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:
| Critical telecommunications assets being:
|
| Critical broadcasting assets being, one or more broadcasting transmission assets that are:
| |
| Critical domain name systems being, an asset:
| |
| 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:
|
| Financial services and markets sector The sector of the Australian economy that involves:
| Critical banking assets being assets:
|
| 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:
| |
| Critical financial market infrastructure assets being assets:
| |
| Water and sewerage sector The sector of the Australian economy that involves:
| 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:
| 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:
| |
| 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:
|
| Transport sector The sector of the Australian Economy that involves:
| 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:
| |
| 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:
| |
| 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. |
