Foreign Investment Review Board to tighten security test to invest

By Conrad Smith

In an interesting development, it is being reported that the Federal Government is set to add a new national security test to Australia’s foreign investment regime. This new test is understood to apply to investments which are deemed to be sensitive national security businesses.

What is particularly interesting is that it is expected the Treasurer will not only have the power to block proposals by foreign investors and impose conditions prior to the acquisition (as currently provided for in the Foreign Acquisitions and Takeovers Act), but will also have the power to vary the conditions imposed on an approved acquisition as well as require the disposal of the investment if security risks emerge post-approval.

These changes closely follow the change to the monetary screening thresholds which were reduced to zero as part of the government’s COVID-19 response measures in an attempt to protect Australian assets from foreign bargain hunting for the duration of the pandemic’s economic effects. Unlike the changes to the monetary screening thresholds, it is expected the new test for sensitive national security businesses is expected to be a permanent change.

The details of the new test are still to be released but are understood to require foreign investors to notify the Foreign Investment Review Board if they propose to start to hold or acquire a direct interest – being a 10% interest, being in a position of control – in a 'sensitive national security business', regardless of the value of the investment.

What constitutes a 'sensitive national security business' is still to be defined, but reporting indicates it is intended to include assets within the energy, telecommunications, ports, water and data sectors.