Recent changes to the Foreign Acquisitions and Takeovers Act (’Act’) increase the Foreign Investment Review Board’s (’FIRB’) powers in screening foreign investments against Australia’s national security. Consequently, FIRB has been able to remove the temporary $0 monetary threshold for non-sensitive investments imposed at the beginning of the COVID-19 pandemic.
Below are some key changes you need to know.
Thresholds and fees
For investments not under the national security test, the monetary thresholds have returned to pre-COVID-19 levels. Thresholds are between $0 and $1.192 billion depending on the type of transaction, and the origin of the investor.
The application fee structure has changed, resulting in increased fees for lower-value transactions. Fees for standard FIRB approvals now start at $6,350 for most lower value transactions and increase incrementally.
The statutory approval timeframe has also returned to 30 days, however FIRB may seek to request extensions from applicants, and often do.
New national security test
The Government has introduced the new “notifiable national security action” concept. This requires investors to obtain FIRB approval for foreign acquisitions of “national security businesses” and “national security land” regardless of transaction size.
National security businesses include (amongst others), critical infrastructure, telecommunications, and developers, manufacturers or suppliers of critical goods or services to the defence force or intelligence community.
National security land includes land in which the national intelligence community has an interest.
FIRB recommends that foreign investors in other potentially sensitive industries (such as mining, logistics, and key supply chains) seek voluntary FIRB approval, even when the ‘notifiable national security action’ test is not met. These sectors identified by FIRB (amongst others) are sectors where it is more likely the Treasurer may exercise a call-in power (see below).
There has been concern in the business community that the industries requiring FIRB approval may increase over time, expanding the web of the national security test. The Government clearly intends to use these powers too, with Treasurer Josh Frydenberg recently rejecting a proposed $300 million takeover of a construction company on national security grounds.
FIRB’s new weaponry also includes:
‘call-in’ power - The Treasurer may retrospectively call-in any acquisition for review on national security grounds for up to 10 years from when the transaction occurred (provided FIRB had not previously approved it). The Treasurer may take a range of actions, including forced divestment.
last resort power – The Treasurer may review acquisitions with previous FIRB approvals if exceptional circumstances arise. The Treasurer may take a range of actions, including forced divestment. In a first, foreign investors cannot remove the risk of FIRB using the last resort power by obtaining FIRB approval.
What you need to consider
If you are, or represent, a person or organisation that is classified under the Act as a ‘foreign person’, you must consider whether FIRB approval is required when investing in Australia. You should also consider whether the industry you are investing in may be at risk of becoming sensitive in the future.
If you have any questions regarding the new national security test or the FIRB regime generally, please contact us and one of our FIRB specialists will be able to assist you.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.