The Foreign Investment Review Board (FIRB) has been charged with the review and assessment of any proposal by private foreign investors to acquire critical state-owned infrastructure assets.
This was 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.
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.
Eugene Chen is head of China Practice at Hall & Wilcox lawyers.