Commercial Notes No. 10

No. 10
23 June 2004

This issue

Australia – United States Free
Trade Agreement

Government procurement under the FTA
The FTA and the Copyright Act

Susan Reye

Susan Reye Senior General Counsel
Australian Government Solicitor
T 02 6253 7110 F 02 6253 7317

On 18 May 2004, the Australia – United States
Free Trade Agreement (FTA) was signed in Washington by
Australia and the United States. This is the outcome
of negotiations between the two countries undertaken
since November 2002.

Once the FTA enters into force, the Australian and
United States governments will be bound to observe the
terms of the agreement as a matter of international law.
This will involve amendments to legislation, changes
to policies and administrative processes.

The FTA does not directly create legal rights or obligations
as a matter of Australian law. Changes to the law as a
result of the FTA will depend on legislative amendments.
This issue of Commercial notes describes measures set out
in the FTA chapters on government procurement and intellectual
property rights and discusses the likely implications for

Entry into force and implementation

The agreement did not take legal effect immediately upon
signature. Article 23.4.1 provides that the FTA will enter
into force 60 days after the parties to the agreement notify
each other that their respective internal requirements
for entry into force have been fulfilled, or such other
date as the parties may agree.

Australian practice is to table treaties in Parliament,
and for them to be considered by the Joint Standing Committee
on Treaties (JSCOT). In addition, the FTA is being considered
by a Senate Select Committee. Formal parliamentary approval
of the FTA is not required.

However, it will be necessary, before the FTA enters into
force, to ensure that Australian legislation is consistent
with, and allows Australia to comply with its obligations
under, the FTA. It will be necessary for parliament to
enact some amendments to existing legislation, and a Bill
for this purpose has been introduced. Some subsidiary legislation
will also need to be amended.

In the United States, the Congress must consider and approve
the agreement, and pass any necessary legislation.

After these processes have been completed in both countries,
the governments will notify each other, probably by an
exchange of diplomatic notes, and the FTA will enter into
force sixty days later. The FTA is not expected to enter
into force before 1 January 2005.

What is covered?

The FTA comprises 23 chapters, several annexes and a range
of side letters (exchanges of letters). Important chapters
include: Pharmaceutical Benefits Scheme, Agriculture, Textiles
and Apparel, Customs Administration, Telecommunications,
Government Procurement, Electronic Commerce, and Intellectual
Property Rights.

Under Article 1.2.15, the FTA covers both citizens and
permanent residents of Australia and the United States,
unless specified otherwise. It covers activity throughout
Australia, except for the Australian Antarctic Territory.
For the United States, the FTA covers activity in the 50
states, the District of Columbia and Puerto Rico (Annex
1-A). Either country can terminate the FTA by writing to
the other providing six months notice of the termination
(Article 23.4.2).

Text of the FTA can be viewed at:

Susan Reye is a Senior General Counsel
practising in the areas of international law, statutory
interpretation, administrative law and constitutional
law. In particular, she has advised on many matters involving
interpretation of treaties and the implementation of
international obligations by legislation. She was General
Counsel to the Department of the Environment and Heritage
from 1996 to 2003, advising on key national and international
environmental law issues. She has also worked as an international
lawyer in the Department of Foreign Affairs and Trade,
the Office of International Law in the Attorney-General's
Department, and at the OECD.

Harry Dunstall

Harry Dunstall Senior Executive Lawyer
T 02 6253 7066 F 02 6253 7301

Chapter 15 of the FTA sets out the measures that Australia
has agreed with the United States will govern the conduct
of their respective government procurement activities.

Once the FTA is implemented, the Australian Government
will be required to ensure that (most of) its departments
and agencies comply with the measures when conducting
procurement covered by Chapter 15. 1

This note describes the range of measures set out in the
Chapter 15. It can be expected that there will be a range
of amendments to the Commonwealth Procurement Guidelines and
other government policies to reflect these requirements.

Existing procurement framework

The measures in Chapter 15 will be integrated into the
existing Commonwealth procurement framework. For FMA departments
and agencies,2 this framework 3 includes:

  • the Financial Management and Accountability Act
    1997 (FMA)
  • the Financial Management and Accountability Regulations
    1997 (FMAR)
  • the Commonwealth Procurement Guidelines (CPGs)
    as issued by the Minister for Finance and Administration
    under the FMAR
  • agency Chief Executive Instructions (CEIs), and
  • the general law of tendering (discussed below).

In general terms, this framework requires agencies and
their officials to conduct their procurement activities
efficiently, effectively and ethically. The integration
of the measures will mainly occur through revision of the

Minor changes to the Commonwealth Authorities and Companies
Act 1997 (CAC Act) will be put in place to extend
the procurement framework to the agencies listed in Chapter
15 of the FTA and governed under that Act.

An important feature of Chapter 15, as it operates within
the FTA, is that the Australian Government is answerable
for the measures it has put in place to ensure compliance
by agencies with the FTA.

The responsibility of individual agencies will be to ensure
that they comply with the measures as they are implemented
by the Australian Government through the CPGs and related
policy instruments.

Key messages

The key messages for agencies arising from Chapter 15
of the FTA are:

  • Many of the measures are consistent with the existing
    procurement framework applicable to agencies, and reflect
    current policy and practice in how agencies conduct their
    procurement. However, there will be some changes.
  • Agencies will be required to approach their procurement
    activities in a more structured, planned and careful
    way, including publishing an annual procurement plan.
  • There is a presumption that agencies will use an open
    tender process for the conduct of their procurement activities.
  • The ability of agencies to use other than open tendering
    processes will be more circumscribed under the measures.
  • In particular, agencies will not be able to issue
    a restricted tender based simply on their knowledge of
    the market.
  • Agencies will be more limited in their ability to
    include industry development requirements in tender documents.
  • Technical standards will need to reflect international
    standards where they are available.
  • Agencies may not be able to award contracts to tenderers
    that do not conform to 'essential requirements' at
    the time that tenders are opened.
  • Agencies may be required to include more information
    in tender documents about how tender evaluation will
    be undertaken.
  • Agencies will be required to include details of their
    method of procurement in gazettal notices of contracts.

Scope and coverage of the measures

What government procurement is covered

The measures in Chapter 15 apply to 'covered procurement'.
In general terms, all procurement contracts above a certain
value that are entered into by Commonwealth departments
and agencies (i.e. most FMA and non-GBE CAC agencies 4)
will be covered by the measures, unless the agreement specifically
excludes the procurement.5

General procurement exclusions

Chapter 15 does provide for a number of exclusions from
the measures. For example, the measures will not apply
to the extent that the activities being undertaken by a
department or agency relate to:

  • the procurement of motor vehicles
  • grant, funding, cooperative and sponsorship agreements

    Example: The Cooperative Research Centre (CRC)
    Program undertaken through AusIndustry would not
    be covered by the measures.

  • procurement undertaken to provide foreign aid

    Example: Procurement undertaken by AusAID or other
    agencies for the purposes of providing aid or assistance
    to other countries would not be covered by the measures.

  • the procurement of research and development services

    Example: Procurement of R&D services by CSIRO
    and DSTO would not be covered by the measures.

  • the procurement of goods and services (including construction)
    for use outside Australia

    Example: All construction, upgrade and maintenance
    work undertaken by the Overseas Property Office of
    the Department of Foreign Affairs and Trade for Australian
    embassies, high commissions and missions around the
    world would not be covered by the measures.

Specific exception for Defence procurement

There are also significant exceptions for the Department
of Defence in that the measures do not apply to the procurement
of major capital equipment, other military equipment and
systems and certain other Defence supplies (Annex 15-A,
Section 1, note 3(a)).6

In addition, the procurement of goods and services by
or on behalf of the Defence Intelligence Organisation,
Defence Signals Directorate and Defence Imagery and Geospatial
Organisation, are also specifically exempted from the Chapter
15 measures (Annex 15-A, Section 1, note 3(c)).

The reservation by Australia of the right to maintain
the Australian Industry Involvement and successor programs
is also significant for Defence
(Annex 15-A, Section 1, note 3(d)). The Australian Industry
Capability (AIC) program is an important element of Defence's
capital acquisition and through life support contracting

Value of procurement contracts

Even if the above exceptions do not apply, the measures
will apply only to contracts above a certain value:

For the procurement of general goods and services, the
thresholds are:

  • for FMA agencies: A$81,800
  • for CAC bodies: A$409,000.

For the procurement of construction services, the threshold
for both FMA agencies and CAC bodies is about A$9.4 million.
The thresholds are subject to increases under a particular
formula to be applied every two years (Annex 15-A, Section

In addition, when calculating the value of a procurement,
an agency or body cannot bypass these thresholds by splitting
up a proposed procurement into separate procurements. The
value of the total procurement must be considered.

Similarly, it must take into account any options under
the contract when calculating the contract value. It seems
that these options would include both options to extend
the contract, and options to procure further supplies under
the contract – whether or not the options are exercised.

And finally, there is a catch-all provision to the effect
that if the total estimated maximum value of a procurement
over its entire duration is not known then the procurement
will be taken to be covered by the measures in the chapter.

Example: Standing offer agreements under which goods
or services may be purchased from one or more suppliers
over the period of the standing offer would generally
be covered by the measures set out in the chapter, irrespective
of the extent to which orders are actually placed under
the standing offer. (Standing offer agreements will also
be discussed in the context of 'multi-use lists.)

The main measures

WTO obligations

Chapter 15 contains the usual 'national treatment' and 'non-discrimination' provisions
consistent with the WTO Agreement.7 These provisions
mean that the Commonwealth cannot:

  • treat US suppliers any less favourably than Australian
  • treat a local supplier any less favourably than other
    local suppliers simply because of the extent of its foreign
    ownership, or discriminate against that supplier simply
    because it may offer US goods or services.

Overarching obligations of fairness and transparency

Like the CPGs, Chapter 15 requires procurement to be undertaken
in a way that is fair and transparent. Consistently with
this requirement, agencies will be encouraged to publish
annual procurement plans as soon as possible each financial
year (Article 15.4.3). The plans should include the subject
matter of each procurement planned to be undertaken during
the year as well as the estimated dates for release of
the respective tender documents.

Chapter 15 recognises that that the Commonwealth may use
open, selective or limited tendering procedures to undertake
its procurement.

However, the clear preference expressed in the chapter
is for open tenders to be undertaken. It is only in certain
circumstances that selective or limited tendering may be
used. Accordingly, agencies will need to be more rigorous
in developing their procurement strategies to ensure that
they meet the pre-conditions set out in the chapter for
using selective or limited tendering.

Selective tendering 8

In relation to selective tendering, the chapter indicates
that tenders should be invited from the maximum number
of domestic and US suppliers consistent with the efficient
operation of the procurement system (Article 15.7.6). The
concept of selective tendering differs from how Commonwealth
agencies might otherwise conduct a restricted tender process.

A selective tender process must be undertaken in accordance
with particular procedures, that is:

  • 'a multi-use list'9
  • a list of suppliers that have responded to a notice
    inviting applications for participation, or to an expression
    of interest (EOI), or
  • a list of suppliers that comply with particular licensing
    or other legal requirements that exist independently
    of the procurement process.

    Example: A tender process for the procurement of
    telecommunications services which requires tenderers
    to hold a carrier licence under the Telecommunications
    Act 1997.

In the case of a notice inviting applications for participation,
or an EOI, it is still possible for agencies to shortlist
out of that initial stage. However, the notice or EOI document
must specify the relevant requirements and evaluation criteria
for shortlisting.

Accordingly, unless a multi-use list is used, it would
appear that in most circumstances agencies will need to
conduct an initial EOI or similar process before undertaking
the selective tendering process. An agency would not be
complying with the selective tendering pre-conditions if
it were to simply issue a restricted tender based on its
knowledge of the market, even if the agency considered
that based on this knowledge there were only a certain
number of suppliers capable of meeting a particular requirement.

Limited tendering

Agencies may, however, be able to undertake a 'limited
tendering' process as long as this is not used for
the purpose of 'avoiding competition or [protecting]
domestic suppliers or in a manner that discriminates against
[US] suppliers' (Article 15.8).

An agency may choose not to comply with the Chapter 15
measures and conduct a limited tendering process by contacting
a supplier or suppliers of their choice, but only in certain
circumstances, including:

  • where a tender process has already been undertaken
    and either no tenders were submitted or no tenders met
    the requirements
  • where particular goods or services can be supplied
    only by a particular supplier and no reasonable alternative
    or substitute goods or services exist, e.g. due to absence
    of competition for technical reasons

    Example: This would cover a situation where an
    agency might require specific technology or access
    to intellectual property where there is only one
    supplier of that technology with the rights to the
    relevant intellectual property.

  • where an existing supplier is in place and the agency
    requires additional goods and services relating to those
    already supplied

    Example: This would cover a situation where an
    agency has procured particular equipment that requires
    spares and the spares can only be sourced from the
    OEM (original equipment manufacturer).

  • where new construction services are required consisting
    of the repetition of similar construction services and
    the initial contract was let following an open or selective
    tendering process
  • for purchases under 'exceptionally advantageous
    conditions that only arise in the very short term',
    e.g. unusual disposals or unsolicited proposals
  • 'insofar as is strictly necessary where, for
    reasons of extreme urgency brought about by events unforeseen
    by the procuring entity' the goods and services
    could not be obtained in time under the tendering procedures
    otherwise set out in Chapter 15.

    While agencies may think the 'extreme urgency' option
    provides a 'get out' clause to enable their
    procurement to be undertaken on a sole or restricted
    source basis, we expect that such procurement would
    be closely scrutinised.

Multi-use lists

Chapter 15 also governs the use of 'multi-use lists' (Article
15.7.4)10 An agency will be able to establish
a multi-use list provided that it publishes annually or
otherwise makes available electronically a notice inviting
interested suppliers to apply for inclusion on the list.
The notice must set out the conditions for participation11 and
how they will be verified by the agency.

The extent to which the term 'multi-use list' would
cover agency standing offer panel agreements, often entered
into following a formal tender process, is not clear. Standing
offer panels have been established by agencies for the
supply of a broad range of different goods and services,
e.g. ranging from the supply of stationery to the provision
of legal services. Standing offer panels are a useful mechanism
to ensure an agency can meet its ongoing requirements for
the provision of day-to-day goods and services. Depending
on the nature of the panel, their duration is often for
around three years with options for extension. The reason
for this is that once the panel is set up following a competitive
tender process, the agency wishes to leverage the efficiency
and effectiveness benefits that a panel brings. Retesting
the market on an annual basis is unlikely to leverage any
greater benefits that would outweigh the time, cost and
resources of conducting the process.

It seems likely that the concept of a 'multi-use
list' is directed at things like the Endorsed Supplier
Arrangement, rather than individual standing offer panels – even
if the particular panel includes numerous suppliers. However,
it is expected that the Department of Finance and Administration
will provide guidance as to whether particular kinds of
panel arrangements will constitute a multi-use list. If
standing offer panels come within the definition, then
much of the benefit of having a panel will be negated.

Many measures are 'business as usual'

Although the measures in Chapter 15 will apply to most
procurement activities undertaken by Australian Government
agencies, many of the measures are broadly consistent with
the way the government already undertakes – or should
undertake – its procurement activities (i.e. consistently
with probity requirements). Many of the measures are consistent
with the CPGs and Finance Procurement Guidance and are
reflected in the usual conditions of tender used by most
agencies. For example:

  • The closing time for tenders must be consistent for
    all tenderers.
  • The tender documents must be provided promptly to
    all suppliers who request them and must contain all information
    necessary to enable suppliers to prepare and submit responsive
  • Agencies must promptly reply to any reasonable request
    for information about a procurement, however in doing
    so they must not give an unfair advantage to one supplier
    over others.
  • If an agency modifies the evaluation criteria or technical
    requirements or otherwise amends or reissues any documentation,
    it must notify this to all known suppliers participating
    in the process and allow suppliers sufficient time to
    modify and resubmit their tenders if required.
  • Tenders must be received and opened under procedures
    that guarantee fairness and impartiality – agencies
    must treat tenders in confidence, and in particular shall
    not provide information to one or more suppliers if that
    would prejudice fair competition.
  • In relation to late tenders, agencies must not penalise
    a tenderer if it is received after the closing time solely
    because of mishandling on the part of the agency.
  • If an agency permits one tenderer to rectify an unintentional
    error during the evaluation process, the agency must
    provide the same opportunities to all tenderers.12

The measures also deal with the minimum time periods
tenderers can be given to submit their tenders. The
starting point is a 30 day minimum period, however
this can be reduced for the procurement of commercial
goods and services13 or for electronic procurement.14

All these requirements would normally be complied
with by agencies who are undertaking procurement activities
in accordance with best practice and probity requirements.
The difference is that changes to the CPGs to reflect
the FTA are likely to make these requirements mandatory.

Content of the tender documents

Chapter 15 also gives guidance about what should be included
in the tender documents. Again, this is broadly consistent
with the approach normally adopted by Australian Government
agencies when drafting their tender documents. So, for
instance, the tender documents must include:

  • a complete description of the nature, scope and quantity
    of the goods and services and requirements to be fulfilled,
    including any technical specifications
  • any conditions for participation, including financial
    guarantees or information to be submitted
  • all evaluation criteria, and
  • 'any other terms and conditions relevant to the
    evaluation of tenders'.

In relation to the last requirement on that list, it is
not entirely clear as to the extent to which the entire
evaluation methodology will need to be included in the
tender documents, e.g. weightings, scoring system, use
of evaluation tools, etc. It is arguable that much more
detail about the evaluation methodology may have to be
included in the tender documents, rather than simply incorporating
the detail in the tender evaluation plan (which is not
provided to tenderers).

This requirement may also mean that it will be difficult
in the future to rely on reserved rights to consider matters
other than those that are expressly set out in the evaluation
criteria or methodology in the tender document.

Conduct of tender evaluation

Chapter 15 also provides guidance as to how tender processes
should be undertaken. Again, many of the measures are broadly
consistent with existing best practice in conducting Commonwealth
tender processes.

Key features include:

  • Agencies must not use technical specifications or a conformity
    assessment procedure to create unnecessary obstacles to
    trade between Australia and the United States.
  • Consistently with the approach now being adopted by
    agencies, technical specifications should be specified
    where appropriate
    in terms of 'performance and functional requirements' (i.e.
    Function and Performance Specifications or FPSs) rather
    than by design or descriptive characteristics.
  • Further, the technical specifications should be based
    on international standards where they exist. Current
    practice under the CPGs is to base performance standards
    on Australian
    standards where they exist, although these are increasingly
    being harmonised with international standards.
  • Interestingly from a probity perspective, Chapter
    15 expressly acknowledges that an agency may allow a
    that is engaged to provide design or consulting services
    to subsequently participate in procurements related
    to such services, so long as it would not give the supplier
    an unfair advantage over other suppliers.
  • Agencies must limit any conditions for participation15 in the procurement process to those that ensure the supplier
    has the 'legal, commercial, technical and financial
    abilities to fulfil the requirements of the procurement'.

One particular condition for participation dealt with
in the chapter is a condition based on 'relevant
prior experience' – such a condition may be
imposed by an agency, but only where this is 'essential
to meet the requirements of the procurement'.

Accordingly, while prior experience of a tenderer may
be an acceptable criterion as part of the overall tender
evaluation, it would seem that agencies may not be able
to use prior experience (or past performance) as a mandatory
screening criteria to exclude a tenderer from further participation
in the process, unless such experience is essential for
the purposes of the particular procurement.

Australian industry involvement

On its face, Chapter 15 could have major implications
for Australia's industry development program, as
currently reflected in the CPGs. This is because, in the
future, an agency will not be permitted to 'seek,
take account of, impose or enforce' offsets in its
procurements (Article 15.2.5)16 Accordingly, Australia
will need to revise its current industry development policy,
and in particular the requirement for agencies to develop
model industry development criteria for inclusion in major

However, the operation of this article is
circumscribed in a couple of respects. First, Australia
has expressly
reserved the right to maintain the Australian Industry
Involvement and successor programs for Defence procurement
(Annex 15-A, Section 1, note 3(d)).

Second, Australia's small and medium enterprise
(SME) policy is preserved because of a reservation that
Chapter 15 does not apply to any form of preference to
benefit SMEs (see Annex 15-A, Section 7). Accordingly,
agencies' 'model industry development criteria' may
need to be limited to the extent of SME participation in
a tenderer's tender.

Given the restriction on 'offsets', it may
therefore be difficult for agencies (and government) to
take account of regional policy considerations in the future
when evaluating and awarding tenders.

Contract award issues

Chapter 15 also deals with the process of awarding of
contracts (Article 15.9).

Conforming to essential requirements

In particular it provides that a tenderer cannot be awarded
a contract unless at the 'time of opening',
the tender 'conforms to the essential requirements
of the tender documentation'.

This raises a few issues. First, it would seem to require
agencies – to avoid any uncertainty on this issue – to
specify the essential requirements of the RFT. We have
seen numerous Commonwealth tender documents that have a
general provision permitting the Commonwealth to exclude
tenderers from further consideration that do not meet 'essential
requirements'. However, there is often nothing in
the conditions of tender or statement of work as to what
actually comprises the essential requirements.

Agencies may also need to update their conditions of tender
to make 'conformance' or compliance' with
essential requirements a mandatory criterion.
Second, it is not clear how such a measure will operate
in the context of a condition of tender that reserves the
right to accept a non-complying tender. Certainly agencies
will need to be careful about what they specify as mandatory
or 'essential' criteria – particularly
as there are usually very few mandatory criteria in a procurement
process because most things are comparative rather than

Third, the requirement is for conformance 'at the
time of opening' of tenders. This may make it difficult
for agencies to seek clarification of tenders or provision
of information that may have been inadvertently omitted
from a tender, to facilitate a tenderer's compliance
with an essential requirement.

Lowest price or best value

Chapter 15 also requires a procuring entity to award the
contract to the tenderer who the procuring entity has determined,
in accordance with the essential requirements and the specified
evaluation criteria, satisfies the conditions of participation,
is fully capable of undertaking the contract and whose
tender is the lowest price or the best value or the most
advantageous. This is broadly consistent with Commonwealth
policy as reflected in the CPGs that tenders should be
awarded on the basis of best value for money and that lowest
price is not necessarily the sole determinant of this.

Tenderer notification and debriefing

Agencies must promptly inform tenderers of contract award
decisions and offer debriefings for unsuccessful tenderers.
Again, this is broadly consistent with current Commonwealth
procurement policy and practice. It would seem that this
measure would not require tenderers to be informed of the
outcomes of the tender process until the contract has been
signed with the successful tenderer (i.e. assuming contract
signature equates to 'contract award', although
Chapter 15 is not entirely clear on this point).

There appears to be some inconsistency in Chapter 15 in
relation to whether debriefings need to be in writing or
whether they can be given orally. The requirement to give
reasons to an unsuccessful tenderer in Article 15.9.8 is
not expressed to be in writing, and accordingly it would
seem that either oral or written debriefings would meet
the requirement. By contrast, if a supplier's application
for participation in a procurement is rejected, or the
supplier is not included in a multi-use list or is subsequently
removed from the list, the supplier must be 'promptly' informed
with a 'written explanation of the reasons for its
decision'. These requirements, although apparently
inconsistent, should be seen in the context of the underlying
philosophy of the chapter that participation in tender
processes is the key outcome.


Consistently with existing gazettal requirements, agencies
must publish a notice of each contract awarded no later
than 60 days after the contract is signed. To comply with
the chapter, the notice must now include information about
the procurement method used for the contract.

Scrutiny of decisions

To ensure that Australia and the United States can monitor
each other in their respective procurement processes, either
party can obtain information from the other on the tender
and evaluation procedures used in the conduct of a particular
procurement to demonstrate that it was conducted fairly,
impartially and in accordance with the requirements of
Chapter 15.

Agencies will therefore be required to maintain records
and reports of their tendering procedures and retain these
for at least three years after contract award.

Challenges to tender processes

Chapter 15 requires each party to have criminal or administrative
penalties to sanction unethical conduct of officials undertaking
the procurement, e.g. soliciting bribes or other benefits
as well as for persons offering a pecuniary benefit or
advantage (Article 15.10). Australia would already generally
comply with these requirements, e.g. under the Crimes
Act 1914, Public Service Act 1999, and the Criminal
Code Act 1995.

However, Chapter 15 also requires both Australia and the
United States to have mechanisms in place whereby unsuccessful
tenderers who complain about the conduct of a tender process
can obtain timely and impartial consideration of their
complaint, including that each party must have at least
one impartial administrative or judicial authority that
is independent from its procuring entities to receive and
review challenges that suppliers submit in accordance with
domestic law (Article 15.11).
While on the face of this requirement, Australia would
be required to put in place merits or judicial review arrangements
for supplier challenges to tender processes, a side letter
between Australia and the United States confirms that Australia's
existing public law of tendering is sufficient to comply
with this requirement.

As agencies would be aware, the Commonwealth is subject
to an obligation to act fairly in the conduct of its tender
processes and its processes may be challenged in a court,
e.g. for breach of process contract,17 or lack of procedural
fairness, or under the law of estoppel or misrepresentation.

In the context of procedural fairness, the signing of
the FTA could give rise to an issue about the extent to
which tenderers 'legitimate expectations' have
been fulfilled. If a particular tendering procedure gives
rise to a legitimate expectation that the procurement process
will be conducted according to that procedure, it may be
possible for a tenderer to challenge the process if the
procedure is not followed. If a Commonwealth procurement
is covered by Chapter 15 of the FTA, then a tenderer may
be able to argue that it had a 'legitimate expectation' that
the process would be undertaken in accordance with the

Similarly, depending on how the measures are implemented
under the Commonwealth's financial management and
accountability framework, the revised framework may give
rise to a legitimate expectation that Commonwealth procurement
processes will be conducted according to those measures.

In any event, unsuccessful tenderers may complain to review
bodies other than courts, such as the Commonwealth Ombudsman.
The Australian National Audit Office also provides a review
mechanism by way of performance audits of agency procurement


While the FTA is consistent with many existing policies
and practices in relation to Commonwealth procurement,
it is clear that there will need to be a number of changes
to the Commonwealth procurement guidelines and potentially
to agency CEIs (for FMA agencies) and applicable procurement
policies (for CAC agencies) to ensure that they are consistent
with the FTA.

Harry Dunstall is a Senior Executive Lawyer practising
principally in the area of Commonwealth procurement of
goods and services. He provides strategic, legal and probity
advice to agencies in their procurement activities and
contracting policy generally. The author gratefully acknowledges
the kind assistance of the Department of Finance and Administration
for comments on an earlier draft of this article. However,
all views expressed in the article are the responsibility
of the Australian Government Solicitor.


  1. Chapter 15 also applies to all Australian States, the
    ACT and NT, and to listed US States (Annex 15-A, Section
  2. Departments and agencies under the Financial Management
    and Accountability Act 1997.
  3. For non FMA agencies, their procurement and financial
    management framework is governed by the Commonwealth
    Authorities and Companies Act 1997 (CAC Act).
  4. Authorities
    and companies under the CAC Act.
  5. The FMA agencies and CAC
    bodies covered by Chapter 15 are set out in Annex 15-A,
    Sections 1 and 3, respectively.
    The measures are also intended to apply to certain
    State and Territory agencies (see Annex 15-A, Section
  6. This
    exception is for 'essential security' reasons,
    as permitted by Article 22.2 of the FTA.
  7. Marrakesh Agreement
    Establishing the World Trade Organization, 15 April
  8. 'Selective tendering' means a procurement
    method where the procuring entity determines the suppliers
    that it will invite to submit tenders (Article 15.15).
  9. A 'multi-use list' means a list of suppliers
    that a procuring entity has determined satisfy the conditions
    for participation in that list, and that the procuring
    entity intends to use more than once (Article 15.15).
  10. See
    note 9.
  11. 'Conditions for participation' means registration,
    qualification and other prerequisites for participation
    in a procurement (Article 15.15).
  12. Presumably, an agency
    will comply with this requirement if it has a condition
    of tender that indicates that the
    Commonwealth will consider permitting these rectifications
    and then applies that condition consistently.
  13. 'Commercial goods and services' means goods
    and services that are sold or offered for sale to, and
    customarily purchased by, non-governmental buyers for
    non-governmental purposes; it includes goods and services
    with modifications
    customary in the commercial marketplace, as well as minor
    modifications not customarily available in the commercial
    marketplace (Article 15.15).
  14. See Article 15.5.
  15. See note 11.
  16. 'Offsets' means any conditions or undertakings
    that require use of domestic content, domestic suppliers,
    the licensing of technology, technology transfer, investment,
    counter-trade or similar actions to encourage local development
    or to improve a Party's balance of payments accounts
    (Article 15.15).
  17. The concept of a 'pre-award' or 'process
    contract' (that is, a preliminary contract governing
    the tender process) applying to government tenders was
    established in Australia in Hughes Aircraft v Airservices
    Australia (1997) 146 ALR 1.

Samantha Schrader

Samantha Schrader Senior Lawyer
Australian Government Solicitor
T 02 9581 7678 F 02 9581 7445

To facilitate the commercial outcomes of the FTA, Chapter
17 of the agreement proposes to reconcile the existing
disparity between the intellectual property regimes of
Australia and the United States. Where relevant, Chapter
17 confirms that certain outcomes require that only certain
administrative processes be adopted to meet Australia's
obligations under the FTA. Other outcomes require legislative

Intellectual property rights are complex, intangible
assets subsisting within the products, services and marketing
strategies of most vendors. A significant feature of the
FTA is its recognition of the ubiquitous nature of these
rights and their importance to the bilateral trade arrangements
between the two countries.

This note outlines the major
changes proposed to Australia's
copyright legislation from the copyright owner's


Copyright is, arguably, the most complex of all
intellectual property rights. Comprising a number of rights,
it also
covers a diverse range of subject matter such as literary
works (including databases and computer software) artistic
works (photographs, drawings), sound recordings and television

Protection is free and automatic under the Copyright
Act 1968 (Cth) ('the Act') provided the
relevant work is eligible for protection. Generally speaking,
depends on originality and a recognised connection to Australia.
Under the Act copyright is typically protected for the
author's lifetime plus 50 years, although this varies
depending on the type of work.1 Ownership of
copyright usually vests in the author or creator of the
work, subject
to several exceptions. A significant exception is where
the work is subject to 'Crown Copyright'.2

Australian Government is a significant owner and prolific
user of copyright works. Its departments and agencies use,
acquire and create copyright works in a diverse variety
of ways when performing their various roles and functions.
These include the creation and acquisition of reports,
photographs, scientific research, educational material,
parliamentary papers and website content.

Crown copyright
provisions are contained in Part VII of the Act. Generally
speaking, they give the Commonwealth
additional rights in relation to ownership and use of certain
copyright material

Major amendments to Copyright Act under
the FTA

Extended term of protection

Article 17.4.4 of the FTA requires
that Australia amend the Act to extend the typical term
of copyright protection
to life plus 70 years. Under the proposed change, the term
of copyright protection under the Act will be 70 years

  • the date of death of author, for literary and artistic
    works, and
  • the date of publication, for sound recordings
    and films.

These amendments extend protection in Australia
by an additional 20 years and bring Australia into line
with the corresponding
US copyright legislation.3

Increased protection against

Another prominent
feature of Chapter 17 is the requirement to introduce a
new copyright enforcement regime for Australian
copyright owners in respect of the infringement of digital
copies of their works.

Digital copyright infringement creates
high-quality reproductions, is virtually instantaneous
and is proliferated predominantly
through facilities of third party service providers. These
providers are referred to in the FTA as network/infrastructure
providers (Optus/Telstra) or value added providers (internet
service providers).

Article 17.11.29(a) of the FTA requires
Australia to implement legal incentives for service providers
to assist copyright
owners in dealing with the infringement of their internet
content. Such incentives require a more prescriptive approach
to the detection and actioning of infringement activities
than that contained in the existing provisions of the Act.

Article 17.11.29(a) will require amendment to the Act
and is modelled on protections available to US copyright
under the corresponding US legislation, The Digital
Millennium Copyright Act (1988).

Of particular note
is the creation of certain 'safe
harbour' defences for service providers. These defences
would essentially limit the liability of service providers
in respect of third party infringement where the service
provider has complied with the relevant requirements. In
other words, where the facilities of a service provider
are used by third parties for infringement activities,
copyright owners can require the service provider
to 'take down' allegedly infringing material
from the relevant website:

  • in the event of receiving an 'effective
    notification' from
    the owner, or
  • upon otherwise obtaining 'actual knowledge of the
    infringement or becoming aware of facts or circumstances
    from which the infringement was apparent'.

service providers would retain the risk of liability for
third party infringement actions brought
by copyright owners.

Additional damages for alleged copyright
infringement on the internet

Under the Act, copyright owners
may sue infringers for unauthorised use of their copyright
works. Awards compensate
owners for loss suffered by the infringement.
Additional damages are available in Australia where the
infringement is particularly deliberate and flagrant.4 Notwithstanding this, it appears additional damages are
not often awarded by courts in Australia.

Article 17.11(7)
of the FTA proposes a more distinct alignment between the
awards traditionally granted by
courts with those commonly handed down in US courts.
In the United States, courts regularly dispense high
awards to deter future infringers.

Under the FTA, the
Australian Government is obliged to ensure awards of additional
damages become a more frequent
feature of successful infringement actions in Australia.


Copyright is a valuable intellectual property asset – it
is also vulnerable to unauthorised duplication and dissemination
on a global scale. The underlying principle of Chapter
17 of the FTA is the alignment of Australian copyright
law with the more robust protections contained in the
US copyright legislation. This is intended to increase
confidence in both countries by creating a familiar legislative
environment for trade relations that facilitates the
protection and enforcement of their intellectual property

Amendments to Australia's copyright legislation
to implement the FTA will significantly advantage copyright
owners (including the Commonwealth). Owners will be in
a stronger position with respect to particular infringement
activities as well as the amount of awards recoverable
upon successful litigation. Conversely, the proposed
of the term of copyright protection will impact on users
(including government and educational institutions) as
copyright owners will be able to demand licence fees
for their works for an additional 20 years.

Samantha Schrader is a Senior Lawyer who specialises in
information technology and intellectual property law with
an emphasis on licensing, e-commerce and technology-related
transactions. Prior to joining AGS, Samantha was an Associate
in the technology group of Shaw Pittman LLP, a leading
IT firm in the United States where she was involved in
numerous US and international technology-related transactions.


  1. Section 33 Copyright Act 1968.
  2. Section 35(1) Copyright
    Act 1968.
  3. US Sonny Bono Copyright Term Extension Act
  4. Section 115 Copyright Act 1968.

AGS has a team of lawyers specialising in advising government
agencies on the implications of the FTA. For further information
on the articles in this issue or on other FTA issues, please
contact the team coordinator, Harry Dunstall, or any of
the lawyers listed below.

Harry Dunstall Senior Executive Lawyer
T 02 6253 7066 F 02 6253 7301


John Scala

02 6253 7223

Linda Richardson

02 6253 7207

Philip Crisp

02 6253 7159

Samantha Schrader

02 9581 7678

Litigation and dispute management

Simon Daley

02 9581 7490

Judy Pownall

02 9581 7451


Robert Orr QC

02 6253 7129

Susan Reye

02 6253 7110

ISSN 1443-9549 (Print)
ISSN 2204-6550 (Online)

The material in these notes is
provided to AGS clients for general information only
and should not be relied upon
for the purpose of a particular matter. Please contact
AGS before any action or decision is taken on the
basis of any of the material in these notes.

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