whole, I am inclined to think that the phrase was intended to bear, and does bear, the latter of these meanings. I think the real point is that the Protocol, which contemplated merely provisional application of G.A.T.T., by agreement between Executive Governments, stopped short of any undertaking to obtain legislative change in any contracting State. Exactly the same idea is expressed, as it seems to me, in Article XXIX of G.A.T.T. itself (quoted in paragraph 14 above). On one view, there is clear inconsistency between G.A.T.T. and the Import Licensing Regulations, because the Regulations say no goods may be imported unless licensed or excepted, whereas G.A.T.T. says no licence or prohibition may be imposed, save for the exceptions expressly provided elsewhere in G.A.T.T. But on the other hand the Minister can ‘apply’ G.A.T.T., without in any way infringing the Regulations, by either licensing as of course, or excepting, all goods that fall outside the exceptions permitted by G.A.T.T.

(19)  My attention has been drawn by the Comptroller-General to Article XVIII of G.A.T.T. This Article deals with cases where special governmental assistance is required for the establishment or development of particular industries. It provides for most elaborate procedures of notification and negotiation. Paragraph 11 runs as follows:

11. Any contracting party may maintain any non-discriminatory protective measures affecting imports in force on September 1, 1947 which have been imposed for the establishment, development or reconstruction of a particular industry or branch of agriculture and which is not otherwise permitted by this Agreement; Provided that notification has been given to the other contracting parties not later than October 10, 1947 of such measure and of each product on which it is to be maintained and of its nature and purpose.

(20)  I understand that Australia did not in fact give, in respect of the Import Licensing Regulations, any notice to the other contracting parties in pursuance of Article XVIII(11). The view was taken, I am informed, that Australia had no such measures to notify. I do not think these facts point clearly in one direction or the other, as regards the question of legal interpretation here involved. The Import Licensing Regulations may in fact not come within Article XVIII(11) at all, because paragraph 11 covers only those protective measures which were ‘imposed for the establishment development or reconstruction of a particular industry …’, and which are also ‘not otherwise permitted’ by the Agreement. In these circumstances, Australia’s abstention from giving notice is consistent either with the view that the Regulations did not conflict with the Agreement or with the entirely different view that the Government did not at the time contemplate using the Regulations for purposes other than those specified in the Agreement. Australia’s view in relation to Article XVIII may of course have a bearing on the policy aspects of these matters; but these are not within my province.

(21)  Accordingly, for present purposes it is, I think, wise to assume that a breach of Australia’s obligations under G.A.T.T., as provisionally applied, would be made if the Minister were to revoke the present exceptions and refuse to license the importation of British merchant ships, unless of course such a refusal can be brought within the terms of one or other of the exceptions specified in G.A.T.T. itself.

(22)  The exceptions in G.A.T.T. are provided partly in Article XI, but principally by Articles XII, XX and XXI. Article XII deals with quantitative restrictions in order to safeguard the contracting parties’ external financial position and balance of payments. This is plainly not relevant for present purposes. Article XX permits general exceptions, none of which appear to be relevant. Article XXI however provides for certain exceptions on grounds of national security, and runs as follows:

Nothing in this Agreement shall be construed

(a)   to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or

(b)  to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests

(i)  relating to fissionable materials or the materials from which they are derived;

(ii)  relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;

(iii)  taken in time of war or other emergency in international relations; or

(c)  to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.

(23)  I do not think it can be said that any of these exceptions would clearly and unequivocally cover action of the kind suggested under the Import Licensing Regulations. On the other hand I think it is at least arguable that, either under paragraph (b)(ii) or under (b)(iii) or under both together, the suggested action does fall within the permitted exceptions.

(24)  As to ‘traffic in arms ammunition and implements of war’ it must be admitted that merchant ships would not ordinarily be included in the term ‘implements of war’. In this regard however it should be noted that ‘war material’ is defined in section 4 of the Supply and Development Act 1939–1948, and this shows the wide sense in which Australia would at the present time understand a phrase such as ‘implements of war’. I would suppose, moreover, it could be contended with even greater force that the present time is one of ‘emergency’ in international relations (paragraph (b)(iii)).

(25)  This whole question of the applicability of the exceptions depends upon facts not in my possession. Consequently I do not think I can say more than that, as above stated, it is at least arguable that the refusal of an import licence for British ships is within one or other of the exceptions permitted by G.A.T.T. on the grounds of national security.

Question 3:  Effect in Australian law of possible breach of G.A.T.T.

(26)  Since I think it possible, though by no means likely, that the contemplated action by the Minister under the Customs (Import Licensing) Regulations might be held to involve a breach of Australia’s international legal obligations under G.A.T.T. as provisionally applied, it is necessary to answer the third question, whether any such inconsistency would impair the validity, in Australian domestic law, of the Minister’s refusal of a licence. I am clearly of opinion that it would not. An international treaty cannot, unless by virtue of Parliamentary authority, have in Australian law the effect of altering existing legal rights powers and duties. I conclude therefore that even if the refusal of import licences would be contrary to G.A.T.T., and the infringement might render Australia liable at international law (in accordance with the various procedures set out in G.A.T.T. itself), this would not affect the validity in domestic law of the Minister’s action, or make it challengeable in Australian courts. As pointed out above, the provisional Protocol has received no Parliamentary authority, and there is nothing whatever to give to the provisions of G.A.T.T., as provisionally applied by virtue of the Protocol, the force of law in Australia.

(27)  In the foregoing, I have confined myself strictly to questions of legal power and liability. It is plain that, in a field like this, large questions of political and moral obligation arise, affecting Australia’s international position generally, and in relation to the United Kingdom in particular. This is I imagine true not only with regard to Australia’s position under the legal obligations with which I have dealt, but also, and perhaps even more clearly, with regard to the undertaking which, I am informed, was given by the Australian Government in 1942 to the Government of the United Kingdom with regard to import restrictions. (I have not seen the text of this undertaking but suppose that it belongs to the category of ‘gentlemen’s agreements’ and not of strictly contractual arrangements). Questions of this character however are plainly matters for government consideration, and I have clearly understood throughout that I am not asked to express any opinion upon them, or even to consider them.

[Vol. 39, p. 168 ]