Foreign Acquisitions and Takeovers Amendment (Threshold Test) Regulations 2020 [F2020L00435]-Instruments raising significant scrutiny concerns [2020] AUSStaCSDLM 129 (11 November 2020)

• Overview
• Scrutiny concerns

Parliamentary oversight – time-limited legislation5

• Actions to date

Committee comment

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

FRL No.	F2020L00435[1]
Purpose	To amend the monetary value thresholds for particular significant actions and notifiable actions which are specified in the Foreign Acquisitions and Takeovers Regulation 2015 to nil. This requires a greater number of investments by foreign persons in Australia to be notified to the Treasurer for review to ensure they are not contrary to the national interest.
Authorising legislation	Foreign Acquisitions and Takeovers Act 1975
Portfolio	Treasury
Disallowance	15 sitting days after tabling (tabled in the Senate on 12 May 2020). Notice of motion to disallow given on 1 September 2020.

Overview

1.1 The instrument amends the Foreign Acquisitions and Takeovers Regulation 2015 to set the monetary thresholds for particular significant actions and notifiable actions to nil. In effect, this means that the majority of actions relating to the acquisition of interests in Australian business or land require notification to the Treasurer under the Foreign Acquisitions and Takeovers Act 1975 (Foreign Acquisitions Act). Under the Foreign Acquisitions Act, the Treasurer may impose conditions on significant actions,^[2] and may refuse to allow an action to proceed if it is deemed contrary to the national interest.^[3]

1.2 The explanatory statement to the instrument explains that this measure is necessary to safeguard the national interest during the COVID-19 pandemic, which is placing intense pressure on the Australian economy and Australian businesses. It also states that the measure is 'intended to be in place for the duration of the Coronavirus crisis';^[4] however, neither the explanatory statement nor the instrument itself specifies a date by which the measures will cease.

Scrutiny concerns

Parliamentary oversight – time-limited legislation^[5]

1.3 The committee's technical scrutiny concerns about this instrument are detailed in Delegated Legislation Monitor 9 of 2020.^[6] The committee considered that instruments implementing significant COVID-19 response measures should specify a date by which they will cease and that this instrument should therefore be amended to provide for a specified end date. This would ensure an appropriate level of regular parliamentary oversight and guard against the risk that temporary measures implemented in response to COVID-19 become an ongoing part of the law without appropriate parliamentary scrutiny and debate.

Actions to date

Initial correspondence

1.4 The committee wrote twice to the Treasurer in May and June 2020 to seek his advice about the committee's scrutiny concerns.^[7] This correspondence is detailed in Delegated Legislation Monitor 9 of 2020. In summary, the Treasurer advised that he did not consider that the instrument should be amended to specify an end date, and that:

• the instrument is necessary as COVID-19 has increased the risk of foreign investment in Australia occurring in ways contrary to the national interest;

• it is appropriate for the instrument to remain in force for an unspecified period of time in light of the continuing uncertainty about the duration of the COVID-19 pandemic;

• if the COVID-19 pandemic continues beyond any specified end date a new instrument would be required to protect the national interest; and

• that significant reforms are planned for Australia's foreign investment review framework and that these reforms are scheduled to commence on 1 January 2021. As part of these reforms certain aspects of the temporary COVID-19 measures, which include the instrument, will be replaced and others will return to pre-COVID-19 settings.

Subsequent correspondence

1.5 The committee detailed its outstanding concerns regarding the instrument in Delegated Legislation Monitor 9 of 2020. In this monitor the committee drew the attention of the Senate to the lack of a specified end date for the significant temporary measures contained in the instrument. The committee recommended that the Senate disallow the instrument and gave a notice of motion to disallow the instrument on 1 September 2020, noting that further developments in relation to this matter may lead the committee to reconsider its recommendation.

1.6 In a letter dated 30 October 2020, the Treasurer advised regulations have been made to reinstate the monetary thresholds where a foreign person is renewing a lease over non-sensitive commercial property, and that between 18 September and 2 October 2020 draft amendments to the Foreign Acquisition and Takeovers Regulation 2015 were released for consultation.^[8] These draft amendments propose to reinstate the other monetary thresholds from 1 January 2021 as indexed at the rates the thresholds would have been if not for the measures made in response to COVID-19.

1.7 The Treasurer also advised that the final decision on whether the other monetary thresholds will be reinstated from 1 January 2021 will depend on the economic impact of COVID-19 and whether foreign investment could be at ongoing risk of detrimentally affecting the national interest.

Committee comment

1.8 The committee thanks the Treasurer for this advice.

1.9 In light of the Treasurer's advice that regulations have been made to reinstate the monetary thresholds where a foreign person is renewing a lease over non-sensitive commercial property and that exposure draft regulations have been released which would reinstate the monetary thresholds for other actions from 1 January 2021, the committee has concluded its examination of the instrument and resolved to withdraw the notice of motion to disallow the instrument.

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[1] Accessible on the Federal Register of Legislation at https://www.legislation.gov.au/.

[2] Foreign Acquisitions and Takeovers Act 1975, section 74.

[3] Foreign Acquisitions and Takeovers Act 1975, section 67.

[4] Explanatory statement, p. 1.

[5] Scrutiny principle: Senate standing order 23(3)(k).

[6] Senate Standing Committee for the Scrutiny of Delegated Legislation, Delegated Legislation Monitor 9 of 2020, pp. 11–14.

[7] Copies of the letters are available on the committee's website.

[8] See Foreign Investment Reform (Protecting Australia’s National Security) Regulations 2020 (Exposure Draft), available at https://treasury.gov.au/consultation/c2020-113460.