New national interest test proposed for New Zealand’s overseas investment rules
The New Zealand Government has recently announced yet more proposed changes to New Zealand’s overseas investment rules to be introduced early next year. The key proposed change is the introduction of a new “national interest” test which will apply to the sale of infrastructure of a certain scale.
The Associate Minister of Finance, David Parker, noted that under the current Overseas Investment Act, the sale of strategic assets such as ports, airports, telecommunications infrastructure, electricity and other critical infrastructure are not assessed through a national interest lens. Mr Parker stated “We are introducing a number of new powers, consistent with global best practice, to protect New Zealanders’ best interests in such important – often monopoly – assets”. Mr Parker said the threshold for considering infrastructure sales would be $500m if the buyer was Australian, $200m from a CPTPP country and $100m from other countries. Although no specific details regarding the elements of the new national interest test have been released, Parker advised that the national interest test is likely to be similar to that of Australia, being “… a broad discretion for the Government to reach into those transactions when it wants to and decline to approve it where we think it’s not in the interest of the country.” In our view, it will be important that there is sufficient certainty so as to not deter foreign investment in New Zealand assets due to a lack of clarity.
Other changes include a “call in” power, with no investment threshold, for the proposed sale of New Zealand’s most strategically important assets. This is likely to include companies developing military technology, other direct suppliers to New Zealand’s defence and security agencies and (potentially) certain key media assets. The Government will be able to stop investments that pose a significant risk to national security or public order. It was noted that these powers are unlikely to be regularly used and would only be used where necessary for protecting New Zealand. A further change would apply to the purchase of water bottling plants on sensitive land. Specifically, a new test which considers the impact on water quality and sustainability of a water botting enterprise where applications are made by overseas buyers to purchase such assets.
There are also changes proposed to the enforcement powers under the Overseas Investment Act. The maximum fine for non-compliance with the Act is currently NZ$300,000. It is proposed that this is increased to NZ$500,000 for individuals and NZ$10m for corporates. This illustrates the current Government’s tough stance on breaches of the Overseas Investment Act.
The Government has advised that a Bill implementing the above changes will be introduced in early 2020. These proposed changes follow the reforms made last year which effectively banned overseas buyers (other than Australian or Singaporean citizens and permanent residents) from buying residential homes in New Zealand.
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