1. The Tribunal grants the application for exemption to the extent and subject to the conditions set out in the notice of exemption attached to this order.
2. Paragraph 1 operates on 26 September 2008. The operation of that paragraph is postponed to give the Applicant an opportunity to make any submissions it wishes to make to the Tribunal about the exact wording of the terms and conditions of the exemption.
3. After paragraph 1 is in operation and after considering any submissions made under paragraph 2, the Tribunal will cause notice of the exemption to be published in the Government Gazette.

Ms K. Eastman of Counsel instructed by Blake Dawson solicitors

The Victorian Civil and Administrative Tribunal has considered an application pursuant to section 83 of the Equal Opportunity Act 1995 by BAE Systems Australia Limited for exemption from sections 13, 14, 15, 100 and 195 of that Act. The application for exemption is to enable the applicant to discriminate on the grounds of nationality against any member of its workforce or person wishing to join its workforce in relation to controlling access to specified technology or technical data for defence-related projects undertaken or to be undertaken by it, to the extent required to enable it to comply with its other statutory obligations and its contractual obligations. Details of the conduct in respect of which the exemption is sought are set out in the application filed with VCAT.

"Commission" means the Victorian Equal Opportunity and Human Rights Commission.

"Controlled information" means information (including classified or sensitive information and technical data) to which the security requirements apply.

"Controlled material" means material (including equipment, technology, articles and services) to which the security requirements apply.

"Discriminate", "employee" and "contract worker" each have the meaning given in the EO Act.

"EO Act" means the Equal Opportunity Act 1995 (Vic).

"Security requirements" means any of the following -

(a) requirements made by the Australian government, that government's Department of Defence or any other department of that government under the Customs (Prohibited Exports) Regulations 1958 (Cth), the Defence Services Manual, or a term or condition of a licence or approval granted under those Regulations or under the Customs Act 1901 (Cth), including requirements for personal security clearances;

(b) the requirements of laws of the United States of America, including but not limited to, the International Trafficking in Arms Regulations and the Export Administration Regulations including requirements of any permit, licence or approval granted, or agreement made, under those laws;

(c) Contractual requirements applying to the Applicant and relating to any of the requirements mentioned in paragraph (a) or (b).

"Specified conduct" means to discriminate on the ground of the nationality against any member of the Applicant's workforce or anyone who wishes to join that workforce, in relation to defence-related projects undertaken or to be undertaken by the Applicant, and only to the extent required to enable the Applicant to comply with the security requirements, and includes but is not limited to the following conduct to the extent that it is required to enable the Applicant to comply with the security requirements -

(a) requiring members or potential members of the Applicant's workforce to provide details of their nationality and country of origin to enable the Applicant to determine whether they are permitted under the security requirements to work on certain defence-related projects or to have access to controlled material or controlled information;

(b) identifying (by means of a badge, maintenance of a list or otherwise) those in its workforce permitted by virtue of their nationality to work on certain defence-related projects or have access to related controlled material or controlled information so as to distinguish them from those not so permitted;

(c) preventing the release of controlled material or controlled information to members of that workforce on the basis of their nationality;

(d) requiring members of that workforce to execute formal security agreements based on nationality;

(e) restricting access to controlled material and controlled information connected with certain defence-related projects to particular members of that workforce based on their nationality;

(f) restricting access to areas of its facilities connected with certain defence-related projects to particular members of its workforce based on their nationality;

(g) rejecting applications to join its workforce in positions relating to certain defence-related projects based on the applicant's nationality, and taking into account a person's nationality in determining who should be offered employment or contract work requiring access to controlled material or controlled information;

(h) transferring members of its workforce from certain defence-related projects on the basis that, due to their nationality, the Applicant may not permit them to work on those projects, whether that transfer takes into account existing or changed nationality;

(i) disclosing information about the nationality of members of its workforce to -

(iv) the Australian Department of Defence;

(v) any other organisation for which or on whose behalf or at whose request the Applicant undertakes work in respect of which the Applicant has (directly or indirectly) an obligation not to transfer defence-related information to non-Australian citizens.

"Workforce" of the Applicant means the Applicant's employees and contract workers.

UPON READING the material submitted in support of the application and upon hearing submissions from Ms Eastman of counsel, and for the Reasons for Decision given by the Tribunal on 11 September 2008, the Tribunal is satisfied that it is appropriate to grant to the Applicant an exemption from sections 13, 14, 15, 100 and 195 of the EO Act to enable it to engage in the specified conduct.

The Tribunal hereby grants an exemption to the Applicant from the operation of sections 13, 14, 15, 100 and 195 of the EO Act to enable the Applicant to engage in the specified conduct.

This exemption is subject to the conditions in the Schedule. The exemption is to remain in force from the day on which notice of the exemption is published in the Government Gazette until 1 October 2011.

1. This exemption applies only to conduct by the Applicant where it has taken all steps reasonably available (including steps that might be taken in negotiating or performing any contract) to avoid the necessity to engage in the specified conduct.
2. Where the specified conduct involves moving a member of the Applicant's workforce from one project, area or facility to another, 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 which might arise from the transfer.
3. Where the Applicant has a system of badges or security passes to identify those in its workforce permitted by virtue of their nationality to work on certain defence-related projects or to access related controlled material or controlled information, or levels of access to that material or information, the pass or badge may show a code that indicates the holder's nationality, but not in such a way that a person unfamiliar with the code would be able to identify that nationality.
4. All information relating to security passes or badges, security clearance levels, or access to controlled material or controlled information, must be restricted to the Applicant's Manager of Security and Human Resources Manager and their properly appointed nominees on a 'need to know' basis.
5. The Applicant's employment policies must be amended as soon as reasonably possible so as to refer to the terms and conditions of this exemption and to make it clear that the purpose of requiring information regarding nationality is solely to enable compliance with the security requirements.
6. The Applicant must provide a copy of this exemption to -
   • (a) existing contractors who supply it with contract workers, as soon as is reasonably possible after this exemption commences; and
   • (b) any new contractors who supply it with contract workers, as soon as is reasonably possible after the relevant contract is entered into.
7. The Applicant must report in writing to the Commission and VCAT six months after the commencement of this exemption and every six months thereafter while the exemption is in force detailing in respect of the period to which the report relates and in respect of the matters covered by this exemption -
   • (a) the steps taken by the Applicant to comply with the EO Act, the Racial Discrimination Act 1975 (Cth) and the terms and conditions of this exemption, including training and education given to its workforce, compliance audits, and any complaints made under those Acts;
   • (b) the number of applications to join its workforce rejected under the exemption and whether any (and if so, how many) were subsequently appointed to other roles;
   • (c) the number of members of its workforce moved to other projects, areas or facilities under the exemption, and any steps taken to minimise harm or loss to those people arising from the transfers;
   • (d) the number of workforce vacancies advertised or offered under the exemption.
8. The Tribunal, in determining whether to renew or revoke this exemption, may (as well as other factors) take into account any breach of these conditions and anything in any report under condition 7.

1. This exemption is granted in part. It does not permit termination of employment. It is also granted subject to various conditions. These appear in the exemption itself. It is granted for three years, and will commence on the date on which notice of the exemption is published in the Government Gazette. I have stayed the operation of the order granting the exemption, to permit comment by the Applicant (BAE) on the exact wording of the exemption and its conditions.

1. On 24 December 2007 BAE applied to VCAT for exemption under s83 of the EO Act. The exemption sought was from ss13-15, 100 and 195 of that Act. I directed that BAE must advertise notice of the exemption application in the Herald-Sun newspaper and by email to all its Victorian employees. I directed that a copy of the application be sent to the Victorian Equal Opportunity and Human Rights Commission (the Commission).
2. The notice set a closing date for submissions on the application. The directions permitted the Applicant to make further submissions. Apart from submissions by BAE, the only other submission received was a letter from the Commission noting that the Victorian Charter of Human Rights and Responsibilities (the Charter) did not apply to this proceeding and also that, if VCAT granted the exemption subject to conditions involving reporting to the Commission, the Commission would be willing to accept this role.
3. After hearing oral submissions on the application by BAE, I directed that further written submissions as to the application of the Charter be filed. I gave the Commission an opportunity to reply to those submissions. BAE has made those submissions, and the Commission has not made any submissions in reply.
4. BAE seeks exemption from the sections of the EO Act previously mentioned to enable it to discriminate on the ground of nationality against any member of its workforce or any person wishing to join that workforce in relation to defence-related projects undertaken or to be undertaken by it, to the extent required to enable it to comply with certain statutory and contractual obligations. Details of the conduct which is to be covered by the exemption are set out in the application. It is sufficient here to say that those details include (for the purpose I have mentioned) -
   • requiring members or potential members of that workforce to provide to BAE information as to nationality and country of origin;
   • identifying (by means of a badge or pass, maintenance of a list or otherwise) those in its workforce whose nationality is included in those permitted (by the statutory and contractual obligations undertaken by BAE) to work on certain defence-related projects or have access to certain technology, materials or sensitive or classified information;
   • preventing the release of that material or information to members of BAE's workforce on the basis of their nationality;
   • requiring members of that workforce to sign formal security agreements based on their nationality;
   • restricting access to the material or information mentioned above in connection with certain defence-related projects to members of that workforce based on their nationality;
   • restricting access to areas and facilities of BAE connected with certain defence-related projects to members of that workforce based on their nationality;
   • rejecting applications to join BAE's workforce in positions relating to certain defence-related projects on the basis of the applicant's nationality;
   • transferring members of its workforce from certain defence-related projects on the basis that due to their nationality, BAE may not permit them to work on those projects;
   • terminating the employment of members of that workforce on the basis that, due to their nationality, BAE may not permit them to work on certain defence-related projects; and
   • disclosing information about the nationality of members of its workforce to the United States of America (US) Department of State, the US Department of Commerce, the US Federal Aviation Authority, the Australian Department of Defence, and other organisations on whose behalf BAE undertakes work in respect of which BAE is under an obligation which prohibits it from transferring defence information to non-Australian citizens.
5. I first say something about the law. I then make findings about BAE and its activities which are relevant to this application and summarise the legal and contractual obligations which BAE says have led to the making of this application. I next make some comments on the application of the Charter. Finally, I consider whether the exemption should be granted and, if so, on what conditions.

1. BAE seeks exemption from ss13 to 15 of the EO Act. In summary, s13 relates to pre-employment discrimination. It prevents an employer from discriminating against a person in determining who should be offered employment, the terms on which employment is offered, by refusing to offer employment or by denying the person access to guidance or training programs.
2. Section 14 relates to discrimination in employment. It prohibits an employer from discriminating against an employee by denying or limiting his or her access to opportunities for promotion, transfer or training, or to any other benefit connected with employment, by terminating his or her employment, by denying to him or her access to a guidance or training program, or by subjecting him or her to any other detriment.
3. Section 15 applies to contract workers. It prohibits a principal from discriminating against a contract worker in the terms on which the principal allows the worker to work, by not allowing the worker to work, by denying or limiting the worker's access to any benefit connected with that work, or by subjecting the worker to any other detriment.
4. Section 4 quotes 'employer', 'employee' and 'employment' very broadly. For example, those terms include work either under a contract of service or a contract for services, work on commission, and work in the public sector or as a statutory employee. Under s15, a contract worker is an employee whose employer has contracted with another person (the principal) that the employee will do work for the principal.
5. BAE also seeks exemption from ss100 and 195 of the EO Act. Section 100 prohibits a person from requesting or requiring another person to supply information that the receiver of the information could use as a basis for discriminating against the supplier of the information. Section 195 prohibits the publication of an advertisement that indicates, or could be reasonably understood as indicating, that a person intends to breach (among other things) Part 3 of the EO Act. Part 3 contains ss13 to 15.
6. The exemption is sought from the prohibitions of discrimination on the basis of nationality. 'Race' is an attribute listed in s6 of the EO Act on the basis of which that Act prohibits discrimination. 'Race', under s4, includes nationality. In the context of the Racial Discrimination Act 1975 (Cth), it has been held that 'nationality' equates to citizenship and has a different meaning from 'national origin'[1].

1. Under s83 of the EO Act, VCAT may grant an exemption from any of the provisions of the Act in respect of a person or class of people, an activity or class of activities, or in any other circumstances specified by the Tribunal[2]. An exemption lasts for a maximum of three years but may be renewed for a similar maximum period. It may be granted subject to conditions. There is also provision for its revocation.
2. Until recently, the Tribunal's approach to exemption applications has been to consider the following questions[3] -
   • Is the exemption necessary?
   • Is the relevant conduct arguably prohibited by the EO Act?
   • Is there some interest sufficient to justify the exemption? Under this third question the Tribunal has looked at matters such as whether the exemption will further one of the objectives of the Act, whether the conduct is within the spirit (although not necessarily the letter) of one of the express exception provisions in the Act, or whether there is some public interest to justify exemption[4].
3. In my view, a number of recent cases require this approach to be re-examined. I briefly mention them.
4. In 2007, the then President of VCAT Justice Morris (as he then was) granted a renewal of an exemption earlier granted to Boeing and related companies, but on more stringent conditions[5]. He rejected the argument that the discretion to grant exemptions could only be exercised to further an objective of the EO Act. His view was that, in an appropriate case, an exemption could be granted although unrelated to those objectives, if justified by some public or private interest. He also rejected the submission that a test similar to that in s7 of the Charter should apply. That test would have looked at whether the exemption imposed reasonable limits on the rights given by the EO Act. Relevant factors would have been the nature of the right (to be free from prohibited discrimination), the importance of the purpose of the exemption and its nature and extent, the relationship between that purpose and the exemption, and whether there was any less restrictive way of achieving the purpose of the exemption. He considered that the correct question to ask was: is the exemption necessary or desirable to avoid an unreasonable outcome (that is, in the operation of the legislation)? It is clear that Morris J envisaged a balancing of various factors which might include the important freedom from prohibited discrimination which the Act confers, but might also include community or economic interests, and questions of practical convenience.
5. My approach is slightly different from that of Morris J. In my view, one must look to the nature of the freedom from prohibited discrimination which the Act gives, its objectives, and whether the interests served by the exemption are sufficient to justify taking the conduct sought to be exempted out of the prohibitions of the EO Act. It is not simply a question of whether the application of the prohibitions in the Act would produce an unreasonable result. Parliament has enacted those prohibitions to promote equality of opportunity, eliminate discrimination and protect its victims, however uncomfortable or inconvenient those subject to the prohibitions might consider them to be. But Parliament has recognised that there may be circumstances in which conduct should be taken out of those prohibitions. It has also included s83 (the exemption power) in the EO Act. The scheme of the Act includes the objectives, the prohibitions and the exemption power. Even the Act's prohibitions are not at large. They do not cover all attributes or all areas of activity. They are subject to various express exception provisions[6]. It can be seen that the express exception provisions deal with a variety of issues such as health, welfare, and measures to benefit those with particular attributes[7].
6. Section 83 gives the Tribunal a broad discretion to grant or refuse exemptions from the Act. That discretion must be exercised in the light of the objectives and scheme of the Act as a whole, and taking into account that the effect of an exemption is to take the relevant conduct out of the Act's prohibitions and to deny the redress which the Act gives to a person who is the victim of that conduct. The purpose which an exemption is to serve must be powerful to justify such a step. One such powerful purpose might be where the exemption is necessary to redress some position of inequality suffered by people with an attribute - a purpose often called 'positive discrimination'. But this is not the only purpose that might justify an exemption. The discretion must be exercised having regard to the circumstances of each case and balancing the factors relevant to that case[8]. But the important prohibitions and protections that the Act provides should not be lightly overridden. Any reasonably available non-discriminatory alternative that would achieve the same purpose as the exemption would also be relevant.
7. I would add that I consider it still necessary to ask the question, it is arguable that the conduct sought to be exempt is prohibited by the EO Act? If that conduct is clearly covered by some express exception or is clearly outside the scope of the prohibitions in the EO Act, it would be unnecessary to go further and the application could be dismissed.
8. An exemption may be granted subject to conditions designed to limit any adverse impact of the exemption or to monitor the exemption's effect. For example, conditions of this kind were imposed on exemptions granted to Boeing Australia Holdings and related companies and to ADI Limited and related companies in Victoria, and to BAE in South Australia[9].

1. I have before me witness statements from Mr Mahoney, BAE's company secretary and legal counsel; Ms Varga, its human resources manager; and Ms Curtin, its security officer. Some of these witness statements were made for the purposes of this proceeding and others for the purposes of an application by BAE for exemption under the Equal Opportunity Act 1984 (SA). A large amount of additional documentary material is before me. These are my findings.

1. BAE is a wholly owned subsidiary of BAE Systems Australia Holdings Limited, which is in turn owned by the UK company BAE PLC. The BAE Group operates internationally in many countries. The Group's business is the development, delivery and support of advanced defence systems in space, in the air, on land and sea. The business includes the design, manufacture and support of aircraft and ship, guided missiles and weapons, avionics and radar, and other electronic communication systems.
2. BAE has facilities in each Australian state and territory. Its largest operations are in South Australia, where its head office is located. Australia-wide, it currently employs approximately 2,500 employees of which more than half are located in South Australia.
3. In Victoria, BAE has a number of facilities, of which the largest is in Abbotsford. Most of the approximately 180 employees in Victoria are based at that site. Approximately five per cent of BAE's total Australian workforce is located in Victoria.
4. BAE also subcontracts various tasks to contract workers. Its work is project-based, rather than geographically based. It employs engineers and professionals of various kinds, managers and other administrative staff. In Australia, it has contracts with approximately 110 contractors.
5. BAE is one of a number of large international companies which perform similar work in Australia. The Boeing group of companies and the ADI group of companies (to which VCAT has granted exemption from the EO Act in Victoria) are two of these.

1. BAE's main customer is the Australian Defence Force (ADF). BAE subcontracts part of this work. Much of this work involves the need to access information which the Australian government classifies as secret or sensitive. The Australian government has entered into arrangements with the US government under which it obtains, from the US, products, components, technology and technical data to be used by the ADF for Australia's defence. Many of the contracts entered into by BAE with the ADF involve products sourced from the US, or products using US componentry, materials, technology or other information. BAE obtains that material and information under contract with US-based suppliers.
2. Commonwealth legislation and Australian government policy apply to some of the material and information which BAE must use if it is to comply with its contracts with the ADF. US legislation and US government policy also apply to some of that material and information. In these Reasons, I call this material and information collectively 'controlled material' and 'controlled information'.

Controlled material and controlled information - security requirements

1. As a contractor with the ADF which imports and exports and produces defence-related products and services and uses information relating to those products and services, BAE is subject to relevant provisions of the Customs Act 1901 (Cth) and the Customs (Prohibited Exports) Regulations 1958 (Cth). The Australian Department of Defence also requires contractors with the Department to be members of the Defence Industry's Security Program (DISP). The purpose of that program is to ensure that classified and sensitive information is not disclosed to people not authorised to access it. The program's security policies and procedures are set out in the Defence Security Manual (DSM).
2. The Customs (Prohibited Exports) Regulations 1958 require, among other things, that special approvals and licences need to be obtained before goods in the defence and strategic goods lists (prepared by the Minister under the Customs Act 1901) can be exported. Contracts between BAE and the ADF relate to goods in that list. To the extent that those goods are manufactured under contract with US suppliers, or are produced using information or components sourced from US suppliers, Australian export licences and approvals are made subject to conditions designed to ensure that the licence or approval holder implements US laws prohibiting the export or re-transfer of US-sourced goods, components or information to countries which the US has proscribed or to nationals of those countries, and otherwise reflect US laws which restrict access to those US-sourced components, products or information. The defence and strategic goods list includes goods used only for defence purposes, and also goods used both for defence purposes and non-military purposes.
3. Among other things, BAE as a member of DISP, must comply with the following requirements of the DSM -
   • Members of its workforce who will have access to classified information (information which the Australian government classifies as top secret, secret, confidential or restricted) must obtain a personal security clearance under the Australian Security and Intelligence Organisation Act 1979 (Cth). BAE sponsors the application. The information which the workforce member, through BAE, must file for this purpose includes details of nationality and country of birth.
   • BAE must maintain a list of the nationalities of each of the members of its workforce, and of those workers who hold personal security clearances.
   • BAE must prevent the release of classified information or equipment to non-Australian citizens or foreign contractors, unless the person holds a relevant personal security clearance, or has signed an undertaking not to disclose that information, or is the holder of an approval from the Australian government. BAE may prevent a foreign citizen who does not hold any of these clearances or approvals from accessing that information.
   • BAE's security officer and any deputy security officers for each of its facilities must be Australian citizens.
   • BAE must provide to the Department of Defence details of the nationalities of those holding management positions in the company.
   • To enable the Australian government to determine whether or not to approve the release of classified information to a non-Australian citizen, BAE must provide details of that person's nationality.
   • BAE must take steps to prevent unauthorised persons having access to classified information or equipment, or databases containing classified information, or areas where that information is stored.
4. One way in which BAE seeks to implement these requirements is through the issue of photographic passes to all the members of its Victorian workforce. It proposes that the passes will be colour-coded so as to identify the nationality of the holder of the pass. It proposes that information as to nationality collected by it for the purpose of issuing a pass should be restricted to duly authorised security officers on a 'need to know' basis.

1. There are two ways in which US laws concerning defence-related articles, services and technical data apply to BAE. I have explained the first already. It is through conditions imposed by the Australian government on export licences or approvals given to BAE. Those conditions reflect US laws regulating the export or re-transfer of US-sourced defence-related components, services or information.
2. The second is through BAE's US suppliers. These suppliers contract with the US government in relation to defence-related articles, services and technical data. They are subject to US laws regulating these things. As I shortly explain, those laws regulate what can be done with that material or information. When a US supplier contracts with BAE and permits it to manufacture or use material or information regulated by US law, or transfers material and information to BAE for that purpose, the supplier seeks to pass on to BAE through the contract the obligations to comply with US law.
3. Relevantly, the US laws are the International Trafficking in Arms Regulations (ITARs)[10] and the Export Administration Regulations (EARs)[11]. The EARs and the ITARs deal with the export of defence-related material and information by US contractors to other countries, and the terms of those contracts. In the material before me, the EARs and ITARs are dealt with on the basis that they are similar in effect. Accordingly, I deal in detail only with the ITARs[12].
4. In summary, the relevant provisions of the ITARs are these. They apply to defence articles, defence services and technical data, all of which are very broadly defined. Defence articles and defence services are listed in the US Munitions List, which is part of the ITARs. That list covers a vast range of defence-related items and services. The ITARs also apply to technical data related to defence articles and services. 'Defence services' covers the furnishing of assistance, training or technical data to 'foreign persons' either in the US or abroad, and a large range of actions performed in relation to defence articles. These cover design through to destruction, and include production, repair, maintenance, operation and modification. Broadly speaking, 'technical data' includes information required for any step in designing, making, operating, repairing or modifying a defence article or performing a defence service. It does not include software. 'Software' is separately covered. 'Technical data' and 'software' do not include certain kinds of publicly available information, such as general scientific or mathematical principles commonly taught in educational institutions, or other information in the public domain.
5. The ITARs define 'US person' and 'foreign person'. Broadly, a US person is a lawful permanent resident of the US, a US citizen, a US national, and certain aliens granted permanent or temporary US residence or admitted as refugees or granted asylum. It includes a corporation or other entity, organisation or group, incorporated to do business in the US, and any US government entity. It does not include a 'foreign person'. 'Foreign person' broadly means a natural person who is not a US person, and a foreign corporation or other entity not incorporated to do business in the US. It covers international organisations and foreign governments and their agencies.
6. Before ITAR-controlled information or material can be transferred by a US contractor to a non-US contractor, the US and the non-US contractors must enter into an export licence agreement, manufacturing licence agreement, warehousing and distribution agreement or technical assistance agreement. That agreement must be approved by the US Department of State or its delegate. Any amendment to that agreement must be approved by the same agency before it can operate. The ITARs require that the agreement must contain a clause that the agreement is subject to 'all US laws and regulations relating to exports and to all administrative acts of the US government pursuant to such laws and regulations'. The agreement must also contain the clause that 'technical data or defence services exported from the US in furtherance of this agreement and any defence article which may be produced or manufactured from such technical data or defence services may not be transferred to a person in the third country or to a national of a third country' except as specifically authorised by the agreement or with the prior approval of the US Department of State.
7. The ITARs do not define 'third country', 'third country national' or 'transfer'. I accept BAE's evidence that the US government considers that 'third country' means a country other than the US or a country to which the agreement authorises the export of ITAR-controlled material or information. The US government interprets 'national' as meaning a US person, or a citizen of the country to which the agreement permits export of ITAR-controlled information or material but excludes a 'dual national'. The US government considers that a 'dual national' is a national of a country covered by such an agreement who is also a national of another country not so covered. The US government interprets 'transfer' to mean not only physical transfer, but also disclosure, by oral, written or visual means.
8. Broadly, the effect of the ITARs on BAE is that, if it contracts with a US company to use ITAR-controlled material or information, it agrees to be subject to and to comply with US laws and regulations concerning that export, and not to disclose or transfer that information or material to non-Australian or non-US nationals, including dual nationals.
9. I accept BAE's evidence that, after the destruction in New York on 11 September 2001, the US government took a stricter view about the obligations of foreign companies who contracted with US suppliers of ITAR-controlled material or information not to transfer that information or material to an ultimate end user or a person not specified in the agreement or otherwise approved by the US Department of State.
10. I accept BAE's evidence that, as from 30 November 2006, the US government permitted Australian dual nationals employed by Australian companies who contracted with US suppliers in respect of ITAR-controlled material or information to have access to that material or information if they held a personal security clearance at the restrict level and on the 'need to know' principle, without the Australian contractor having to provide their nationality information to the US supplier. But this directive did not apply to people who are not Australian citizens, people who were nationals of proscribed countries (countries to which the US prohibits the export of ITAR-controlled information or material), or where the Australian Department of Defence was not the end user of the information or material. I am satisfied that, to determine whether this more relaxed policy applies to a particular member or potential member of its workforce, BAE still needs to be provided with information about that person's nationality.

Consequences of non-compliance with the security requirements

1. If BAE breaches a condition of a licence or approval under the Customs (Prohibited Exports) Regulations 1958, the licence or approval may be withdrawn. It also may be subject to fines and other penalties under the Customs Act 1901. Personal security clearances given to BAE workforce members may be withdrawn, if the holder of the clearance or BAE itself are found to have breached conditions concerning access to controlled material or controlled information. I accept BAE's evidence that, of the 181 employees in its Victorian workforce, approximately 80 per cent hold personal security clearances.
2. If BAE fails to comply with the requirements of the DSM, its membership of DISP may be cancelled. The ADF will not enter into contracts with Australian companies who are not members of DISP, in relation to projects involving classified information or equipment. BAE would then lose its main customer.
3. If BAE breaches the ITARs or other US security requirements, the US contractor may be liable to very heavy penalties (both civil and criminal) under the ITARs and EARs themselves and may be banned by the US government either indefinitely or for a period from being a defence contractor for that government. BAE would be liable to substantial damages for breach of its contract with the US contractor. Because the contract obliges BAE to comply with the US security requirements, those damages might reflect the heavy penalties to which the US contractor was subject under the US security requirements. It is unlikely that it would be given further contract work by its US contractor.

1. I now make findings about some other issues relating to the exemption application.
2. Apart from two matters, I am satisfied that the conduct for which exemption is sought is necessary to enable BAE to comply with its obligations under the Australian and US security requirements. The two exceptions are these.
3. The first concerns photographic identity passes or badges. I am satisfied that it is necessary for BAE to know the nationality of each member of its workforce, so that it can give information required by the security requirements to the Australian government, the US government or its US contractors, and so that it knows which of its staff are and which are not permitted to access (including by visual and oral means) controlled material and controlled information. One way (although not the only way) of achieving this is a photographic identity pass with a coded reference to nationality on it. Duly authorised security officers familiar with the code could then determine whether the person was, or was not, permitted to have access to relevant security material or information. But I am not satisfied on the evidence that it is necessary to show on every pass the person's nationality in uncoded form. The only people who need to know the nationality of the workforce are those security staff with responsibilities to monitor access to controlled information or controlled material. For all others, a person's nationality cannot be more than a matter of idle curiosity.
4. The second matter relates to termination of employment. I accept Mr Mahoney's evidence that, if exemption were granted to BAE, there would be little risk of termination of the employment of staff who, because of their nationality, are not permitted to work on projects involving access to controlled material or controlled information. The other parts of the exemption would enable BAE to advertise for workers on a project-by-project basis, and make a nationality-based decision as to the offering of employment or the rejection of certain applicants. This should be sufficient to enable it to comply with the security requirements without a need to terminate the employment of existing employees.
5. It is clear from the evidence that, whatever precautions BAE takes, it can never ensure absolutely that unauthorised people do not have access to controlled material or controlled information. But I am satisfied that the measures sought in the exemption will substantially lessen the risk of that access occurring.
6. I am satisfied that it is highly probable (although not certain) that the following consequences will occur if this exemption is not granted to BAE. I am not satisfied that BAE will simply flout the security requirements and its contractual obligations relating to them. The consequences of doing so would be too serious for its business across the whole of Australia. Since BAE now has an exemption under the Equal Opportunity Act 1984 (SA), but would not have one in Victoria, I consider it highly probable that BAE would simply close its Victorian facilities and transfer them to South Australia.
7. The consequence of this would be the loss of a very significant (although not catastrophic) number of jobs in Victoria, with flow-on effects to associated contract work. How serious this loss would be would depend on the overall employment situation in Victoria at the time. Victoria would lose a highly skill workforce. The loss of some 180 skilled jobs is a significant matter for the State. The transfer of employees and facilities may mean that contracts for the Department of Defence would be delayed, causing increased costs. However, I am not prepared to find that Australia's defence capability would be seriously compromised.
8. I note that two companies performing similar defence industry work to BAE now have exemptions in Victoria[13]. There is insufficient evidence for me to find whether the Department of Defence might give BAE's Victorian contracts to these companies.
9. I am satisfied that it is in our national interest that contracts with the Australian Department of Defence for defence-related products and services should be performed with as little disruption and delay as possible.
10. I am satisfied that, until now, BAE has attempted to conduct its business in Victoria without seeking an exemption. It has made this application because it has become clear to it that it cannot do this and comply with the security requirements at the same time. It has asked for information on a voluntary basis, but that information can be refused and this approach does not give certainty. I am satisfied that in all other respects it is committed to equality of opportunity for its workforce and has in place comprehensive procedures designed to educate and train its workforce as to the prohibitions on discrimination and how to complain about discrimination when it occurs. I am satisfied that there are no realistic non-discriminatory alternatives to what is sought in the exemption. It is unrealistic to expect the Australian government to change policies which stem from international alliances and agreements. It is even more unrealistic to expect that BAE can change US law or US government policy. This dilemma is not of BAE's making or within its control.

1. I now deal with the application of the Charter. BAE submitted that the Charter did not apply to this proceeding because the application to VCAT was made before 1 January 2008. I agree.
2. Under s2 of the Charter, the Charter (except for Divisions 3 and 4 of Part 3) commenced on 1 January 2007. Those two divisions commenced on 1 January 2008. Division 3 of Part 3 contains, among other things, section 32. That obliges statutory provisions (including those of the Charter) to be interpreted, so far as is possible consistently with their purpose, in a way that is compatible with human rights. Division 4 of Part 3 contains, among other things, s38. Subject to some exceptions, that makes it unlawful for a public authority to act in a way incompatible with a human right or, in making a decision, to fail to give proper consideration to a relevant human right.
3. Section 49 contains transitional provisions. Section 49(2) and (3) provide -

(2) This Charter does not affect any proceedings commenced or concluded before the commencement of Part 2.

(3) Division 4 of Part 3 does not apply to any act or decision made by a public authority before the commencement of that Division.

1. The explanatory memorandum for the Bill which eventually became the Charter explains that s2 was intended as a staggered commencement provision, in order to allow government to review existing laws, policies and procedures for Charter compliance. Among other things, it says that s 49 provides that the Charter 'does not apply to legal proceedings commenced before 1 January 2008' and that the Charter 'may not be relied on in proceedings commenced before that date'. It explains that s49(3) means that 'the obligations upon public authorities in the Charter to do not apply to an act or decision made before 1 January 2008'.
2. There is a difficulty with s49(2). It provides that the Charter does not apply to proceedings commenced or concluded before the commencement of Part 2. That part commenced on 1 January 2007, not 1 January 2008. But s2 directly provides that Division 3 of Part 3 (the division in which the obligation to interpret statutes in a rights-compatible way appears) commences on 1 January 2008.
3. In the light of the explanatory memorandum, I suspect that the reference to the commencement of Part 2 in s49(2) is an error. However, the wording is clear and I am not prepared to say that the result is so absurd that Parliament could never have intended it. After all, the bulk of the Charter commenced on 1 January 2007. If s49(2) contains an error, it is an error that will need to be corrected by Parliament.
4. In my view, s49(2) does not apply to this proceeding, because this proceeding was commenced after the commencement of Part 2, that is after 1 January 2007. But this is not the end of the matter. The key question in this proceeding is how the general discretion to grant or refuse exemptions given to VCAT under s83 of the EO Act should be interpreted. Section 32 of the Charter requires that a statutory provision like s83 must be interpreted, so far as is possible consistently with the purpose of s83, in a way that is compatible with human rights. That provision, according to s2 of the Charter, commenced on 1 January 2008. Section 32 makes a fundamental change in the way in which all Victorian statutory provisions are required to be interpreted. If Parliament had intended that the new interpretation were to apply to proceedings commenced before those new rules came into operation, it would have said so. It did not.
5. It follows that s32 of the Charter at the new interpretation rules do not apply to this proceeding.
6. BAE also made submissions about whether it might be a 'public authority' within the meaning of the Charter. In summary, and with certain exceptions, s38 of the Charter makes it unlawful for a public authority to act in a way incompatible with a human right or, in making a decision, not to give proper consideration to a relevant human right. Assuming (without deciding) that BAE is a public authority, this exemption would apply to BAE's conduct from the date on which the exemption was published in the Government Gazette until the exemption expires. I have considered whether BAE, when it acts as the exemption permits it to do, would be acting incompatibly with a human right and in breach of s38 of the Charter. In my opinion, it would not be acting in breach of s38 for these reasons.
7. First, BAE acts in accordance with an exemption granted by VCAT. This is not conduct which it chooses to undertake, without exemption, and ignoring the prohibitions of the EO Act.
8. Second, the EO Act itself recognises that the granting of an exemption by VCAT takes the relevant conduct out of the prohibitions of the EO Act.
9. Third, the exemption only applies to conduct required to enable BAE to comply with certain Australian and US security requirements. BAE is in the unfortunate position of either breaching those requirements and complying with the EO Act, or complying with those requirements and breaching the EO Act.
10. In these circumstances, it is my view that it can be said that BAE 'as a result of a statutory provision or a provision made by or under an Act of the Commonwealth or otherwise under law... could not reasonably have acted differently' within the terms of s38(2) of the Charter. Section 38(2) provides that s38(1) does not apply in these circumstances.
11. It should not be assumed that I agree with BAE's submission that it is merely a commercial supplier of goods and services to the Australian Department of Defence and so not a 'public authority' within the meaning of s4 of the Charter. In my view, it is arguable that what BAE does in providing services and designing, producing and maintaining land, air, space and sea defence systems for that Department might be a function of a public nature performed on behalf of the Commonwealth. It might be characterised as a function connected to or generally identified with functions of government[14].
12. I do not accept BAE's submission that I cannot consider whether BAE is a public authority until it acts under the exemption and someone raises that conduct under s39 of the Charter. It is clearly relevant, in considering whether or not to grant this exemption, to consider whether the Charter would apply to the conduct which BAE seeks to be exempt from the EO Act, and whether, if it is a public authority in respect of that conduct and obliged to act compatibly with human rights, it would be inconsistent with that obligation and the Charter to grant the exemption.
13. I do not consider that the Charter affects the determination of this proceeding or the operation of any exemption granted.
14. I add a word of caution. My conclusion does not mean that the Charter will not apply to any application to renew this exemption. At that time, the interpretation of s83 of the EO Act will need to be considered again in the light of the Charter, and the question of whether BAE (and VCAT in determining exemption applications) is a public authority for Charter purposes. Relevant factors in considering whether BAE is a public authority will no doubt include that, under contract, it performs defence-related work for an Australian government department. Relevant factors in considering whether VCAT, in determining exemption applications, is a public authority will no doubt include the nature of an exemption proceeding itself. An exemption proceeding is a proceeding of an unusual kind. It can commence on application or on the Tribunal's own initiative. Generally, there is no 'dispute' or 'respondent'. An exemption, if granted, has future application and operates by notice published in the Government Gazette. It may relate to a class of people, activities or circumstances. But all these are matters for another day.

1. Balancing the purpose of the exemption and the interests which it serves (as I have found them to be) and the very important interest served by the broad but not universal prohibitions on discrimination in the EO Act, and taking into account that Act's purpose, scheme and objectives, I am satisfied that the balance falls in favour of granting the exemption in part. I have framed it in tighter terms than was suggested in the application. I have not granted an exemption to permit termination of employment. If the rest of the exemption is in place, I am not satisfied that a termination power is necessary. Although the exemption will permit a coded reference to a nationality on any identifying pass or badge required to be carried by members of BAE's workforce, it will not permit uncoded references to nationalities on those passes or badges.
2. I grant the exemption for three years, which is the maximum period for which VCAT may grant exemptions under the EO Act. The exemption will be granted subject to a number of conditions designed to monitor the impact of the exemption and to minimise any potential adverse impact it may have, and to ensure that it interferes no more than is necessary with the operation of the prohibitions in the EO Act. The conditions require BAE to investigate other non-discriminatory alternatives reasonably available before relying on the exemption.

1. I make some final comments. First, I have briefly stayed the operation of the order so as to give BAE an opportunity to comment (if it wishes to do so) on the conditions to which the proposed exemption will be subject. An exemption subject to conditions was mentioned briefly but not canvassed at length in BAE's submissions.
2. Second, I have not given great weight to the commercial advantage which BAE might gain by being granted the exemption, or to the commercial disadvantage which it might suffer if the exemption were not granted. This application is made by a company with a very large business in a context in which some of its Victorian competitors have already been granted exemptions by this Tribunal. I doubt whether commercial advantage alone would be a powerful enough reason to grant an exemption which would override the prohibitions in the EO Act. But this is not to say that all private interests should be ignored when considering whether or not to grant an exemption. In the end, each case must be determined on its own circumstances.
3. Third, it is unfortunate that those exemptions which have been granted to BAE and its competitors are all slightly differently framed. But this no doubt has to do with the way in which each of the applications was framed and differences in submissions made in each proceeding. I have framed this exemption, as far as possible, in similar terms to the exemption granted to BAE from the Equal Opportunity Act 1984 (SA).
4. Fourth, while the exemption applies to BAE's employees and contract workers, it does not apply as between BAE's contractors and their employees. Employers of those workers would need to apply separately to the Tribunal for exemption.
5. Fifth, although this comment is unlikely to influence the framing of the Australian and US security requirements, I would have thought that the use of nationality-based measures to prevent unauthorised access to information or material is a blunt and imperfect instrument. Assessment of individuals on a non-stereotyped basis, or training and education about the importance of the obligation of secrecy, would seem to me to be a better approach.

[1] See Macabenta v Minister for Immigration, Multicultural and Indigenous Affairs (1998) 90 FCR 202, cited with approval by Morris J in Re Boeing Australia Holdings Pty Ltd & ors. [2007] VCAT 532

[3] See Stevens v Fernwood Fitness Centres Pty Ltd (1996) EOC 92-782

[4] Olympic Roads and Transport Authority [2000] VCAT 1635; Re ADI Limited & ors. [2004] VCAT 1963

[5] Re Boeing Australia Holdings Pty Ltd & ors. [2007] VCAT 532

[6] As to the Act's prohibitions see for example Part 3; as to some express exceptions see for example Part 4; as to the objectives of the Act, see s3

[7] See for example ss19, 80 and 82. As to the effect of an exemption or exception provision, see s12

[8] For a similar approach to the Western Australian Equal Opportunity Act 1984 see Commissioner for Equal Opportunity v ADI Ltd & ors. [2007] WASCA 261; for a case where the relevance of aspects of the public interest was emphasised, see ADI Ltd & ors. [2007] VCAT 2242 and re BAE Systems Australia Ltd [2008] SAEOT 1

[9] See Boeing Australia Holdings & ors. [2007] VCAT 532; ADI Ltd & ors. [2007] VCAT 2242; BAE Systems Australia Ltd [2008] SAEOT 1

[10] 22 FCR 120 of 2003, made under the Arms Export Control Act (22 USC 27 of 2004)

[11] Made by the Department of Commerce under the Export Administration Act 1979 (US)

[13] See ADI Ltd & ors. [2007] VCAT 2242 and Boeing Australia Holdings Ltd [2007] VCAT 532

[14] See for example Charter s4(1)(c), 4(2)(b) and 4(4)