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Changes to national security and critical infrastructure laws in 2021: Understanding the regime and the Treasurer’s new powers (Part 1)

21 July 2021

#Corporate & Commercial Law

Published by:

Michael Tong

Changes to national security and critical infrastructure laws in 2021: Understanding the regime and the Treasurer’s new powers (Part 1)

The major changes to Australia’s foreign investment regulatory regime implemented from 1 January 2021 are complex. Seven months in, investors and the Foreign Investment Review Board (FIRB) are still coming to terms with the new regime. More than ever before, Australian government agencies (FIRB and its consulting agencies) are scrutinising foreign investments in Australia, especially in sensitive sectors.

In this series, we will help you navigate the new regime and its implications for foreign investment in Australia. We begin by summarising the main changes and explaining key concepts relating to the new FIRB regime, the national security test and the Australian Treasurer’s new powers.

Understanding the basics of the new national security review regime

Like many other nations, Australia has had a national interest test for foreign investment for many years. This national interest test remains unchanged. Factors such as the investor’s character, competition, impact on the economy and community, national security and government policies (including tax) continue to be at the centre of Australia’s foreign investment review regime.

National security has been, and continues to be, a key factor that the Treasurer considers when assessing Australia’s national interest. That said, the Foreign Investment Reform (Protecting Australia’s National Security) Act 2020 (PANS Act) and its accompanying regulations (PANS Regulations) have significantly changed the regulatory environment for foreign investment in Australia. This new regime has increased the national security review of sensitive investments by foreign investors.

Under the Foreign Acquisitions and Takeovers Act 1975 (FATA), a foreign person must not proceed with a ‘notifiable action’ or a ‘significant action’ (also known as a notifiable action) until the Treasurer has issued a statement of no objection. The foreign person obtains this statement by applying to the Foreign Investment Review Board (FIRB) in a process often referred to as ‘FIRB approval’.  

Since 1 January 2021, the PANS Act and PANS Regulations supplemented the FATA and two new categories of actions subject to FIRB approval were introduced – notifiable national security actions and reviewable national security actions.

Under the new regime, FIRB will assess if the proposed action is contrary to Australia’s national security in collaboration with its consulting agencies.

What are ‘notifiable national security actions’?

Notifiable national security actions are actions relating to a ‘national security business’ or ‘national security land’. By definition:

  • a ‘national security business’ is a business that, if disrupted or carried out in a particular way, may create national security risks. A business involved in or connected with critical infrastructure, telecommunications, or the defence and national intelligence communities (or suppliers of critical goods, technology or services to those communities) is likely to be a ‘national security business’
  • ‘national security land’ includes defence premises and land in which a national intelligence agency has an interest (provided that the interest is publicly known or could reasonably be known)
  • ‘notifiable national security actions’ include, among others actions, a foreign person either starting or acquiring a direct interest (generally 10 per cent or more) in a ‘national security business’ or in ‘national security land’.

What do foreign investors need to do if they want to take actions relating to ‘national security business’ or ‘national security land’ in Australia?

A person proposing to take a ‘notifiable national security action’ is required to give notice of the action to the Treasurer (through FIRB), regardless of the monetary value of the investment.

The person is not able to take this action before:

  • receiving a ‘no objection’ notification from the Treasurer;
  • being granted an exemption certificate covering the action; or
  • the decision period lapses.

What are ‘reviewable national security actions’?

‘Reviewable national security actions’ (not to be confused with ‘notifiable national security actions’ described above) are transactions that are not otherwise caught by the legislation (that is, actions that are not a significant action, a notifiable action or a notifiable national security action).

These are actions that will give foreign persons (individuals or companies):

  • potential influence and rights (such as the ability to influence the entity’s policy); or
  • the ability to participate in the management and control of the entity.

A person may choose (but is not required) to notify the Treasurer before taking a ‘reviewable national security action’, subject to the Treasurer’s ‘call in’ power described below. The practical upshot of this change is that foreign investors who are not sure whether they may be taking a ‘reviewable national security action’ are inclined to seek FIRB approval for the action.

What is the Treasurer’s new ‘call in’ power?

The Treasurer has a new ‘call in’ power for actions that are either a ‘reviewable national security action’ or a ‘significant action’ that is not otherwise notifiable under the PANS Act.

In practice, the Treasurer may independently and unilaterally ‘call in’ the action or proposed action for review if the Treasurer considers that the action poses or may pose a national security concern. 

Notably, the ‘call in’ power may be exercised for up to 10 years after the action is taken.

What is the Treasurer’s new ‘last resort’ power?

If national security risks emerge in respect of an investment already approved under the FATA, the Treasurer may, after having notified the foreign person of the review, impose new conditions, vary existing conditions, or require the divestment of that realised investment.

This ‘last resort’ power can only be exercised if certain conditions have been met, including:

  • the foreign person made a statement that was materially false or misleading, or that omitted something that was material;
  • the business, structure, organisation or activities of the relevant foreign person have materially changed since the FIRB approval was granted; or
  • the circumstances or market in which the transaction was undertaken have materially changed since the FIRB approval was granted.

There is no time limit on the exercise of this power, including the power to require divestment.


Regulation of foreign investment in Australia is becoming increasingly rigorous. While foreign investment remains welcome in Australia and the overwhelming majority of investment is approved, geopolitical tensions and COVID-19 have certainly increased challenges for foreign investors in Australia, especially in sensitive sectors.

We encourage foreign investors to contact an experienced legal practitioner to assist with the approval process affecting their investment in Australia under the new FIRB regime.

Holding Redlich’s international legal services team assists its foreign and Australian-based clients with their Australian projects and investment approvals. For any questions regarding your investment, please contact us.

Next week, the second article in this series will focus on the implications of recent changes to fees on foreign investment applications. This will be followed by an article looking at the foreign investment impact of ongoing reforms to Australia’s security of critical infrastructure and cybersecurity regime.

Authors: Carl Hinze, Jeanne Vallade & Michael Tong

  • Carl Hinze (a fluent Mandarin speaker) and Jeanne Vallade (a native French speaker) assist clients with their investments regularly and advise on investment structures, regulatory approval processes and requirements, including FIRB approvals. Both are the trusted advisors to many foreign clients investing and operating in Australia.

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Michael Tong

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