Research On Australia’s Security-Related Review Regime For Foreign Investment

Foreign investment screening mechanism is the main tool used by sovereign states to regulate foreign investment.In recent years,along with the rise of protectionism under economic globalization,increasing sovereign states endeavor to strengthen their control over national sovereignty through the reform of their foreign investment screening mechanisms.As a result,security-related foreign investment screening mechanisms tend to be abused.The 2020 reform of Australia’s security-related review regime for foreign investment also focuses on protecting national security.Alongside widening Treasury’s screening scope and allowing it to review an approved investment again,the reform reserves the regime’s shared features with other security-related screening mechanisms for foreign investment,i.e.abstract criteria for review and limited relief measures.In practice,Australian reviewing agencies also impose closer scrutiny on Chinese state-owned enterprises("SOEs")than on other state’s SOEs.Most domestic and international studies on the regime do not cover the contents introduced by its 2020 reform.Meanwhile overall they have failed to offer a sufficient analysis on evaluating the proportionality of and exactly how to deal with the regime.Hence,by applying the method of historical analysis,literature analysis,case study and comparative analysis,this paper endeavors to analyze the proportionality of Australia’s security-related review regime for foreign investment after its 2020 reform and provide coping measures for Chinese investors,under the framework of the guiding principles for security-related screening mechanism for foreign investment proposed by OECD.In addition to the introduction and conclusion,the article consists of the following four chapters:Chapter 1 analyzes the historical evolution and features of Australia’s security-related review regime for foreign investment,and points out the abuse of security-related screening mechanisms for foreign investment as well as standards to evaluate their proportionality.To start with,in correspondence with the change of dominant ideas in the international investment law area,the history of the regime is divided into the budding,maturing and strengthening periods.By analyzing the legislative background and legislated contents of the regime in each stage,the ideals and problems of Australia’s security-related review regime for foreign investment in each stage are summarized.Then,three prominent features of the current Australia’s security-related review regime for foreign investment are concluded as follow:(1)while Foreign Acquisition and Takeover Act 1975 and Foreign Acquisition and Takeover Regulation 2015 at the federal level remain at the core,states can carry out acts or regulations for issues not covered by federal laws;(2)constant changes have resulted in overlapping concepts within the applicable laws.Finally,upon pointing out the abuse of security-related screening mechanisms for foreign investment,it is proposed to evaluate the proportionality of Australia’s security-related review regime for foreign investment with the guiding principles proposed by OECD.Chapter 2 probes into the substantive and procedural laws under Australia’s securityrelated review regime for foreign investment.First of all,the factors constituting mandatory or voluntary actions within the scope of review are listed in a table.And how investment subjects and targets impact behavior,monetary and consequence threshold is summarized and analyzed.Further,through analyzing the members of Australia’s foreign investment reviewing agency,it is concluded that Australia’s security-related review regime for foreign investment is more commercial in nature compared with that of the U.S.Besides,Treasury’s call in power and last resort power vested by the 2020 reform are analyzed.And then,a detailed analysis on the concrete factors to be considered in the national interest test is conducted,with a focus on the dimension of "national security" in light of the potential threats of foreign investment to national security.Finally,possible relief measures under Australia’s security-related review regime for foreign investment are explored.On the domestic level,it is proposed that general foreign investment review decision is subject to procedural judicial review according to the common law,while decision made under Treasury’s last resort power is subject to Administrative Appeal Tribunal’s review.On the international level,remedies through international arbitration,WTO dispute settlement mechanism or international litigation may be sought.Chapter 3 analyzes the status quo and reasons of discrimination against Chinese SOEs under Australia’s security-related review regime for foreign investment.Based on the practice and academic viewpoints,it is concluded that Australia’s foreign investment reviewing agencies do impose more stringent scrutiny on Chinese SOEs as well as some private Chinese enterprises.This status quo is due to the concern that Chinese SOEs might be instructed by Chinese government to carry out non-commercial activities in Australia that threaten its national security,go against competitive neutrality policy or constitute monopoly which undermine Australia’s domestic and international market competition.Based on the discussion in previous chapters,Chapter 4 firstly concludes the following features of Australia’s security-related review regime for foreign investment:transparent policies and opaque reviewing process;relatively complete national and international accountability mechanism;appropriate reviewing scope,entity and power,and abstract reviewing criteria.And then it provides suggestions for all Chinese investors to avoid or pass Australia’s security-related review regime for foreign investment,both in terms of investment strategy and preparation for filing,including investing through joint ventures with local enterprises,lowering the percentage of interests acquired,and taking active compliance measures.In accordance with the reasons of discrimination against Chinese SOEs,solutions in terms of shareholding structure,corporate governance and competitive neutrality are provided for Chinese SOEs.