9 Practicalities

Foreign persons are advised to make applications for FIRB approval to remove the risk of adverse orders (such as disposal) if the Treasurer decides the proposed transaction will be contrary to the ‘national interest’ or, in the case of notifiable national security actions and reviewable national security actions, contrary to ‘national security’.

The concept of ‘national interest’ is not defined in the legislation. The Treasurer has the power to determine on a case-by-case basis whether a proposed transaction will be contrary to the ‘national interest’. The Policy states that the Government typically considers the following factors when assessing foreign investment proposals: national security; competition; other Australian government policies (including tax); impact on the economy and the community as well as employees; and character of the investor.

Foreign investors should be aware that in many cases it is a criminal offence to proceed without approval (see paragraph 10). In response to an application the Treasurer (through FIRB) may decide that:

• there are no objections to the proposal, and give a no-objection notification (commonly known as a ‘FIRB approval’) to the applicant accordingly;
• there are no objections to the proposal provided certain conditions are met, and give a no-objection notification (commonly known as a ‘FIRB approval’) to the applicant imposing conditions (in which case the conditions notified to the acquirer are legally binding if the transaction proceeds); or
• the proposal is contrary to the national interest or national security (as applicable), and make a public order prohibiting the transaction.

The Government has publicly stated that conditions are the regulatory mechanism by which it can allow foreign investment to occur while at the same time managing the risks to the national interest or national security associated with that investment. The types of conditions that have been imposed on previous FIRB approvals include:

• reporting conditions, such as the requirement to provide FIRB with annual reports on whether or not the applicant has complied with Australian tax laws in relation to the proposed transaction, and also to provide FIRB with information regarding the applicant and target group’s post-transaction equity and debt funding structure;
• conditions to support national security, such as a requirement for at least half of the target’s board to comprise Australian citizens and residents, and a requirement that the target’s chairman be an independent director who is an Australian citizen and resident;
• conditions relating to the treatment of sensitive data, which seek to mitigate risks of unauthorised access, corruption, denial or exfiltration, such as:
  
  • a requirement to develop and implement data security policies and procedures that extend beyond the requirements of general Australian law;
  • restrictions on access to specified data by directors, representatives and staff of the applicant;
  • restrictions on the location of data storage and access;
  • cybersecurity arrangements; and/or
  • reporting requirements in the event of a data breach;
• conditions relating to sensitive infrastructure, which seek to mitigate risks relating to espionage and sabotage, such as a requirement that operational control or maintenance of sensitive assets generally occurs within Australia;
• conditions relating to commercial property, which seek to mitigate risks relating to client security, such as:
  
  • notification to tenants of changes in ownership and/or property management; and/or
  • restrictions on investor access to the property;
• conditions to support competition policy, such as restricting the aggregate ownership by associated investors in a specific industry or sub-market;
• conditions designed to mitigate risks to the community or to the national or regional economy, such as:
  
  • a requirement to maintain company headquarters in Australia;
  • a requirement to maintain production facilities in specified regional areas without loss of employment for a specific period;
  • a requirement that there should have been an open opportunity for Australian investors to acquire a parcel of agricultural land before its purchase by a foreign investor; and
• conditions to address the risk of land banking and speculation, such as a requirement to commence continuous construction on vacant land within a specified period and not to sell the land until construction is complete.

Finally, it should also be noted that the Treasurer has powers to request information and documents from other parties if relevant to an application (information request).

Before making a recommendation to the Treasurer (or their delegate) on whether to approve an application, FIRB consults broadly with Commonwealth, state and territory government departments and agencies, and in particular with the Australian Competition and Consumer Commission (ACCC), the Australian Taxation Office (ATO) and, where critical infrastructure assets (such as telecommunications, gas, electricity, water and ports) are involved, the Cyber and Infrastructure Security Centre (CISC) which is part of the Commonwealth Attorney‑General’s Department.

The ATO will undertake a ‘tax risk assessment’ of each FIRB application. Following input from the ATO, FIRB might recommend that the Treasurer (or their delegate) impose ‘tax conditions’ on approvals. While FIRB will consult closely with the ACCC, FIRB is entitled to adopt its own position on competition matters even if the ACCC clears a transaction. The CISC undertakes a national security risk assessment of a proposal where the target is or has critical infrastructure assets, and then provides advice to FIRB.

These regulatory interdependencies can lead to timing and transaction risks. It is therefore important to analyse likely issues early – especially competition and tax issues – and develop an integrated strategy to manage those risks.

The FATA has a regime requiring foreign persons to make certain notifications to FIRB following receipt of a no objection notification or exemption certificate. In general terms, the regime requires a foreign person to notify FIRB within 30 days of the taking of an 'action' covered by the no objection notification or exemption certificate. Notifications are also required in various situations where a foreign person ceases to have an interest the acquisition of which was covered by the no objection notification or exemption certificate. Notifications are made online on FIRB's website via completing and submitting an online notification form.

In addition, the FATA requires records relating to foreign investment notices and applications to be maintained. Failure to keep such records is an offence under the FATA.

A person must make and keep records of every act, transaction, event or circumstance relating to the matters shown for the length of time specified in the following table.