Ex-US Marine Daniel Edmund Duggan was arrested in Australia on October 21, the same week the British government issued a rare warning about China's recruitment of retired military pilots.

The Australian government has confirmed Duggan, 54, was arrested at Washington's request, although US authorities have refused to say more and the charges remain sealed.

Duggan was a "well-regarded" fighter jet pilot, a fellow ex-Marine has told AFP, and had recently worked in China training commercial flight crew.

Defence lawyer Dennis Miralis said he would file a complaint about the conduct of Australian intelligence officers during Duggan's arrest.

Miralis said Duggan's extradition should be put on hold until that complaint was resolved by Australia's intelligence watchdog.

"We will be filing a complaint with the Inspector-General of Intelligence and Security, who deals with complaints against national security officials," Miralis told reporters.

"Mr Duggan is an Australian citizen. We ask the US not to interfere."

Miralis, speaking outside Sydney Local Court after a brief administrative hearing, did not elaborate on what the complaint might cover.

He criticised the US government's approach to Duggan's arrest, saying he still did not know much about the charges.

"There is no factual material that has been provided supporting the way he was indicted secretly in the US," he said.

Duggan, a father of six, had recently returned from China when he was arrested in the rural town of Orange, about four hours' drive west of Sydney.

Miralis said Duggan was a "proud Australian" and no longer held US citizenship.

"He denies breaching any US law, any Australian law, and any international law," Miralis said.

"This is a position he will defend vigorously."

Duggan's company website says he spent more than a decade flying in the US Marine Corps, reaching the rank of major and working as a tactical flight instructor.

He ran an adventure flight company in Australia after leaving the Marines, then moved to Beijing around 2014, company records show.

- 'Dramatic and aggressive' -

Miralis said he had also launched a separate complaint about Duggan's treatment in prison.

He alleged a prison officer "directly intervened" during a legally protected conversation between Duggan and his lawyers.

Miralis also said Duggan would soon be moved to a maximum-security facility in New South Wales, Australia's most populous state.

"We are concerned by this dramatic and aggressive move," Miralis said.

"He's holding up as well as you could expect in these extraordinary circumstances."

Both the British and Australian governments have recently highlighted fears that Beijing has been poaching retired pilots to train China's air force.

China's foreign ministry has denied any knowledge of the employment of British pilots after British media reported more than 30 pilots had accepted lucrative offers to train China's military.

Duggan's case will return to court in late November.