Australia: Commencement of reforms to Australia’s foreign investment framework and news from Maddocks
The Treasurer of Australia, The Hon Josh Frydenberg MP, had previously announced major reforms to Australia’s foreign investment framework. A link to our earlier article on the reforms can be found here.
The legislation to implement the reforms was passed by the Commonwealth Parliament on 10 December 2020, with the commencement date of 1 January 2021.
The amendments are largely in line with those described in our earlier article. One concession is that moneylenders do not need Foreign Investment Review Board (FIRB) approval when taking security over ‘national security business’ – approval will only be needed if the moneylender acquired such assets by enforcement of the security.
FIRB monetary thresholds reinstated
The temporary changes to the foreign investment rules announced on 29 March 2020 reduced all FIRB monetary thresholds to $0.
With effect from 1 January 2021, the previous monetary thresholds will be reinstated, subject to indexation. Acquisitions below the relevant thresholds will no longer require FIRB approval after 1 January 2021.
FIRB application fees
The FIRB application fees will be increased with effect from 1 January 2021, with some fee increases being quite significant.
FIRB Guidance Notes
FIRB will be updating their Guidance Notes shortly to reflect the amendments to the legislation.
By Maddocks partners Chong Ming Goh and Ron Smooker
Is the law of the contract and the law of an arbitration agreement the same? Not always
In the absence of an express choice of law to the contrary, an arbitration agreement will, in the usual case, be governed by the system of law that is most closely connected to it.
In Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb  UKSC 38, the Supreme Court of England and Wales held that in the absence of an express choice of law to the contrary, an arbitration agreement will, in the usual case, be governed by the system of law that is most closely connected to it. In most cases, that will be the law of the seat of arbitration, which in an international or other multi-jurisdictional context, will often differ from the law governing the contract.
The decision considered the choice of law to be made by an English court under English common law rules in circumstances where contracting parties do not choose the law to govern either their contract or an arbitration agreement contained in it.
It serves as an important reminder for drafters of contracts that contain arbitration agreements that nominate England as the seat of arbitration, not to assume that the law of the contract will automatically apply to the arbitration agreement.
While the decision in not binding under Australian law, it will provide persuasive authority for similar actions commenced in Australian courts.
The primary issue before the court was which national law governs the validity and scope of an arbitration agreement, when the law that governs the contract differs from the seat of arbitration.
The court, in applying English common law rules, held that where the parties have chosen the law to govern a contract, that law should also apply to the arbitration agreement contained in it, even when that law differs from the law of the seat of arbitration: .
But where the parties have not chosen the law to govern the contract or the arbitration agreement, by default, the law applicable to an arbitration agreement will be the system of law ‘most closely connected’ to it, not the contract:  and . That will usually be the law of the seat of arbitration, which in this case was English law, because:
- the seat is where the arbitration agreement is to be performed: 
- this general position accords with international law, i.e. the New York Convention: 
- it is more likely to uphold the reasonable expectations of the contracting parties who have chosen to specify a place to settle their disputes by arbitration. This is particularly so where the contracting parties are different nationalities and have chosen a ‘neutral forum with which neither party is connected’: 
- having a clear default rule is in the interests of legal certainty: .
The decision highlights the importance of a governing law clause that covers all aspects of the contract, not just the parties’ substantive obligations. And if contracting parties intend for the law of the contract to apply to the arbitration agreement irrespective of the place of the arbitration, that choice should be expressly made under contract.
Maddocks continues to grow with appointment of two partners
Maddocks has appointed Ilan Kraus and Cameron Thomson as partners of the firm.
Ilan will be joining the firm’s Banking & Finance team in Melbourne, together with a team of three lawyers, while Cameron will be joining the Property team in Sydney.
Ilan brings extensive experience in all areas of banking and finance law with a diverse client base, including banks, institutional and private lenders and investors, commercial borrowers, family offices, property developers, and ASX-listed entities.
Ilan brings particular expertise advising on commercial and institutional lending and borrowing arrangements, in particular in relation to property, development, corporate and structured finance.
Cameron is a leading property lawyer with experience across commercial property portfolios, including divestment and acquisition programs, leases, development projects and joint ventures.
Cameron’s clients include a wide range of stakeholders in the real estate and development industry in both the public and private sectors. He also regularly advises inbound investors, particularly from Asia.
Ilan and Cameron will begin at Maddocks on 1 February. Their appointments come after Rosalie Byrne joined the Maddocks Commonwealth litigation team in Canberra in November.
These appointments bring the number of partners at Maddocks to 84.
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