Corrs Global Network

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China

China is Australia’s top two-way trade partner globally. In line with the substantial demand for services in this area, our China Business Group is a cornerstone of our cross-border capability. Corrs lawyers are viewed as thought leaders when it comes to doing business in China and with Chinese entities. The core focus of our work in and with China is in all areas of corporate/M&A, energy & natural resources and finance. In the past 12 months we have also seen an increase in demand for our services in intellectual property as well as trade & regulatory issues in relation to China. We are advising the growing number of leading private equity companies with operations in Hong Kong.

Corrs has a strong team with Mandarin speakers and a number of experts on FIRB and the many issues that impact Chinese investors in Australia as well as key industry sectors for investment. We advise on best commercial practice between China and Australia. Chinese entities comprise a large number of our clients. In line with China’s ever-increasing predominance in the global markets, our work in the region has expanded exponentially in recent years.

Recent mandates relating to China include acting for ZIMC and CMBG in a major equity investment in an Australian uranium explorer, Zeus Resources; advising Stanmore Coal, a coal company focused on coking, thermal and PCI coal in Australia in a placement to Greatgroup (HK); CITIC Dicastal, a leading manufacturer of Aluminium wheels in China and supplier of Aluminium road wheels to GM Holden and Ford Australia, in a major anti-dumping investigation in Australia as well as advising Wanbei Coal Electricity Group, a Chinese provincial state-owned enterprise, in a range of corporate/M&A matters.

Contact our team to learn more about the firms we work with across the region and how we can assist.




Our Thinking

Investing in the Australian mining industry: A focus on coal and iron ore

Australia is a country with vast mineral wealth. This fact, coupled with its stable political, legal and economic environment, a highly skilled workforce, and a welcoming attitude to foreign investment, makes Australia a favoured destination.

Large scale foreign investment into Australia’s mining industry started in the 1960s by the USA and Japan, and continues today with foreign investment in Australian mining projects from China, India, Korea, Japan, the USA, the UK, Brazil, South Africa and many other countries from all around the world.

Australia’s resource wealth extends to a wide variety of minerals, including copper, lead, zinc, gold, silver, nickel, tin, uranium, rare earths, oil and gas to name just a few.

But it is Australia’s bulk mineral commodities – coal and iron ore – that have taken the spotlight in recent years, provoking enormous interest from foreign investors.

This publication has been prepared by Corrs Chambers Westgarth, a premium independent Australian law firm, and a key adviser to foreign investors. This publication gives an overview of the Australian coal and iron ore industries and the key legal issues involved in investing in or developing a mining project in Australia.


Click 'Download' to read our full publication and find out how we can help you develop your business in Australia.

China’s One Belt One Road - A new opportunity for Australian expertise

Australia’s strengths in delivering large projects are clearly aligned with China’s new infrastructure vision.

"Without stones there is no arch"

(Marco Polo)

The renowned scholar Joseph Needham in his monumental work Science and Civilisation in China, travelled the silk road to better understand the flow of technology (particularly papermaking, movable-type printing, gunpowder and the compass) from China to Europe and India.

These technologies were instrumental in liberating Europe from the dark ages. What then can the West and China expect from China’s One Belt One Road initiative?

This bold endeavour is much more than a thought bubble. It is an economic reality embracing 60 economies amounting to 60% of the world’s population and 46% of global GDP supported by access to China’s accumulated $5 trillion in foreign reserves and a clear and consistent political will.

Will Australia participate in this bold endeavour or allow the Asian infrastructure boom to pass us by?

In 2013 President Xi Jinping announced the launch of the New 21st Century Maritime Silk Road just one month after announcing the New Silk Road Economic Belt. The two quickly morphed into a consolidated strategy – the One Belt One Road.

One road one belt

Courtesy China’s Silky Indian Ocean Plans

This grand vision, like most successful Chinese policies, has one eye on the past (a strong historic link to the China of the Yuan and Ming dynasties) and one eye on the future (avoiding the so-called Thucydides trap).

A vision based upon a China that is more open to the outside. As President Xi says, “It is impossible for China to develop with its doors closed.” It’s a policy that is non-confrontational, based on mutual respect and that presents a common ground on issues of common interest.

Infrastructure is the focus

After more than 20 years of building roads, railways and airports, China now has a world-class infrastructure industry. Infrastructure employs roughly three percent of China’s working age population.

As China approaches a point where it can no longer deploy resources on domestic infrastructure investment, it is looking to re-orient this infrastructure industry to foreign markets. That is why infrastructure, in all its forms, is a clear priority of One Belt One Road.

This infrastructure focus has been given a powerful impetus through the Chinese government’s establishment of the $40 billion Silk Road Fund, the $100 billion Asia Infrastructure Investment Bank and the $100 billion New Development Bank.

The One Belt One Road policy in its aim to promote connectivity clearly complements China’s going out strategy and supports the export of Chinese infrastructure on a grand scale.

China’s commitment to building infrastructure in countries covered by the One Belt One Road initiative was revealed in data released by Grison’s Peak which shows the majority of the 67 overseas loan commitments made by China’s largest lenders – the China Development Bank and China Exim Bank – were for infrastructure projects in areas along the One Belt One Road.

These loans (just like development assistance programmes led by the West and Japan in the 1980s) have been tied to the involvement of Chinese companies either as suppliers of machinery and raw materials or in constructing and operating projects.

Indeed, on 16 July, China’s state news agency launched an information service which will offer credit information and risk assessments on countries in the One Belt One Road as well as databases, a think tank and consulting services.

The complexity and sheer scale of the second pillar of the One Belt One Road policy – facilities connectivity – cannot be understated. Projects to remove transport bottlenecks, promote port infrastructure construction, gas and oil pipeline construction, road construction, trunk line and network construction will require, in addition to iron ore and coal, project planning expertise and most importantly the right talent.

Opportunity for Australia

The commodities boom presented Australian construction companies with an opportunity to quickly climb the construction curve. The spike in energy and resource mega projects focused the world’s best construction professionals and contractors on Australia resulting in increased local project capability and capacity.

Complex construction projects enabled Australian companies to gain confidence in project delivery and develop world best practices in project planning and financial forecasting, talent and risk management.

With the decline in the commodities cycle, this expertise can now be redeployed in the One Belt One Road. We have already witnessed the desire for Australian construction companies with the acquisition by China Construction and Communication of John Holland.

As President of China Construction and Communication International, Mr Lu Jianzhong said, “From our perspective, ownership of John Holland is the optimal way for CCCC to participate in this dynamic market as part of our aim to be a global transportation infrastructure business. It will be an important strategic addition to CCCC and we see JHG as a strong independent competitor in the Australian market.”

China clearly understands the benefits that the Australian services sector has to offer China under CHAFTA. As we previously discussed China’s commitments to Australian companies under ChAFTA cover a wide range of service sectors including legal, financial, telecommunications, education, medical services, and construction and engineering services.

Acquisition is not the only option for China in securing the skills of Australian construction firms. The One Belt One Road Initiative, together with ChAFTA presents, opportunities for Australian companies to joint venture with Chinese companies in providing construction services.

At its heart the One Belt One Road Initiative is about connectedness both physically through infrastructure and politically through neighbourhood diplomacy (see Connectedness: The key to unlocking Asia?). Securing and maintaining a social licence in the delivery of infrastructure projects throughout the One Belt One Road will be fundamental to its success.

One dividend of the mining boom not frittered away is the positive reputation of Australian companies in the sector for sensitivity to local conditions, fair dealing and good corporate responsibility.

The delivery of large and small scale energy and resource projects, has equipped Australian construction companies with a myriad of sophisticated approaches to working with complex and competing interests which, in turn, have allowed them to effectively manage reputational risk and to secure a social licence to operate.

Chinese companies investing and partnering with Australian construction companies can utilise and leverage their expertise in developing and maintaining a social licence and seek to dispel myths about China’s greater ambitions underlying the One Belt One Road.

While Australia does not fall on the One Belt One Road map, it nonetheless presents Australian construction companies with an opportunity to gain from the spreading of economic development.

Supporting the One Belt One Road initiative, together with our involvement in the G20 Hub and Asia Infrastructure Bank, means Australian construction companies can be participants rather than bystanders in an initiative that is likely to reshape the global economy as the Silk Road did in the 14th century.

The Treasurer is right to have pushed for Australia to join the Asian Infrastructure Investment Bank

There is a clear connection between infrastructure and trade opportunities for Australia.

Despite the absence of the United States and Japan, the Treasurer Joe Hockey is right to push for Australia to be intimately involved in the establishment of the Asian Infrastructure Investment Bank (AIIB).

We will join with some 57 other countries to be involved in building and rebuilding roads, railways, water treatment works, bridges, and harbours throughout our region.

As a founding member of the AIIB we have grasped the opportunity to influence the Bank's design. Indications are that Australia’s role has helped ensure the AIIB’s governance is based on best practice principles - all members will be directly involved in the Bank’s direction and decision making “in an open and transparent manner”.

It is planned that Australia will contribute around A$930 million to the AIIB over five years, making us the sixth largest shareholder. The AIIB will have paid-in capital of US$20 billion ($A25.2 billion) with total authorised capital of US$100 billion (A$126.2 billion).

We know from the Asian Century White Paper that the need for infrastructure investment in Asia's emerging economies is vast. Around US$8 trillion is needed to fund the region’s estimated infrastructure gap in just the current decade. 

The connection between infrastructure and trade is a critical one for Australia. Infrastructure is a key enabler for more efficient trade within our region. Australian companies are competing on a global scale for a slice of the Asian market – we must take every opportunity to help our businesses deliver goods and services faster and at lower costs.

We should not obsess, like some in Washington, about the AIIB reflecting a desire of China to strengthen its global standing or advance its commercial interests more directly. As we have written it is in China’s best interests to allocate its huge stockpile of savings to productive use on projects in the region that will bear fruit for it in the long term. (See Australia's infrastructure deficit and China's investment appetite - The perfect match).

President Xi’s vision for the overland and maritime “one belt one road” programme is clearly a literal and symbolic reference to this idea.

China can no doubt deliver infrastructure projects on a monumental scale – fast trains, dams, railways and roads to name a few. For Australia and our neighbours this could also mean better and more secure trade routes and new opportunities for trade. 

Throughout Asia people are becoming wealthier. Consumption patterns are changing. The proportion of income spent on basics such as everyday food items is declining, while spending on education, high quality foods, services and tourism is rising sharply.

Most developing countries in Asia are also undergoing massive demographic shift. A new generation of business and government leaders is emerging. Educated and tech-savvy they are looking for more efficient, and often cheaper, ways to do business. (See From Facebook friends to tomorrow’s leaders: Understanding the impact of demographic change in Asia).

Australia has much to offer Asia’s new consumers and businesses, and better infrastructure will help us capitalise on the opportunities opening to our north.

A seat at the AIIB table will ensure that Australia is not a bystander to the plethora of possibilities the AIIB presents. It will enable us to directly shape the institutional foundations of the AIIB and build connections which will be of use more broadly. Our presence in the AIIB will provide Australia an opportunity to build on the platforms it has already created, included extracting the synergies and opportunities from the AIIB for the G20 Infrastructure Hub. 

Modernising the foreign investment regime - Conditional approvals and enforceable undertakings

The ability to attach conditions to foreign investment approvals has been highly successful in Australia, but the policy needs changing so that it can be better enforced.

A highly successful aspect of Australia’s foreign investment regime has been the use of conditional approvals. The ability to approve investments with conditions has been instrumental in ensuring investors behave in a way that is consistent with Australia’s national interest.

The regime could however be improved. Now, as Treasury is taking steps to modernise the 40 year old foreign investment rules, the Government should consider amending the conditional approval regime so that it is better able to be enforced and conforms to the equivalent policies used by ASIC and the ACCC.

Under current law the Australian Treasurer has the power to block a foreign investment proposal from proceeding or limiting it if he or she believes it would be contrary to the ‘national interest’.

In practice the Government often allows a foreign investment proposal to proceed subject to conditions. These conditions are often framed as behavioural undertakings designed to preserve the national interest. For example, a common requirement is that the location of the organisation’s management stays in Australia.

The ability to grant approvals with conditions has allowed the Foreign Investment Review Board (FIRB) and the Government considerable flexibility and many proposals are approved with conditions. Since 2006, more than half (56%) have been approved with conditions.

Outcome

2006 / 07

2007 / 08

2008 / 09

2009 / 10

2010 / 11

2011 / 12

2012 / 13

2013 / 14

Total considered

7025

8548

5821

4703

10865

11420

13,322

25,005

Total approved

6157

7841

5352

4401

10293

10703

12731

24102

Approved unconditionally

1520

1656

2266

2672

4606

4900

5535

12307

Approved with conditions

4637

6185

3086

1729

5687

5803

7196

11795

Percentage approved with conditions

75%

79%

58%

39%

55%

54%

57%

49%

 

Source: Applications considered (number of proposals) Foreign Investment Review Board Annual Report 2013-14

STATE-OWNED ENTITIES

State-owned entities have been particularly prominent in approvals that have been granted with conditions. Since 2008, the Government has managed concerns about SOEs investing in Australia by imposing behavioural undertakings to try to ensure SOEs operate like normal corporate players.

These conditions (as we have previously discussed) have been readily accepted and complied with by SOEs are an important part of protecting the national interest.

IT’S TIME TO IMPROVE CONDITIONAL APPROVALS

A significant limitation of the existing conditional approval regime is the lack of options available to the Government in the case of a condition being breached.

As it stands today if an investor breaches a condition, FIRB has to treat it as if the entire acquisition is in breach of the Foreign Acquisitions and Takeovers Act (FATA). There is no nuanced response available. The transaction would infringe the national interest and be liable to be unwound and punished by criminal penalties.

The conditional approval policy will be improved by the proposed new civil penalty and infringement notice regime. But an explicit enforceable undertaking regime might further enhance the Government’s enforcement of FATA and the Policy.

A logical step would be to align FIRB’s conditional approval policy with the equivalent policies used by the Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC).

An enforceable undertaking is an administrative sanction available to various Australian regulators at both the federal and state level. It is used in a number of instances to deal with alleged breaches of the law and a preventative measure to address potential competition concerns in a merger.

The similarity between the models adopted in Australia, particularly ASIC and the ACCC has been recognised in a number of judgments, and there is a significant body of judicial opinion.

As Marina Nehme points out regulators should have available a mix of enforcement strategies and sanctions. This mix allows the regulator to react in a manner proportionate to the committed offence.

The judgments in relation to these provisions are regularly cross-referenced and have built up a considerable body of law. For example, a court in deciding if an undertaking is breached or not, will apply an objective test and will not consider “intent” where intent is not a requirement of the law that has been breached.

As a practical matter it may mean that some of the more vague language of FIRB conditions will need to be improved. Courts will require the terms of an enforceable undertaking be formulated with precision so they are capable of being obeyed.

If the FATA undertaking provisions were drafted in similar terms to the ACCC and ASIC legislation, a breach of an undertaking may cause the court to order the enforcement of the undertaking. However, the court has gone further than that in the past and has made declaratory orders, issued injunctions and made punitive and non-punitive orders.

Furthermore, a breach of an undertaking may result in the aggravation of any applicable penalty. Like ACCC and ASIC the Government would need to adopt templates and guides in relation to the content of these conditions that take into consideration the different decisions made by the courts in relation to the enforcement of ACCC and ASIC undertakings.

There is now an opportunity to improve the conditional approval regime as part of Treasury’s current efforts to modernise the 40 year old FATA. By borrowing from the ACCC and ASIC the Government could better enforce its system of granting investment approvals that are subject to conditions regulating the behaviour of applicants.

Investing in the Australian petroleum industry

The Australian resources sector is moving into a new era, with the future of the industry marked by major emerging opportunities in the petroleum industry.

The energy and resources sector has moved to centre stage with regard to Australia’s economy and competitiveness on an international stage. Australia’s upstream oil and gas industry has entered a period of unprecedented growth and transformation, with almost $200 billion currently being invested in oil and gas projects including seven major LNG projects.

Based solely on projects currently committed or under construction, the industry will bolster Australia’s economy, contributing approximately A$28 billion or 2.5 per cent per year to the GDP and billions of dollars in taxation revenue.

With a stable political, legal and economic environment, a highly skilled workforce and a welcoming attitude to foreign investment, Australia is a favoured destination for foreign investors.

Major developments in the petroleum industry in Australia have taken the spotlight in recent years, provoking great interest from foreign investors. Over the next few years, Australia is set to become one of the world’s largest exporters of LNG.

This publication provides background information in relation to the Australian oil and gas industry and explores key legal considerations for investing in or developing an oil and gas project in Australia.


Click 'Download' to read our full publication and find out how we can help you develop your business in Australia.

Our Experts


Andrew Lumsden.jpg

Andrew Lumsden

Partner & China Focus Group Co-chair Location Sydney Profile
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Dr Geoff Raby

Co-Chair, China Business Group Location Profile
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Liming Huang

Partner Location Melbourne Profile
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Lizzie Knight

Partner & China Focus Group Co-chair Location Sydney Profile
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Stephanie Daveson

Partner & Co-chair of China Focus Group Location Brisbane Profile

Recent News

Corrs strengthens ties with China and India

Corrs Chambers Westgarth has continued to deepen its relationships with two of the world’s largest countries - China and India - through its involvement in three major international business forums held this week.

On Sunday Corrs partner and CEO John W.H. Denton and co-chair of Corrs’ China Business Group Geoff Raby participated in the Australia-China Senior Business Leaders Forum in Canberra, discussing a range of issues aimed at strengthening the bilateral relationship between Australia and China.

On Monday the Business Council of Australia hosted the 4th Australia-China CEO Roundtable Meeting. John attended as part of his role as Chairman of the BCA’s Global Engagement Taskforce and one of the Roundtable’s founding members. He said it was a proud moment to see some of Australia’s top CEOs join their Chinese counterparts in discussing the range opportunities arising from the recent signing of the Free Trade Agreement. The CEOs in attendance included ANZ’s Michael Smith, Fortescue Metals Group’s Andrew Forrest, Telstra’s Catherine Livingstone (BCA President), Bank of China’s Guoli Tian, CITIC Group Corporation’s Zhenming Chang and Baosteel Group Corporation’s Lejiang Xu.

John then joined a number of Australia’s business elite at a Chief Executive’s Round Table with the Prime Minister of India Narendra Modi in Melbourne on Tuesday. Hosted by Victorian Governor Alex Chernov, the event gave the Indian Prime Minister an opportunity to outline how Australian businesses could work more effectively with the Indian government to boost investment and expand trade. Prime Minister Modi also made it clear that he sees Australia as a priority relationship, outlining a reform program that included new highways, ports, freight corridors and rail modernisation (including high-speed rail). CEOs who attended included BHP Billiton’s Andrew Mackenzie, Rio Tinto’s Sam Walsh and Aurizon’s Lance Hockridge.

John noted, “India and China are key areas of focus for the firm. The forum and roundtables gave Corrs a chance to connect with key Indian and Chinese contacts and Australian business representatives.”

Corrs is continuing to develop its growing global network, which is expanding across key regions, including in the UK, US, Asia and the Middle East.

Corrs Partner and CEO John W.H. Denton leads Presidents’ discussion at ABAC

John W.H. Denton chaired an ABAC Dialogue with Leaders event in Beijing which was attended by President Xi from China, President Putin from Russia and President Aquino from the Philippines.

The Presidents joined in the dialogue and exchanged views with John and colleagues from the US, China, Malaysia and Mexico. John sought President Xi’s views about infrastructure development, the free trade area of the Asia Pacific and whether or not he felt that China had the capacity to overcome the risk of falling into a middle-income trap. 

John also attended the 4th APEC Business Advisory Council (ABAC) meeting where he chaired the Finance and Economic Working Group and provided an update of the work completed during the year including the Asia Pacific Financial Forum (APFF) and the Asia Pacific Infrastructure Partnership (APIP).

“It was useful to hear from leaders, policy makers and industry figures on what’s driving their decisions in relation to economic policy and growth stimulus and ensuring Corrs is part of these discussions,” Mr Denton said.

About ABAC

The APEC Business Advisory Council (ABAC) provides business-specific advice to APEC leaders on the implementation of the Osaka Action Agenda (OAA), trade and investment liberalization and facilitation (TILF), economic and technical cooperation (ECOTECH) and other priorities specifically related to the business sector. Membership is composed of up to three senior representatives of the business sector from each member economy. It was established in 1995 and formally recognized by the APEC Ministers in 2005 as one of the five categories of delegates to attend APEC official meetings.