In a welcome move, the New Zealand Supreme Court recently dismissed a last ditch attempt by a competing bidder to prevent the sale of the Crafar farms to Chinese investors Shanghai Pengxin. Chapman Tripp acted for Shanghai Pengxin Group on its Overseas Investment Act consent and the associated Court proceedings.
The Supreme Court decision brought to a close a court process that has clarified the technical application of the law for overseas investment in New Zealand, and restored certainty to New Zealand’s overseas investment regime.
Shanghai Pengxin will now be able to complete its purchase and begin to restore the land to full productivity. That work programme will include conferring other public benefits – including public walking access, ecological benefits and heritage benefits.
Earlier court decisions related to whether the Government Ministers had correctly applied the Overseas Investment Act in granting consent to Shanghai Pengxin’s overseas investment application.
The Courts were satisfied that Shanghai Pengxin had adequate experience to undertake the investment and that the investment would create substantial benefits for New Zealand.
However, the High Court held that the Minister had incorrectly applied the Overseas Investment Act when assessing those benefits and required the Ministers to reconsider the application using the correct test (the Court found that the Ministers should have applied a “with or without” test when considering the benefits of overseas investment rather than a “before and after” test - see Chapman Tripp’s earlier commentary for further details). The Ministers reconsidered the application on this basis and again granted their consent.
The key points for potential overseas investors that arise from the cases are:
- Seek expert advice when considering investing in New Zealand. The statutory tests to gain approval to invest can be complicated, but experienced advisers can help manage the process.
- Investors need to have business experience and acumen relevant to the proposed investment; however specific sector experience is not required. It can be sufficient for the investor to have other more general business experience and acumen.
- As noted by the Court, international investors have a right to acquire New Zealand assets if they meet the statutory criteria.
We think the ultimate outcome of this case is pleasing, and in keeping with the spirit of New Zealand’s Free Trade Agreement with China and the upcoming celebrations to mark 40 years of diplomatic relations between New Zealand and China.