2

The Treasurer’s powers

The mechanisms by which the FATA governs transactions involving a foreign person as acquirer are as follows.

  • For each proposed transaction which constitutes both a notifiable action and significant action:
  • the acquirer is legally obliged to notify FIRB of the proposed transaction, and failure to do that is a criminal offence;
  • the acquirer cannot complete the proposed transaction unless and until it obtains FIRB approval; and
  • the Treasurer can choose to:
  • approve the proposed transaction (ie grant FIRB approval) if the Treasurer considers it would not be contrary to the national interest, and such approval can be given on an unconditional basis or subject to binding conditions; or
  • make an order prohibiting the proposed transaction if the Treasurer considers it would be contrary to the national interest (and if the transaction has already occurred the Treasurer has power to make an order requiring disposal).

  • For each proposed transaction which constitutes a significant action (but not also a notifiable action or notifiable national security action), the acquirer is not legally obliged to notify FIRB of the proposed transaction. However, if prior FIRB approval is not obtained, the acquirer is subject to the risk that the Treasurer considers the transaction to be contrary to the national interest and that they may be subject to adverse orders.

  • For each proposed transaction which constitutes a notifiable action (but not also a significant action or notifiable national security action), the acquirer is legally obliged to notify FIRB of the proposed transaction, but the acquirer need not wait for receipt of any FIRB approval before completing the proposed transaction.

  • For each proposed transaction which involves a national security business or national security land, and which constitutes a notifiable national security action:
  • the acquirer is legally obliged to notify FIRB of the proposed transaction, and failure to do that is a criminal offence;
  • the acquirer cannot complete the proposed transaction unless and until it obtains FIRB approval; and
  • the Treasurer can choose to:
  • approve the proposed transaction (ie grant FIRB approval) if the Treasurer considers it would not be contrary to national security, and such approval can be given on an unconditional basis or subject to binding conditions; or
  • make an order prohibiting the proposed transaction if the Treasurer considers it would be contrary to national security (and, if the transaction has already occurred, the Treasurer has power to make an order requiring disposal).

  • For each proposed transaction which constitutes a reviewable national security action, the acquirer is not legally obliged to notify FIRB of the proposed transaction. However, if prior FIRB approval is not obtained, the acquirer is subject to the risk that the Treasurer, at any time within 10 years after the transaction completes, exercises his/her call-in power to review the transaction on national security grounds and to make orders (such as a disposal order) if the Treasurer is satisfied that the transaction is contrary to national security. FIRB Guidance Note 8 (National security test) contains guidance on the types of reviewable national security actions that may raise national security concerns and in respect of which the Government encourages that a voluntary notification (and therefore application for FIRB approval) be made.
'The notifiable action, significant action and notifiable national security action categories are not mutually exclusive, nor is one a subset of the other...'

The notifiable action, significant action and notifiable national security action categories are not mutually exclusive, nor is one a subset of the other – each has its own set of tests which must be applied to decide if a transaction is caught. However, an action that is a notifiable action, significant action or notifiable national security action cannot also be a reviewable national security action.

The result is that there are different tests within each category (notifiable action, significant action and notifiable national security action) for different types of transactions. Broadly, Australian targets can be separated into three categories:

  • Australian entities and businesses generally (but excluding land and the agricultural sector);
  • land and land rich entities; and
  • agricultural land and agribusinesses.

We deal with each of these in paragraphs 3, 4 and 5 below, with the focus being on mandatory FIRB approval triggers (ie an action which is both a notifiable action and significant action, or which is a notifiable national security action).

The Treasurer has a last resort power to make orders (such as disposal orders) on national security grounds in respect of a transaction after FIRB approval has been granted. The power is exercisable in respect of any FIRB approval given on or after 1 January 2021, unless given in respect of a significant action notified to FIRB or taken before 1 January 2021.

Various requirements must be satisfied before this power can be exercised in respect of an action, including:

  • that, after having reviewed the action and taken into account national intelligence agency advice, the Treasurer is satisfied that a national security risk exists in relation to the action;
  • that one or more of the following applies: (i) the applicant made a false or misleading statement and the Treasurer is reasonably satisfied that the misstatement directly relates to the national security risk; (ii) the business, structure or organisation of the person has materially changed since the FIRB approval was granted, and the Treasurer is reasonably satisfied that the national security risk that has emerged as a result of this change could not have been reasonably foreseen at the time of the FIRB approval or that the likelihood of the risk arising was remote; and (iii) the market in which the action is taken has materially changed since the FIRB approval was granted, and the Treasurer is reasonably satisfied that the change altered the nature of the national security risk posed at the time the decision was made;
  • that the Treasurer has taken reasonable steps to negotiate in good faith with the applicant to achieve an outcome of eliminating or reducing the national security risk;
  • that existing regulatory systems would not adequately eliminate or reduce the national security risk; and
  • if a disposal order is to be made – the action must have been taken and the result of the action is contrary to national security.

It is possible to apply to the Administrative Appeals Tribunal for review of a decision by the Treasurer that a national security risk exists, but it is not possible to seek review of orders made by the Treasurer (such as a disposal order).

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