AUSTRALIA: FIRB to publish guidelines on Australia investment by Australia foreign state-owned enterprises

Friday August 31 2012

It has been reported that FIRB will publish guidelines to clarify requirements for FIRB approval for investments in Australian entities by Australia foreign state owned enterprises.

The action has been triggered by the recent acquisition of shares in Virgin Australia by Etihad Airways, the national airline of the United Arab Emirates. In June this year, Etihad announced that it had acquired a 3.96% stake in Virgin Australia on the market. Etihad did not obtain FIRB approval before the acquisition, but merely informed FIRB as a step prior to its subsequent successful application to FIRB for approval to acquire 10% of Virgin.

Under Australia’s Foreign Investment Policy, all foreign governments and their related entities should notify FIRB and get prior approval before making a direct investment in Australia, regardless of the value of the investment. A direct investment has the objective of establishing a strategic long-term relationship with a target enterprise. It may allow a significant degree of influence by the investor in the management of the target. It is common international practice to consider an investment of 10% or more as a direct investment. However, FIRB considers that interests below 10% may also be direct investments and must also be notified if the acquiring foreign government or related entity can use that investment to influence or control the target.

This information will be updated as further details become available.