Green light for foreign investors in South Australia

By Michael Sheng and Tanya Denning, Blake Dawson
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The Woomera Prohibited Area (WPA) is a 127,000 square kilometre area of Crown land located in South Australia operated by the Department of Defence. It is a world class defence testing range due to its large size, remote location, low population and quiet electromagnetic environment. It also contains valuable minerals with about 62% of Australia’s copper, 78% of Australia’s uranium and large amounts of gold, silver and iron ore.

Michael Sheng Partner Blake Dawson
Michael Sheng
Partner
Blake Dawson

Woomera was first declared a prohibited area in 1947. As a prohibited area, any person wishing to access the WPA must first gain permission from the Department of Defence, and must usually sign a deed of access. In the past, access to the WPA has been managed on an ad hoc basis by the Woomera Test Facility under the auspices of Defence Instruction 38-1.

The recommendations of the Hawke Report, a government-commissioned but independent review of environmental sustainability in Australia, include overhauling the provisions of the Defence Instruction and increasing transparency and certainty for those seeking access to Woomera.

Relevance for foreign investors

South Australia has increasingly been seen as an attractive place for foreign investment in resources projects. However, national security concerns have in some cases resulted in the Foreign Investment Review Board (FIRB) refusing approval to foreign investors where the Department of Defence has expressed concerns about a project’s coexistence with the WPA.

Tanya Denning 博雷道盛 合伙人 Tanya Denning Partner Blake Dawson
Tanya Denning
Partner
Blake Dawson

The Hawke Report found that foreign investment in resources is an issue of national interest, and considered how the FIRB and Department of Defence should manage foreign investment in the context of the WPA.

One of the report’s recommendations was that “preconditions on the nature and scope of potential foreign investment in the WPA should be dealt with by FIRB”. Any security concerns about foreign investment in the WPA should be managed by the Department of Defence through conditions imposed on access arrangements entered into with the foreign user.

This represents a significant departure from the approach to the WPA that was previously taken by the FIRB and Department of Defence, which involved the FIRB taking advice from the department about foreign access and security concerns. This approach has led to the FIRB rejecting some investments outright on national security grounds.

A key recommendation of the Hawke Report is that the WPA should be managed under a time-share model which prioritizes the Department of Defence’s position as the main user of the area, while facilitating other uses of the area.

The traffic light access model

Under the current access model, non-defence users’ access to the WPA is subject to the Department of Defence’s right to require them to evacuate with very little notice.

The proposed co-existence model divides the WPA into three zones: red, amber and green. It creates clear limits on the number of days per year that the Department of Defence can require non-defence users to evacuate land. The proposed zones are based on the areas of highest priority for use by the Department of Defence.

The boundaries of the zones are to be finalized based on consultation between the Department of Defence and the South Australian Department of Primary Industries and Resources (PIRSA).

No new non-defence users will be granted access to the proposed red zone. The proposed amber zone will be divided into two areas in which non-
defence users will be required to evacuate for a maximum of 140 and 70 days per year, respectively. In a proposed green zone, non-defence users will be required to evacuate for a maximum of 56 days per year.

Permit system

The current regime of negotiated access deeds will be replaced with a permit scheme to be implemented by new Commonwealth legislation. The new permit scheme will allow standard conditions to be drawn up, covering users in each zone.

Unlike the current access arrangements, the terms and conditions attached to permits and details of the application process and selection criteria will be publicly available. This is likely to streamline the process of obtaining access, and reduce risk and uncertainty for parties involved in investment and development projects.

A key aspect of the proposed permit system is the creation of a standard set of conditions that will be publicly available to parties seeking access to the WPA. It is envisaged these conditions will deal with issues including:

  • restrictions on physical structures, people and electromagnetic emissions;
  • providing the Department of Defence with powers of inspection; and
  • enabling the Department of Defence to confiscate equipment and remove people from the WPA for safety and security reasons.

These conditions would be drafted to manage any security concerns created by foreign investment in the WPA. Importantly, the Hawke Report recommends that there be no requirement for people accessing the WPA to obtain security clearance from the Department of Defence. Instead, restrictions would be based “exclusively on Defence requirements for the part of the WPA the non-defence user is seeking to access”.

Future developments

The Hawke Report provides solid recommendations on how to manage access to the WPA, but there is not yet certainty on how these recommendations will be implemented. A six-month moratorium is in place on applications to access the WPA while the Australian government puts in place frameworks to implement the new system.

As a result, investors and potential investors in the WPA will need to stay abreast of developments over the next six to 18 months as legislation is put before the federal parliament and the system of conditions and penalties is developed.

Michael Sheng is a partner in the Shanghai office and Tanya Denning is a partner in the Adelaide office of Blake Dawson

Blake Dawson Shanghai office Suites 3408-10, CITIC Square

1168 Nanjing Road West, Shanghai

Postal code: 200041

Tel: 86 21 5100 1796

Fax: 86 21 5292 5161

E-mail:

michael.sheng@blakedawson.com

jeff.lynn@blakedawson.com

www.blakedawson.com

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