Timor Leste's Prime Minister, Xanana Gusmao, called upon his Australian counterpart, Tony Abbott, on Wednesday to explain the allegation of spying in which it is reported that Australian Security Intelligence Service (ASIS) bugged the Timorese cabinet office in 2004, during sensitive negotiations for the Certain Maritime Arrangements in the Timor Sea (CMAT) treaty between the two countries.

Mr Gusmao's demand came after news broke out that Australia's Attorney General, George Brandis had authorised a secret services raid on the Canberra homes of lawyer Bernard Collaery, who is representing Timor-Leste in an international arbitration hearing in The Hague against Australia, and a former ASIS spy, who is a key witness in the case.

In a statement issued on Wednesday, Timor Leste's prime minister called on Mr Abbott, to explain himself and guarantee the safety of the witness.

"The actions taken by the Australian government are counterproductive and uncooperative," Mr Gusmao said in the statement.

"Raiding the premises of a legal representative of Timor-Leste and taking such aggressive action against a key witness is unconscionable and unacceptable conduct. It is behaviour that is not worthy of a close friend and neighbour or of a great nation like Australia," he said.

Timor-Leste's Ambassador to Australia, Abel Guterres, meanwhile, said his country which came out of 24 years of struggle and trauma and the mayhem in 1999, could never possibly pose a security threat to Australia.

"Thousands of people in Australia asked the government to help us [during the violence around the autonomy ballot in 1999] and Australia helped us ... are we a security threat to Australia, I don't think so, I think any fair-minded Australian would see this as ridiculous," Mr Guterres told Guardian Australia.

Stating that Timor-Leste acted "in good faith" as both parties agreed to try to resolve the issue through arbitration, Mr Guterres said, "now the whole thing has turned sour".

The ambassador said Australia's actions seemed to be aimed at preventing the key witness from giving verbal evidence at The Hague.

Following the raid, Australia has cancelled the passport of the former ASIS officer who was to give evidence in the case.

"It depends how the arbitration sees it if the witness cannot appear in person ... but it doesn't help our case," Mr Guterres said.

"Australia of all places, our ally, our neighbour, our trusted friend, is doing something that is not worthy of being an example," he said.

Reacting to the raid, the Australian prime minister said on Wednesday that the action was to ensure national security.

"We don't interfere in cases, but we always act to ensure that our national security is being properly upheld. That's what we're doing."

The Australian attorney general, meanwhile, said, he has instructed Australian Security Intelligence Organisation (ASIO) which carried out Tuesday's raids, not to share any material gathered during the search, with Australia's legal team in The Hague "under any circumstances".

Australia respected the arbitral proceedings, Mr Brandis said.