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Does the federal government have the power to tear up Victoria’s Belt and Road Agreement with China?

On 23 October 2018, Daniel Andrews, premier of the Australian State of Victoria, signed a framework agreement for the Belt and Road Initiative with Ning Jizhe, deputy head of China’s National Development and Reform Commission. The framework agreement will allow Victoria and China to work together on infrastructure, innovation, tackling issues around the aging of society, trade, and markets. It will also expand the participation of Chinese infrastructure companies in Victoria, including in areas of advanced manufacturing, biotechnology, and agricultural technology.

However, the federal government has ‘torn up’ the Belt and Road Agreement between Victoria and China, further escalating tensions between the two countries. Did the Victorian government have the right to make its own agreements with China in the first place? Did the Federal government have the right to ‘tear it up’?

 

Decoding the Australian Government: What is the relationship between states, territories, and the Commonwealth?

Before Australia became a nation on 1 January 1901, there were six separate British colonies: New South Wales, Victoria, South Australia, Western Australia, Queensland, and Tasmania. There was also land that did not belong to any colony. After federation, the original colonies became independent states, and areas that were not part of any colony became territories. 

Chapter 51 of the Australian Constitution establishes the legislative power of the Federal Government and assigns certain powers and duties to the Federal Government, while the remaining duties are reserved to each of the six states. As a result, each of the six states has its own Constitution and has relatively independent judicial, executive, and legislative powers in areas outside the jurisdiction of the Commonwealth.

 

Why does the Victorian government have the right to sign its own Belt and Road agreement with China?

In Australia, only the Federal government has the power to sign international treaties on behalf of Australia with other foreign governments. However, under current Australian law, State and Territory Governments, universities, companies and even individuals are free to enter into agreements or contracts with foreign governments and their subsidiaries with no obligation to inform the Federal government of such agreements. Therefore, although the Belt and Road Agreement was signed by the Victorian government with China, it is not signed on behalf of Australia, and thus the execution of the agreement did not violate any Australian law nor did the Victorian Government had obligation to report such agreement to the Federal Government.

 

Why does the federal government have the right to “tear up” the agreement?

While the Victorian government says the Belt and Road Agreement does not legally tie Victoria to any specific project and prior to agreeing to any specific project the interests of Victoria and Australia will be duly considered. On the day the deal was signed, Minister Peter Dutton accused Premier Daniel Andrews of failing to act in the nation’s best interest. The Australian Prime Minister Scott Morrison also told the reporters that he was ‘shocked’ the Victorian government had involved the State in a ‘matter of international relations’ without discussion with the federal government.

Although the federal government was not pleased by the execution of the agreement, it did not have any right or legal basis to “tear up” the agreement back then. However, in December 2020, Australia passed and implemented a new Act, the Foreign Arrangements Scheme, which empowers the Australian Foreign Minister to review all agreements between State Governments and foreign governments. The Foreign Minister has been granted the power to cancel these agreements if such agreement is considered to be contrary to Australian foreign policy or detrimental to Australia’s diplomatic relations. Following the enactment of the Foreign Arrangements Scheme the Australian Foreign Minister Marise Payne pointed out that the Belt and Road Agreement was inconsistent with Australia’s foreign policy and subsequently decided to “tear up” this agreement.

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