Transparency of the Regulatory System
The Commonwealth Government utilizes transparent policies and effective laws to foster national competition and develop competition policy, and is consultative in its policy making process. The government generally allows for public comment on draft legislation and publishes and makes available laws once they enter into force.
Australian accounting, legal, and regulatory procedures are transparent and consistent with international standards. Accounting standards are formulated by the Australian Accounting Standards Board, an Australian Government agency under the Australian Securities and Investments Commission Act 2001. Under that Act, the statutory functions of the AASB are to develop a conceptual framework for the purpose of evaluating proposed standards; make accounting standards under section 334 of the Corporations Act 2001; and advance and promote the main objects of Part 12 of the ASIC Act, which include reducing the cost of capital, enabling Australian entities to compete effectively overseas and maintaining investor confidence in the Australian economy. The Commonwealth Government conducts regular reviews of proposed measures and legislative changes and holds public hearings into such matters.
Australia subscribes to the 1976 declaration of the OECD concerning International Investment and Multinational Enterprises. The instruments cover national treatment and investment incentives and disincentives, and spell out voluntary guidelines for the conduct of multinational enterprises in member countries. Australia also subscribes to two OECD codes of liberalization, one covering capital movements and the other invisible transactions.
International Regulatory Considerations
Australia is a member of the WTO, the Asia-Pacific Economic Cooperation (APEC) and became the first of the Association of Southeast Nations’ (ASEAN) ten dialogue partners in 1974. While not a regional economic block, Australia’s free trade agreement with New Zealand provides for a high level of integration between the two economies with the ultimate goal of a single economic market.
Legal System and Judicial Independence
The Australian legal system is firmly grounded on the principles of equal treatment before the law, procedural fairness, judicial precedent, and the independence of the judiciary. Strong safeguards exist to ensure that people are not treated arbitrarily or unfairly by governments or officials. Property and contractual rights are enforced through the Australian court system, which is based on English Common Law.
Laws and Regulations on Foreign Direct Investment
Information regarding investing in Australia can be found in Austrade’s Investor Guide at http://www.austrade.gov.au/International/Invest/Investor-guide . The guide is designed to help international investors and businesses navigate investing and operating in Australia. It is an online guide to the regulations, considerations, and assistance relevant to investing in, establishing, and running a business in Australia, with direct links to relevant regulators and government agencies that relate to Australian Government regulation and available assistance.
Foreign investment in Australia is regulated by the Foreign Acquisitions and Takeovers Act 1975 and Australia’s Foreign Investment Policy. The Foreign Investment Review Board (FIRB), a division of Australia’s Treasury, is a non-statutory body established to advise the Treasurer and the Commonwealth Government on Australia’s foreign investment policy and its administration. The FIRB screens potential foreign investments in Australia above threshold values, and based on advice from the FIRB, the Treasurer may deny or place conditions on the approval of particular investments above that threshold on national interest grounds. Following a number of recent investments made by foreign companies in key sectors of Australia’s economy, the laws and regulations governing foreign direct investment have been subject to a wide ranging and ongoing review.
In December 2015, the Government enhanced the enforcement of rules governing foreign investment in Australia and introduced a ‘national interest’ consideration in reviewing foreign investment applications. Changes made in the Government’s Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 provide for greater compliance powers to the Australian Taxation Office (ATO) and introduced strict new penalties for investors circumventing foreign investment rules. The Government also introduced a new agricultural land foreign ownership register to understand the nature of foreign ownership of Australian land. The ATO also collects information on the location and size of property and size of interest acquired on new foreign investment in agricultural land and residential real estate. Lower screening thresholds for agricultural land and agribusiness also mean that more agricultural investment is screened by the FIRB.
In February 2016, the Government announced its intent to implement a national register of foreign ownership of water access entitlements, which is intended to enhance transparency and assist in informing the Government and the community about emerging investment trends. The Government also announced new requirements on foreign investment applications to ensure that multinational companies investing in Australia pay tax on what they earn in Australia.
In March 2016, the Government announced that it would amend the Foreign Acquisitions and Takeovers Regulation so that the FIRB could assess the potential sale of ‘critical state-owned infrastructure assets’ to private foreign investors. Starting March 31, 2016, the FIRB will formally review critical infrastructure assets sold by State and Territory governments.
Under the Australia-United States Free Trade Agreement (AUSFTA), all U.S. greenfield investments are exempt from FIRB screening. U.S. investors require prior approval if acquiring a substantial interest in a primary production business valued above AUD 1.094 billion (USD791.6 million).
Competition and Anti-Trust Laws
The Australian Competition and Consumer Commission (ACCC) enforces the Competition and Consumer Act 2010 and a range of additional legislation, promotes competition, fair trading and regulates national infrastructure for the benefit of all Australians. The ACCC plays a key role in assessing mergers to determine whether they will lead to a substantial lessening of competition in any market. ACCC also engages in consumer protection enforcement.
Expropriation and Compensation
Private property can be expropriated for public purposes in accordance with Australia’s constitution and established principles of international law. Property owners are entitled to compensation based on “just terms” for expropriated property. There is little history of expropriation in Australia although a few U.S. investors have claimed certain commercial disputes should be considered expropriation. (See below description.)
ICSID Convention and New York Convention
Australia is a member of the International Centre for the Settlement of Investment Disputes (ICSID Convention) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. The International Arbitration Act 1974 governs international arbitration and the enforcement of awards.
Investor-State Dispute Settlement
Investor-State Dispute Settlement (ISDS) is included in some but not all of Australia’s 21 BITs and 9 FTAs. AUSFTA establishes a dispute settlement mechanism for investment disputes arising under the Agreement. However, AUSFTA does not contain an investor-state dispute settlement (ISDS) mechanism that would allow individual investors to bring a case against the Australian government. Regardless of the presence or absence of ISDS mechanisms, there is no history of extrajudicial action against foreign investors in Australia.
International Commercial Arbitration and Foreign Courts
Australia has an established legal and court system for the conduct or supervision of litigation and arbitration, as well as alternate dispute resolutions. Australia is a leader in the development and provision of non-court dispute resolution mechanisms. It is a signatory to all the major international dispute resolution conventions and has organizations that provide international dispute resolution.
Bankruptcy is a legal status conferred under the Bankruptcy Act 1966 and operates in all of Australia’s States and Territories. Only individuals can be made bankrupt and not businesses or companies. Where there is a partnership or person trading under a business name, it is the individual or individuals who make up that firm that are made bankrupt. Companies cannot become bankrupt under the Bankruptcy Act though similar provisions (called administration and winding up) exist under the Corporations Act 2001.
The Bankruptcy Act established the roles of Inspector-General in Bankruptcy and Official Receiver and Official Trustee in Bankruptcy, and the Australian Financial Security Authority (AFSA) oversees each of these roles. The relevant courts covering bankruptcy are the Federal Court of Australia, General Division, and the Federal Circuit Court. Creditors can apply to the court to make an individual bankrupt if they can satisfy the court that a debtor owes them money; however, when an individual enters bankruptcy, this limits the rights of unsecured creditors to recover their debts directly from the debtor.