Order under subsection 67(2) - Prohibition - Cheung Kong Infrastructure Holdings Limited, Power Assets Holdings Limited, CK Hutchinson Holdings Limited and Cheung Kong Property Holdings Limited

Overview

The Foreign Acquisitions and Takeovers Act 1975 was enacted by the Australian Parliament to safeguard the nation's security and economic interests by regulating foreign acquisitions and takeovers of Australian entities. This Act was introduced to address the problem of foreign entities potentially gaining control over critical infrastructure and assets that could pose a threat to national security. In this context, the Act provides mechanisms for the Australian Government to review and, if necessary, prohibit transactions that could be detrimental to the nation's interests. The policy objective of the Act is to ensure that foreign acquisitions do not compromise Australia's economic or security interests, particularly by preventing foreign ownership or control over key sectors such as utilities and infrastructure. The provided notifiable instrument F2016N00016, issued by the Hon Scott Morrison MP, Treasurer of the Commonwealth of Australia, on 19 August 2016, pertains to a proposed acquisition by several Hong Kong-based entities of a significant interest in the Ausgrid electricity network. The Treasurer was satisfied that this acquisition would be contrary to the national interest, thereby exercising powers under the Act to prohibit the proposed acquisition and any associated significant agreements. This action underscores the government's commitment to protecting critical infrastructure from foreign entities that might not align with Australia's strategic and security interests.

Scope and Application

The Foreign Acquisitions and Takeovers Act 1975 applies to any foreign person or entity proposing to acquire an interest in Australian businesses, land, or entering into significant agreements with Australian businesses. The Act has a national jurisdictional reach, covering all of Australia, and applies to acquisitions that are deemed to be contrary to the national interest. The application of the Act can extend through subordinate instruments which may further define or specify the types of acquisitions and agreements that fall under its purview. In this specific case, the order made under the Act prohibits the acquisition of a 50.4 per cent interest in the assets of the Ausgrid electricity network by Cheung Kong Infrastructure Holdings Limited, Power Assets Holdings Limited, CK Hutchinson Holdings Limited, and Cheung Kong Property Holdings Limited, as well as the entering into of a significant agreement with an Australian business. The decision to prohibit the acquisition is based on the determination that it would be contrary to the national interest.

Key Provisions

The main sections of this order pertain to the prohibition of a significant acquisition by foreign entities in Australian business assets, as outlined in the Foreign Acquisitions and Takeovers Act 1975 (section 41) and the acquisition of Australian land (section 43). In this case, the order made by the Treasurer, Scott Morrison, prohibits the acquisition of a 50.4 per cent interest in the assets of the Ausgrid electricity network by Cheung Kong Infrastructure Holdings Limited, Power Assets Holdings Limited, CK Hutchinson Holdings Limited and Cheung Kong Property Holdings Limited. The order also prohibits the entering into of any significant agreement related to this acquisition. The Act imposes several obligations on the parties involved, particularly the foreign entities seeking to acquire the assets. The most prominent obligation is the requirement to notify the Treasurer of the Commonwealth of Australia of any proposed significant acquisitions. This notification must occur prior to the acquisition, as stipulated in section 41 of the Act, which deals with the acquisition of interests in assets of an Australian business, and section 43, which addresses the acquisition of Australian land. Furthermore, the Act mandates that the Treasurer considers whether the proposed acquisition would be contrary to the national interest. Failure to comply with the provisions of the Act, or breaching the order made by the Treasurer, can result in significant legal consequences. The Act does not specify exact penalties for non-compliance or breach, but it is clear that such actions can be considered contrary to the national interest. The consequences of such a determination could include the disallowance of the acquisition or agreement, financial penalties, and potentially legal action against the parties involved. The severity of these consequences underscores the importance of adhering to the Act's requirements and the Treasurer's orders.