Altering copyright law to allow AI companies to scrape music, books and journalism could trigger a constitutional breach, Coalition senators and the recording industry have warned, as they raise new fears it could open Australia to massive legal action and compensation claims from rights holders worldwide.

The attorney general’s department admitted it was “extremely alive” to the issue, and Australia’s leading constitutional expert, Anne Twomey, agreed there was “potentially” a concern – depending how legislation was drafted – that granting AI companies permission to scrape copyrighted material from the internet could amount to an acquisition of property by the government.

In a simmering debate centred on the same legal point as the movie The Castle , the question of acquiring property “on just terms” is emerging as a key concern amid furious lobbying from tech companies and rights holders ahead of a looming federal government announcement on AI.

“We could be liable for ‘just terms’ compensation for…