The Senate Economics Legislation Committee has now reported on its inquiry into the Foreign Acquisitions Amendment (Agricultural Land) Bill 2010.
The private members’ Bill was introduced by Senators Xenophon and Milne in November 2010. It was subsequently referred to the Economics Legislation Committee for inquiry and report (see Piper Alderman’s paper – “Foreign investment in Australian farm land: domestic scrutiny is on the horizon”.
The Committee called for public submissions on the Bill. Eleven submissions were received and a public hearing conducted. (See Piper Alderman’s paper – “Update on Senate inquiry into foreign investment in Australian farmland”.
The Bill sought to amend the Foreign Acquisitions and Takeovers Act 1975 to:
- implement a national interest test to be applied against proposed foreign acquisitions of agricultural land
- require any interest in agricultural land greater than 5 hectares to be notified to the Treasurer
- require online publication of information about foreign acquisitions of interest in agricultural land
- impose penalties for not notifying the Treasurer of a proposed acquisition.
The ultimate conclusion of the Committee’s 70 page report was a recommendation that the Bill not be passed. In making that recommendation the Committee’s core comments included:
- It is essential that Australia remain a country that welcomes foreign investment and continues to be an attractive place to invest. Any changes to foreign investment policy or legislation should be considered in this light.
- The proposed national interest test, applying only to agricultural land, would effectively create two separate national interest tests within the Foreign Acquisitions and Takeovers Act 1975, which could unintentionally create confusion for investors.
- The Bill’s proposed legislated national interest test would be inflexible and overly prescriptive.
- The current mechanism, whereby the national interest test is determined on a case-by-case basis at the discretion of the Treasurer, is sufficient and should remain unaltered.
- The publication of all applications, as proposed by the Bill, may undermine foreign investor confidence in the agricultural sector.
- The 5 hectare threshold would not be appropriate in the context of the Australian agricultural sector.
- Although there was evidence which suggested that the AU$231 million threshold for foreign investment in the agricultural sector would rarely trigger a FIRB review, the current data gathering and research project (the Agricultural Land and Water Ownership Survey) should be completed before any adjustment to the threshold is made. Following the reporting of better data, the FIRB figure should then be reviewed to allow for an appropriate threshold.
- The current regulatory framework for assessing foreign investment proposals is adequate, save that the strategic accumulation of agricultural land be re-examined following the release of the ALWO Survey.
- The Bill may be in breach of Australia’s Free Trade Agreements and inconsistent with the obligation within the OECD to progressively liberalise capital movements.
While there remain calls for regulatory change, the proposed amendments which sought to tighten the rules around the foreign acquisition of Australian agricultural land are off the legislative agenda, at least for the short term.
The issue promises to remain live for some time to come after another inquiry into the FIRB regime was recently announced.
On 6 July 2011, the Senate referred issues surrounding the FIRB national interest test to the Rural Affairs and Transport References Committee for inquiry and report by 30 November 2011. The terms of reference of the new FIRB related inquiry include:
- how the test was applied to purchases of Australian agricultural land by foreign companies, foreign sovereign funds and other entities in the past 12 months
- how the test was applied to purchases of Australian agribusinesses by foreign companies, foreign sovereign funds and other entities in the past 12 months
- the role of the Government, regulators and receivers, including their obligations under the Corporations Act 2001 and/or the Foreign Acquisitions and Takeovers Act 1975, including the role of the Australian Securities and Investments Commission, in upholding the test
- the global food task and Australia’s food security in the context of sovereignty
- the role of the foreign sovereign funds in acquiring Australian sovereign Assets
- how similar national interest tests are applied to the purchase of agricultural land and agri-businesses in countries comparable to Australia.
In conducting this inquiry, the Committee was instructed to examine ways of improving the transparency of decisions made by the FIRB under the national interest test and all other rules which govern its operation.