Over the weekend, Minister Seymour went further, announcing a review of the underlying legislation to reverse the presumption that investing in New Zealand is a privilege. Rather, the proposed new starting point will be that overseas investment is positive and should be allowed unless it presents a risk to New Zealand’s interests.
At this stage, details of the proposed amendments are limited, although Cabinet has agreed to the following principles:
- Retaining the scope of transactions that the OIO currently assesses.
- Fast-tracking assessments through the consolidation of the regime’s core tests (investor test, benefit test, and national interest test) with the assumption that an investment can proceed unless risk factors are identified.
- Providing the Government with the flexibility to call in and scrutinise investments and impose conditions or block investment where risks to New Zealand’s national interest are found.
While these initiatives are positive, it remains to be seen how much additional benefit the reforms will bring to investors over and above the beneficial changes brought about by the Ministerial Directive. In particular, the principles suggest that investors should not expect to see major changes in the current thresholds for triggering a consent or notification requirement. Rather, the process of obtaining approval will be streamlined (presumably beyond the changes that have already resulted from the implementation of the Ministerial Directive that has seen consent timeframes slashed).
A critical question is how the Government intends to “consolidate” the regime’s core tests, where currently the different tests apply to different types of transactions. For example, under the current regime an investor who is not acquiring sensitive land does not need to prove benefits to New Zealand, while the “national interest test” generally only applies where a transaction involves a foreign government investor or a strategically important business. It will be important to ensure that any proposed consolidation does not add unintended complexity to those consent or notification processes.
However, while we await the details of the reforms, the signs are positive. In parallel with the announcement, each of the Government’s coalition parties have been voicing their support for increases to foreign investment in New Zealand. Deputy Prime Minister Winston Peters of the New Zealand First party, which has historically been more guarded around foreign investment, stated that “the economy is going to be strengthened by foreign investment”. Prime Minister Christopher Luxon has also been in support of increased foreign investment, proposing the introduction of a new investment model to aid overseas entities in their investments.
Overall, while the exact shape of the reforms will not be known until next year, with the legislation set to pass before the end of 2025, the Government continues to signal that overseas investors are welcome in New Zealand. We expect to be actively involved in the reforms and will advocate for sensible legislative changes to alleviate many of the “pain points” currently faced by overseas investors needing consent under the Act.
If you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.