New Critical Infrastructure Centre to boost security of sensitive assets and to support FIRB

WHO SHOULD READ THIS

• Industry participants in high risk sectors across the country, particularly in electricity, water and ports sectors.

THINGS YOU NEED TO KNOW

• A new Critical Infrastructure Centre has been established to pre-emptively assess and manage national security risks for critical infrastructure. The new Centre will identify and record, by way of a new critical assets register, Australia’s most critical infrastructure and will support the existing foreign investment framework by developing more coordinated, whole-of-government national security risk assessments.

The Australian Government has established the new Critical Infrastructure Centre (Centre) within the Attorney-General’s Department to pre-emptively assess and manage national security risks for critical infrastructure and to streamline engagement with the Foreign Investment Review Board (FIRB).

Key points

• The Centre will undertake coordinated security risk assessments of sensitive assets, with the initial focus being on the most critical assets in electricity, water and ports sectors. The Centre will expand this list to other critical assets following consultation with states, territories, industry and investors.
• The Centre will consult closely with all levels of government (including in particular the Department of Defence and Australia’s intelligence agencies), private owners and operators to collaboratively identify and manage risks.
• The Centre will also develop and maintain a confidential critical assets register (Register) that will identify critical infrastructure ownership in high risk sectors and proactively manage the national security risks that may arise from operational and procurement strategies.
• The establishment of the Centre does not represent a change in Government policy or law governing foreign investment in Australia. Rather, the Centre will support the existing foreign investment framework and FIRB, which will continue to assess and manage foreign investment applications on a case-by-case basis.
• FIRB will engage in pre-emptive consultations with the Centre and have regard to the Register in an effort to streamline its assessment of foreign investment applications involving critical infrastructure.
• As a first step, the Centre plans to publicly release a discussion paper outlining key issues and seeking input on additional measures that could assist the Centre.

Implications

• It is envisaged that the new Centre will provide greater certainty and clarity for existing owners of critical infrastructure assets (including local and State governments) when seeking investment, as well as for potential investors, at the start of the sale process on the types of assets that will be classed as critical infrastructure attracting national security scrutiny by FIRB. This will assist all parties in making informed decisions about proposed transaction structures and other measures that may be required to address any national security concerns.
• If these intended benefits are realised, the new Centre may play an important role in creating predictability and building confidence for foreign investors. By the same token, it may also create another layer of conditions to the approval process for foreign investment in Australia. The precise scope of the Centre and its interplay with FIRB in practice is yet to be seen.
• The establishment of the Centre follows last year’s unpredictable decision-making in the 2016 Ausgrid bid and national security concerns following the long-term lease of the Port of Darwin to a Chinese–owned company in 2015. The Centre also follows other recent reform involving foreign investment in critical infrastructure, including changes to the Foreign Acquisition and Takeovers Regulation 2015 (Cth) which mandated that all foreign investors are to comply with the FIRB approval regime when buying critical infrastructure assets.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.