Prosecutors will not pursue a key element of a foreign interference charge levelled against a Sydney businessman, a court has been told.
Alexander Csergo, from Bondi in the city's eastern suburbs, will remain behind bars as he awaits trial for allegedly providing information to Chinese spies posing as think-tank workers.
He pleaded not guilty to one charge of reckless foreign interference during a local court hearing at Sydney's Downing Centre on Wednesday.
His lawyer, Jolan Draaisma, told the court prosecutors would no longer attempt to prove Csergo's alleged reckless conduct "prejudiced Australia's national security".
The 55-year-old, who has been refused bail on three separate occasions, appeared in the court via a video link from jail.
Prosecutors alleged that in Shanghai, NSW and elsewhere, Csergo engaged in covert or deceptive conduct, in collaboration with, funded, directed or on behalf of two foreigners named "Ken" and "Evelyn".
He allegedly provided handwritten reports to the pair, who claimed to be from a think tank.
More than 1200 pages of written statements, 2000 emails and 72,000 images form part of the prosecution case.
High-profile lawyer Bernard Collaery, who is representing Csergo, told a court hearing in October that his client used open-source information and co-operated as harmlessly as possible in his exchanges with the alleged foreign agents.
Mr Collaery said Csergo had done so out of fear of repercussions while he was in China as the country remained in COVID-19 lockdown.
"This man was determined not to be detained in China," he told a bail hearing at the time.
"He was co-operating to keep his nose clean."
The case has been listed for arraignment on April 26.
