Australia's AI copyright overhaul risks global compensation lawsuit, experts warn

The federal government is preparing a major announcement on artificial intelligence regulations, and legal experts say the draft copyright changes could expose Australia to massive financial liability. Coalition senators and representatives from the creative industries warned on Thursday that altering the law to permit AI companies to scrape music, books, and journalism might breach the constitution. They argue the move could open the door for rights holders around the world to demand compensation from the Australian state.

The core of the dispute centers on Section 51 of the Australian constitution, which requires the Commonwealth to acquire property on just terms. Senators and legal scholars contend that if the government grants AI firms a new legal right to use copyrighted material without existing licensing agreements, it is effectively taking property from creators. Ross Cadell, a Nationals senator and member of the federal parliamentary committee on AI, stated that the government could become liable for just terms compensation for every rights holder on the planet. He described the potential exposure as the biggest compensation rights case in history.

The Attorney General’s Department acknowledged the severity of the issue during a committee hearing on Friday. Officials told the committee they were extremely alive to the constitutional concerns raised by Cadell. However, they did not directly answer his question regarding the international implications of such a liability. Michaelia Cash, the shadow attorney general, criticized the government for rushing to entice AI investment at the expense of Australian creators. She said the government should not sell out rights holders in the process.

Anthropic, one of the major AI developers, has proposed an opt-out model for copyright usage. Under this system, companies could scrape content unless a rights holder deployed specific digital protections to signal an objection. Cadell argued that this approach raises a real question about whether the government is acquiring the intellectual property rights of others. He noted that how Australia supports property rights is central to this debate.

Anne Twomey, a leading constitutional expert and professor emerita of law at the University of Sydney, agreed that the situation is complex. She noted that no specific legislative proposal has been released yet. Twomey pointed out that the High Court has handled various cases involving copyright and property acquisition, including disputes over video games and cigarette packaging, with mixed results. She warned that granting a new right to AI companies while diminishing the rights of copyright holders could potentially trigger constitutional issues. She emphasized that legislators must be confident about whether Section 51 applies before enacting the law.

The creative industry is divided on the best path forward. Annabelle Herd, CEO of the Australian Recording Industry Association, claimed that any proposal to allow AI companies to scrape data is clearly an acquisition of property. She said it is hard to imagine what kind of compensation would make up for the fact that creators are trading away their rights to companies that will monetize them. Chris Maund, CEO of Mushroom Records, argued that current copyright law is working effectively. He noted that companies like Spotify are already making AI-related deals through existing licensing arrangements.

Maund raised concerns about the international ramifications of changing Australian law. He said that an AI company could train its models in Australia to circumvent copyright laws in other countries. This would make Australia a target for legal action from global rights holders. He added that international groups have been urging the Labor government not to weaken copyright protections. Maund acknowledged that the government has supported the music industry through initiatives like Creative Music Australia, but he felt they were out of step with artists on this specific point.

Prime Minister Anthony Albanese has promised the strongest possible protection for creators. He warned that it would be theft if creatives were not paid for their work. The government is currently weighing these concerns as it finalizes a suite of reforms covering data centers, online safety, workforce issues, and energy. The final legislation will determine whether Australia adopts a new standard for AI training data or sticks to existing licensing frameworks.

The debate continues as the government prepares its announcement. Senators from the Coalition said they welcome the benefits of AI but will examine the constitutional question of property rights closely. They intend to hold the government to its promise of fair compensation. The outcome of this legislative process will determine whether Australia becomes a global hub for AI training or a focal point for international copyright litigation.