BAE SYSTEMS AUSTRALIA LTD - [2008] SAEOT 1

EQUAL OPPORTUNITY TRIBUNAL
(District Court Administrative and Disciplinary Division)
In the Matter of AN APPLICATION FOR EXEMPTION UNDER THE EQUAL OPPORTUNITY ACT 1984
BAE SYSTEMS AUSTRALIA LTD
[2008] SAEOT 1
Reasons for Decision of His Honour Judge Herriman, Member Ms A Bachmann and Member Yapp
21 January 2008
DISCRIMINATION LAW
Application for exemption in order to discriminate on grounds of nationality - applicant's principal business is in defence contracting work and requires access to security-sensitive material controlled by the government of USA. That government by regulation and contractual controls insists that persons of proscribed nationalities not be able to access it - whether power to exempt under s.92 of Equal Opportunity Act limited to exemptions which will serve purposes of legislation. Discussion of grounds for exemption. Granted.
Equal Opportunity Act 1984 (SA) ss 5, 23, 52, 54, 92; Racial Discrimination Act 1975 (Cwth) ss 9, 15, referred to.
ADI Limited & Ors and Commissioner for Equal Opportunity [2005] WASAT 259; Boeing Australia Holdings Pty Ltd (Anti-Discrimination Exemption) [2007] VCAT 532; Pulteney Grammar School v Equal Opportunity Tribunal & Ors [2007] SASC 308, applied.
Exemption application re: Boeing Australia Holdings Pty Ltd & Ors [2003] QADT 21; Stevens v Fernwood Fitness Centres Pty Ltd (1996) EOC 92-782; Exemption Application re Mt Isa Mines Ltd [2001] QADT 16; City of Brunswick: re Application for Exemption from Provisions of Equal Opportunity Act 1984 (1992) EOC 92-450; Plaintiff S 157/2002 v Commonwealth (2003) 211 CLR 476; Jupiter Holdings Pty Ltd and Commissioner for Equal Opportunity [2005] WASAT 202, discussed.

BAE SYSTEMS AUSTRALIA LTD
[2008] SAEOT 1
Introduction

BAE Systems Australia Limited (“BAE” or “the applicant”) has applied under section 92 of the Equal Opportunity Act 1984 (SA) (“the Act”) for an exemption from the provisions of sections 52 and 54 of the Act with respect to particular employment practices it wishes to adopt and which if not exempted would constitute breaches of the Act.
The Commissioner for Equal Opportunity has appeared on the application, as of right, and has opposed it. For convenience we shall hereafter refer to the Commissioner as “the respondent”.
Sections 52 and 54 of the Act provide as follows:
52. (1)It is unlawful for an employer to discriminate against a person on the ground of race –
(a) in determining, or in the course of determining, who should be offered employment;
or
(b) in the terms or conditions on which employment is offered.
(2)It is unlawful for an employer to discriminate against an employee on the ground of race –
(a) in the terms or conditions of employment;
(b) by denying or limiting access to opportunities for promotion, transfer or training, or to any other benefits connected with employment;
(c) by dismissing the employee;
(d) by segregating the employee from persons of other races;
or
(e) by subjecting the employee to any other detriment.
…
54. (1)This section applies to a principal for whom work is done by contract workers in pursuance of a contract between the principal and the employer of those contract workers.
(2)It is unlawful for a principal to enter into any contract or arrangement with an employer of contract workers under which the employer is to discriminate against a person on the ground of race.
(3)It is unlawful for the principal to discriminate against a contract worker on the ground of race –
(a) in the terms or conditions on which the contract worker is allowed to work;
(b) by not allowing the contract worker to work;
(c) by denying or limiting access to any benefit connected with employment;
or
(d) by subjecting the contract worker to any other detriment.
Section 5 of the Act defines “race” as follows:
race of a person means the nationality, country of origin, colour or ancestry of the person or persons or of any other person with whom he or she resides or associates
Section 92 of the Act is, relevantly, expressed in these terms:
(1)    The Tribunal may, upon application under this section, grant exemptions from any of the provisions of this Act in relation to –
(a)a person, or class of persons;
(b)an activity or class of activity;
or
(c)any circumstances of a specified nature.
(2)     An exemption under this section –
(a)may be granted unconditionally or upon conditions;
(b)…
and
(c)subject to revocation, remains in force for a period, not exceeding three years, determined by the Tribunal, but may be renewed from time to time for a further period, not exceeding three years, determined by the Tribunal.
(3)     …
(6)     In determining an application under this section, the Tribunal may –
(a)have regard (where relevant) to the desirability of certain discriminatory actions being permitted for the purpose of redressing the effect of past discrimination;
(b)have regard (where relevant) to any other factors that the Tribunal considers relevant
(7)     …
(8)     …
Put shortly, the applicant seeks an exemption to enable it to discriminate in its employment practices on the grounds of race, relevantly here with respect to persons of specified nationalities. Its original application was expressed in wider terms than that and referred as well to discrimination with respect to countries of origin, but that aspect was not pursued.
The respondent, for its part, contends that the exemption sought is beyond the power of the Tribunal, that, on a proper interpretation of section 92, the Tribunal may only grant an exemption if the effect of such will be to serve or advance the general purposes of the Act and that the exemption sought here will not do that. It challenges the merits of the application in any event.
Background
The applicant is the Australian subsidiary of an international company based in the United Kingdom, which is engaged in the development, delivery and support of advanced defence aerospace systems in the air, on land, at sea and in space.
It employs 2,360 people across several states of Australia, but more than half of that workforce, some 1,200 people, are attached to its head office at Edinburgh Parks near Adelaide. In the course of conducting its business in this State, the applicant also deals with more than one hundred local contractors.
Its principal client is the Australian Defence Force (“the ADF”) and, at any one time, it is a party to numerous contracts with that entity relating to the provision of highly sophisticated military and support systems and involving very substantial sums of money. It also performs subcontract work of a similar kind for third parties who are themselves principal contractors with the ADF or the Australian Government.
It competes for such work with local and overseas corporations.
It says that the services it provides, to the ADF in particular, are important to Australia’s defence capability.
It further contends that it is a major employer in South Australia, that the defence industry is a vital contributor to this State’s economy and that it plays a key role in that industry. That particular submission was not contested by the respondent and, indeed, was supported by a letter dated 27 July 2007 from the Deputy Premier of this State and addressed to the respondent.
By its very nature, the work undertaken by the applicant is security‑sensitive and it is not in dispute that its performance requires the applicant to have access to information, materials and technology carrying secrecy classifications, both in Australia and in the United States of America (“USA”).
In consequence, employees engaged on particular projects for the applicant are, with respect to such material, subject to strict security requirements imposed by the government of the Commonwealth of Australia (“the Commonwealth”). These include physical security, personal security clearances, restrictions on the release of classified information to non-citizens or foreign contractors and careful recording and supply of employee information. Compliance is regularly audited, but can be achieved in this country without the need for the applicant to obtain any exemptions under the Act.
The government of the USA imposes stricter limitations on third party access to such material, however, and it is the impact of that country’s control regime which has led to this application.
In its dealings with the USA, the applicant gains access to such material (“controlled material”) through contractual licensing arrangements with government or semi-government institutions in that country or with entities approved by that government. Generally, these take the form of export licences, technical assistance, and manufacturing licences and warehouse distribution agreements. These contracts bind the applicant to observe a raft of security measures which themselves reflect the laws of the USA relating to the export of sensitive materials. These laws are contained in the Arms Export Control Act (USA) and regulations thereunder, described as the “International Traffic in Arms Regulations” (“ITAR”).
This application has been brought because, in recent years, in particular since the events of 11 September 2001 in the USA, ITAR requirements have become increasingly focussed upon excluding nationals of “proscribed” countries (“proscribed nationals”) from access to controlled materials; indeed, in administering ITAR the USA State Department now insists upon being fully informed as to the proposed location(s) of all exported controlled material and as to the identities, including nationalities, of all persons who may have access to it. It forbids any access to it whatsoever by proscribed nationals and it obliges importers, such as the applicant, to put in place a range of protective security measures aimed at preventing the transmission of that material to any outside parties. In consequence, the applicant says its ability to continue to comply with the Act, in its employment practices, has been severely compromised.
Nationals of specified countries, including the United Kingdom, New Zealand and Australia, who “need to know” and who are otherwise security cleared, will be allowed access, but not proscribed nationals, even if they carry dual Australian citizenship.
Whilst obligations of this kind have been in force since 2005, the applicant says it has been able to achieve substantial compliance by employing a system of voluntary employee disclosure and careful workforce placement, but the point has now been reached whereby that is no longer possible. Proper compliance will now necessarily oblige it to discriminate in its employment practices in ways otherwise prohibited by sections 52 and 54 of the Act.
In particular, it submits that in order now:
(1)to complete existing contracts without being in substantial breach and at risk of termination and consequential damages suits;
(2)that it may compete for, and indeed gain, future work in its principal operating area on an equal footing with others operating in the field;
(3)that it may survive in this State and, indeed, this country as a major defence contractor;
(4)that it may not be exposed to very significant criminal and civil penalties for breach of USA law;
(5)that it not lose its Australian security status;
(6)that the interests of its local community, of the State and of the Commonwealth be properly served,
it requires an exemption from the Act to enable it to discriminate in its employment practices so that it may comply with ITAR requirements.
The applicant says that should such an exemption be granted, it will nonetheless do as much as it can to limit the impact of those requirements on its employment practices. It will undertake to:
(1)conduct its business in a way that will minimise the impact of the restrictions so as to ensure there is little disruption to the work of any individual employee or contractor;
(2)treat the rejection of an employment application by a person of proscribed nationality as a decision of last resort; and
(3)ensure that, in considering an employment application by any such person who is otherwise suitable for employment, it will seek to use that person’s skills, qualifications and experience in the conduct of its business other than in the ITAR area.
The specific employment practices it seeks to undertake to ensure it complies with its legal and contractual obligations to the USA government and authorised USA contractors, are as follows:
(1)to request nationality information from potential employees and contracting persons;
(2)to take such information into account in determining who should be offered employment or contract work and in making other work‑related decisions;
(3)to establish and maintain records of the nationality of all employees and contractors who may have access to controlled material;
(4)to ensure that controlled material is disclosed only to persons who are authorised by ITAR to receive it;
(5)to impose limitations or prohibitions on persons of particular nationalities having access to controlled material;
(6)to discuss with the ADF the nationalities of all employees and contractors who will have access to such material;
(7)to disclose to USA companies for which the applicant performs work under subcontract and, as well, to the government of the USA, the nationalities of all employees and contractors who might have access to controlled material;
(8)to establish security systems which prevent the unauthorised re-export or re‑transfer of controlled material to ensure there is no disclosure to persons of proscribed nationalities and to limit disclosure to other persons.
It recognises that the implementation of such measures will likely offend section 52 or section 54 of the Act, hence it seeks appropriate exemptions.
The Evidence
In support of the application, the applicant tendered:
·       two statements of David Mahony, its Company Secretary and Legal Counsel
·       a statement of Fran Varga, its Manager of Human Resources Shared Services
·       a statement of Dr Lincoln Wood, its Director of Engineering and Product Assurance
·       a statement of Jenny Curtin, its Company Security Officer.
The factual matters dealt with in those statements were uncontested, save for those in the statements of Mr Mahony, who was called and cross-examined. Otherwise, the respondent led no evidence.
We will not deal with Mr Mahony’s evidence in great detail, as much of it was uncontentious.
On his account, the applicant company became aware in the 2004/05 year of circumstances which obliged it to consider whether it could continue to comply with the provisions of the Act. Those circumstances amounted to a realisation of the increasing severity of security obligations imposed by ITAR and of problems of a similar kind being experienced by the applicant in other parts of the world where it operated.
In consequence, the application was brought.
There had not to date been any complaint of the applicant breaching the Act nor any investigations of such.
In financial terms, Mahony estimated that the present value of contracts undertaken by the applicant and involving the use of controlled material, was several hundred millions of dollars.
In cross-examination, he spoke of a recent easing of ITAR requirements which avoided the need for the applicant to notify any relevant exporter of the participation, in a contract, of an Australian citizen holding a security clearance or of a cleared person holding dual Australian and other nationality, except where the other nationality was that of a proscribed country. He conceded that notwithstanding that relaxation, ITAR requirements still meant that questions had to be asked of all employees as to nationality. Were there an application made for access with respect to a specific person of a proscribed nationality, it would be rare for the USA State Department to approve it.
It was suggested to him that as the applicant had complied with ITAR requirements to this point, it might be inferred that it had already discriminated in its employment practices with respect to proscribed nationalities. He rejected that, saying that the applicant had been able to comply with the Act to this time by inviting voluntary disclosure from employees or job applicants. Where there had been no voluntary disclosure or disclosure of a proscribed nationality, the applicant had simply ensured that that person would not be exposed to ITAR work. Its approach has been to first employ people and then to decide in which work area they might be engaged. The fact that some had not been engaged in ITAR work had not impacted upon their advancement opportunities, albeit that the range of work available to them had been limited.
He acknowledged that, since 2003, the applicant had not employed anybody to work with ITAR-controlled material who did not otherwise meet with ITAR security requirements.
It was put to him, and he agreed, that from the applicant’s business perspective, compliance with its obligations to USA contractors was very important. Even so, he rejected the suggestion that the company had taken no account of the Act in negotiating its contracts with USA entities and said that it had sought to manage its contractual obligations and at the same time comply with Australian law.
He was tested on the applicant’s current practice of inviting disclosure of nationality. He said it has been a voluntary process, undertaken in the context of the applicant explaining to the person concerned the security requirements of particular projects. He denied there had been any sanctions attaching to a person’s continuing employment if he or she had chosen not to make voluntary disclosure. Even so, it had necessarily had to use disclosed or non-disclosed nationality as a screening factor in selecting people for ITAR‑controlled work.
He was tested on whether he considered nationality was relevant to a person’s work capacity. He responded that it would be if applicants were required to abide by particular regulatory requirements, whether they be Australian security requirements or the security requirements of the USA imposed “through a contractual mechanism” (T/S 34).
He agreed that he was not in a position to speak about the interests of the Commonwealth or the ADF.
As to other documentary evidence relied upon by the applicant:
(1)The statement of the Human Resources Manager, Mrs Varga, spoke of the applicant’s workforce and distribution and of its practices with respect to anti-discrimination and equal opportunity. She stated that it generally sought to recruit its workforce locally, but that that was not always possible and that a demand for persons of particular skills meant they also recruited nationally and internationally. Whilst they had not previously kept records of nationality, there had been some approximately 50 overseas recruitments in the 18 months prior to September 2006 and, anecdotally, she was aware of many differing nationalities within their workforce.
She spoke, as well, of the applicant’s procedures in obtaining security clearances for relevant personnel and how, to satisfy even Commonwealth requirements, birth, nationality and citizenship details were required. She estimated that 40% of their workforce did not require security clearances, but care had then to be taken to ensure such persons did not access secure material. In consequence, careful workforce engagement and management was required.
(2)The statement of Dr Lincoln Wood, the applicant’s Director of Engineering and Product Assurance, spoke of the applicant’s concern to be a good corporate citizen and of its practices with respect to that.
He provided details of its support of secondary and tertiary institutions and programs designed to enhance the education of Australian-based engineers, particularly in this State. He spoke of its particular interest in supporting refugee students interested in engineering.
He represents the applicant as a member of the SA Industry Leadership Forum, supporting in particular the SA Electronics Industry Strategic Plan.
As well, he said, the applicant had a key role in establishing the Northern Advanced Manufacturing Industry Group, a body which supports schools in the northern suburbs, in particular, by encouraging their students to pursue careers in that sector.
The applicant has participated, as well, in a national initiative to support the development of skills in the defence area. In particular, it has, in partnership with the University of South Australia, established a post-graduate course in defence-related engineering and has enrolled members of its staff in that course.
It has also established prizes in other local and national educational institutions, including the Australian Defence Force Academy, and has entered into arrangements with institutions supporting access of disabled persons to the workforce.
It sponsors Young Achievement Australia programs and charitable projects.
(3)The statement of Jenny Curtin spoke of security arrangements in place in connection with the applicant’s operations in South Australia.
Those arrangements meet with Commonwealth security requirements under the Defence Industry Security Program (“DISP”).
She also spoke of the required procedures for obtaining personal security clearances and of the personal information required for these. DISP requirements necessarily regulate the disclosure of security information to non‑cleared employees and contractors.
She also spoke of the applicant’s physical security controls and, in particular, about the use of photographic security passes and access to protected areas.
She referred then to the security requirements of ITAR and how the applicant has sought, and will continue to seek, to limit the impact on its work practices of those and of DISP by limiting, so far as is possible, the numbers of employees who require access to security‑controlled information.
She then spoke of DISP and ITAR audit processes with which the applicant must comply and of the consequences for it of failure.
The Legal Issues

A number of recent cases were cited to us dealing with similar exemption applications brought under anti-discrimination legislation in other States of Australia and prompted by the impact of ITAR requirements on other applicants operating in the defence-related field.
Those other decisions are necessarily based upon different factual backgrounds, albeit similar ones, and the powers of exemption have arisen under differing anti-discrimination enactments. Even so, we have found the discussions in them useful in our consideration of the Act and it is noteworthy, for reasons we will discuss, that in all of them the applicants have succeeded.
We propose to focus only upon the following cases:
(1)Exemption application re: Boeing Australia Holdings Pty Limited & Ors [1]
[1]    [2003] QADT 21
(2)ADI Limited & Ors and Commissioner for Equal Opportunity & Ors[2]
[2] [2005] WASAT 259
(3)Boeing Australia Holdings Pty Ltd (Anti-Discrimination Exemption)[3]
[3] [2007] VCAT 532
(4)Pulteney Grammar School v Equal Opportunity Tribunal & Ors[4], a decision handed down after argument in this case.
[4] [2007] SASC 308
·In the Boeing case (Queensland 2003), the exemption application was unopposed. The applicant had contracted with the ADF to provide defence‑related goods and services and, for that purpose, needed to import controlled material subject to ITAR regulations. In consequence, it became obliged to enquire of employees or potential employees as to their nationalities and to ensure none were exposed to controlled material.
The penalties for and consequences of non-compliance facing the applicant differed little from those advanced in this case.
The relevant legislation simply empowered the Tribunal to grant an exemption in favour of a class of persons.
In granting the application, the Queensland Tribunal followed the Victorian Equal Opportunity Board decision of Stevens v Fernwood Fitness Centres Pty Ltd[5] and held that in order to grant an exemption, it must be satisfied that it would be “appropriate and reasonable to do so”. It took account of several matters, including:
[5] (1996) EOC 92-782
(1)whether the exemption was necessary (Exemption Application re Mt Isa Mines Ltd[6]);
[6]    [2001] QADT 16
(2)whether there were available other, non‑discriminatory, ways of achieving the same object (City of Brunswick: re Application for Exemption from Provisions of Equal Opportunity Act 1984[7]);
[7] (1992) EOC 92-450
(3)whether it was in the community interest (City of Brunswick, supra); and
(4)whether any others supported the applications.
As to necessity, the Tribunal found it established, reasoning that to refuse the application would likely oblige the applicant to contravene the relevant legislation. Further, it was satisfied that there were no practical, non-discriminatory ways of achieving the required outcome.
It then focussed upon community interest. It was satisfied that the potential loss of defence-related work would have an adverse impact upon the applicant and its workforce and it concluded that there was a national interest in generating employment for skilled persons working in the defence-related field and those training for it in tertiary institutions. Otherwise, it found that the work conducted by the applicant was a major contributor to the support of the ADF.
We recite those particular findings not because they necessarily have application here, but rather because they identify the criteria relied upon by that Tribunal and their application in the circumstances of that matter.
·In ADI (Western Australia 2005), the applicant was a large defence engineering and systems contractor operating in Australia and overseas and employing, in that State, some 159 people engaged in a variety of major projects involving the use of ITAR‑controlled technology. It, too, sought exemptions under State legislation to permit it to discriminate in employment on the basis of nationality so that it could meet ITAR requirements.
Its application was opposed by the Commissioner for Equal Opportunity and other intervening parties.
The applicant argued that the objectives of the relevant Act had to be seen in the context of a wider public interest and it contended that the legislative scheme recognised that interest, as indeed had other similar tribunals in Australia. That public interest, it argued, resided in national security and national and state economies (para. 65).
The objectors strongly opposed the exemption, saying it was wholly unrelated to the objects of the legislation; that any question of public interest was governed by the need to meet with those objects; that little was to be gained from a consideration of decisions in other jurisdictions; that the applicant would in any event, if exempted, be breaching the Racial Discrimination Act of the Commonwealth; and that a grant would infringe international conventions. It contended that neither contractual obligations nor commercial advantages could justify a grant, particularly where the basis for the application was the requirement of a foreign power, and that the ultimate solution for the applicant was to resolve the matter politically. Otherwise, it said there were alternative ways of dealing with the matter and the number of employees and projects affected was not significant.
The Equal Opportunity Act (WA) provided that that Tribunal might grant exemptions “subject to such terms and conditions as are specified in the order”.
The Tribunal observed that that Act gave “no guidance as to the facts or circumstances to be taken into account by the Tribunal in the exercise of its power of exemption” (para. 56).
Even so, it followed Plaintiff S 157/2002 v Commonwealth[8] and recognised that there could never be a wholly unfettered discretion and that any power “must always be exercised in conformity with the Act’s limits, which are usually implied as to subject matter, scope and purpose” (para. 97).
[8] (2003) 211 CLR 476
It had regard to the parliamentary debates, which it noted did not lay down any tests for the exercise of the discretion. It concluded that the discretion was a very broad one and that the power was designed “to give the Tribunal flexibility” (para. 102).
It discussed Stevens v Fernwood (supra), an authority relied upon by all the parties before it, but preferred an extension of the rationale of that case described in a decision in its own jurisdiction of Jupiter Holdings Pty Ltd and Commissioner for Equal Opportunity[9]:
[9] [2005] WASAT 202 at para. 33
“In the case of ADI Limited (Exemption) [2004] VCAT 1963 at [12] the Victorian Civil and Administrative Tribunal (whilst not binding this Tribunal), provided guidance to us as to how we might exercise our powers on an exemption application. The general body of Australian law that has built up with respect to applications for exemption make it clear that the process that the Tribunal should go through is three-fold; First, the Tribunal should ask whether the conduct sought to be exempted falls broadly within the spirit of one of the express exception provisions in the Act; second, the Tribunal should consider the scheme of the objectives of the Act; and finally, the Tribunal should consider what interests might be pointed to in the application that would justify the granting of the exemption. We would add that these three steps should be tested against a framework of the ‘public interest’.”(our emphasis)
In following Jupiter, the Tribunal noted that the application before it did not fall within the spirit of any nominated exception in that Act and, on its face, did not fit within its objectives. It continued (at para. 111):
It is clear that in this case, the grant of the exemption would not fit within the objects of the EO Act. However, the issue for the Tribunal is whether despite this flaw, there is a public interest that should be taken into account in considering the application and what weight that public interest should carry – in fact, whether that public interest overrides the exercise of the discretion to grant or refuse the application for exemption, particularly where the exemption would otherwise be outside of the scope and purpose of the EO Act. There has been movement in other States of Australia towards an overriding public interest test and that has in fact been applied by this Tribunal, for example, in Jupiter Holdings Pty Ltd and Commissioner for Equal Opportunity (supra) …
It noted that the applicant would obtain a commercial advantage were the application granted and, conversely, if it were not, would suffer a fundamental commercial disadvantage and might well cease to operate in Western Australia, the latter being an outcome which it thought was “not in any way in the best interests of the Western Australian community …” (para. 115).
Even so, it recognised that commercial interest, of itself, would not be a proper basis for the grant of an exemption.
In applying the “public interest” test and considering what other interests could be pointed to, the Tribunal observed (para. 126):
The public interest in this case lies in ADI fulfilling its contractual obligations to the Australian government - supplying to it defence equipment of the highest quality and using the latest available technology, developed and made according to US controlled processes and technology.
It concluded, at paras. 131-132:
The discretion vested in us is very broad and flexible although not entirely unfettered; this application for exemption does not fit squarely within the objects of the EO Act. But Parliament cannot have intended us to look at these applications completely in isolation with only the scope and purpose of the EO Act to guide us and to qualify an application. To be able to deal sensibly and realistically with this application, we must consider it in its broader context, looking at the ramifications not just on anti-discriminatory or discriminatory conduct, if it is granted. This is not to say that economic considerations should or could be paramount; they are not. Rather, we need to look to the total combined effect of the consequences if the exemption is or is not granted. We must consider all of the interests that can be pointed to that would justify the granting of the application, against a framework of the public interest … that combined effect if the exemption is granted is to make unlawful discriminatory conduct lawful; there are broad economic consequences not just for ADI, but for its employees in Western Australia and for the Western Australian economy; and there will be consequences on Australia’s defence capability. It is the combination of these ramifications – discriminatory, economic and defence, that lead us to the conclusion that the public or community interest in this application outweighs the negative discriminatory impact that granting the exemption would have.
We note that this decision is presently subject to an appeal.
·In Boeing (Victoria 2007), the factual background was again similar, albeit that the applicant there was seeking the renewal of an exemption already in place.
The exempting provision in the Victorian Equal Opportunity Act 1995 simply stated that the Tribunal had a power of exemption from provisions in the Act relating to people, activities and particular circumstances. The Tribunal observed, at para. 30:
When a discretion is contained in the statutory instrument and the instrument is silent as to the basis upon which the discretion is to be exercised, the usual approach is to acknowledge a discretion unlimited by anything but the scope and object of the instrument conferring it. Clearly enough the object of the Act is to promote the right to equality of opportunity and to eliminate discrimination. But it does not follow that a discretion to grant an exemption from the prohibition on discrimination can only be exercised if this would advance the objects of the Act. Such an approach is anomalous if the discretion in question allows an exemption from provisions of the Act prohibiting discrimination. Rather it would seem that Parliament’s intent was that an exemption may be granted by the tribunal where, in the circumstances, it is necessary or desirable to avoid an unreasonable outcome. (our emphasis)
The Tribunal had regard to ADI (Western Australia 2005) and its conclusion that the question of whether the exemption should be granted ought be determined by reference to the public interest, but it took the view that that was not a complete test and that in certain circumstances even private interests might be relevant. It preferred the test of “whether the proposed exemption is necessary or desirable to avoid an unreasonable outcome” (para. 34).
In applying that criterion, it recognised that to grant the exemption sought would be to depart from human rights standards recognised by the legislation itself and it examined whether such a departure was necessary to avoid an unreasonable outcome. It concluded that it was, albeit in the context of a range of conditions which it imposed. It concluded (at para. 53):
This case is one where, in the circumstances, it is desirable to grant an exemption from the Act, provided this is subject to stringent conditions that minimise the prospect of, and impact of, actual discrimination. The exemption is desirable to avoid an outcome which would be unreasonable by reference to considerations of employment, the economy, defence and tertiary education. The circumstances which make the exemption desirable are not of Boeing’s own making, but are dictated by the economic reality that the use of American technology is essential for the Australian aerospace industry and the fact that the use of such technology is subject to American law.
In passing, the Tribunal noted that any question of a breach of the Racial Discrimination Act did not arise as that Act did not identify “nationality” as a discriminating factor.
·In Pulteney Grammar (South Australia 2007) (a decision handed down after argument in this case), the Full Court dealt with an appeal from a decision of this Tribunal, refusing an exemption from the provisions of section 37 of the Act relating to proposed discrimination by a co-educational school in seeking to achieve greater gender balance.
In discussing section 92 of the Act, the court observed (per White J at para. 13):
Section 92(6) identifies one particular circumstance in which an exemption may be appropriate, namely, to permit discrimination for the purpose of redressing the effect of past discrimination. An exemption for this purpose would promote the purposes sought to be achieved by the EOA. Section 92 does not otherwise provide assistance as to the criteria for the grant of an exemption. It provides instead that the Tribunal may have regard to any other factors which it considers relevant.
His Honour then observed (para.14) that the Act:
seeks to establish norms of social conduct … (and that) … the effect of an exemption is to qualify (those) norms … This is an important factor to be considered by the Tribunal in the exercise of its discretion to grant an exemption. It leads naturally to the inference that the Tribunal must, in considering an application for an exemption, have regard to the general objects of the EOA and must be satisfied that proper grounds for the exemption are established.
He considered that the grounds for an exemption would usually be found in one or more of these three circumstances:
(1)where the exemption was desirable, if not necessary, to achieve a purpose of the Act;
(2)where the general prohibition would be unreasonably harsh or burdensome in the particular circumstances; or
(3)where there is some wider public interest which the grant of the exemption will serve.
He went on to say that he did not intend to state exhaustively the circumstances in which the grant might be appropriate, but that the applicant would need to show more than that the “relevant prohibition is inconvenient or irksome”. The task of the Tribunal was thus to “scrutinise the evidence relied upon with some care … balance the benefits … against any detriments”. That task might “require the Tribunal to consider the availability to the applicant of alternative means of achieving its stated purpose” (para. 15).
In reviewing those authorities, it appears to us that ADI (Western Australia 2005) focussed upon a touchstone of public interest, that Boeing (Victoria 2007) thought that was rather too narrow a criterion and expanded it to consideration of what was reasonably necessary in the circumstances, and that the Full Court of this State in Pulteney Grammar allowed that either one of those criteria might justify the grant of an exemption.
Without the benefit of the Pulteney Grammar decision, the parties here argued as follows.
- The Applicant’s Contentions
The applicant submitted:
(1)that the power to exempt in section 92(6) should not be read down so as to be confined to exemptions consistent with the purposes of the legislation. It contended that it was inherent in the Act, and recognised in other jurisdictions where similar legislation existed, that the power of exemption might, indeed, lead to a result that conflicted with the legislative purpose.
Sections 56 and 65 of the Act illustrated circumstances where exemptions might be made which did not necessarily serve the purposes of the Act.
It suggested that there was nothing in the parliamentary debates which assisted in the interpretation of subsection (6)(b), but had the parliament intended to limit the discretion, it would have said so.
The true test, it said, was whether the Tribunal considered there was a “good and proper basis” for granting an exemption;
(2)that there was a substantial economic and public interest in the grant of the exemption which was reflected in the exemptions already granted upon similar applications in other jurisdictions;
(3)that it had not produced evidence of national interest, but it referred to section 23(2) of the Act and invited the Tribunal to take notice of Australia’s military and security alliances with the USA;
(4)that whilst the ITAR nationality test was not a sophisticated one, even so it was forced to comply with it or otherwise lose access to material critical to its principal work in this State;
(5)that any potential for breach of the Commonwealth Racial Discrimination Act was immaterial, that the international convention which underpins that legislation and this Act does not create a fundamental human right and, in any event, the Racial Discrimination Act does not deal with the question of “nationality”;
(6)that the economic consequences of it being denied access to ITAR-controlled material would be very substantial indeed.
- The Respondent’s Contentions
The respondent argued:
(1)that section 92(6)(b) should, by virtue of section 92(6)(a), be read down so as to be applicable only to exemptions serving the purposes of the Act. The purposes are set out in the preamble:
to promote equality of opportunity … to prevent certain kinds of discrimination based on … race … to facilitate the participation of citizens in the economic and social life of the community …
The legislation is thus beneficial and any application to exclude its benefit should be examined with great care;
(2)that the exemptions envisaged by section 92(6)(a) and sections 65 and 65 of the Act are all of a kind consistent with the general legislative purpose and strengthen the argument that section 92(6)(b) exemptions should also meet that purpose;
(3)that the Boeing (Victoria 2007) and ADI (Western Australia 2005) cases were wrongly decided and were in any event based on legislation of a different character;
(4)that there was no evidence before the Tribunal of national interest, that the applicant’s case might be one of private as opposed to public interest, anyway;
(5)that neither economic and practical advantages nor the demands of a stronger economic nation should be allowed to overcome fundamental human rights conferred by the Act, the Racial Discrimination Act and international conventions relating to discrimination;
(6)that the applicant had acted peremptorily in entering into contracts which potentially inhibited its employment freedoms and then seeking exemptions;
(7)that granting the exemptions would do little to advantage the applicant as it would remain in breach of the Racial Discrimination Act in implementing any changed employment practice;
(8)that the applicant should resolve its difficulties by seeking political protection;
(9)that the applicant, on its own case, had been able to operate and comply with ITAR over the past four years in any event, and should be prepared to continue to operate in that way.
Discussion

As to legal principles, this Tribunal respectfully adopts the rationale approved by the Full Court in Pulteney Grammar, which binds us anyway. As that reasoning adopts each of the criteria respectively applied in ADI (Western Australia 2005) and Boeing (Victoria 2007), we will also have some regard to remarks made about them in each decision.
It necessarily follows from Pulteney Grammar that we reject the respondent’s contention that the power to exempt under the Act is confined to granting exemptions which will still serve the purposes of the legislation. Both the ADI (2005) and Boeing (2007) cases recognise that an exemption may indeed conflict with the purpose of anti-discrimination legislation and, by implication, so does Pulteney Grammar, recognising, as it does, that a desire to serve that legislative purpose in this State provides but one basis for the grant of an exemption.
Further, it seems to us, in any event, that the existence of an unqualified power to exempt (as we find it to be) necessarily implies that there will be circumstances in which its exercise will not merely permit discriminatory conduct, but will involve conduct that, for particular reasons, does not in any sense conform with the purposes of the Act.
Nor do we find that the provisions of subsection (6)(a) of section 92 in any way serve to limit the “other” factors referred to in subsection (6)(b) which the Tribunal may consider relevant. Subsection (6)(a) merely identifies one circumstance which the Tribunal may take account of in considering an exemption application, otherwise the Tribunal may have regard to “any other factors that the Tribunal considers relevant”. There is no reason to read down those factors by reason of what is set out in subsection (6)(a) and, plainly, in Pulteney Grammar the court did not suggest as much.
Here, of course, the application cannot meet that first criterion identified in Pulteney Grammar and it is thus not satisfied.
The focus of our attention must therefore be upon the second and third criteria identified there, namely, whether the application of the general prohibitions contained in sections 52 and 54 of the Act would be unreasonably harsh or burdensome in the particular circumstances of this case and/or whether there is some wider public interest which the grant of the exemption will serve.
- The second criterion – would the general prohibitions of sections 52 and 54 be unreasonably harsh or burdensome?
We are satisfied that the applicant has here demonstrated that compliance with sections 52 and 54 in all aspects of its employment practices would be unreasonably harsh and burdensome, and for these reasons:
(1)On all the evidence, we are satisfied that the applicant has no significant control or influence over the types of restrictions placed by ITAR upon its access to controlled material.
The realities are:
(a)    the government of the USA is in possession of material which the applicant needs to access in order to conduct the major part of its business operations in this State and, in particular, to fulfil the requirements of its contracts, whether present or prospective, with the ADF;
(b)    that material is strategically valuable to the USA and it is not unreasonable that it thus might take steps to protect its dissemination. The owner of intellectual property generally enjoys the privilege of being able to dictate whatever terms it may choose for sharing it with others, particularly where, as here, that party happens to be the major economic power in the world;
(c)    it has here chosen to take the step of simply denying nationals of proscribed countries access to that material;
(d) that prohibition may well be, as the respondent describes it, a “blunt instrument”: a more sophisticated test which did not discriminate as broadly as that might have been devised, but we are not persuaded that is a matter which the respondent can hope to control or influence.
To oblige the applicant to comply with sections 52 and 54 and thus, as we apprehend it, to effectively deny it access to material critical to the performance of its operations because of its lack of political power or influence, would appear to us to be unreasonably harsh and burdensome, given the nature of its core business and, as well, the public interest we are satisfied it serves and upon which we will comment in a moment.
(2)It was suggested by the respondent that the appropriate way of dealing with the realities of ITAR requirements is a local political one; that is to say, that State or federal governments can legislate or exempt, so as to enable parties such as the applicant to lawfully discriminate and correspondingly comply with ITAR requirements. In that respect, the asserted interests of the Commonwealth and State governments in ensuring the applicant can carry on its business here was suggested as an appropriate motive for that form of political intervention.
Whilst there is something to be said for that submission, we again accept the applicant’s contention that it cannot itself force the political process. Further, it could well be that that form of intervention would itself produce a “blunt” political imprimatur and one lacking the capacity or flexibility to impose conditions appropriate to a particular undertaking and otherwise designed to ensure that the intention of the Act is supported so far as is possible.
To expect the applicant to obtain specific legislative protection from the impact of sections 52 and 54 is to impose on it a burden that is unreasonably harsh.
(3)The uncontested evidence is that the applicant has over 1,200 employees in this State engaged in contracts valued from time to time in hundreds of millions of dollars; further, that the principal part of its operations here involves work requiring access to material controlled by ITAR.
It appears to us that the application of any legislative inhibition which would effectively deny it access to what is, in essence, its core body of work would, in purely economic terms, be unreasonably harsh or burdensome.
We recognise at once that private commercial considerations should not of themselves be determinative but, as ADI (2005) recognises, they are relevant matters, particularly if they also have a public impact, as indeed they would here, in local employment terms.
(4)We are not persuaded that the applicant has acted peremptorily and accept its contention that it has, until recently, made genuine attempts to contemporaneously comply with the Act and with ITAR requirements, but that the situation has now developed where that is no longer possible. To oblige it to continue to comply with both sets of requirements, even if that were possible, would impose upon it an unreasonably harsh burden.
The respondent contended otherwise, but the applicant’s evidence as to this was not successfully challenged or contradicted.
(5)We are further satisfied that, due to the highly skilled nature of its workforce and the limited local supply of suitable applicants, the applicant needs to recruit from beyond these shores and that that exacerbates the difficulties it has in ensuring compliance with ITAR requirements as to nationality.
(6)We are satisfied that if the applicant wishes to have continued access to controlled material, it must comply with ITAR requirements. We are satisfied that if it fails to do so, it will be exposed to a range of consequences, including serious criminal proceedings, very large civil suits, the loss of all future access to ITAR-controlled material and, in essence, the loss of its core business operations in this State.
(7)We note that Tribunal’s observations in Boeing (Victoria 2007) (at para. 53):
This case is one where, in the circumstances, it is desirable to grant an exemption from the Act, provided this is subject to stringent conditions that minimise the prospect of, and impact of, actual discrimination. The exemption is desirable to avoid an outcome which would be unreasonable by reference to considerations of employment, the economy, defence and tertiary education. The circumstances which make the exemption desirable are not of Boeing’s own making, but are dictated by the economic reality that the use of American technology is essential for the Australian aerospace industry and the fact that the use of such technology is subject to American law.
Those same reasons resonate here.
All in all, we are satisfied that to refuse the application for an exemption and oblige the applicant to continue complying in all its employment practices with sections 52 and 54 would, in these particular circumstances, be unreasonably harsh or burdensome.
- The third criterion – does the wider public interest justify the granting of an exemption?
It appears to us that this question should be viewed through a number of prisms:
(1)We take particular account of the statement of Dr Lincoln Wood where he speaks of the participation and support of the applicant in skilled education at all levels, in industry fora, in local and wider community support and education, in the enhancement of skills designed to support the defence industry generally, in support for employment of youth and for the disadvantaged and disabled, and in general charitable works.
We are satisfied that that range of contributions made by the applicant to the local and state‑wide community is a significant one.
(2)As a separate matter, we take account of the letter from the Deputy Premier of this State, Hon. Kevin Foley, to the respondent dated 27 July 2007 and forwarded to the respondent after this application was filed. It speaks of the vital importance to the economy of this State of the defence industry generally and, in particular, of the status of the applicant as a major and valued employer in that field.
The government of this State supports the application subject to express conditions of which we have taken note.
(3)It was submitted by the applicant, albeit contentiously, that the Tribunal should take account of a national interest in the applicant’s ability to continue with activities it pursues and which necessitate access to ITAR-controlled material. That national interest was identified as one whereby the applicant, in carrying out ITAR-related work, supports the Commonwealth and the ADF in defence-related matters and, further, as one supporting the strategic ties between the USA and Australia.
As the respondent correctly contended, there was no direct evidence before us as to this interest, but we are not persuaded that the matter ends there:
(a)Whilst it is correct to say that the major part of the applicant’s operations, and indeed its Australian headquarters, are situated in this State, one half of its work‑force is located in other mainland States and Territories. To that extent alone, there is a national interest in its continued operations in its core activities in this country.
(b)Its principal customer is the Commonwealth on behalf of the ADF and, even in the absence of direct evidence from the Commonwealth but being mindful of section 23(2) of the Act, we are prepared to assume that the Commonwealth has a significant level of interest in the capability of the applicant to perform contracts for it which require access to ITAR-controlled material. In that context we take further notice of the fact that the Commonwealth has close defence and security alliances with the government of the USA and we accept that the maintenance of those is a matter of public interest.
(c)Whilst the outcomes of similar exemption applications in other States are not of direct relevance to this application, we are not prepared to entirely ignore them. It appears to us that such grants reflect an acceptance, in those jurisdictions, of a level of public interest in defence contractors within the Commonwealth being able to continue working in activities requiring access to ITAR-controlled material, notwithstanding that the performance of that work will on occasions require them to engage in discriminatory employment practices.
As the Tribunal in ADI (2005) observed at para. 132:
In this case, that combined effect if the exemption is granted is to make unlawful discriminatory conduct lawful; there are broad economic consequences not just for ADI, but for its employees in Western Australia and for the Western Australian economy; and there will be consequences on Australia’s defence capability. It is the combination of these ramifications – discriminatory, economic and defence, that lead us to the conclusion that the public or community interest in this application outweighs the negative discriminatory impact that granting the exemption would have.
Those remarks have equal application here.
We should also address the contentions, raised by the respondent, that the grant of an exemption would still leave the applicant in breach of the Racial Discrimination Act and that a grant would abrogate a fundamental human right to be protected from discrimination.
As to the first matter, we are not persuaded the applicant would necessarily breach the Racial Discrimination Act as that Act does not prohibit discrimination based upon nationality. A similar conclusion was reached in Boeing (Victoria 2007).
As to the second matter, if such a fundamental right were recognised (and we are not satisfied as to that), we are nonetheless fortified by and adopt the remarks of the Tribunal in Boeing (2007) (supra) at para. 35:
The Commission also submitted that discretion is to be informed by an acknowledgment that our community is one that is based on principles of human dignity, equality and freedom. This is clearly right. It also argued the starting point of any analysis is that departures from rights cannot be based on mere preference or convenience. This is less obviously right. Sometimes an exemption might be sought on the basis of convenience or cost or practicality; and whether it is appropriate will depend on the impact of the exemption on human rights and equality of opportunity and upon the importance of the purpose for which an exemption is sought. In this respect I would note that there is a strong public interest in maintaining human rights (even though human rights very much exist to protect private interests); but there is also a public interest in achieving convenient, economic and practical outcomes, even though such outcomes may serve private interests.
After lengthy and careful consideration, we have found ourselves satisfied that the grant of the exemption sought by the applicant will, upon the conditions we propose, serve the wider public interest.
Finally, we should say that, on all the evidence, we are satisfied that to oblige the applicant to continue to comply in all its employment practices with sections 52 and 54 is to impose on it an obligation that is much more than merely “inconvenient or irksome”. We are satisfied that in managing that part of its operations affected by ITAR requirements, the applicant cannot by any reasonable alternative means, take measures to ensure its contemporaneous compliance with sections 52 and 54 of the Act.
Conclusion
We will therefore grant an exemption from the Act, but not in the general terms sought in the application and, in any event, subject to particular conditions and monitoring.
Pursuant to section 92(6)(b) of the Act, the applicant is exempted from compliance with the provisions of sections 52 and 54 of the Act to the extent that it may:
(1)request nationality information from existing and potential employees and contractors;
(2)take a person’s nationality into account in determining who should be offered employment or contract work in areas requiring access to ITAR-controlled material and when making decisions as to the participation of employees or contractors in such work;
(3)maintain records of the nationalities of all employees and contractors who have or may have access to ITAR-controlled material;
(4)ensure that ITAR-controlled material is disclosed only to persons who are authorised by ITAR controls to receive it;
(5)impose limitations or prohibitions on persons of particular nationalities having access to ITAR-controlled material;
(6)disclose to the ADF the nationalities of all employees and contractors who will have access to ITAR-controlled material in the performance of their work;
(7)disclose to USA-based contractors for whom the applicant performs work under subcontract and to the USA government, the nationalities of all employees and contractors who will have access to ITAR-controlled material in the performance of their work;
(8)establish security systems which will prevent the unauthorised re-export or re-transfer of ITAR-controlled material.
We have not granted an exemption to permit the applicant to terminate any employment on the ground of nationality. On its own account, it has successfully managed a mixed workforce to this time and its exemption with respect to future employment means that the occasion for termination should not arise.
This exemption will be granted for a period of three years from now, but will be subject to the following conditions:
(1)It will apply only to conduct by the applicant where:
(a)that conduct is necessary to enable it to enter into and/or perform contractual undertakings requiring access to ITAR-controlled material;
(b)it has taken all steps that are reasonably available (including steps which might be taken in negotiating and performing the terms of its agreements with contractors in the USA) to avoid the necessity for engaging in conduct which would otherwise be in breach of sections 52 and 54 of the Act.
(2)Where, in the exercise of this exemption, an employee or contract worker is moved from a project involving the use of ITAR-controlled material to any other work controlled by the applicant or any of its related entities, the applicant must through a duly authorised officer explain to the person why he or she is being transferred and must otherwise take all reasonable steps to avoid or limit harm or loss to that person.
(3)Where the applicant uses a system of security passes to reflect the fact of access to ITAR-controlled material or levels of access to any security-sensitive material by employees and contract workers, the passes may be coded but not in such a way as to identify the nationality of the person or the reasons for that person’s level of access.
(4)All information relating to security passes, security clearance levels and access to ITAR-controlled material shall be restricted to the company secretary and human resources officer of the applicant or their properly appointed nominees on a “need to know” basis.
(5)The applicant’s employment policies shall be amended as soon as reasonably possible so as to refer to the terms of this exemption, including all conditions attaching to it, and to make it clear that the purpose of the request for information regarding nationality is made solely for the purposes of compliance with the laws of the USA.