Federal Court considers interpretation of sanctions on Russia: whether Australian company engaged in ‘transport’ of import sanctioned goods
Tigers Realm Coal Limited v Commonwealth of Australia [2024] FCA 340
The Federal Court has published a judgment considering the interpretation of the sanctions imposed by Australia on Russia following the invasion of Ukraine.
The case involved an application by an Australian listed company, Tigers Realm Coal Limited, for a declaration that its conduct in indirectly owning all of the shares in three Russian companies which transported coal extracted on Russia’s East Coast by truck to ports in Russia and load that coal on to ships for export to the Asian market did not breach the Autonomous Sanctions Regulations 2011 (Cth) (the Regulations). The application for a declaration was commenced following an Indicative Assessment by the Department of Foreign Affairs and Trade that the operations were likely to be prohibited or require authorisation.
Regulation 4A relevantly defines a ‘sanctioned import’, which is not permitted without an authorisation under regulation 12A, as a situation where a person transports import sanctioned goods for a country or part of a country. There was no dispute that Russian coal constitutes ‘import sanctioned goods’. Tigers Realm Coal Limited argued that one only ‘transports’ import sanctioned goods within the meaning of regulation 4A(1)(a)(ii), if the person carries or conveys the goods in an importation or cross-border setting, and as the subsidiaries only moved coal within Russia, the conduct was not in breach of the Regulations.
Kennett J held that Regulations 4A and 12A are not limited in their operation to goods that are imported (or in the process of being imported) into another country and on that basis, found that the activities of the Russian subsidiaries involve actions which constitute ‘sanctioned imports’ as defined in regulation 4A. At [56] of the judgment, the Court held:
“Arguably at least, that [the verb “transports” in reg 4A(1)(a)(ii)] covers all transport of the subject goods from the time they are identified as objects of international trade to the time they reach the hands of the importer”.
In reaching this conclusion, Kennett J considered the text and structure of reg 4A, the scheme of the Regulations more broadly, the consequences of the competing constructions the extrinsic materials.
The Court confirmed that contravention of reg 12A(1) can occur outside Australia and where the conduct in question has some connection with Australia, can lead to criminal liability.
Tigers Realm Coal Limited also submitted that if the Regulations are construed in the way that ‘transport’ covers the operations in question, they exceed the regulation making power in the Autonomous Sanctions Act 2011 (Cth), which it argued was limited to provisions concerned with supply, sale, transfer or procurement of goods and services. Tiger Realm Coal Limited contended that if the word ‘transport’ in Regulation 4A included domestic transport within Russia, the Regulation was beyond power as this kind of domestic transport did not relate to supply, sale, transport or procurement. The Court rejected this argument, pointing to the power to making regulations with respect to ‘dealing with’ ‘assets’ which it held was abroad power.
Despite being unsuccessful, Tigers Realm Coal Limited was not subject to any Court-imposed sanction penalties because the proceeding only concerned an application by Tigers Realm Coal Limited to review DFAT’s Indicative Assessment (which Tigers Realm Coal Limited had proactively applied for).
The Court also considered whether it had jurisdiction to issue a declaration given that Tiger Realm Coal Limited was not seeking to set aside any exercise of statutory power but was rather seeking a declaration that its activities did not contravene the legislation. The Court accordingly had to consider whether the application was a ‘matter’ within the meaning of section 39B(1A)(c) of the Judiciary Act 1903 which confers jurisdiction on the Court to determine ‘matters arising under any laws made by Parliament.’ This required a consideration of whether a ‘justiciable controversy’ or a ‘real dispute involving the parties legal rights’ existed. The Court held that given Tiger Real Coal Limited’s potential criminal liability under the Regulations, it had sufficient interest in the subject matter of the proposed declarations to give rise to a ‘matter’ engaging the Court’s jurisdiction.
This case highlights the far-reaching effect of Australia’s sanctions regime and the importance of all companies engaged in transport and logistics to undertake a very careful compliance review if their business involves dealing with Russian entities, Russian goods or transport to and from Russia (or any other country subject to the Australian sanctions regime).
Partner
T: + 61 2 9230 9437
E: nick.humphrey@nortonwhite.com
Address: Level 4, 66 Hunter Street, Sydney NSW 2000
Partner
T: + 61 3 9119 2585
E: adam.martin@nortonwhite.com
Address: Level 13, 459 Collins Street, Melbourne VIC 3000
Partner
T: + 61 2 9230 9440
E: keira.nelson@nortonwhite.com
Address: Level 4, 66 Hunter Street, Sydney NSW 2000
Senior Associate
T: + 61 2 9230 9408
Address: Level 4, 66 Hunter Street, Sydney NSW 2000