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Overseas Investment Act - Post Election Update

November 29, 2017

Contacts

Partners James Hawes, Andrew Matthews, Robert McLean, Michael Pollard, Greg Allen, Greg Towers
Special Advisors Tony Ryall

International investment Public Policy (inc Election 2017) Public law

An NZVCA update prepared with input from Simpson Grierson.

The recent change of government will see an overhaul of New Zealand’s foreign investment regime.

Legislative reform?

Amongst other developments, the new Labour-led coalition has announced:

  • restrictions on purchases of residential housing by non-citizens and non-residents (excluding Australians); and 
  • the creation of a comprehensive register documenting foreign ownership of New Zealand land. 

Restrictions relating to residential housing are expected to come into effect in the early part of 2018 (in order to fulfil the Government’s “100 day” pledge and to avoid additional complications resulting from the potential ratification of the new “Comprehensive and Progressive Trans-Pacific Partnership”).

Given the coalition commitment between Labour and New Zealand First to “strengthen the Overseas Investment Act”, it is expected that reforms will ultimately address more than residential housing. Market rumour suggests that the Government may be contemplating changes:

  • to add a “national interest” test when assessing applications;
  • to amend the volume and nature of the different criteria against which investments in sensitive land can be tested. The Government regards these criteria as being too numerous and too difficult to apply in a consistent manner; and
  • to set a higher bar in terms of the character and business acumen of persons seeking to make investments in New Zealand.

While most of these changes are likely to require legislative change, it is possible that the Government might look to fast track certain aspects of its reforms using a Ministerial Directive Letter.

Administrative upheaval

Aside from any possible changes to the legislation, the change of Government has, understandably, disrupted the operation of the OIO. Processing times for significant business asset applications have been lengthened and those applications relating to sensitive land which require ministerial approval cannot be signed off until the necessary delegations are in place empowering ministers to do so.

A watching brief

We are in regular contact with the Overseas Investment Office and other relevant departments within Government. We will, of course, seek to update you as and when further information arises.

In the meantime, if you have questions or would like to discuss these matters further please do not hesitate to contact one of our experts.

UPDATE:

Simpson Grierson notes the publication of the new Government’s Ministerial Directive Letter to the OIO 

Importantly, the letter instructs the OIO to take a stricter line on acquisitions of “rural land”, greater than 5 hectares (excluding forests). In the context of these applications, the OIO is to apply particular weight to certain economic factors including the introduction of new jobs and technologies.

In respect of Overseas Investments in forestry assets, the letter reiterates the Government’s desire to encourage foreign investment in the value added processing of raw products and the advancement of its forestry-related strategies. The letter instructs the OIO to apply particular weight to factors including the “increased processing of primary products” when assessing overseas investments in forestry assets. This may well provide an advantage to an overseas person willing to invest in New Zealand forestry assets and prepared to supply logs to New Zealand processors of timber products.

Simpson Grierson will communicate directly with any clients affected by these instructions and will provide further general updates when the implications of these changes becomes clear and as/when further proposals are announced by Government.

Contributors matt.tolan@simpsongrierson.com