16 December 202126 minute read

Significant Expansion of the Notifiable National Security Actions Test

Key Takeaways

On 2 December 2021, the Australian Federal Government enacted the Security Legislation Amendment (Critical Infrastructure) Act 2021 (Amending Act) amending the Security of Critical Infrastructure Act 2018 (SOCI Act) to protect certain infrastructure that forms part of or is viewed as critical to the essential services to which Australia relies on.

The Amending Act significantly enhances the existing framework (which currently covers specific entities in the electricity, gas, water and ports sectors) expanding the scope of the SOCI Act to include critical infrastructure entities in a wider range of sectors.

Following the recent reforms to the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) and the Foreign Acquisitions and Takeovers Regulations 2015 (Cth) (Regulations) that came into effect on 1 January 2021, the enactment of the Amending Act will also result in the scope of the new ‘notifiable national security actions’ test being significantly expanded. For further details of the significant amendments previously made to the FATA and the Regulations refer here.

Please contact any of the authors or your usual DLA Piper contact if you would like to discuss any of the amendments and how they could impact on foreign investment in Australia.

Scope of notifiable national security actions significantly widened

‘Notifiable national security actions’ involve a foreign person acquiring (amongst other things) a direct interest (being, generally, an interest of 10% or more or where it provides the investor with a position of control) in an existing ‘national security business’ or commencing such a business.

A 'national security business', includes a business, carried on wholly or partly in Australia, that (amongst others):

  • is a responsible entity (within the meaning of the SOCI Act) for an asset;
  • holds a direct interest (10%+) in relation to a critical infrastructure asset (within the meaning of the SOCI Act) for an asset.

Accordingly, prior to the enactment of the Amending Act, the national security businesses within the scope of the ‘notifiable national security actions’ test were restricted to specific entities in the electricity, gas, water and ports sectors. The widening of the scope of the SOCI Act to envelope a wider range of sectors within the purview of the SOCI Act will have a corresponding effect to the scope of the sectors subject to review by FIRB as a ‘notifiable national security action’.

Critical infrastructure sectors

Prior to the enactment of the Amending Act, the scope of the SOCI Act was limited to critical infrastructure assets in the electricity, ports, water, gas sectors or other assets as declared by the Treasurer. Following the enactment of the Amending Act, the scope of the SOCI Act will now include regulation of businesses and assets, including the following new sectors:

  • the communications sector;
  • the data storage or processing sector;
  • the financial services and markets sector;
  • the water and sewerage sector;
  • the energy sector;
  • the health care and medical sector;
  • the higher education and research sector;
  • the food and grocery sector;
  • the transport sector; and
  • the defence industry sector.

The following table details a summary of the critical infrastructure sectors and the critical infrastructure assets within each sector that may now be subject to review by FIRB under the ‘national notifiable security action’ test. Certain additional critical infrastructure assets may be prescribed by the Treasurer by amendment to the Security of Critical Infrastructure Rules 2018 (Cth) (Rules).

Sector Critical Infrastructure Assets

Communications sector

The sector of the Australian economy that involves:

  • supplying a carriage service (or owning or operating assets that are used in connection with the supply of a carriage service);
  • providing a broadcasting service (or owning or operating assets that are used in connection with the transmission of a broadcasting service); or
  • administering an Australian domain name system.

Critical telecommunications assets being:

  • a telecommunications network that is owned or operated by a carrier and used to supply a carriage service;
  • a telecommunications network, or any other asset, that is owned or operated by a carriage service provider or used in connection with the supply of a carriage service.

Critical broadcasting assets being, one or more broadcasting transmission assets that are:

  • owned or operated by the same entity and are located on a prescribed transmission site;
  • owned or operated by the same entity and are located on at least 50 different sites and not broadcasting re-transmission assets; or
  • owned or operated by an entity that, is prescribed to be critical to the transmission of a broadcasting service.

Critical domain name systems being, an asset:

  • managed by a prescribed entity that is critical to the administration of an Australian domain name system; and
  • used in connection with the administration of an Australian domain name.

Data storage or processing sector

The sector of the Australian economy that involves providing data storage or processing services.

Critical data storage or processing assets being, an asset that is owned or operated by an entity that provide a service that enables end-users to store or back-up data or a data processing service and is used wholly or primarily to provide the services on a commercial basis to an end-user that is:

  • any Commonwealth, State or Territory government or a body corporate established by the laws of any of these governments; or
  • a responsible entity for a critical infrastructure asset and related to business critical data.

Financial services and markets sector

The sector of the Australian economy that involves:

  • carrying on banking business;
  • operating a superannuation fund;
  • carrying on insurance business, life insurance or health insurance business;
  • operating a financial market;
  • operating a clearing and settlement facility;
  • operating a derivative trade repository;
  • administering a financial benchmark;
  • operating a payment system;
  • carrying on financial services business; or
  • carrying on credit facility business.

Critical banking assets being assets:

  • owned by an authorised deposit taking institution; or
  • owned or operated by a body corporate that is a related body corporate of an authorised deposit-taking institution,
  • critical to the security and reliability of the financial services and markets sector and used in connection with carrying on of banking business.
Critical superannuation assets being assets owned or operated by a registerable superannuation entity that is critical to the security and reliability of the financial services and markets sector and is used in connection with the operation of a superannuation fund.

Critical insurance assets being assets owned or operated by:

  • an entity that carries on an insurance business, life insurance business or health insurance business (as applicable);
  • a body corporate that is a related body corporate of an entity that carries on an insurance business, life insurance business or health insurance business (as applicable);
  • that is critical to the security and reliability of the financial services and markets sector and is used in connection with carrying on of insurance business, life insurance business or health insurance business (as applicable).

Critical financial market infrastructure assets being assets:

  • owned or operated by an Australian body corporate (or associated entity of that body corporate) which holds an Australian market license and is used in connection with the operation of a financial market that is critical to the security and reliability of the financial services and markets sector;
  • owned or operated by an Australian body corporate (or associated entity of that body corporate) which holds an Australian CS facility license and is used in connection with the operation of a clearing and settlement facility that is critical to the security and reliability of the financial services and markets sector;
  • owned or operated by an Australian body corporate (or associated entity of that body corporate) which holds a benchmark administrator license and is used in connection with the administration of a significant financial benchmark that is critical to the security and reliability of the financial services and markets sector;
  • owned or operated by an Australian body corporate (or associated entity of that body corporate) which holds an Australian derivative trade repository license and is used in connection with the operation of a derivative trade repository that is critical to the security and reliability of the financial services and markets sector; or
  • that is used in connection with the operation of a payment system that is critical to the security and reliability of the financial services and markets sector.

Water and sewerage sector

The sector of the Australian economy that involves:

  • the operation of water or sewerage systems; or
  • manufacturing or supplying goods, or providing services, for use in connection with the operation of water or sewerage systems or networks.

Critical water assets being one or more water or sewerage systems or networks that are managed by a single water utility and ultimately deliver services to at least 100,000 water connections or 100,000 sewerage connections.  

Energy sector

The sector of the Australian economy that involves the:

  • production, transmission, distribution or supply of electricity;
  • production, processing, transmission, distribution or supply of gas; or
  • production, processing, transmission, distribution or supply of liquid fuel.

Critical electricity assets being a network, system or interconnector, for the transmission or distribution of electricity to service at least 100,000 customers or an electricity generation station critical to ensuring the security and reliability of electricity networks or systems in a State or Territory.

Critical gas assets being:

  • a gas processing facility that has a capacity of at least 300 terajoules per day;
  • a gas storage facility that has a maximum daily quantity of at least 75 terajoules per day;
  • a network or system for the distribution of gas to ultimately service at least 100,000 customers;
  • a gas transmission pipeline that is critical to ensuring the security and reliability of a gas market.
Critical energy market operator assets being assets that are owned or operated by Australian Energy Market Operator Ltd (ACN 072 010 327), Power and Water Corporation, Regional Power Corporation or Electricity Networks Corporation are used in connection with the operation of an energy market or system that is critical to ensuring the security and reliability of an energy market.
Critical liquid fuel assets being a liquid fuel refinery, liquid fuel pipeline or liquid fuel storage facility that is critical to ensuring the security and reliability of a liquid fuel market.

Health care and medical sector

The sector of the Australian economy that involves the provision of health care or the production, distribution or supply of medical supplies.

 

Critical hospitals being hospitals with a general intensive care unit.

Higher education and research sector

The sector of the Australian economy that involves being a higher education provider or undertaking research supported financially (in whole or part) by the Commonwealth or is relevant to a critical infrastructure sector (other than the higher education and research sector).

Critical education assets being a university that is owned or operated by an entity registered under the National Register of Higher Education Providers under the Australian university category.

Food and grocery sector

The sector of the Australian economy that involves, manufacturing, processing, packaging, distributing or supplying of food or groceries on a commercial basis.

Critical food and grocery assets being a network that: is used for the distribution or supply of food or groceries and is owned or operated by an entity that is a:

  • critical supermarket retailer;
  • critical food wholesaler; or
  • critical grocery wholesaler.

Transport sector

The sector of the Australian Economy that involves:

  • owning or operating assets that are used in connection with the transport of goods or passengers on a commercial basis; or
  • the transport of good or passengers on a commercial basis.

Critical ports being the Ports of Adelaide, Brisbane, Cairns, Christmas Island, Dampier, Darwin, Eden, Fremantle, Geelong, Gladstone, Hay Point, Hobart, Melbourne,  Newcastle, Port Botany, Port Hedland,  Rockhampton, Sydney Harbour, Townsville and Broome Port.

Critical freight infrastructure assets being:

  • a road network;
  • rail network; or
  • intermodal transfer facility;
  • that functions as a critical corridor for the transportation of goods between two States, two Territories, a State or a Territory or two regional centres.
Critical freight services assets being, a network used by an entity in carrying on a business that is critical to the transportation of goods by road, rail, inland waters or sea.
Critical public transport assets being, a public transport network managed by a single entity capable of handling at least 5 million passengers per month.

Critical aviation assets being, assets used in connection with:

  • the provision of an air service and is owned and operated by an aircraft operator;
  • the provision of an air service and is owned and operated by a regulated air cargo agent; or
  • operation of an airport by an airport operator.

Defence industry sector

The sector of the Australian economy that involves the provision of critical defence capabilities.

Critical defence industry assets being an asset that is, or will be, supplied to an entity to the Defence Department, or the Australian Defence Force, under contract and consists of, or enables, a critical defence capability.

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