Chapter 3 Foreign Direct Investment System and Law

Foreign investment takes place when an individual, business or investment vehicle（such as a superannuation or pension fund）from outside Australia, establishes a new business in Australia or acquires property or shares in an Australian-owned business.

There are two main ways in which foreign entities can invest funds in the Australian economy:（1）portfolio investment, that is, the purchase of Australian securities（such as stock or bonds）or equity and debt transactions which do not provide the investor with any control over the operation of the enterprise. Examples of such investment include the purchase of property, shares in Australian companies or government bonds by foreign superannuation or pension funds. （2）Foreign direct investment（FDI）, that is, when an entity, from outside Australia, establishes a new business or acquires at least 10 percent or more of an existing Australian enterprise. When acquiring at least 10 percent or more of an existing Australian enterprise, the entity acquires some control over the operations of the enterprise. Examples of FDI include the establishment of Australian branches of multinational companies or joint ventures between Australian and foreign companies.

At the end of 2015, portfolio investment accounted for 54 percent of total foreign investment within Australia whereas, FDI made up a further 24 percent, while other investments（such as trade credits）accounted for around 22 percent of total foreign investment.

Foreign investment plays a critical role in the Australian economy as it has done for over 200 years. From a historical perspective, English investments during the 19th century contributed significantly to the development and expansion of the Australian wool industry, the first major export which continues to be an important Australian export.

During the 20th century, international investment contributed to growth in Australia's financial services and manufacturing sectors, while over the past 25 years, foreign investment has helped to develop Australia's mineral and energy resources. It is thus imperative that the government continuously focuses on the booming global and regional markets. The Australian Government therefore promotes foreign investments in Australia with emphasis on its five national investment priorities which includes agribusiness and food, resources and energy, major infrastructure, tourism infrastructure, advanced services, manufacturing and technologies. To continuously support foreign investment in Australia and improve the financial environment, reform is currently taking place.

The total value（stock）of foreign investment in Australia was AUD 3 trillion at the end of 2015. The United States and the United Kingdom are the top two sources of investment in Australia, ahead of Belgium, Japan and Singapore. Chinese and Indian investments in Australia have increased since 2005, reaching AUD 75 billion and AUD 12 billion respectively at 31 December 2015（Table 3）.

Based on ABS catalogue 5352.0

Last Updated: May 2016

3.1 Visa options

Whether foreign investor is contemplating portfolio or foreign direct investment opportunities in Australia, it is important to consider if conducting their businesses in Australia means that they are required to be physically present and in this case, which visa suits them best. The Australian Government provides a number of visa options.

The Australian Government provides sponsorship visas where a business can sponsor and employ skilled workers who have recognised qualifications, skills or experience in specific occupations required in Australia. However, if an employer wishes to employ overseas workers for occupations that are not on the list of approved occupations for regular business visas, and a genuine skills shortage exists, there is an option for the employer to establish a formal labour agreement with the Australian Government. Employer-sponsored labour agreements are negotiated directly with Australian Government agencies. The new complying investment framework for the Significant Investor Visa（SIV）and introduction of the Premium Investor Visa（PIV）aims to attract applicants with businesses, entrepreneurial skills and capital to innovate Australian businesses and the commercialisation of Australian ideas, research and development.

3.2 Investment framework

The government of Australia operates at three levels: federal, state（or territory）and local. This multilayer governance system affects a number of sectors and industries that foreign investors may seek to invest in, including both natural resources, infrastructure, commercial real estate, tourism as well as manufacturing.

Investors must understand Australia's regulatory environment and abide by all the relevant requirements. The Foreign Investment Review Board（FIRB）website provides guidance on some of the obligations that foreign investors need to consider. Some of the obligations of which foreign investors should be aware are the principle of good corporate governance（and act as a good corporate citizen）the responsibility to register with ASIC, the specific responsibilities of the director of Australian company（such as due care and diligence, good faith, avoid misuse of their position and information）, act in accordance with the Corporations Act 2001（Cth）as well as the Competition and Consumer Act 2010（Cth）and finally, to abide by the Australian taxation regime. These responsibilities are discussed in greater detail later in this chapter.

It is therefore, necessary, that foreign investors become familiar and acquire a strong understanding of the responsibilities of each level of government as well as the framework which regulates foreign investment prior to investing in these sectors. Australia has adopted a flexible approach to receiving foreign investment. Unlike other countries, there is no list-based sector which governs foreign investment. In other words all sectors are open for investment. The only limit is that a foreign investment must not be contrary to national interest. However, certain businesses are recognised as sensitive businesses which may attract closer scrutiny. Sensitive businesses are media, telecommunication, transport, defence related industries and activities, and the extraction of uranium or plutonium or the operation of nuclear facilities as well as other critical infrastructure. The financial limit for investment is higher for Free Trade Agreement partners than for other investors. The financial limit is adjusted every year on 1 January so investors should see the updated notification from the Australian Foreign Investment Review Board（FIRB）.

Australia's foreign investment policy framework is governed by the Foreign Acquisitions and Takeovers Act 1975（Cth）and Australia's Foreign Investment Policy.

Investment by a foreign entity in Australia may require the formal submission of a proposal. This is subject to approval by FIRB. The FIRB examines proposals and advises the Australian Government on whether those proposals are suited for approval under the Government's policy. Whether a proposal is required to be submitted to FIRB by the investor depends on the monetary value, the nature of the investment, and type of investor. Approval is however only necessary if the investment proposal exceeds a certain amount. In 2014, the FIRB only screened investments greater than AUD 248 million which increased to AUD 252 million on 1 January 2015. Based on advice from the FIRB, Australia's Treasurer may deny or place conditions on the approval of particular investments above the threshold on national interest grounds.

The main principle which governs approving of such proposals is national interest. Australia's Foreign Investment Policy provides guidance on what factors are typically considered when assessing whether an investment proposal is contrary to the national interest. The concept of national interest includes factors such as national security, competition, the impact on other Australian Government policies（such as tax and environmental policy）, the impact on the economy and the community, and the character of the investor. If a proposal involves a foreign government or a related entity, the Government will also consider the commerciality of the investment.

Proposals for foreign investment in Australia should be submitted to FIRB. FIRB outlines the information that needs to be included in the investment proposal , along with details on how to apply in the policy statement.

3.3 Setting up business in Australia

Australian incorporates a number of different types of business structures which all depend on the investor's objectives and needs. These include a company, sole trader, joint venture, partnership or trading trust. Each business structure has its own legal characteristics, obligations and tax implications so a foreign investor wanting to set up a business structure in Australia to conduct business will need to carefully consider which structure is appropriate for their objectives and needs. This section provides a general overview of these business structures and outlines some approvals that they may need to obtain.

3.3.1 Business structures

The common Australian business structure is company limited by shares. This is an attractive option for many wishing to conduct business because they provide limited liability for their shareholders. From general perspective, this means that shareholders are only held liable to the extent of their investment in the company and once formed, a company becomes a separate legal entity with the same powers as an individual.

The principal regulator of companies in Australia is the Australian Securities and Investments Commission（ASIC）.

The most common business structure in Australia is a company limited by shares. Such a company can be either a proprietary company or a public company. A proprietary company must in this regards have no more than 50 non-employee shareholders and at least one director who is ordinarily resident in Australia. On the other hand, a public company can have an unlimited number of shareholders. A public company must furthermore have at least three directors（at least two of whom need to be ordinarily resident in Australia）and at least one company secretary who is ordinarily resident in Australia.

Both proprietary and public companies must have a minimum of one shareholder as well as a registered office in Australia. Usually, there are no minimum capital requirements for establishing a company in Australia or particular limitations on the scope of its business. However, some industries, such as banking, do have specific licensing requirements.

A foreign investor who decides to conduct business in Australia using the company structure may consider establishing a new Australian company or acquiring an already established Australian company.

When choosing to establish a new Australian subsidiary, the foreign investor must complete and submit the required application form and pay the prescribed registration fee to ASIC. Alternatively, a foreign investor does have to choice to purchase a so-called“shelf company”（a company that has been registered but is yet to trade）from businesses that set up companies for that very purpose.

An individual has the choice to conduct his/her business in Australia as a sole trader. A sole trader is personally liable for all debts and obligations incurred by the business. If a sole trader wants to conduct business in a name other than his or her own, that person will need to register the business name with ASIC.

Foreign investors can also enter joint ventures with existing Australian entities. Joint ventures most often involve two or more companies or individuals coming together, usually by way of a joint venture agreement, to work together on a defined project.

A joint venture may be established as a company（incorporated）, an unincorporated entity（a purely contractual arrangement）or a partnership. Foreign investors joining the venture as a partnership must, however, take note that such ventures are governed by State and Territory legislation, rather than Federal law. A partnership usually consists of two to 20 individuals or companies which may be subjects to certain exceptions. A partnership does not have separate legal entity and similar to sole traders, partners are personally liable for all debts and obligations incurred by the business but on a joint basis. In some States, it is possible for some joint ventures to be established as a limited liability partnership affording limited liability to some of the partners .

Foreign investors may also conduct business in Australia through a trust where one or more trustees, who may be either individuals or corporations, operate a business on behalf of their beneficiaries. The benefit of conducting businesses through a trust is that it may provide certain tax advantages over traditional corporations and they are often used for purchasing real estate.

It is also possible for a foreign company to conduct business in Australia without using an Australian business structure（e. g. establishing an Australian subsidiary）. In that case, the foreign company is required to register as a foreign company operating in Australia. This involves completing and submitting the required registration forms and supporting documents to ASIC. A further requirement for such business structure is that they are required to have a registered office in Australia and to appoint an agent in Australia to ensure compliance with Australian law.

3.3.2 Company mergers

The Competition and Consumer Act 2010（Cth）（CCA）regulates all company mergers. Its aim is to support trade and subsequently protect against anti-competitive trade practices and consumers.

Section 50 of the CCA prohibits acquisition of shares and assets that would affect or be likely to lessen competition in any market in Australia. Section 50（3）specifies a non-exhaustive list of factors which must be considered when assessing whether a proposed merger affects or is likely to affect the market competition in a negative sense. Such factors include：

• the actual and potential level of import competition in the market；

• the height of barriers to entry to the market；

• the level of concentration in the market；

• the degree of countervailing power in the market；

• the likelihood that the acquisition would result in the acquirer being able to significantly and sustainably increase prices or profit margins；

• the extent to which substitutes are available in the market or are likely to be available in the market；

• the dynamic characteristics of the market, including growth, innovation and product differentiation；

• the likelihood that the acquisition would result in the removal from the market of a vigorous and effective competitor; and

• the nature and extent of vertical integration in the market.

The merger provisions of the CCA are enforced by the ACCC which alone has the standing to seek a Federal Court injunction to prevent a merger. Where a merger has been completed, the ACCC may seek a Federal Court order for full or partial disposal of a business unit through sale, exchange, closure, bankruptcy（divestiture）or alternatively a financial penalty. Other persons, including competitors, can also bring Federal Court proceedings in relation to a completed merger seeking damages or divestiture.

Notifying the ACCC of mergers and acquisitions is voluntary, however, the Informal Merger Review Process Guidelines 2013 indicate that the ACCC expects notification in advance where the merged firm will have a post-merger market share greater than 20 percent in the relevant market.

3.4 Acquiring a business in Australia

Foreign investors may wish to purchase all or part of an Australian business. This can be done by either purchasing the shares in, or the assets of, the relevant company which conducts the business.

When purchasing assets in a business, the purchaser generally only assumes the liabilities that it contractually assumes. Whereas, by acquiring a business through shares, the purchaser acquires all the liabilities of the company. To mitigate such risks, it is recommended that the purchaser obtains warranties and indemnities from the seller. In contrast to purchase of assets, purchasing shares in a company entails that all contracts are automatically transferred to the purchaser and obtaining third-party consent is not necessary. Finally, there are also differences between the two methods in terms of tax. In purchase of shares, seller receives 50 percent discount on GST for that sale. However the buyer assumes all liabilities known or unknown which may be adjusted in the future tax returns. A small business（currently with less than 2 million turnover）may claim tax concessions. In purchase of shares, a purchaser benefit substantially on capital gains in the future because the value of assets is reset at the market value at the time of purchase. The seller on the other hand may utilise tax losses to offset other tax liabilities arising from the sale.

3.4.1 Investment opportunities

Australia's economy is primarily services-based, however in recent years, it has been supported by a strong resources sector, which is rich in natural resources such as coal, iron ore, gold and natural gas. Australia is a major exporter of such resources. In 2016, the total export of ores, slag and ash accounted for USD 49.23 billion（26 percent）and in the same year export of mineral fuels, oils and distillation products amounted to USD 48.54 billion（26 percent）. In 2016 the export of Aluminium and Copper was USD 2.98 billion and USD 2.48 billion respectively.

3.4.2 Natural resources

Acquisitions of interests in mining and petroleum tenures constitutes acquisitions of interests in Australian urban land under the Foreign Acquisitions and Takeovers Act 1975（Cth）. Australian urban land is land which is used wholly and exclusively for carrying on a business of primary production（such as agriculture）and which is not considered rural.

The shale and coal seam gas industries are still in their early stage, however, there are likely to be significant opportunities in these industries in the coming years.

Australia's mining industry is largely regulated at State and Territory level, with the exception of Commonwealth regulations. From a legal perspective, minerals are, with few exceptions, owned by the State. The State and Territory governments may authorise companies and individuals to undertake specific mining activities in respect of designated areas.

In addition to relevant exploration, retention and/or mining tenements provisions, mining projects must comply with all other regulations relevant to the project which can range from explosives licences to chemicals permits to water permits.

Commonwealth, State and Territory governments administer a permit system for the exploration and development of petroleum in Australia, depending on where the resource is located. Offshore permits are granted by The National Offshore Petroleum Titles Administrator（NOPTA）who is responsible for the daily administration of petroleum and greenhouse gas titles in Commonwealth waters in Australia. While off-shore permits are governed at federal level, on-shore permits are granted by the state or territory by which the permit relates to. State and Territory governments allocate petroleum titles up to three nautical miles from the shoreline, with the Commonwealth Government regulating offshore operations beyond that demarcation.

Most investments in the Australian mining and oil and gas sector by foreign entities are likely to require clearance from the Treasurer acting through the Foreign Investment Review Board. This is because they are considered interests in Australian land which is regulated by the Australian foreign investment legislation, which was discussed previously in this chapter, part B.

Registration fees upon acquisition or stamp duty may be payable under state or federal law. These are not uniform and especially stamp duty and taxation structures such as the Petroleum Resource Rent Tax should be carefully considered before investments are made. The PRRT is assessed on a petroleum project basis and is levied at a rate of 40 percent of a project's taxable profit. Taxable profit is calculated by deducting a project's eligible project expenses from the assessable receipts derived from the project. Deductible expenditure broadly includes those expenditures, whether capital or revenue in nature that are directly incurred in relation to the petroleum project.

Environmental approval may also be necessary and is regulated at state level. However, the Commonwealth Environmental Planning and Biodiversity Act 1999（Cth）applies where a project is likely to have a significant impact the environment. A simplification of this process has been implemented since 2013 called the One-Stop Shop project which will accredit state planning systems under national environmental law, to create a single environmental assessment and approval process for nationally protected matters. The One-Stop Shop policy aims to simplify the approvals process for businesses by providing a single process for environmental assessments, lead to swifter decisions and improve Australia's investment climate, while maintaining high environmental standards.

The new approval process was implemented by bilateral agreement during 2014 and includes a three-stage process with each of the willing jurisdictions, comprising the signing a Memorandum of Understanding, an agreement on bilateral assessments and updating any existing agreement with the state and the negotiation of approval bilateral agreements within 12 months.

Native title describes the land rights of Aboriginal and Torres Strait Islander peoples under traditional laws and customs. Where a resources project takes place on land affected by native title, project participants must follow the procedures of the Native Title Act 1993（Cth）. This may involve compliance with the ‘future acts' regime, negotiations with native title holders or claimants and, in some cases, a project may require a more broad ranging Indigenous Land Use Agreement before it can proceed. Projects affecting sites of cultural heritage must follow certain requirements. There is the risk of delays if significant areas of cultural heritage are identified, so it is important to assess this early in any project.

The grant of tenements and other permits to project participants is usually tied to reporting obligations to relevant State/Territory governments. Depending on the structure of the project, reporting may also be required under the Australian Corporations Act 2001（Cth）and the Tax Laws Amendment（Implementation of the Common Reporting Standard）Act 2016.

3.4.3 Commercial real estate

Each Australian state and territory has their own land laws, however these are regulated from the perspective of some common principles.

Land registration in Australia is based on the Torrens system. Under this system, the act of registration in a central register creates title and ownership over land and property. It is only upon registration of transfer that a buyer obtains legal title to real estate.

Generally, foreign investors must apply for foreign investment approval before purchasing residential real estate in Australia. Rights and obligations of foreign investors in terms of real estate is governed by the Foreign Acquisitions and Takeovers Act 1975（Cth）and the approvals process is undertaken by the Foreign Investment Review Board.

The Government's policy on foreign investments in real estate is to channel foreign investment into new dwellings because this creates additional jobs in the construction industry and supports the economy. Further, it can also increase government revenue in the form of stamp duties and other taxes and from the overall higher economic growth that flows from additional investment. Foreign investment applications are therefore generally considered in light of the overarching principle that the proposed investment should increase Australia's housing stock（be creating at least one new additional dwelling）.

Consistent with this aim, different factors may be applicable depending on whether the type of property acquired will increase the housing stock or whether it is an established dwelling. It is therefore important that foreign investors understand and comply with Australia's foreign investment framework as strict criminal and civil penalties may apply for breaches of the law, including disposal orders.

3.4.4 Foreign investment in tourism

The Australian Government is committed to working with the industry to support the development of tourism infrastructure that can drive demand through the Tourism Plan of 2020 which aims to double overnight visitor expenditure to between AUD 115 billion to AUD 140 billion by 2020.

Austrade is committed to providing the necessary assistance to foreign investors to promote, attract and facilitate productive investment into tourism infrastructure in Australia. This is done by partnering with Tourism Australia and working with state and territory governments. Further, the Australian Trade and Investment Commission also operates a Tourism Major Project Facilitation service to assist with tourism projects and help navigate foreign investors through Australian Government approvals system.

3.4.5 Foreign investment in manufacturing

The Australian manufacturing business has been in the decline since 2014. The manufacturing sector contracted in 2014-15, with output declining by 1.2 percent. Output fell in five out of eight manufacturing subsectors, with the sharpest falls occurring in printing ＆ recorded media, machinery ＆ equipment, and metal products. Non-metallic mineral products and wood ＆paper products recorded strong rises in output in 2014-15. Employment in the manufacturing industry declined by 12,600 persons over the same period.

The Australian government is therefore focused on supporting, attracting and facilitating this industry by encouraging foreign direct investment. Austrade provides the information needed to establish or expand a business in Australia.

3.5 The Australian taxation system

This section provides an overview of the Australian taxation system.

3.5.1 Income tax

In Australia, both residents and non-residents are obligated to pay tax on their income. See the Income Tax Assessment Act 1997（Cth）, divisions 3-6.

Non-residents are obligated to pay income tax on their Australian source income. Residents must pay income tax on their worldwide income. The income tax rate for both resident and non-resident companies is 30 percent. Certain smaller businesses may be taxed at 28.5 percent. See S 4.1 and 5.5 of the Tax Assessment Act 1997（Cth）.

A company resident in Australia is liable for income tax based on its Australian source taxable income and on certain foreign source income. Companies that are not tax resident in Australia are generally only liable for Australian income tax based only on their Australian source income.

The treatment of Australian branches of foreign companies and Australian subsidiaries of foreign companies is generally the same. However, an Australian company that constitutes a wholly owned group of companies is able to form a consolidated group for tax purposes which may be beneficial in transfers of assets between the companies.

The tax regulations on company loss is complex. For a company's tax losses to be carried forward to the coming year, a continuity of ownership test or, failing that, a same business test must be satisfied.

Non-residents are taxed on capital gains. In Australia a capital gain arises from the disposal of Australian real property or on disposal of certain“no portfolio”interests in the property of an entity. A non-resident must pay capital gains tax either when it disposes of its interest in an Australian resident entity or in another non-resident entity, if the underlying assets of that other entity directly or indirectly consist principally of real property in Australia. Finally, non-residents are also taxed on capital gains on the disposal of assets used to conduct their business through a branch in Australia.

Stamp duty is a tax which the States and Territories of Australia imposes on certain documents and transactions. This tax relates primarily to the acquisition of certain types of property, including land, goods acquired with land and businesses. The rates of stamp duty differ between the various States and Territories and range from 0.6 to 7 percent. The duty is calculated by reference to the highest amount paid for the asset or its real value.

In addition, each State and Territory also imposes a duty on the acquisition of interests in companies and trusts which hold Australian land. This duty is generally referred to as“landholder duty”.

3.5.2 Taxes on goods and services

Australia imposes a tax on goods and services（GST）which is very similar to many value added tax（or VAT）and GST regimes in other jurisdictions. Irrespective of residence, an entity is obligated to pay GST in Australia on any taxable supplies that it makes. A taxable supply is defined as a supply which is：

• Made by a supplier registered（or required to be registered）for GST

• Made for consideration in the course or furtherance of an enterprise carried on by the supplier, and

• “Connected with Australia”（for which there are various tests）, and is not a“GST-free”or“input taxed”supply.

The concept of supply is broad in scope and includes supply of goods, services, rights and interests in land.

An entity can register for GST voluntarily if it is carrying on an enterprise, whether in Australia or another country. An entity is obliged to be registered for GST where it makes certain supplies connected with Australia to the value of more than AUD 75,000 per annum. If an entity is registered for GST, it must file GST returns on a regular basis. If the net amount is positive, a payment must be made to the Australian Taxation Office（ATO）. If it is negative, a refund may be obtained from ATO.

There are two major categories of supply which are exempt from GST. GST-free supplies include supplies of services and rights that have a connection to Australia but are exported either to non-residents outside Australia or to residents that are outside Australia who enjoy the supplies outside Australia. Input taxed supplies comprise of financial supplies and supplies of residential accommodation. In certain circumstances, where a registered entity receives a taxable supply, it can claim an input tax credit for the GST component of the cost of that supply.

Upon payment, the GST is levied by the Federal Government and distributed to the States and territories. GST is charged at the rate of 10 percent on the supply of most goods and services consumed in Australia and is payable by the supplier in respect of“taxable”supplies.

3.6 Australian anti-bribery laws

Investors need to consider the risk of bribery and similar criminal offences in connection with their business' operations and activities in Australia and overseas.

Prohibited conduct

Under the Commonwealth Criminal Code Act 1995（the Code）it is a criminal offence to provide, offer or promise a benefit（monetary or non-monetary）to another person（or to cause a benefit to be promised, offered or provided）, where the benefit is not legitimately due to the person, with the intention of influencing a foreign public official（FPO）in the exercise of their duties in order to obtain or retain business or an undue business advantage. An offence is committed if the benefit is provided directly to the FPO or indirectly, for instance by providing the benefit to the s relative or business partner of an FPO, or by causing an agent or other third party to provide the benefit to the FPO. The definition of a FPO is broad and includes officials, employees and contractors of a foreign government body, and officers, employees and contractors of a public international organisation（e. g. the United Nations）or state-controlled enterprise. Bribery of an Australian public official Under the Code, it is an offence to dishonestly provide, offer or promise a benefit to another person, either with the intention of influencing a Commonwealth public official（C）PO in the exercise of their duties, or with the result that the receipt（or expected receipt）of the benefit would tend to influence a CPO in the exercise of their duties）. Bribery of State or Territory public officials is also prohibited by relevant State or Territory laws.

In almost every State and Territory, bribery in the private sector is prohibited by criminal legislation concerning“secret commissions”. Secret commissions arise where an agent or representative receives or solicits a commission from a third party, without disclosing that commission to their principal, as an inducement to influence their principal's decision making. Further, an individual or company that is found to have kept inaccurate or misleading books and records（e. g. by not fully and accurately recording certain payments）may be exposed to criminal prosecution. In addition to these and other statutory prohibitions, several common law bribery offences exist, including“bribery of a public official”. Under extraterritorial application of Australian anti-bribery laws, individuals and companies can be prosecuted for bribery of a FPO if all or some of the relevant conduct occurs in Australia. Additionally, Australian incorporated companies and Australian citizens and residents can be prosecuted for the offence, regardless of whether it is committed in Australia or elsewhere. Australian laws prohibiting secret commissions and bribery of a CPO or State/Territory public official also capture conduct that occurs overseas.

Anti-bribery laws apply to companies and liability can be attributed to a company where a company employee, agent or officer, acting within the scope of their employment or authority, commits the offence. For a company to be liable, it must also be established that,（i）the board of directors or a senior manager carried out the relevant conduct or expressly or impliedly permitted or authorised the commission of the offence; or（ii）the company had a deficient“corporate culture”.

This requires proof that the company either had a corporate culture that directed, encouraged or led to non-compliance with anti-bribery laws, or did not have a corporate culture that required compliance with such laws.

No statutory defences are available to allegations of secret commissions or bribery of a CPO or State/Territory public official. The Code provides a defence to allegations of bribery of an FPO in the following two circumstances：

（i）where the conduct is required or permitted under the written law of the FPO's country; or

（ii）where the benefit was of a minor nature and was provided to expedite or secure the performance of routine government action（a facilitation payment）.

Notably, the Federal Government has recently reviewed the second defence which may result in its removal. The Code imposes the following penalties for bribery of an FPO or CPO：

（i）for an individual, the maximum penalty is 10 years' imprisonment, a fine of AUD 1.8 million, or both（per offence）; and

（ii）for a company, the maximum penalty is the greater of AUD 18 million, three times the value of the benefit attributable to the offence, or, if the court cannot determine the value of that benefit, 10 percent of the company's annual turnover for the previous 12 months.

Bribery of State or Territory public officials and secret commissions lead to fines and imprisonment. In the past, Australia has been criticised for failing to enforce its anti-bribery laws. In recent years anti-bribery enforcement efforts in Australia have increased. At the Commonwealth level, the Australian Federal Police（the AFP）has assigned high priority to foreign bribery investigations. In 2014, the AFP established the Fraud ＆ Anti-Corruption Centre, a multi-agency unit which enables the AFP to work closely with other Commonwealth regulators, including ASIC. This builds on the establishment of the AFP Foreign Bribery Panel of Experts in 2012, which undertakes“periodic operations reviews”of enforcement activity, indicating that the AFP is increasingly willing and able to devote significant resources to the investigation of bribery. To date there has only been two prosecutions for bribery under the Code. The first prosecution was brought in July 2011 against two Australian companies and various associated individuals（such as directors）, and the second was brought in March 2015 against three employees of a construction company operating overseas. The prosecutions marked the culmination of complex investigations, and serves as examples of the AFP working with overseas law enforcement authorities to bring bribery charges. Recently, there has been a notable upswing in the number of investigations and the head of the AFP Fraud ＆Anti-Corruption Centre has made public statements that more investigations are expected to move to prosecution stage in the next year or so. ASIC has also indicated that it may investigate any accusations of foreign bribery against a company where the accusation involves a possible contravention of the Corporations Act（for example, a breach of directors' duties）. At State and Territory level, most jurisdictions（including New South Wales and Victoria）have now established anti-corruption commissions. Though the mandates of such commissions are limited to conduct involving the public sector, this may include conduct involving commercial or private sector entities or employees if they fall under the category or“public body”or“public officer”. This may happen when a private entity or its employee performs the role of the government or a public body under contract or otherwise. In 2015 the Senate ordered an inquiry into foreign bribery laws with a deadline of 1 July 2016 to report. This enquiry lapsed when the 44th Parliament ended. In October 2016 the Senate readopted the inquiry requiring a report to be submitted by June 2017. The Inquiry is considering the scope of foreign bribery laws, including whether the“facilitation payment”defence should be abolished and whether the laws should be expanded to cover bribery in the private sector including protections for whistle-blowers. Any changes stemming from the review are likely to be implemented after 2017.

3.7 Australian anti-privacy laws

Investors should be aware of obligations to protect the information of individuals regulated in Australia's privacy legislation.

The Privacy Act 1988（Cth）is the key privacy legislation applicable to most private sector organisations in Australia. The legislation has some exemptions, including acts relating to employee records and, generally, the activities of organisations with an annual turnover of less than AUD 3 million. Substantial reforms to the Privacy Act took effect on 12 March 2014 and are incorporated in this overview. The Privacy Act contains special rules for entities which handle tax file numbers and credit information. Additionally, legislation in several states and territories regulate the handling of health information by private sector organisations in addition to the requirements of the Privacy Act. Government agencies and companies that provide services to them are subject to a broader range of privacy laws. The Privacy Act imposes 13 Australian Privacy Principles（APPs）as a minimum standard for handling personal information. The APPs regulate the collection, use, disclosure and handling of records of“personal information”, which is any information or opinion about an identified or reasonably identifiable individual. Special restrictions apply to the use of“sensitive information”, which includes information or an opinion about an individual's health, racial or ethnic origin, membership of political, professional or trade organisations or of a trade union, sexual orientation, religious and political beliefs, criminal records, genetic information and biometric information and templates.

Entities are required to have a clearly expressed and up-to-date privacy policy, which is to be made available upon request by the public, see the Privacy Act 1988（Cth）, Schedule 1, Principles 6 and 7. The privacy policy must address certain matters set out in APP 1, including whether personal information is likely to be disclosed to overseas recipients（and, if so, in which countries those recipients are located）and information regarding how an individual may access and correct personal information held by the entity and make a complaint about a breach of the APPs by the entity.

An entity“collects”personal information only if that entity collects the personal information for inclusion in a record or generally available for publication, see the Privacy Act 1988（Cth）Schedule 1, Principle 2. An entity collecting personal information about an individual is required to take reasonable steps to provide notice to the individual before, at or as soon as practicable after the time of collection of personal information. The notice must address a number of matters, including the purposes of collection, typical disclosures, and whether the information will be disclosed outside Australia. Individuals must also be told that they can find information about accessing, correcting data and making a complaint in the entity's privacy policy. This requirement applies even if personal information is collected indirectly from an entity other than the individual concerned. Entities are only permitted to collect information if the information is reasonably necessary for one or more of the entity's functions or activities. In addition, an entity collecting sensitive information about an individual is generally required to obtain the individual's consent. See the Privacy Act 1988（Cth）Schedule 1, Principle 2.

Although the Privacy Act does not define“use”and“disclosure”of personal information, it is generally accepted that an entity uses personal information when it handles and manages that information within its effective control and that it discloses personal information when it makes it accessible to others outside the entity and releases the subsequent handling of that information from its effective control. Unlike some other countries, in Australia no distinction is made between controllers and processors of personal information. However, as Schedule 1 utilises the words“record keeper”and“collector”, this distinction should not matter because a record keeper and or collector can both include someone who controls and or processes the information. Generally, personal information may be used and disclosed without consent for the primary purpose for which the information was collected and, with consent, for a secondary purpose. Personal information may also be used and disclosed for a secondary purpose that is related（directly related in the case of sensitive personal information）to the primary purpose and for which the individual would reasonably expect the information to be used or disclosed. There are certain other limited circumstances（such as where use is required by law）in which personal information may be used and disclosed for a purpose other than the purpose for which it was initially collected. See the Privacy Act 1988, Schedule 1, Principles 10 and 11. Personal information for direct marketing（other than email or telemarketing, which is regulated separately, is prohibited unless an exception is satisfied. See the Privacy Act 1988, Schedule 1, Principle 7. The exceptions depend on the circumstances in which the information was collected（Principles 7.2 and 7.3）, but in all cases require a simple opt-out mechanism to be provided to the individual. If the individual may not reasonably expect their personal information to be used for direct marketing, or the information was collected indirectly rather than from the individual, consent to the direct marketing must be obtained unless it is impracticable to do so. Use of sensitive information for direct marketing is prohibited unless consent has been obtained.

Subject to certain narrow exceptions, when disclosing personal data outside Australia, entities are required to take reasonable steps to ensure that the overseas recipient complies with the APPs under the Privacy Act, and may be deemed liable for any breaches of the Privacy Act by that overseas recipient.

Where consent is required, it must be informed, voluntary, current and specific. The person whose consent is required must also have the capacity to understand and communicate his or her consent. Consent can generally be express or implied. For open and transparent management of personal information entities must take reasonable steps to ensure that the personal information they collect is accurate, up-to-date and complete and to protect personal information from misuse, interference, loss and from unauthorised access, modification or disclosure. Personal information must be destroyed or de-identified when it is no longer needed. With some exceptions, entities must provide individuals with access to the information held about them and correct information that is inaccurate, out-of-date, incomplete, irrelevant or misleading. If entities refuse to give access or correct information, they must usually provide written notice of the reasons for such refusal.

There are various exemptions under the Privacy Act. Most significantly related bodies corporate may share their employees' personal information（but not sensitive information）without breaching the collection and disclosure restrictions under the APPs. However, each group member is required to comply with the APPs in all other respects. An entity's handling of employee records in a way which is directly related to a current or former employment relationship will be exempt from the Privacy Act. This exemption does not apply to contractors or prospective employees.

The Privacy Act has extra-territorial application and extends to acts and practices of entities outside Australia where：

• the entity is incorporated or otherwise established in Australia; or

• the entity carries on business in Australia and the information was collected or held by the entity in Australia before or at the time of the act or practice.

Credit reporting is regulated by Part IIIA of the Privacy Act（supported by the Privacy Regulation 2013（Cth）and the Privacy（Credit Reporting）Code 2014）which regulates the collection, use and disclosure of personal information relating to individuals' activities in connection with the receipt of consumer credit. Credit reporting bodies and credit providers must comply with a range of requirements in relation to their collection, use and disclosure of credit information.

The Spam Act 2003（Cth）governs the sending of commercial electronic messages which originate in Australia or have another“Australian link”（as defined in the legislation）. The Spam Act provides for an opt-in regime（based on express or inferred consent）for commercial electronic messaging. It requires that commercial electronic messages contain a functional“unsubscribe”facility as well as information about the person who authorised the sending of the messages. It also prohibits electronic address harvesting software and address lists generated using such software. The Do Not Call Register Act 2006（Cth）prohibits unsolicited telemarketing calls from being made to fixed line home phone numbers registered on the Do Not Call Register.

There is currently no express obligation to inform the Privacy Commissioner or the affected individuals when a security breach occurs. However, the Office of the Australian Information Commissioner（OAIC）has issued non-binding guidance stating that organisations should notify affected individuals and the OAIC of a breach where there is a real risk of serious harm as a result of the breach. The Privacy Amendment（Notification of Serious Data Breaches）Act came into effect on 22 February 2017 and makes it mandatory to report serious data breaches to the OAIC and affected individuals. Under the exposure draft's terms, the notification requirements would then become effective no later than 12 months after the date that the Bill is passed. In respect of breach of Privacy Act, the Privacy Commissioner has the power to undertake investigations（either in response to complaints made by individuals or on its own initiative）, to make determinations, to audit organisations, to accept enforceable undertakings, to develop and register binding privacy codes. The Privacy Commissioner may also apply to the Federal Court or Federal Circuit Court for civil penalties of up to AUD 1.8 million for corporations, for an order to enforce a determination or an enforceable undertaking, for injunctions and orders for compensation and other practical measures to redress loss and damage. Individuals may complain to the Privacy Commissioner and commence proceedings for injunctions only. Under the Spam Act and Do Not Call Register Act, a flexible range of civil sanctions, including warnings, infringement notices and court-ordered penalties of up to AUD 1.8 million for corporations is available to the regulator, the Australian Communications and Media Authority. The Privacy Commissioner has historically taken a conciliatory approach to enforcing the Privacy Act. However, in determinations made since 2011, the Privacy Commissioner has, among other things, declared that the respondent must apologise in writing to the complainant, review its staff training regarding the handling of personal information, advise the Privacy Commissioner of the outcome of the training review, and pay compensation to the complainant. This has been taken as an indication that the Privacy Act will be enforced more strictly in future, supported by the introduction on 12 March 2014 of the civil penalties referred to above and other enforcement mechanisms. According to the OAIC's 2014-15 Annual Report, the Office received 2841 complaints and responded to 16,142 written and phone enquiries in the year ending 30 June 2015. The OAIC issued seven privacy determinations in 2014-15. The typical remedies include apologies, review training of staff, processes and documentation as well as compensation（ranging from AUD 5,000 to 18,000）, either jointly or separately. During the same period, the OAIC commenced four Privacy Commissioner-initiated investigations, commenced 12 privacy assessments involving 85 entities and received 117 notifications of data breaches from organisations（including 110 voluntary notifications）. In March 2015, for the first time since reforms to the Privacy Act which took effect in March 2014, one organisation entered into an enforceable undertaking with the Privacy Commissioner. Among other things, the undertaking requires the organisation to implement recommendations and rectify the deficiencies identified by an independent third party engaged by that organisation to investigate whether the organisation's practices, procedures and systems are reasonable to protect the personal information it holds.

3.8 Australian intellectual property regulations

Intellectual property is protected in Australia under both Federal legislative schemes and the common law. These legislative schemes governing both patents, trademarks, designs and plant breeders' rights are managed at Federal level by IP Australia.

The role of IP Australia is to process applications, conduct hearings, and decide disputes relating to granting or denying of Australian IP rights. IP Australia maintains the Registers of Patents, Trade Marks, Designs and Plant Breeders' Rights, and provides public facilities for searching and accessing information on IP rights. Finally, IP Australia also acts as Receiving Office and International Searching and Preliminary Examination Authority for Patent Cooperation Treaty applications filed in Australia.

3.8.1 Patents

In Australia, patents are governed by the Patents Act 1990（Cth）and in Section 13, it is expressed that a patent provides an exclusive right to exploit an invention that solves an industrial issue for a specified period. In this connection, an invention can be either a device, substance, method or process，

A patent can be granted protection for a maximum of 20 years（The Patent Act S 67）. The patent application and registration system is governed by the principle of first in time, so it is therefore very important for protection of an invention to take steps to acquire a patent as soon as the invention has become materialised. Generally, it takes approximately two years for a complete standard patent application to be granted and timing of registration depends on whether there is any opposition to that patent.

Innovations patents are valid for eight years and protects inventions which may not meet the high threshold of patentability required to obtain a standard patent. As compared to standard patents, innovation patents is a simplified patent which is both faster to obtain and suited to inventions that are technologically quite simple or have a short life span.

Finally, inventions may be treated as information and thus protected under common law. Provided that the information continues to be maintained as confidential, it can be protected indefinitely.

Plant varieties can be protected under the Plant Breeders'Rights Act 1994（Cth）and this form of protection is sometimes referred to as a“Plant Patent”. This is because it is designed to enable plant breeders to apply for and receive proprietary rights for new varieties of plants which they develop. Plant breeders' rights are also protected under the Patents Act. The term of protection is 25 years for trees and vines, and only 20 years for other plant varieties.

3.8.2 Trademarks

A trade mark is a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person. Section 20 of the Trade Marks Act provides that upon registration, exclusive rights to use the trade mark are granted, similar to that of patents. Section 17 and Part 4 of The Trade Marks Act 1995（Cth）set out the essential requirement for a trade mark to be granted and registered in Australia. The requirement is that it is capable of distinguishing the applicant's goods or services in the course of trade from the goods or services of others entities. The Trade Marks regulations also regulate what cannot be registered as trademark—including certain signs such as“Olympic Champion”, “Austrade”and“Returned Soldier”. Where no objections to an application for registration are filed, it takes approximately three months for an application to be examined and actual registration usually takes at least 7.5 months.

An Australian trade mark lasts for 10 years, but an option to renew for further 10-year periods does exist. If a trade mark is not in use, it may be removed from the registration. .

Importation of a trade-marked product is not an infringement of registered trade mark rights. This means that parallel importation is permitted under Australian law. Unregistered trademarks may also be protected at common law.

Passing off is a tort in Australia and includes the unauthorised use of get-up and company or business names that are not registered trademarks. In order to raise a successful claim of passing off in Australia, the following elements must be present:

• reputation or goodwill relating to name, mark（sign）or get-up；

• use by the defendant of the same or a deceptively similar name, mark（sign）or get-up so as to confuse or deceive; and

• damage or likely damage to the business reputation or goodwill of the plaintiff, as a result of that conduct.

Passing off is particularly relevant to importers in view of judicial decisions such as Reckitt ＆ Colman Products Ltd v Borden Inc［1990］1 All E. R. 873 and Erven Warnink v. Townend ＆Sons Ltd.（1979 AC 731,742（HL）that foreign plaintiffs' goods might have substantial reputation without ever having been sold in Australia. However, registration as a trademark is always preferable, as it avoids the need to rely on substantial reputation in a given area.

3.8.3 Design

Designs for manufactured products can be registered as a design and the applicant can be granted exclusive rights to the design upon registration when the overall appearance of the design is new and distinctive. This means that designs that are too controlled by their physical function may not be granted protection. Registered designs are protected for a five-year period but the period may be renewed for another five years, making the maximum protection time 10 years.

The Designs Act 2003（Cth）specifies that certain designs cannot be registered. This includes designs for medals, scandalous designs, and designs including the Australian flag.

All applications proceed to registration without any examination as to whether the design can be registered or not. It is therefore up to the owner of the design or a third party to request an examination of the registered design. This may be done at any time during or after its 10-year term of registration. Upon request, the Designs Office carries out a full examination as to whether the design can be registered and then either certifies or revokes the registration. Because of the principle of first in time, it is important that design applications are sought before the relevant design is published either in drawings or in a relevant product bearing the design. .

The Designs Act specifies the exclusive rights of registered design owners during the term of the design's registration. The exclusive rights as granted upon certification includes the rights to：

• make the product；

• import the product into Australia for sale；

• sell, hire or otherwise dispose of the product；

• use the product in any way for the purpose of any trade or business；

• keep such a product for the purpose of any of the things mentioned in the preceding two paragraphs; and

• transfer or license the above rights.

Under the Design Act, the maximum term for protection is 10 years, and a renewal fee applies at the fifth year from filing.

3.8.4 Copyrights

Copyrights are regulated by the Copyright Act 1968（Cth）and remain unregistered. This means that works acquire protection upon creation and this usually for the duration of lifetime of the author and 70 years from their death. In cases of television and sound broadcasts, copyright will last until the end of the 50th year from the year of first broadcast, and for published editions of sound recordings, television and sound broadcasts and cinematograph films, until the end of the 25th year from year of publication.

Australia has adopted TRIPS plus provisions（which adopts the Berne Convection as its standard）with respect to intellectual property protection in its dealings with other World Trade Organisation members. Such international obligations are therefore implemented in the national legislation.

The subject matter of copyright law is confined to creative works such as literary works, dramatic works, musical works and artistic works. Subject matter other than works that also receive the protection of copyright in Australia include sound recordings, cinematograph films, television or sound broadcasts and published editions of works.

Circuit Layout Rights Computer technology is also protected under the Circuit Layouts Act 1989（Cth）which provides a similar to copyright law protection for original computer chip layouts.

The requirement for providing works protection under Australian copyright law is that it must be original. . This implies that the work must originate from the author and that some skill and labour is involved in the making the work which constitutes the labour-based rationale for copyright law as expressed by John Locke. In relation to subject matters other than works, there is only the requirement that it is original in the sense that it cannot be a mere copy of a previous sound recording, cinematograph film, television broadcast or published edition.

For a circuit layout to be protected, it is required that it be original and it has some connection with Australia or with a foreign country listed in the Circuit Layout Regulations 1990. The originality requirement for an eligible layout is higher than the standard required under copyright law, but lower than that required under designs law. Circuit layouts are protected by the Circuit Layouts Act. The owner is provided an exclusive right to copy the layout in material form, to make an integrated circuit in accordance with the layout or a copy of the layout, and to exploit the layout commercially in Australia. The protection under the Circuit Layout Act subsist for between 10 and 20 years depending on whether or not, and when, the layout is commercially exploited.

Once this threshold requirement is met, copyright automatically subsists and no registration is required. Therefore, upon creation, copyright law provides the copyright owner（author）with exclusive rights to control the work. This includes the exclusive rights to publication, reproduction as well as right to fully transfer the right during the term of protection.

In Australia, copyright infringement may involve criminal offences, such as offences in aid of enforcement regimes for technological protection measures（TPM）liability, abuse of rights management information and broadcast decoding devices, unauthorised access to encoded broadcasts, piracy of books, computer software, sound recordings and films, and infringements on a commercial scale and other actions that prejudice the economic rights of the copyright owner. The Copyright Act provides for three tiers of offences relating to copyright infringement: indictable, summary and strict liability offences. It is regulated at federal level and disputes must therefore be initiated a lowest court at federal level which is the Federal Circuit Court.

3.9 Relationship between international treaties and Australian domestic law

The general position under Australian law is that treaties which Australia has joined, apart from those terminating a state of war, are not directly and automatically incorporated into Australian law. Signature and ratification do not, of themselves, make treaties operate domestically. In the absence of legislation, treaties cannot impose obligations on individuals nor create rights in domestic law. Nevertheless, international law, including treaty law, is a legitimate and important influence on the development of the common law and may be used in the interpretation of statutes.

Many treaties do not require new or prior legislation, as they can be implemented through executive action（for example, trade cooperation, defence logistics and procurement treaties）. Other treaties, including a number of international human rights and industrial relations treaties, have been ratified on the basis of an assessment by the Commonwealth that existing Commonwealth or State/Territory legislation is sufficient to implement the provisions of the convention（in other words, we are already meeting domestically the terms of the convention and no further action is necessary）, or that the particular treaty obligations can be implemented progressively and without radical change to existing laws.

Australia is a WTO member since 1 January 1995 and a member of GATT since 11 October 1967.

Free trade agreements（FTAs）are international treaties that reduce barriers to trade and investment. Australia is party to numerous FTAs—both with individual countries and groups of countries which provide Australia with better access to important markets, an improved competitive position for Australian exports, more prospects for increased two-way investment, and reduced import costs for Australian businesses and consumers alike. More recently concluded FTA's includes agreements with China, Japan, R. O. Korea and the Trans-Pacific Partnership Countries.

Australia has signed Bilateral Investment Treaties（BIT）with Argentina, mainland of China, Czech Republic, Egypt, Hong Kong of China, Hungry, India, Indonesia, Laos, Lithuania, Mexico, Pakistan, Papua New Guinea, Peru, the Philippines, Poland, Romania, Sri Lanka, Turkey, Uruguay, and Vietnam. The BIT with India has now come to an end with the unilateral withdrawal of India. Therefore, all investments made before the termination of the BIT will be protected for another 15 years from the date of the termination of the BIT. However, any investments made after the date of termination of the BIT will have no protection under the BIT. For those investments, parties have to use alternative methods of protecting investments including the dispute resolution mechanism for any investment disputes.