Inward Foreign Investment Screening in Australia: Development and Implications

Abstract

This chapter outlines political, legal and economic aspects of Australia’s inward foreign investment screening regime, taking account of the historical development of the legislative framework and its practical implementation to date. Australian screening is characterised by high levels of discretion in the Treasurer, within broad policy parameters regarding the meaning of ‘national interest’ and ‘national security’. The impact of the most recent changes as of 2021 is difficult to assess, but they have clearly increased the number of investment proposals that are subject to review. Although most applications are approved, approval with conditions is common, while other applications may be withdrawn following informal feedback, obviating the need for formal rejection. The increasing restrictiveness of Australia’s approach and its continuing differentiation between investors from different countries create risks of violating one of Australia’s 30+ international investment agreements in force, the majority of which include investor–state dispute settlement mechanisms. The economic and diplomatic rationale for such restrictiveness and differentiation (particularly in the form of higher screening thresholds for some but not all of Australia’s preferential trade agreement partners) is unclear.

Keywords: international dispute settlement, international law, investment, regulation, national security

JEL Classification: F5, F23, K20, K33