Foreign Acquisitions and Takeovers (Prohibition of Proposed Significant Action) Order No. 1 2020

Overview

The Foreign Acquisitions and Takeovers Act 1975 was enacted to safeguard Australia's national security and economic interests by regulating foreign investments and takeovers. The Act provides the Treasurer with the authority to assess and control significant foreign acquisitions and takeovers that may be detrimental to Australia's interests. In response to a notice given by Baogang Group Investment (Australia) Pty Ltd on 13 December 2019 regarding its proposed acquisition of an 11.1 per cent interest in Northern Minerals Limited, the Treasurer, Joshua Anthony Frydenberg, determined that the proposed acquisition constituted a significant action under the Act and posed a threat to the national interest. Consequently, the Foreign Acquisitions and Takeovers (Prohibition of Proposed Significant Action) Order No. 1 2020 was enacted to prohibit the acquisition, reflecting the policy objective of protecting Australia's economic and strategic assets from potentially harmful foreign influence.

Scope and Application

The Foreign Acquisitions and Takeovers (Prohibition of Proposed Significant Action) Order No. 1 2020 pertains specifically to the acquisition of an 11.1 per cent interest in Northern Minerals Limited by Baogang Group Investment (Australia) Pty Ltd, a foreign government investor. This prohibition is grounded in the Foreign Acquisitions and Takeovers Act 1975, which aims to protect national security and ensure that certain acquisitions do not compromise the national interest. The order applies to the particular transaction involving Baogang Group Investment (Australia) Pty Ltd and Northern Minerals Limited, targeting the acquisition of a significant interest in an Australian entity engaged in mining, production, or exploration. The order’s jurisdictional reach is national, encompassing all territories and entities within the Commonwealth of Australia. The Act applies to foreign government investors and their acquisitions of interests in Australian entities that meet specified criteria, such as land acquisition, interest in entities, and securities in mining entities. The application of the Act is further refined through the Foreign Acquisitions and Takeover Regulation 2015, which provides detailed provisions regarding significant actions and monetary thresholds. This specific order does not create any exclusions or exemptions, as it is tailored to prohibit the particular acquisition that is deemed contrary to the national interest.

Key Provisions

The Foreign Acquisitions and Takeovers (Prohibition of Proposed Significant Action) Order No. 1 2020 (the Order) prohibits Baogang Group Investment (Australia) Pty Ltd from acquiring an 11.1 per cent interest in Northern Minerals Limited, based on the Treasurer’s determination that this proposed acquisition constitutes a significant action under the Foreign Acquisitions and Takeovers Act 1975 (the Act) and is contrary to the national interest (Section 1). The significant action in question is the acquisition of an interest in an Australian entity by a foreign government investor, as outlined in section 43 of the Act, paragraph 56(1)(a) of the Foreign Acquisitions and Takeover Regulation 2015, and subparagraph 56(1)(c)(ii) of the Foreign Acquisitions and Takeover Regulation 2015 (Section 2(B)). Under the Act, the Treasurer is required to consider whether a proposed significant action is contrary to the national security or national defence of Australia, or is otherwise contrary to the national interest (Section 67(2)(a)). The Order specifies that Baogang Group Investment (Australia) Pty Ltd is prohibited from acquiring the specified interest in Northern Minerals Limited (Section 3). The Order also states that the Treasurer is satisfied that the proposed acquisition would be contrary to the national interest (Section 2(C)). The Order imposes an obligation on Baogang Group Investment (Australia) Pty Ltd to comply with the prohibition set out in the Order (Section 3). Any person or entity that contravenes the Order is liable to a civil penalty of up to $10 million for a body corporate and up to $2 million for an individual (Section 67(6)). The Order also provides for the possibility of criminal penalties for breaches, with a maximum penalty of imprisonment for five years or a fine of up to $300,000 for a body corporate, and imprisonment for two years or a fine of up to $50,000 for an individual (Section 67(7)). The Order further states that any person who contravenes the Order may also be subject to other civil or criminal consequences as provided by law (Section 67(8)).