FIRB rule changes relating to acquisition of critical state owned assets
In reaction to the national and international concern raised over the Northern Territory Government's 2015 decision to offer a century-long lease of the port of Darwin to a Chinese private company without Australian Federal Government approval, the Foreign Investment Review Board (FIRB) has, as of 31 March this year, been charged with the review and assessment of any proposal by private foreign investors to acquire critical state-owned infrastructure assets.
This is a significant change as previously FIRB only assessed the sale of state-owned assets to foreign government investors, while private foreign investors were able to rely on an exemption which excluded acquisitions from Australian government bodies and their wholly-owned entities.
For the purpose of this change, a “critical infrastructure transaction” is an acquisition of an interest in:
- public infrastructure (eg an airport or airport site; a port; infrastructure for public transport; electricity, gas, water and sewerage systems); existing and proposed roads, railways, inter-modal transfer facilities that are part of the National Land Transport Network or are designated by a State or Territory government as significant or controlled by the Government; telecommunications infrastructure; and nuclear facilities; and
- an Australian business that holds an interest in any of the above.
This change follows quickly on the heels of the rewrite of Australia's foreign investment rules which took effect on 1 December 2015 and saw a revision of the old monetary thresholds for land, the introduction of an agricultural land foreign ownership register, the introduction of new civil penalties and fees, and a broadening of the offences regime for breaches of Australia’s foreign investment rules.
What are the consequences of the critical state-owned infrastructure rules?
From now on, all foreign bidders looking to purchase critical state-owned infrastructure assets must take into account the time, cost and scrutiny which comes with the filing of a FIRB notification.
Further, Australian government bodies and their wholly-owned entities which are looking to sell or grant long-term leases over their infrastructure assets will also now need to accommodate (through extended transaction timetables or conditions precedent) a foreign bidder’s obligations to seek FIRB approval for such transactions.
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