23 January 2017

Australian Government announces Critical Infrastructure Centre and register of critical infrastructure assets

This article was written by Stephen Brightman and Louis Chiam.

The Australian Government has today announced the establishment of the Critical Infrastructure Centre (Centre). The Centre will undertake assessments of sensitive federal-owned, state-owned and privately-owned assets, initially in the sensitive sectors of power, ports and water. Other asset sectors may be added following consultation with relevant stakeholders. The Attorney General’s Department will be responsible for the Centre, and it is understood the Centre will consist of ASIO, Australian Signals Directorate, Treasury and other Australian Government agency representatives. The Centre will consult closely with state and territory governments, regulators and private asset owners.

The Critical Infrastructure Centre will maintain a register of critical infrastructure assets (Register) to which national security concerns apply. The Government has indicated that physical assessments of assets will be undertaken, and that cybersecurity considerations will form part of the assessment. It is proposed that the Register will identify vulnerable assets and proposed measures that may be necessary to mitigate national security concerns in the context of sale of those assets. At this stage, the register will not be made publicly available. Instead, it is designed to allow the Foreign Investment Review Board (FIRB) to make a quicker assessment and provide initial feedback on whether an application is likely to be seen as requiring closer scrutiny.

The FIRB will continue to be responsible for assessing foreign investment applications on a case by case basis, and will consult with the Centre and have regard to the Register in performing its assessments of applications involving critical infrastructure. The Centre and register do not represent a formal change in Government policy. Rather they represent a streamlining and formalisation of the Government’s existing policy and procedures.

It is anticipated that the establishment of the Centre and Register will have the following key benefits:

  • allow federal, state and private vendors to identify, at an early stage, when national interest concerns are likely to arise in relation to infrastructure asset sales, because relevant assets will be included on the register;
  • provide a degree of certainty to foreign investors about whether national security concerns are likely to be raised during the foreign investment review process by FIRB. This should assist investors to make an informed decision about whether or not to proceed with a bid, and start to think about measures that may be necessary to mitigate national security concerns;
  • allow foreign investors to engage in meaningful dialogue with vendors and FIRB about mitigating measures that may need to be implemented in order to successfully demonstrate that the proposal will not be contrary to the national interest. This is the test against which all foreign investment proposals are assessed.

To the extent these anticipated benefits can be realised, the establishment of the Centre and the Register is a welcome move by the Australian Government. Ideally, it will help to ensure that issues like the last minute rejection of the Ausgrid sale in 2016 do not arise again.

In order for the Centre to be successful, it will be imperative that:

  • the Centre stays on the front foot assessing risks and identifying realistic mitigating measures in consultation with federal and state governments and private asset owners;
  • foreign investors are given an opportunity to address national security concerns through their applications and subsequent discussions with FIRB; and
  • consultations with the Centre by FIRB occur in a timely manner to avoid extended delays with the assessment of foreign investment applications.

The Australian Government has reaffirmed that it is is ‘committed to jobs and growth and maintaining strong foreign investment while ensuring our national security’ in its media release on the Centre. This statement indicates that Australia remains open for business while emphasising the importance of national security considerations for the Australian Government in the current climate.

The establishment of the Centre and Register adds to other recent reform involving foreign investment in critical infrastructure. As of 31 March 2016, sales of critical state-owned infrastructure assets to private foreign investors are now formally reviewed by the FIRB (removing a previous exemption for private foreign investors acquiring an interest in critical infrastructure assets purchased directly from state and territory governments).

The Centre plans to publicly release a discussion paper about its activities in the near future.

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