Recent decisions by the Treasurer indicate a growing trend towards the imposition of data control conditions in connection with foreign investment approvals. In particular, the conditions focus on personal information and other sensitive, industry-specific data (sensitive data) being stored or accessed from outside Australia.
The imposition of data control conditions may in certain cases slow down the approval process and, potentially, lengthen the timeline for completing a transaction. Investors should allow for the possibility of delays at various stages in the approval process, including due to the consultation process between FIRB and CIC and negotiations between the investor and FIRB regarding the appropriateness of any conditions imposed.
Importantly, recent consultations with stakeholders indicate that FIRB and the CIC are seeking to better understand any practical challenges which may arise when implementing these conditions. This will hopefully provide foreign investors with greater clarity regarding compliance with conditions.
Conditions may include obligations on foreign investors to ensure that:
In circumstances where the Foreign Investment Review Board (FIRB) has not restricted offshore storage or access to sensitive data, it may still impose conditions requiring foreign investors to:
FIRB’s increasing use of data control conditions is likely driven, at least in part, by the recent establishment of the Australian Federal Government’s Critical Infrastructure Centre (CIC).
Our September 2017 update, The Critical Infrastructure Centre: what foreign investors need to know, noted that the aim of the CIC was to bring together all levels of government, owners and operators of critical infrastructure to identify and manage potential national security risks. CIC then uses that information to advise FIRB in relation to inbound investments.
While the CIC is primarily focused on the high risk telecommunications, electricity, gas, water and ports sectors, recent FIRB decisions indicate it is also willing to recommend data control conditions in respect of businesses and assets in other sectors that hold large amounts of sensitive data.
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