The government is rushing significant reforms to Australia’s foreign investment framework which have left much of the tech sector confused and concerned, according to the federal opposition.
The legislation includes a new national security review for foreign investments and gives last-resort powers to the Treasurer to divest a previous investment. The reforms aim to ensure the regime “keeps pace with emerging risks and global developments, while remaining a welcoming destination for foreign investment”.
The rules will be applied to local companies deemed to be a “nationals security business”, any “endeavour that if disrupted or carried out in a particular way may create national security risks” and catching many tech firms.
The proposed reforms have led to significant concerns that they will act as a disincentive to foreign investment and that the 10-year timeframe for the government to “call-in” a previous investment will create uncertainty.
There is also widespread confusion over how the new rules will be imposed, and what the legislation actually entails.
In the report, the committee largely rejected most of these concerns apart from acknowledging the confusion surrounding the bill that was “repeated in many submissions” to the inquiry.
The committee recommended that guidance material around the new rules be released by the government “as a matter of priority in advance of the legislation coming into effect”.
In additional comments, Labor senators broadly supported the legislation but criticised the government’s rushed approach. With the green light from the committee, the government is now set to pass the bill in the next fortnight, with the new regime to be in place from the start of 2021.
“Regrettably, the bills are being rapidly progressed through the 46th Parliament, with the government providing little opportunity for further considered debate by members and senators of legislation deemed pressing to ‘the national interest’,” the Labor senators said.
“Labor senators are of the view that the timely, open and transparent explanation of the bills that are before the Senate Inquiry and any foreshadowed related regulations and consequential amendments, must be made available and seriously debated before the bill’s passage.”
Various definitions included in the legislation need to be explained clearly “for the benefit of the Australian community and businesses, and existing and future foreign investors, before the bill’s passage and proposed enactment”, they said.
Labor is also calling for more transparency around the publication of decisions on a foreign investment, and for a review to be completed into the new rules within a year of their commencement.
A number of submissions to the inquiry raised significant concerns with the new call-in power to be handed to the Treasurer, particularly with the 10-year timeframe. The Law Council of Australia along with the Queensland and Victorian state governments, said this would act as a disincentive for foreign investors and create unnecessary uncertainty.
But the committee said many submittors did not understand how the call-in powers would operate in practice.
“The safeguards in the last-resort power require that changes that lead to a national security review and potential use of the last-resort power could not have been foreseen at the time of the initial assessment. The call-in power does not relate to investments that have been approved, and investors can extinguish the power by voluntarily notifying,” it said in the report.
The legislation was introduced to Parliament in late October and expected to be brought for debate and passed during the last sitting fortnight of the year.