Federal Treasurer Scott Morrison has scuttled a plan by activist US fund manager Elliott International to shift BHP Billiton's primary stock market listing away from Australia, saying it is not only against Australia's interests, but illegal.

Mr Morrison said he would not vary the original conditions set by his predecessor Peter Costello in allowing BHP to merge with the big South African miner, Billiton, in 2001.

Those conditions include that the merged company remained listed on the ASX and that the holding company remained headquartered in Australia.

"It is unthinkable that any Australian Government could allow this original Big Australian to head offshore," Mr Morrison said in a statement.

"The conditions set down by then Treasurer Costello are in Australia's national interest and remain necessary and appropriate.

"There is nothing in what I have seen of the proposals to suggest otherwise.

"Should BHP Billiton implement the Elliott Associates proposal contrary to the conditions imposed in 2001, it may commit a criminal offence and could be subject to civil penalties under the Foreign Acquisitions and Takeovers Act (FATA)."

Opposition Leader Bill Shorten said shifting BHP offshore would be a disaster, as would the sale of its energy assets outlined in the Elliott plan.

"I think we face challenges to our energy security if the petroleum operations are hived off," he said.

"I think that having BHP listed in Australia and head-officed in Australia makes a list of differences to the a lot of economic advantages this country enjoys."

Elliott released plan to list BHP on London Stock Exchange

Last month activist fund manager Elliott, which had a assembled a 4.1 per cent stake in BHP, released a plan to replace the existing dual-listing structure with a single UK domiciled company.

The primary listing would be on the London Stock Exchange, with Chess Depository Instruments quoted in Australia on the Australian Securities Exchange.

Elliott also planned to spin off BHP's substantial oil and gas assets and return the capital to existing shareholders.

The plan was flatly rejected by BHP who had been pursued for months in private, before Elliott made its plan public.

"The Government welcomes foreign investment in Australia, but it is important that such investment be consistent with the national interest," Mr Morrison said.

"This includes compliance with foreign investment conditions imposed on investments."

Mr Morrison bluntly told Elliott there was not much point trying to gain control of BHP or an LSE-listed company buying BHP assets.

"If an acquisition proceeds without my consent, I would be able to order a divestment of the assets acquired and take court action to enforce this order," he said.

"Further, a proposal by an LSE-listed company to acquire the assets of BHP Billiton Limited would be a significant action under the FATA.

"Under the FATA, I am able to order that such an acquisition not occur if it is contrary to the national interest.

"The proponents of the acquisition may also be liable to civil and criminal penalties."