Regulation of foreign investment

By Michael Wadley and Justin Shmith, Blake Dawson
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Although restrictions on foreign investment exist in Australia, the Australian government actively promotes foreign investment. Foreign investment is regulated primarily through a regime established under the Foreign Acquisitions and Takeovers Act 1975 (FATA) and regulations made under that Act, as supplemented by government policy.

The FATA regime is administered by the Australian Treasurer and the Foreign Investment Review Board (FIRB), an advisory body within the Commonwealth Department of Treasury. Under FATA, the Treasurer has wide powers to prohibit foreign investment proposals and to order the divestiture or unwinding of foreign investment arrangements in respect of Australian companies and businesses if they are considered contrary to the national interest.

Michael Wadley
International partner,
Head of China practice
Blake Dawson

The notification of some investment proposals to FIRB is compulsory while the notification of others, although not compulsory, is advisable to avoid the risk that the transaction may subsequently be unwound on the grounds that it is considered contrary to the national interest. Notification of the proposal to FIRB requires the submission of certain information prescribed under FATA regarding the acquirer and the proposal.

Approval may be granted by the Treasurer subject to the acquirer and the proposal meeting certain conditions. These are frequently prescribed in the case of proposals concerning real estate (examples of conditions imposed include the time for completion of development activities or environmental requirements). However, more recently, conditions are also increasingly being imposed on acquisitions by foreign state-owned enterprises and sovereign wealth funds.

Where notification under FATA is compulsory, it is a criminal offence to proceed with a proposal unless notification has been given and either the proposal has been cleared, or more than 40 days (or more if the approval period has been extended by a further 90 days) have elapsed since the notification was received by FIRB.

Proposals notifiable to FIRB

Justin Shmith
Justin Shmith
Blake Dawson

Foreign investment proposals which require notification to FIRB (whether under FATA or under FIRB’s policies) include:

  • acquisitions by a foreign person or persons of a “substantial and controlling interest” of an Australian business or corporation which is valued above, or the proposal values it above, A$231 million;
  • acquisitions by a foreign person or persons of a “substantial and controlling interest” in a foreign company whose Australian subsidiaries or gross assets exceed A$231 million;
  • direct investments by foreign governments and their agencies (including state-owned enterprises and sovereign wealth funds) irrespective of value;
  • acquisitions of interests in “Australian urban land”.

Where any doubt exists as to whether a proposed acquisition is notifiable to FIRB, FIRB should be notified.

The monetary thresholds cited in this section are current as at 1 January 2010. The thresholds are indexed against the GDP price deflator on 1 January each year.

There are also various government policies and regulations which impose additional foreign investment requirements on certain sectors. Foreign investment proposals involving these sectors should be notified to FIRB for examination to determine whether they are contrary to the national interest.

The sectors which are subject to additional requirements are banking, civil aviation (both domestic and international services), airports, shipping, media and telecommunications.

Australia’s foreign investment policy (which may be obtained from indicates that any investment in these sectors should be notified to FIRB.

Foreign government investment

Australia’s foreign investment policy provides that proposed investments by a foreign government or its agencies (for example state-owned enterprises and sovereign wealth funds) should be notified to FIRB to obtain approval before making a “direct investment” in an Australian company, regardless of the value of the investment.

The policy, which was updated in July, sets out five national interest considerations that apply to all foreign investments: national security; competition; Australian government policies (including tax); impact on the economy and the community; and character of the investor (i.e. the extent to which the investor operates on a transparent and commercial basis).

Urban land

Foreign investment in Australian real estate is strictly controlled. Notification to (and, in some cases, pre-approval by) FIRB is compulsory in respect of the acquisition of certain interests in Australian urban land.

“Australian urban land” includes all land situated in Australia that is not used exclusively for carrying on a substantial business of primary production. Therefore, generally speaking, land that is not used for commercial farming or forestry purposes will be regarded as being “urban land”. It should be noted that land used for purposes associated with mining and petroleum production (whether onshore or offshore) may be considered to be urban land.

Any agreement by virtue of which a corporation in which foreigners hold a “controlling interest” acquires an interest in Australian urban land must be notified to FIRB. Importantly, notification is also required in the case of the acquisition of shares in a company (and its subsidiaries) if the value of its total Australian urban land assets exceeds 50% of the value of its total assets irrespective of the total value of the company or the value of the proposal (being an Australian urban land corporation).

Recommended action

The regulation of foreign investment in Australia is a highly complex area, particularly as it is governed by a combination of FATA and Australian government policy. Specific legislation or policy also regulates foreign investment in certain industry sectors.

Where a foreign investment proposal may potentially raise issues, it is recommended that FIRB be consulted prior to any formal notification being

Michael Wadley heads Blake Dawson’s China Practice

Justin Shmith is a partner in Blake Dawson’s corporate team in Melbourne

Blake DawsonBlake 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

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