Foreign Acquisitions and Takeovers Amendment (Threshold Test) Regulations 2020 [F2020l00435] [2020] AUPJCHR 91 (17 June 2020)

• Further response required
• Foreign Acquisitions and Takeovers Amendment (Threshold Test) Regulations 2020 [F2020L00435]1
• Reducing the monetary threshold for reporting investments by foreign persons
• Summary of initial assessment
• Preliminary international human rights legal advice
• Right to equality and non-discrimination
• Committee's initial view
• Treasurer's response7
• Concluding comments
• International human rights legal advice
• Committee view

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Further response required

1.3 The committee seeks a further response from the relevant minister with respect to the following instrument.

Foreign Acquisitions and Takeovers Amendment (Threshold Test) Regulations 2020 [F2020L00435]^[1]

Purpose	This instrument amends the monetary threshold above which certain investments in Australia by foreign persons may require notification to the Treasurer for approval
Portfolio	Treasury
Authorising legislation	Foreign Acquisitions and Takeovers Act 1975
Disallowance	15 sitting days after tabling (tabled in the House of Representatives and the Senate on 12 May 2020). Notice of motion to disallow must be given by 12 August 2020 in the House of Representatives and the Senate[2]
Right	Equality and non-discrimination
Status	Further response required

1.4 The committee requested a response from the minister in relation to the instrument in Report 5 of 2020.^[3]

Reducing the monetary threshold for reporting investments by foreign persons

1.5 This instrument provides for a nil monetary threshold for actions taken by foreign persons in relation to entities, businesses and agricultural lands, and prescribes all kinds of land other than agricultural land as being land without a threshold value. This has the effect that all proposed foreign investments in relation to these actions and investments in Australia must be notified to the Treasurer for prior approval. The instrument repeals and replaces Part 4 of the Foreign Acquisitions and Takeovers Regulations 2015, which previously set out a number of different monetary thresholds in relation to which a proposed investment had to be notified to the Treasurer. The lowest previous monetary threshold was $15 million, in relation to agricultural land being acquired by a foreign person.^[4]

Summary of initial assessment

Preliminary international human rights legal advice

Right to equality and non-discrimination

1.6 By reducing to nil the monetary threshold for notification to the Treasurer regarding proposed foreign investments in Australia, which only applies to proposed investments by foreign persons,^[5] this measure may engage and limit the right to equality and non-discrimination.^[6] This measure may indirectly discriminate against persons based on their nationality, as it only applies to persons not ordinarily resident in Australia.

1.7 The initial analysis considered that further information was required as to the compatibility of this measure with the right to equality and non-discrimination.

1.8 The full initial legal analysis is set out in Report 5 of 2020.

Committee's initial view

1.9 The committee noted that the measure may engage and limit the right to equality and non-discrimination. This right may be subject to permissible limitations if it is shown to be reasonable, necessary and proportionate. The committee sought the advice of the Treasurer as to the compatibility of this measure with the right to equality and non-discrimination.

Treasurer's response^[7]

1.10 The Treasurer advised:

The Foreign Acquisitions and Takeovers Act 1975 (the Act) allows the Treasurer to review foreign investment proposals that meet certain criteria. The Treasurer has the power to block foreign investment proposals or apply conditions to the way proposals are implemented to ensure they are not contrary to the national interest. The criteria that, if met, would require a proposed investment to be reviewed by the Treasurer, include whether the consideration for the proposed investment meets the monetary thresholds prescribed in the Foreign Acquisitions and Takeovers Regulation 2015 (the 2015 Regulation). The 2020 Regulations amend the monetary threshold in the 2015 Regulation.
As the Report notes, it is the framework, which is set out in the Act, and which allows for acquisitions by foreign persons to be screened, that directly engages the rights of equality and non-discrimination. However, given the nature of the regulated activity, the extent of any incompatibility is likely to be small, and comprehensively outweighed by the national interest protected by the 2020 Regulations. As the Committee notes, this measure is designed to safeguard the national interest by protecting vulnerable businesses as COVID-19 puts intense pressure on the Australian economy and Australian businesses.
The significant impact of Coronavirus on the Australian economy has increased the risk of foreign investment in Australia occurring in ways that would be contrary to the national interest. To the extent that the 2020 Regulations engage the rights of equality and non-discrimination, limits imposed on those rights are thus reasonable, necessary and proportionate.

Concluding comments

International human rights legal advice

1.11 The Treasurer advises that given the nature of the activity regulated by the Foreign Acquisitions and Takeovers Act 1975, the extent of any incompatibility with the right to equality and non-discrimination is likely to be small, and is outweighed by the national interest and the objective of protecting vulnerable Australian businesses subjected to the pressure on the Australian economy due to the

COVID-19 pandemic.

1.12 The objective of protecting vulnerable Australian businesses from the intense pressure placed on them during the COVID-19 pandemic would appear to be capable of constituting a legitimate objective for the purposes of international human rights law. However, it is not clear that the measure is rationally connected to this objective (that is, effective to achieve the objective). In providing for a nil monetary threshold for investment actions taken by foreign persons in relation to entities, businesses^[8] and agricultural lands, and prescribing all kinds of land other than agricultural land as being land without a threshold value,^[9] it would appear that the scope of the notification provision is broad. In effect, it would appear that these changes would mean that all proposed investments in land, at any value, including the purchase of any residential property,^[10] by foreign persons must be notified to the Treasurer for prior approval. It is not clear how requiring foreign persons to apply to the Treasurer for approval for purchasing any residential property would be effective to achieve the stated objective of protecting vulnerable Australian businesses.

1.13 There are also questions as to whether the measure is proportionate to the objective sought to be achieved. In particular, it appears, for example, that a

foreign-based person acquiring an interest in residential land would be liable for application fees in seeking the Treasurer's approval, starting at $5,700 where the price of the acquisition is $1 million or less.^[11] Further, it appears that the time taken for the Treasurer to approve the application may be lengthy, noting that guidance from the Foreign Investment Review Board states that statutory timeframes for reviewing applications will be extended from 30 days to up to six months.^[12] Given that this may significantly increase the time before which a foreign person may be given approval to purchase property, this may significantly impair the capacity of foreign persons who seek to purchase residential property in Australia. It is also not clear, if the measure is designed to safeguard businesses during the COVID-19 pandemic, why the legislative instrument does not include a sunset date for these changes, rather than applying them on an ongoing basis.

1.14 In order to more fully assess the compatibility of this measure with the right to equality and non-discrimination, further information is required as to:

• whether the changes made by this instrument apply to the purchase of any land at any value, including residential land, and if so, how is the measure rationally connected to the stated objective of protecting vulnerable businesses;

• what safeguards are in place to ensure that foreign persons are not disproportionately affected by this measure;

• what the application fees are that apply to foreign persons seeking to purchase property (including residential property) that apply as a result of the changes made by this instrument;

• what the timeframe is by which the Treasurer will make decisions regarding investments by foreign persons; and

• why these changes are made on an ongoing basis (noting that it has been stated to be in response to the COVID-19 pandemic).

Committee view

1.15 The committee thanks the Treasurer for this response. The committee notes that this instrument amends the monetary threshold above which certain investments in Australia by foreign persons may require notification to the Treasurer for approval to nil. The committee considers this measure is designed to achieve the legitimate objective of safeguarding the national interest by protecting vulnerable businesses as COVID-19 puts intense pressure on the Australian economy and Australian businesses.

1.16 The committee notes that the response did not provide sufficient information for it to finalise its assessment of this instrument. In order to fully assess the compatibility of this measure with the right to equality and

non-discrimination, the committee seeks the Treasurer's further advice as to the matters set out at paragraph [1.14].

1.17 In seeking this further information, we are mindful that the Treasurer was required to act with great urgency and immediacy to safeguard the national interest by protecting assets more vulnerable to foreign acquisition by reason of the Coronavirus pandemic and that these assets may include residential property. The committee notes the legal advice with respect to these changes being made on an ongoing basis and understands that the Government intends these measures to be temporary.

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[1] This entry can be cited as: Parliamentary Joint Committee on Human Rights, Foreign Acquisitions and Takeovers Amendment (Threshold Test) Regulations 2020 [F2020L00435], Report 7 of 2020; [2020] AUPJCHR 91.

[2] In the event of any change to the Senate or House's sitting days, the last day for the notice would change accordingly.

[3] Parliamentary Joint Committee on Human Rights, Report 5 of 2020 (29 April 2020), pp. 42-44.

[4] Foreign Acquisitions and Takeovers Regulations 2015, subsection 52(4).

[5] ‘Foreign person’ is defined in section 5 of the Foreign Acquisitions and Takeovers Act 1975 to include an individual not ordinarily resident in Australia.

[6] Articles 2 and 26 of the International Covenant on Civil and Political Rights. The prohibited grounds of discrimination are race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status. Under 'other status' the following have been held to qualify as prohibited grounds: age, nationality, marital status, disability, place of residence within a country and sexual orientation. The prohibited grounds of discrimination are often described as 'personal attributes'.

[7] The minister's response to the committee's inquiries was received on 18 May 2020. This is an extract of the response. The response is available in full on the committee's website at: https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Human_Rights/Scrutiny_reports.

[8] Foreign Acquisitions and Takeovers Regulations 2015, section 51, states that in taking action in relation to entities and businesses (including agribusinesses) for the purposes of section 51 of the Act, the prescribed value is nil.

[9] Foreign Acquisitions and Takeovers Regulations 2015, section 52(2), stipulates that for the purposes of paragraph 52(2)(b) of the Act on agricultural lands, the prescribed value is nil.

[10] 'Land' is defined in the Foreign Acquisitions and Takeovers Act 1975 to include 'a building (including a new dwelling or an established dwelling) or a part of a building'.

[11] See Foreign Investment Review Board, Guidance Note 29, Fees- residential land https://firb.gov.au/index.php/guidance-resources/guidance-notes/gn29.

[12] Foreign Investment Review Board, Guidance Note 53: Temporary Measures in Response to the Coronavirus, 18 May 2020 https://firb.gov.au/sites/firb.gov.au/files/guidance-notes/GN_53_cv_0.pdf.