Report proposes changes for foreign investment in Australian agriculture

The Australian parliament asked the senate standing committee on rural and regional affairs and transport in July 2011 to report on the application of the national interest test – particularly in relation to agricultural land and agribusiness – the role of sovereign funds in acquiring Australian assets, and the rules and decision making process of the Foreign Investment Review Board (FIRB).

On 26 June 2013, the committee issued its report, making a total of 29 recommendations. The key recommendations are set out below.

National interest test

The test for approving a foreign investment in Australia is whether it is “contrary to the national interest” (sections 18 and 19 of the Foreign Acquisitions and Takeovers Act [FATA] 1975). There is no definition of “national interest” in the FATA. FIRB policy states that the government determines national interest concerns on a case-by-case basis, having regard to factors including national security, competition, the impact on the economy and community, other government policies, and the type of investor. The committee expressed deep concern about “the lack of a systematic approach by FIRB to the conduct of the national interest test”. It recommended that the transparency and public awareness of the national interest test be increased so that it:

• provides precise and unambiguous instructions to prospective foreign investors about their obligations to FIRB and the nation’s treasurer, and how the national interest test is conducted; and
• builds confidence in the public, FIRB stakeholders and the parliament that the national interest test is being rigorously and fairly applied, and takes into account all relevant factors including impacts on rural communities and the agricultural industry.

Michael Sheng and Tiffany Barton are partners at Ashurst in Shanghai and Melbourne, respectively. Tai Fred, a lawyer at Ashurst in Melbourne, co-authored this article