Interim Order under section 68

Overview

The Foreign Acquisitions and Takeovers Act 1975 was enacted to address the need for the Commonwealth to regulate foreign acquisitions of Australian entities to ensure they are not contrary to the national interest. This Act empowers the Treasurer to intervene in significant foreign acquisitions and takeovers that may impact Australia's security, economic interests, or national infrastructure. The policy objective of the Act is to maintain and enhance Australia's economic and national security by allowing the government to review and, if necessary, prohibit or impose conditions on foreign acquisitions that could jeopardise these interests. In response to a notice given under the Act by Newlake Alliance Management Co., Ltd and JB Asset Management (Newlake-JBAM Fund) on 1 June 2017, proposing to acquire a 100 per cent interest in various entities including OneSteel Recycling Hong Kong Limited and Arrium Mining Services Asia Limited, the Treasurer's delegate, Trevor Thomas PSM, issued an interim order prohibiting the proposed acquisitions until 29 May 2019. This order was made under the authority of the Treasurer to allow for a thorough examination of the potential implications of these acquisitions on Australia's national interests.

Scope and Application

The Foreign Acquisitions and Takeovers Act 1975 governs the acquisition of Australian entities by foreign persons, aiming to ensure such acquisitions do not prejudice Australia’s national security or the control of entities that provide essential services. This Act applies to foreign persons intending to acquire control of Australian businesses, entities, or assets. It includes both direct and indirect acquisitions, mergers, and takeovers. The geographic scope of the Act extends to the Commonwealth of Australia, covering all states and territories. The Act is administered nationally, overseen by the Treasurer and the Foreign Investment Review Board. Specific exclusions or exemptions are not detailed in this notifiable instrument, but the Act provides for certain acquisitions to be excluded from scrutiny if they fall below a designated threshold or if they are of a kind that is otherwise exempted by regulation. The Act’s application may be extended or restricted by subordinate instruments, enabling the Treasurer to modify the scope of foreign acquisitions subject to review based on changing national security concerns or economic conditions.

Key Provisions

The main operative sections of this Notifiable Instrument under the Foreign Acquisitions and Takeovers Act 1975 (the Act) prohibit the proposed acquisition by Newlake Alliance Management Co., Ltd and JB Asset Management (Newlake-JBAM Fund) via a special purpose company in the Republic of South Korea of a 100 per cent interest in the listed target entities (section 68). This prohibition is effective from the date of the instrument, 28 February 2019, and will remain in place until 29 May 2019, during which period the proposed acquisitions are not permitted (section 68). This interim order is made to allow for consideration of whether to make a final order under section 67 of the Act. The Act imposes specific obligations and requirements on the parties involved in the proposed acquisition. Firstly, the Applicants must cease and desist from pursuing the acquisition of the listed entities in accordance with the prohibition (section 68). This includes refraining from taking any actions that would result in the acquisition of the target entities, such as entering into agreements or making payments related to the acquisition. Additionally, the Applicants must provide any relevant information and documentation requested by the Foreign Investment Division of Treasury to facilitate the assessment of the proposed acquisition. Failure to comply with the provisions of this Notifiable Instrument may result in offences and penalties. Under the Act, a person who contravenes a prohibition order is liable to a civil penalty of up to $10,000 for each contravention, as well as potential criminal penalties (section 126). Specifically, an individual officer or employee who knowingly or recklessly contravenes a prohibition order may face a fine of up to $11,000 or imprisonment for up to one year, or both (section 126). Furthermore, a body corporate that contravenes a prohibition order may be fined up to $55,000 (section 126). The severity of the penalties reflects the importance of adhering to the requirements and prohibitions set out in the Act and the Notifiable Instrument.