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What the FIRB? An update on Australia’s foreign investment rules for energy and resources

Mellisa Lai, Partner, Johnson Winter & Slattery

For over a decade, I’ve helped investors navigate Australia's foreign investment laws. The area saw a significant change in 2015 when a lot of things that were set out only in policy were brought into the legislation. Since then, we’ve had a number of changes around critical infrastructure associated with the port of Darwin lease in 2016, followed by COVID changes in 2020 and more critical infrastructure changes linked to national security in 2021. At the same time, the government has been looking at critical minerals facilitation and the changing geopolitics of the world. At the ER Annual Conference I’ll be giving a snapshot of these changes and how they impact you. 

Often people think that it’s just major transactions that need to be reviewed by the Foreign Investment Review Board but in reality, the foreign investment laws are a broad set of rules and many things can be caught up in them. The day-to-day operations of a mining company or an energy provider may be caught by the rules when it comes to things like internal corporate changes or establishing new projects, including acquiring real estate or critical energy assets like mining tenements.

There are many doors that can lead an investor into the rules - all of which have to be closed, or approval obtained before proceeding with a transaction or project in Australia. 

The first question is whether you are considered a foreign investor. The concept is much broader than it seems and Australian incorporated entities can still be considered to be foreign investors.

Another thing to be aware of is that, ultimately, whether or not to grant a foreign investment approval (conditionally or unconditionally) is a discretionary decision of the Treasurer of Australia having regard to Australia’s national interest. This decision is supported through a broad consultation within government and could include the Critical Minerals Facilitation Office, the Australian Competition and Consumer Commission, the Australian Taxation Office and national security agencies, for example. State government agencies might also be involved.

A decision will only be made by the Treasurer if the transaction is not contrary to Australia's national interest, or for a subset of national security related transactions, is not contrary to Australia's national security. To support this, investors need to understand the political landscape and impact of their investment on national security, competition, the economy and community. 

The character of the investor is also considered. Operational matters such as investment in energy transition projects, decommissioning existing power plants, or new capacity building can all be caught by Australia’s foreign investment rules. Each engagement may also result in new conditions being imposed for past investment decisions. 

Given this year’s change in government, there are questions about whether any significant changes will arise for the foreign investment rules. We’ve already seen the application fees that foreigners pay to engage with the system have doubled to almost $1.1 million since the change in government. 

At the moment, businesses are looking for certainty - particularly with energy transition being a focus - however this is a constantly changing area and investors should seek advice early to keep projects on track. To hear more about this join me at the ER Law Annual Conference in October.

You can register to attend the ER Law Annual Conference HERE 

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