TONY JONES, PRESENTER: As discussions continue over Australia's refugee swap with Malaysia, Lateline has gained a unique insight into what Malaysia wants out of the deal.

Lateline has obtained the draft document which contains Malaysia's proposed amendments to the deal.

UNHCR analysis shows the Malaysians want no references to human rights in the agreement.

This has raised major concerns at the UNHCR, who have to sign off on the deal for it to go ahead.

Steve Cannane has this exclusive report, produced by Alison McClymont.

STEVE CANNANE, REPORTER: Julia Gillard has staked a large part of her political future on achieving an agreement over asylum seekers. Her announcement in early May that Australia would swap refugees with Malaysia set off a flurry of diplomatic talks and meetings.

The documents obtained by Lateline gives a behind-the-scenes insight into the state of these negotiations. They show how difficult it will be to achieve an agreement and how hard Malaysia is pushing.

DAVID MANNE, REFUGEE & IMMIGRATION LEGAL CENTRE: What the document shows is that there's a real reluctance by Malaysia to commit to a clear inclusion of human rights standards and guarantees. For example, in the document, refugees are referred to as illegal immigrants. There's no reference to the word asylum seeker. There's certainly no reference to human rights.

STEVE CANNANE: This draft agreement includes amendments made by Malaysia on Monday last week. And it's clear from this document they're playing hardball.

The Malaysian government wants a veto power over who is transferred into its country.

(female voiceover): "The following persons shall not be transferred to Malaysia for processing ... Persons who the Malaysian authorities do not provide consent or approval for the transfer."

STEVE CANNANE: Malaysia says it will send 4,000 refugees to Australia regardless of the numbers Australia sends to them.

(female voiceover): "This number of illegal immigrants in Malaysia who have been officially issued with the UNHCR card will be resettled even if the Government of Australia does not seek to transfer the total 800 ...".

STEVE CANNANE: And it doesn't want asylum seekers transferred to Malaysia to be subjected to the Refugee Convention.

(female voiceover): "The treatment of the transferee while in Malaysia will be in accordance with the Malaysian laws, rules, regulations and national policies ...".

STEVE CANNANE: This draft agreement makes it clear that Malaysia wants Australia to pay for virtually all of the costs of the refugee swap, including health, housing, education, transport and resettling costs. They also want Australia to pay for any relocation of asylum seekers to third nations - what Malaysia refers to as "voluntary forced returns."

(female voiceover): "Where the transferee does not agree to return to their country of origin, voluntarily forced returns may be necessary. In this event, the Government of Australia will be fully responsible to accept and ensure voluntarily forced returns."

STEVE CANNANE: And there's a third party to this agreement. The deal relies on the participation of the United Nations High Commission on Refugees, which will process the asylum seekers.

It's concerned that Malaysia is not a signatory to the UN Convention on Refugees and has a reputation for treating asylum seekers harshly. They live in cramped conditions in Malaysia and police routinely arrest them for working illegally.

JOHN, ASYLUM SEEKER: Wherever we are, we are very in a nervous situation.

STEVE CANNANE: Lateline has obtained a series of internal emails from the UNHCR that shed light on the negotiations.

From these emails we now know the reason why there's no reference to human rights in the draft of this agreement. Malaysia removed it.

In this email, Alan Vernon, the UNHCR's representative in Kuala Lumpa, outlines the changes made.

ALAN VERNON, UNHCR MALAYSIA REPRESENTATIVE (male voiceover):"... the Malaysian text removes the standards of treatments contained in the earlier versions with language stating the transferees will be treated in accordance with Malaysian laws, rules, regulations and national police. Other changes include that Malaysians would clear the list of transferees, (and the) removal of the reference of human rights in the introduction ...".

STEVE CANNANE: But they're not the UNHCR's only concerns. The emails make it clear that the UNHCR has serious concerns that the deal may breach Australia's obligations under the Refugee Convention, and it may breach the UNHCR's requirement to operate according to international law.

These fears are reflected in an internal email from the senior executive assistant to Erika Feller, an assistant high commissioner for the UNHCR.

CHIARA CARDOLETTI, EXECUTIVE ASSISTANT TO ERIKA FELLER (female voiceover): "Erika is of the view that the new text is not one we can endorse or be positively associated with."

STEVE CANNANE: And Richard Towle, the UNHCR representative in Canberra has also voiced his concerns.

RICHARD TOWLE, UNHCR AUSTRALIA-PACIFIC REPRESENTATIVE (male voiceover): "... the level and standard of protection for the group of 800 may not meet required human rights standards."

STEVE CANNANE: But perhaps the commission's biggest concern is that by being involved in the deal they could be undermining their own convention on refugees.

GRAHAM THOM, AMNESTY INTRNATIONAL: This agreement undermines non-discrimination principles in a number of ways, both in terms of treatment of people arriving here, but also how they might be treated in Malaysia. And there are very real concerns about both.

STEVE CANNANE: This UNHCR document sets out the commission's bottom line for negotiations with the two governments. It shows it's worried about the principle of non-discrimination and how it could be applied by Malaysia.

UNHCR DOCUMENT (male voiceover): "We need to be careful with this formulation, as Malaysia could use it as justification for equally low levels of treatment for all."

STEVE CANNANE: The UNHCR has also expressed concerns internally about what might happen to children under the plan.

UNHCR DOCUMENT (male voiceover): Exceptions from transfer to Malaysia will need to be made in the case of separated or unaccompanied children where return to Malaysia is determined to be not in their best interest.

STEVE CANNANE: Julia Gillard has repeatedly refused to answer questions about what this deal means to children arriving here by boat. On May 9th, the Prime Minister was asked if there would be any exceptions.

JOURNALIST (May 9): Will there be any exclusions for people who will are sick, infirm, young, close to birth?

JULIA GILLARD, PRIME MINISTER: We - we are not at this stage dealing with those kind of details.

STEVE CANNANE: But this internal UNHCR document, written a day later, suggests Australia already had a position on sending children to Malaysia.

UNHCR DOCUMENT (male voiceover): Australia doesn't want to provide exceptions for UAMS (unaccompanied minors) and vulnerable individuals for fear if (sic) this being a pull factor exploited by smugglers."

STEVE CANNANE: The draft agreement does say ...

(female voiceover): "Special procedures will be developed and agreed to by the participants to deal with the special needs of vulnerable cases, including unaccompanied minors."

STEVE CANNANE: But what these procedures are is still unclear.

Refugee advocate Pamela Curr says there are already 17 children from recent boat arrivals who face transfer to Malaysia.

PAMELA CURR, ASYLUM SEEKER RESOURCE CENTRE: Amongst that 17, we also hear that there are teenage Vietnamese girls who are unaccompanied minors who are in that group, which is, you don't need an imagination to fear what would happen to them in an overcrowded Malaysian detention centre.

STEVE CANNANE: The UNHCR is committed to protecting human rights, while the Malaysian Government is committed to protecting its sovereignty and Julia Gillard desperately wants a deal.

Steve Cannane, Lateline.