Australia: The new Korea-Australia Free Trade Agreement is an open door for Korean investors, but not in agriculture

Australia's new free trade agreement with Korea is a clear signal Australia is open for business for Korean investors. And, it could fuel a much needed investment surge in Australia's resources and infrastructure sectors.

The final agreed version of the Korea-Australia FTA amounts to some 1000 pages. It deals with several bilateral trade areas, seeking to eliminate tariffs, red-tape and impediments to mutual trade,

Most significant is the agreement's chapter on foreign investment. It affords Korean investors in non-sensitive sectors the same treatment as Australia currently provides to US and New Zealand investors. This means the screening threshold for review of investments in non-sensitive sectors by Korean investors will be raised from $248 million to $1,078 million.1

Further, it covers all forms of investment including investments in companies and businesses and there is protection against expropriation or nationalisation of investments without prompt, adequate and effective compensation.


However, as with all FTAs, there are restrictions. Australia has reserved the right to screen foreign investment proposals of AU$15 million or more in Australian agricultural land and AU$53 million or more in Australian agribusinesses".

Given these low monetary thresholds, it is clear Australia is treating agriculture as a "sensitive" industry where foreign investment will be scrutinised to determine whether it is in the national interest. Criteria include:

  • the quality and availability of Australia's agricultural resources, including water;
  • land access and use;
  • agricultural production and productivity;
  • Australia's capacity to remain a reliable supplier of agricultural production, both to the Australian community and our trading partners;
  • biodiversity; and
  • employment and prosperity in Australia's local and regional communities.

It is unclear how these criteria relate to what is in, and what is not in, the national interest. They are also different from those applied in the national interest test under the Foreign Investment Review Board rules – for example as seen recently in the Archer Daniels Midland approach to Graincorp.

Putting agriculture aside, it is evident that the higher thresholds for scrutiny of Korean investment in Australia, effectively treating it as an equal to US and New Zealand, should encourage Korean companies and businesses to invest in Australia, particularly in the resources, energy and infrastructure sectors.


The inclusion of an investor state dispute settlement (ISDS) provision in the KAFTA should give Korean investors additional confidence the Australian Government will not unduly interfere with their investments.

The ISDS provision grants Korean investors, in certain circumstances, the right to appeal to an international arbitral tribunal if they believe actions of the Australian Government constitute an expropriation or nationalisation of their investments without prompt, adequate and effective compensation.

In effect, it allows Korean companies to sue the Australian government directly for undue interference with their investments.

During KATFA negotiations it was reported the previous Labour Government's reluctance to include an ISDS provision was a key sticking point for both parties and held up the agreement's conclusion.

Last year the newly elected Coalition Government announced it would put the ISDS provision back on the negotiating table provided there were 'safeguards' to protect the Government's ability to make laws in respect of public interest matters.

The final KAFTA text reflects this position. While the ISDS provision still grants Korean investors the ability to institute proceedings against the Australian Government, there are carve outs directed at public interest matters. For example:

  • except in rare circumstances, non discriminatory regulatory actions by the Australia Government for the purpose of protecting 'public welfare objectives' - such as public health, safety and the environment - will not constitute expropriation;
  • provided measures are not discriminatory or arbitrary, the adoption and maintenance of measures by the Australian Government in the following areas are exempt from the ISDS provision:
    • measures necessary to protect public morals, order or safety;
    • measures necessary to protect human, animal or plant life or health;
    • measures to ensure compliance with laws not inconsistent with the KAFTA;
    • measures to protect intellectual property;
    • measures for the protection of national treasures of artistic, historic or archaeological value;
    • measures relating to the conservation of living or nonliving exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption; and
    • measures relating to taxation; and
  • decisions by the Australian Government with respect to whether or not to refuse, or impose conditions on, an investment that is subject to Foreign Investment Review Board approval.

The effect of these carve outs is that in certain areas, Korean investors will not have recourse against the Australian Government.


Korea's total investment in Australia at the end of 2012 was around $12 billion. This could rise dramatically under the KAFTA with the resources and infrastructure industries being the most likely beneficiaries.

A word of caution though, research done by the Productivity Commission in 2010 shows that most of Australia's previous FTAs have fallen far short of their promised economic benefits . Could the KAFTA be a turning point?

We will certainly keep a close watch on how Korean investments into Australia's growing agribusiness sector are analysed under the national interest test and whether the ISDS provisions alter Government behaviour over time.


1Sensitive sectors include media, telecommunications, transport, the supply of goods or certain services to the Australian Defence Force and the extraction of uranium or plutonium or operating a nuclear facility.

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.

Most awarded firm and Australian deal of the year
Australasian Legal Business Awards
Employer of Choice for Women
Equal Opportunity for Women
in the Workplace (EOWA)

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.