Overseas Investment Through Legal, Policy and Comparative Law Lenses: An Examination of New Zealand’s Approach to Protecting Sensitive Land and the Interests of Future Generations Including Comparisons with Canada and Kuwait
Dr. Myra E. J. B. Williamson
Senior Lecturer of Law and Convenor of the BA in – Law at Te Piringa Faculty of Law – University of Waikato – New Zealand
“The Government’s economic strategy aims to build a productive, sustainable and inclusive economy. Overseas investment contributes to this when it brings with it new jobs and increases productivity, which is the biggest determinant of people’s living standard in the longer term”.
Overseas investment often attracts controversy: there are conflicting opinions on the need for it and way in which it can best be managed. New Zealand has actively encouraged overseas investment since at least 1973 when the Overseas Investment Commission (OIC) was established by the Overseas Investment Act 1973. In the past 47 years, the law pertaining to the management of overseas investment in New Zealand has undergone significant changes, reflecting the changing policies of successive governments.
The current entity is the Overseas Investment Office (OIO), which is a regulatory unit within Land Information New Zealand (a government department). The OIO is responsible for administering New Zealand’s overseas investment laws. The OIO is engaged with “realising the benefits of overseas investment, while protecting New Zealand’s sensitive land and assets”, which is a difficult balancing act. The Act states that it is a privilege for overseas persons to own or control sensitive New Zealand assets.
New Zealand is a great place to “do business” – currently it’s ranked the best in the world. It’s also a great place in which to invest and New Zealand encourages overseas investment so long as there is a “benefit to New Zealand”. That means, any overseas person wishing to buy sensitive land or business assets must demonstrate that their investment will, or is likely to, benefit New Zealand (or any part of it, or a group of New Zealanders). If the land is over five hectares, then the benefits must be substantial and identifiable. Decision-makers take into account 21 economic, environmental and cultural factors when deciding if the overseas investor passes that test. This test is “unique among global investment screening regimes. Its closest comparator is Canada’s ‘net benefit’ test, but that focuses on economic factors”.
This paper will proceed on the assumption that-in accordance with the principles and purposes of comparative law-every legal system has something to learn from every other system; knowing how other legal systems have tackled an issue can inform national lawmaking since virtually all legal systems face the same problems. For international scholars with an interest in overseas investment law, the paper will provide an overview of New Zealand’s unique approach. The paper will discuss what is meant by “benefit to New Zealand”, a crucial test that any potential “overseas person” must satisfy. The paper will also discuss the recent changes to the meaning of “sensitive land” which now includes all residential land, significant business assets and fishing quota. In a nutshell, overseas persons (or associates of overseas persons) now need prior consent from the OIO before they can purchase sensitive land or business assets.
The paper will explain key legislative provisions and some recent court decisions one of which resulted in an order for an overseas person to divest itself of its entire interest in two properties for failure to obtain consent before purchasing, in addition to a substantial civil penalty. Interestingly, getting prior legal advice provides no protection from the OIO’s powers.
The overall purpose of this paper is to explain how one jurisdiction (New Zealand) is managing overseas investment and how it seeks to achieve a balance between the benefits and risks.
Keywords: Overseas investment; Overseas Investment Office; Foreign investment; Overseas person; Sensitive land; New Zealand investment law; comparative law.