This guide is intended to supplement our popular Foreign Investment in Australia guide and has been drafted with the intention of providing an overview of the specific considerations a foreign person who is seeking to make an investment into the Australian energy and resources sector ("Energy and Resources Investor") should be aware of. Please note that this guide is written as a general guide only. It should not be relied upon as a substitute for specific legal advice.
Australia's foreign investment policy encourages foreign investment that is consistent with Australia's national interest. As a resource rich country with a relatively high demand for capital and a small population, foreign investment helps fill the void between what Australia saves and invests every year. Australia's national investment and savings gap has been on average about 4 per cent of gross domestic product per year over the last few decades.
In 2018, foreign direct investment in mining and quarrying was A$365.5 billion and in electricity, gas and water was A$21.7 billion.
Due to its low level of sovereign risk, Australia's energy and resources sector is generally regarded to be an excellent place to invest for foreign investors.
Australia's future E&R policy direction
The National Resources Statement was released on 14 February 2019 and sets out the Government's position on the policy and long-term agenda for the Australian resources sector. Driving the statement is the Government's vision for Australia to have the world's most advanced, innovative and successful resources sector. In the Statement the Government recognises that Australia's resources sector has never been more important to the nation's economic wealth and prosperity than it is today. The Government seeks to grow the resources sector by attracting international investment and supporting employment through progressive policy development in partnership with industry, research and Australian state and territory governments.
To maintain its strong position in the global resources market, the Government will prioritise five key goals that will form the future of all Government action within the sector:
- deliver the most globally attractive and competitive destination for resources projects;
- develop new resources, industries and markets;
- invest in new technologies and approaches, especially to deliver better environmental outcomes;
- create well paid, secure jobs; and
- support communities to ensure they receive benefits from the development of Australian resources.
The Government's primary priority is to promote the Australian resources sector as globally attractive to encourage investment from foreign companies. As a result of the Statement, the resources sector can expect changes in resource regulation, new investment opportunities and a greater insight into the future direction of the resources sector in Australia. With these upcoming developments, the resources sector is rich in potential for foreign investors and investment that seeks to capitalise on the opportunities.
2. What you need to know
The Australian Foreign Investment Review Board ("FIRB") reviews foreign investment proposals on a case-by-case basis and advises the Treasurer on the national interest implications of the proposed transaction. The decision to grant or refuse an application is made by the Treasurer. If FIRB clearance is required and a foreign investor makes an acquisition without it, the investor risks delaying the transaction, the transaction not completing, having the investment unwound or even civil or criminal penalties being imposed.
2.1 The legal regime
The main laws that regulate foreign investment in Australia are the:
- Foreign Acquisitions and Takeovers Act 1975 (Cth) ("FATA");
- Foreign Acquisitions and Takeovers Regulation 2015 ("FATR"); and
- Foreign Acquisitions and Takeovers Fees Imposition Act 2015 (Cth) ("Fees Imposition Act") and its associated regulations.
Other relevant laws include:
- Security of Critical Infrastructure Act 2018 (Cth) ("SCIA");
- Foreign Influence Transparency Scheme Act 2018 (Cth); and
- National Security Legislation Amendment (Espionage and Foreign Interference) Act 2018 (Cth)
FIRB Guidance Note 24 ("GN 24") also provides useful commentary on foreign investment in the energy and resources sector.
Notification to FIRB and clearance by the Treasurer is required if the value of a proposed investment exceeds the prescribed monetary threshold. The relevant monetary threshold is determined by the type of investor and the type of investment.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.