On 24 April 2020, the Foreign Investment Review Board (FIRB) published the "Guidance Note 53: Temporary measures in response to the coronavirus" (GN 53). GN 53 provides guidance on the temporary changes announced by the Federal Treasurer, Josh Frydenberg, on 29 March 2020. The temporary changes mean that a greater number of investments by foreign persons in Australia are now required to be notified to the Treasurer for review, to protect Australia's national interest in light of the unprecedented economic impact brought on by COVID-19 pandemic.
As we discussed in a previous article here, all monetary screening threshold amounts have been temporarily reduced to $0, so all proposed foreign investments subject to the Foreign Acquisitions and Takeovers Act 1975 (Cth), regardless of value, now require notification and approval from FIRB.
The Government has explained that the temporary changes are not an investment freeze and Australia continues to welcome and be open to foreign investments that are beneficial and in the national interest of Australia.
We have outlined below the six key considerations based on GN 53 for prospective investors' new foreign investment proposals:
- Statutory timeframe for reviewing investment proposals
To ensure sufficient time for screening applications, the statutory timeframe for reviewing new proposals has now been extended from 30 days to six months.
Acknowledging the challenge of dealing with the substantial increase in the volume of applications, FIRB is triaging cases using a risk-based approach. As such, applicants are encouraged to stipulate in their applications, with supporting materials, whether:
- the investment is an urgent case that supports the Australian economy and businesses
- it is routine application of lower economic significance and risk
- there is a commercial deadline.
Despite the FIRB being committed to prioritising urgent applications, it is unlikely that any guarantees will be provided that such applications will be considered earlier than the six month statutory timeframe.
However, to deal with the substantial increase in the volume of applications, the Government has diverted a significant amount of resources to the FIRB to assist them in their attempts to expeditiously review applications and provide determinations.
- Timing of lodging investment proposals
Whilst it is ultimately a decision of the foreign persons as to when to notify FIRB of the investment, considering the extended statutory timeframe, foreign persons are encouraged to contact FIRB and submit the application early in the transaction process. The earlier the application is submitted, the earlier the screening process will commence.
Furthermore, the statutory timeframe for making a decision will not start until the correct fee has been paid. Factors that may delay the application process include instances where the applicant pays the incorrect fee or does not include sufficient information about the proposed action in their application. Legal advice should be sought on what is "sufficient information".
- Fees payable in all circumstances
Fees will be payable for all foreign investments that are now required to be screened, other than where the fee payable is prescribed as nil.
- Refund of fees in certain circumstances
Where there is a delay to, or deferrals of investment decisions the subject of a foreign investment proposal which have arisen as a consequence of the measures implemented globally (and in Australia) by governments, businesses and individuals as a result of the COVID-19 pandemic, the applicant may elect to withdraw their application, whereby the Treasurer may, at his discretion by reference to the national interest test, refund the paid fee. The applicant is expected to provide clear reasons for their refund request at the time of withdrawal.
- Fee waivers in certain circumstances
To put non-foreign government investors in line with the concessional fee treatment of foreign government investors for acquisitions in non-vacant commercial land of up to $55 million, fee waivers will be considered and processed on a per-application basis, so that non-foreign government investors will ultimately pay the same fee (of $2,000) as foreign government investors. To avoid unnecessary delays in the review process, non-foreign government investors are advised to pay the applicable fee at the time of lodgement of the proposals before any waivers are applied and considered.
- Conditions on approvals
The Treasurer and his delegates will continue to review foreign investment proposals against the national interest on a case-by-case basis. Where appropriate, conditions will be applied proportionately to address identified risks on a non-discriminatory basis.
Conditions imposed on investments that are now required to be screened under the temporary changes may remain after the expiry of the temporary measures, in light of the national interest consideration.
Key takeaways
GN 53 provides practical guidance on interpreting the Treasurer's temporary changes to the foreign investment framework. To effectively manage the FIRB notification and approval requirements in the current circumstances, we encourage foreign investors to:
- incorporate the FIRB process early in their planning and structuring of Australian investments
- contacting FIRB (on a no-names basis, if required) early in the process of developing an investment proposal
- lodging the investment proposal early in the transaction (e.g. before transaction documents are entered into, provided "sufficient information" can be provided to FIRB at such an early stage)
- address all elements in the proposal that may warrant a priority assessment
- pay the correct fee as soon as the proposal is lodged
- provide sufficient information in respect of the investment proposal
- consider the possibility of a fee waiver if the proposal relates to non-vacant commercial land.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.
