From 31 March 2016, FIRB will assess the sale of
critical state-owned infrastructure assets to private foreign
On 18 March 2016, in a climate where there has already been
significant change to Australia's foreign investment rules, the
Commonwealth Government has announced further changes to the
From 31 March 2016, the Foreign Investment Review Board
(FIRB) will assess the sale of critical
state-owned infrastructure assets to private foreign investors.
This is the first time that the sale of such assets will come under
In its current form, the legislation only allows FIRB to assess
the sale of critical infrastructure when these assets are sold to
foreign state-owned enterprises. Now, all foreign investors will
need to obtain FIRB clearance before purchasing critical
state-owned infrastructure assets. These include, amongst other
things, public infrastructure (airports, ports, infrastructure for
public transport, gas systems and water systems), existing and
proposed roads, railways, telecommunications infrastructure and
What do the foreign investment changes mean for
Going forward, this means that FIRB will become a relevant
consideration for all foreign purchasers looking to acquire
critical state-owned infrastructure assets. For foreign bidders
looking to purchase critical state-owned infrastructure assets,
consultation with and review by FIRB will now need to be taken into
the consideration when considering the transaction timetable.
Australian State and Territory vendors of infrastructure assets
will also now need to take into consideration the need for foreign
investors to obtain FIRB approval for those transactions. In order
to maintain competitive tension, those governments may either need
to extend bid timetables (to allow approvals to be obtained during
this process) or impose a condition precedent which requires the
purchaser to obtain FIRB approval.
The changes will also lead to increased engagement between
foreign purchasers and FIRB, as assets which were not previously
subject to a formal FIRB review now will be subject to review.
While it has been announced that these changes will be
implemented through an amendment to the Foreign Acquisitions and
Takeovers Regulation 2015 (Cth), the text of these changes remains
to be seen. However, the changes come into effect on 31 March 2016,
so we expect to see these amendments shortly.
It is also worth keeping an eye on a number of proposed
transactions in the market including the privatisation of each of
Ausgrid, the Port of Melbourne and the Port of Fremantle to see how
the new rules are applied to each of these proposed sales.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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This decision has implications for Government authorities and corporations, and for private sector project proponents.
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