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[co-authour: Joshua Jones and Luke Bowers]
Recent legislative reforms have increased the New Zealand government's ability to take national interest considerations into account, but have also looked to exclude lower-risk transactions
In mid-2021, a national security and public order regime was introduced, applying to certain investments in strategically important businesses
Joshua Jones1 and Luke Bowers authored this publication. The Overseas Investment Office (OIO) is the regulator responsible for the administration of the Overseas Investment Act 2005 (OIA), the statute that regulates investments in New Zealand assets by overseas investors. The OIA sets out a consent regime in relation to investments that meet a value threshold or are in respect of certain types of land. In mid-2021, a national security and public order (NSPO) regime was introduced, applying to certain investments in strategically important businesses that don't otherwise require consent. The OIO has delegated authority to determine most consent applications, based on an assessment of whether the investor meets an investor test and (for land acquisitions) the benefit to New Zealand test. For certain land acquisitions, or where a national interest assessment is required—including as part of the NSPO regime—ministerial approval is required. In response to the pandemic, the New Zealand government introduced a separate notification pathway that applied to a broad range of transactions that did not already trigger a consent requirement. That regime subsequently has been discontinued, but still applies to transactions entered into before June 7, 2021.
WHO FILES
An overseas person making an acquisition that requires consent under the OIA's consent regime, or clearance under the NSPO regime, must apply to the OIO for consent or clearance (as applicable) before completion of the acquisition. Any agreement to make the acquisition must be subject to receiving consent or clearance. A consent application includes a filing fee that varies according to the type of transaction and transaction value, and whether a national interest assessment is required. A notification under the NSPO regime does not require any filing fee. TYPES OF DEALS REVIEWED
Consent under the OIA is required for a range of acquisitions by overseas persons, including an acquisition of a more than 25 percent ownership or control interest in a target entity (or an increase in an existing interest to or through 50 percent, 75 percent or 100 percent) where:
The value of the applicable New Zealand assets, or consideration attributable to those assets, exceeds NZD 100 million
The target owns or controls (directly or indirectly) an interest in sensitive land. The definition of sensitive land is very detailed and requires careful checking and analysis from qualified advisers. In particular, land may be "sensitive" if it adjoins certain types of land, or is "associated" with other land already controlled by an overseas person. It also includes all residential land
The target owns or controls (directly or indirectly) an interest in fishing quotas
Consent requirements can be triggered for transactions occurring upstream of the New Zealand assets, as well as for direct acquisitions in New Zealand. Certain types of investors receive differing treatment for their transactions:
Australian investors: A higher monetary threshold applies to acquisitions by certain Australian investors. Currently, that higher threshold is NZD 552 million for Australian non-government investors and NZD 116 million for Australian government investors
Free trade agreement investors: Consistent with New Zealand's free trade agreement (FTA) commitments, a higher monetary threshold of NZD 200 million applies to acquisitions made by certain non-government investors from South Korea, Taiwan, Hong Kong, China, Brunei, Chile and countries for which the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is in force
Residential land: Consistent with New Zealand's treaty obligations, certain Australian and Singaporean investors are exempt from consent requirements for investments in residential land
Foreign government investors: Further scrutiny is applied to investments by foreign government investors, in respect of which a national interest assessment is undertaken as part of the consent process
Under the NSPO regime, certain investments in strategically important businesses (where a consent requirement is not already triggered) can, and in some cases must, be notified to the OIO for clearance by the relevant minister. Notification is mandatory for investments in critical direct suppliers to New Zealand's intelligence or security agencies and businesses involved in military or dual-use technology, but is otherwise optional. Non-notified transactions can be called in for review by the minister before or after completion of the transaction. In response to the pandemic, the New Zealand government introduced a separate notification pathway that applied to a broad range of transactions
SCOPE OF THE REVIEW
Under the consent regime, each overseas investor and the individuals who control that investor are required to meet a bright-line investor test comprising a closed list of character and capability factors. Those factors include:
Convictions resulting in imprisonment
Penalties for tax avoidance or evasion
Unpaid tax of NZD 5 million or more
For investments in land, the overseas investor must also satisfy the "benefit to New Zealand" test or, where the land is residential or forest land, an alternative set of criteria. The benefit test requires the investor to demonstrate the benefits that will be delivered by the transaction (compared to the position if the transaction did not occur) against a list of economic, environmental and other factors. This area of the law is currently in flux, with changes made in recent legislative amendments due to come into force some time before mid-May 2022. In addition, a national interest assessment is applied to transactions involving strategically important businesses or being undertaken by foreign government investors. National interest assessments are supported by a cross-government standing committee that looks across the New Zealand government system to obtain and use a wide range of information. The minister has broad discretion to determine whether to block a transaction on the basis that it is contrary to New Zealand's national interests. Under the NSPO regime, the minister will consider whether there are any national security or public order risks associated with the transaction. If there are such risks, the minister can impose conditions on the transaction, prohibit the transaction (if not yet completed) or require a disposal (if completion has occurred). REVIEW PROCESS TIMELINE
Currently, there are no statutory timeframes that apply to the OIO or ministers' consideration of a consent application under the OIA, making it difficult to specify with certainty how long a consent process will take. For a non-land application, a decision typically takes at least two to three months from the date the application is accepted for processing and payment of the fee is made. Depending on its complexity, a land application can take five to seven months, or even longer. From November 2021, statutory timeframes for consent applications will be phased in. The OIO has not yet published details of the applicable timeframes. Under the NSPO regime, an initial review period of 15 working days applies, after which the OIO will inform the applicant whether the transaction has been cleared or is being subjected to a more detailed assessment. If a more detailed assessment is required, a further 40 working-day review period applies, which can be extended once by the minister for a further 30 working-day period up to a maximum overall period of 85 working days. HOW FOREIGN INVESTORS CAN PROTECT THEMSELVES
In most circumstances, it is difficult to obtain consent under the OIA in advance of agreeing a transaction, as the consent regime operates to screen specific transactions rather than simply acting on the identity of the investor. An investor may apply on a standalone basis to be screened against the investor test, but this does not negate the need to seek consent for a relevant transaction (though in theory it would make that consent application easier and quicker). Where consent under the OIA is required, or the investor is required or wishes to make a notification under the NSPO regime, the transaction should be conditional on receiving the relevant consent or clearance, and must not proceed to completion until such consent or clearance is received. Given the relatively long review timeframes, investors should assess early in a transaction process whether consent or notification under the OIA will be required. In some (but not most) circumstances, a discussion with the OIO ahead of filing can be helpful to gauge the OIO's reaction to aspects of the transaction. TRENDS IN THE REVIEW PROCESS
The New Zealand government had already commenced a reform program in relation to the OIA when the pandemic occurred. As a result of the pandemic, aspects of that reform process—particularly in relation to national interest considerations—were accelerated and an additional temporary screening regime was put in place to guard against potentially harmful or opportunistic foreign investments. In mid-2021, that temporary screening regime was suspended (with the NSPO regime coming into force) around the same time as the reform process was completed. The commencement of a number of the legislative amendments resulting from the reform process was delayed, to allow the OIO time to prepare for those changes. While the recent reforms have resulted in a number of welcome changes to exclude lower-risk transactions from consent requirements, the New Zealand government has now given itself broader powers to intervene in transactions on national interest grounds. As those changes have only recently been implemented, there is not yet a meaningful track record of how the relevant ministers intend to wield those powers. Historically, there have been few formal rejections by the OIO or ministers of consent applications. In part, that results from investors withdrawing applications before a decision was made. 1 Joshua Jones is a Special Counsel with Chapman Tripp (T +64 9 357 9084, [email protected] ) and Luke Bowers is a Senior Associate with Chapman Tripp. White & Case LLP has no affiliation with Chapman Tripp.

Foreign direct investment reviews 2021: New Zealand

Attorney-General David Parker has announced the appointment of nine District Court judges. The appointees will take up their roles in November and December 2021, replacing sitting judges who have reached retirement age. There are five women and four men and a range of ethnic and work backgrounds among the appointees. Those taking up appointment to the District Court are:
Taryn Bayley, barrister of Tauranga, has been appointed as a District Court judge with a jury jurisdiction to be based in Whangarei. Bayley has practised as a barrister sole in Tauranga since 2017, specialising in criminal defence work as well as holding appointment as a youth advocate since 2011 for the Eastern Bay of Plenty and Tauranga. A former Crown prosecutor, she has extensive trial experience and was appointed as counsel assisting the Royal Commission of Inquiry into Abuse in Care. Judge Bayley will be sworn in on December 2. Jacqueline Blake, barrister and solicitor of Gisborne has been appointed as a District Court judge with a Family Court jurisdiction to be based in Hastings. Prior to entering into legal practice, Blake was a researcher for the Te Aitanga a Mahaki Waitangi Tribunal claim and a self-employed consultant with Te Runanga o Turanganui a Kiwa and Turanga Health. In 2000 she began her legal career as a staff solicitor at Burnard Bull and Co in Gisborne. She was a partner from 2003 until 2019 and then became a sole practitioner primarily in family law. She has extensive Family Court experience and has been a lawyer for child since 2003. She also has governance experience serving on Whangara Farms, Tapuwae Whitiwhiti incorporation and Gisborne Holdings Ltd. Her iwi affiliations include Ngati Konohi, Ngati Porou, Te Aitanga a Hauiti, Te Aitanga a Mahaki, and Te Whanau a Kai. Judge Haapu-Blake will be sworn in on December 4. Traicee Eugene McKenzie, barrister and solicitor of Invercargill, has been appointed as a District Court judge with a Family Court jurisdiction to be based in Christchurch. After graduating from Otago University, she joined Watson Savage in Invercargill and then Hewat Galt, specialising in criminal and family litigation. She formed her own firm McKenzie Associates (now McKenzie Law) in 1993, becoming a bespoke family law/youth justice practice. McKenzie is a Lawyer for Child and is on the Ministry of Justice Hague Convention panel. Judge McKenzie will be sworn in on November 15. Kathryn Maxwell, barrister of Auckland, has been appointed as a District Court judge with a jury jurisdiction to be based in Auckland. She started work as junior counsel to barristers Michael Levett and Barry Hart before taking a junior barrister role with Barry Hart from 2000 to 2005. In 2005 she joined the Public Defence Service in Auckland and was a lawyer and senior lawyer in the Manukau and Auckland offices till 2009. Following that, Maxwell worked as a barrister sole and has been in practice for 12 years. She has been based at Sentinel Chambers in Auckland for the past six years. Her experience is primarily in the criminal jurisdiction with an emphasis on jury trails. Judge Maxwell will be sworn in on December 14. Andrew Nicholls, barrister and solicitor of Wellington, has been appointed as a District Court judge with a jury jurisdiction to be based in Wellington. He is now the Wellington managing partner at Chapman Tripp and has been a partner at that firm since 2004. His practice has been in commercial law, principally in competition and regulatory change, the energy sector, and Pacific issues. Nicholls is also involved in community work as chair of the Newtown Festival Trust and is Chapman Tripp’s relationship partner for the Wellington City Mission. Judge Nicholls will be sworn in on December 9. Maria Pecotic, barrister of Auckland, has been appointed as a District Court judge with a jury jurisdiction to be based in Waitakere. She has practised as a barrister sole since being admitted in 1994 and founded Verus Chambers in 2012 having previously been based at Greenlane East Chambers. She has specialised in criminal and youth matters and has significant trial experience. Pecotic is an executive member of the Criminal Bar Association, a member of the Bar Association Criminal Committee, a present member of the NZLS Standards Committee, and the NZLS Youth Justice Committee. Judge Pecotic will be sworn in on December 16. Paul Shearer, barrister and solicitor of New Plymouth, has been appointed as a District Court judge with a Family Court jurisdiction to be based in Christchurch. He joined Govett Quilliam in New Plymouth as a staff solicitor in 1993 and became an associate in 1996 and a partner in 2000. Specialising in family law, Shearer has acted as lawyer for child in a significant number of matters and has more than 25 years’ trial experience in the Family Court and 15 years’ experience as youth advocate in the Youth Court. Judge Shearer will be sworn in on November 30. Terence Singh, barrister and solicitor of Hamilton, has been appointed as a District Court judge with a jury jurisdiction to be based in Waitakere. After graduating from the University of Waikato (LLB) and the University of Queensland (LLM), his legal career began in 1996 in Northland with Palmer Macauley Connell Rishworth and then Webb Ross. Singh became a senior prosecutor with NZ Police in 2004 and after that spent time with Crown Law and Inland Revenue in Wellington. In 2011 he joined the Public Defence Service based in Hamilton and is now the duty lawyer supervisor at the Hamilton District Court. He has also lectured at the University of Waikato in criminal law and the law of evidence and has extensive experience in the criminal jurisdiction. He is the immediate past president of the Waikato Bay of Plenty branch of the New Zealand Law Society. Judge Singh will be sworn in on November 19. Charles Martin Treadwell, barrister and solicitor of Auckland, has been appointed as a District Court judge with a general jurisdiction and will take up the position of chair of the Immigration and Protection Tribunal. He started practice as a staff solicitor with Daniel, Overton and Goulding and then Haigh Lyon in Auckland before becoming a member of the Refugee Status Appeals Authority in 1995. He has since held appointment with a number of immigration tribunals and authorities and has been the deputy chair of the Immigration and Protection Tribunal since its establishment in 2010. He has extensive experience in immigration matters and is the present secretary of the International Association of Refugee and Migration Judges, having been a member and chapter president since 1998. Judge Treadwell will be sworn in on November 18. This is supplied content and not commissioned or paid for by NBR.

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