Local government owns and maintains assets and infrastructure that are strategically important to the whole country. The National Security and Public Order regime is in place to ensure overseas investments in strategically important businesses and infrastructure are in New Zealand’s interest. The Overseas Investment Office (OIO) has a range of helpful information and is available to answer any questions.
Councils own valuable strategic assets
Important facilities like ports and airports, as well as infrastructure like electrical lines networks and, in some cases, fibreoptic cable networks are owned, or majority owned, by local government. This infrastructure is obviously important to local communities and regional economies but is also of strategic importance to the whole country.
This sort of infrastructure, and the businesses that control and operate them, are likely to be an attractive investment proposition to an overseas investor. This could include larger international operators looking to diversify, specialist infrastructure investors, or long-term investors like pension funds.
Overseas investment brings many benefits, such as new capital, international linkages, access to new technology and expertise. However, it also brings potential risks, and as a country we need to make sure overseas investments are in our interest, particularly when the investment involves a business that is strategically important.
Protecting our interests and security
The Overseas Investment Act is in place to ensure New Zealand can protect our interests, and provides rules and approval requirements for overseas investments into land, businesses, business assets and fishing quota. The Act sets out different requirements for different types and amounts of investment.
The National Security and Public Order (NSPO) regime is in place to assess overseas investments of less than $100 million into strategically important businesses, where particular thresholds are met. This includes businesses that are critical direct suppliers to the Defence Force or intelligence agencies, major financial institutions, and producers of military technology.
It also applies to investments in important infrastructure and the businesses that operate it, including ports, airports and electricity distribution networks. The regime’s coverage is described in deliberately general terms and captures any overseas investment into a strategically important business or its assets.
The NSPO regime gives the power to, where necessary, call in an investment for closer scrutiny and for Ministers to take action to mitigate risks if a foreign investment is not in the national interest or presents a national security risk.
There is a high bar for taking action, but there are significant powers to impose conditions, and even order the disposal of assets where that is needed to mitigate risk.
Notifying the OIO of overseas investments in ports, airports and electricity lines companies is voluntary, but recommended. It is free to notify, and initial assessments are usually completed within 15 working days. Further assessment is only needed if a significant risk is identified.
If a notification is made, and the OIO gives a ‘Direction Order’ to proceed, the investment will receive ‘safe harbour’ status and not be subject to further overseas investment scrutiny. If no notification is made, the investment can be scrutinised at any point in the future.
Like local government, strategically important businesses and overseas investments come in many different shapes and sizes, and some investments may be worth more than $100 million.
Overseas investments of more than $100 million are automatically classed as significant business assets and need consent under the Overseas Investment Act. Overseas investments of this size in strategically important businesses or involving a foreign government investor also require a mandatory national interest assessment.
This is a complex area of law and we do recommend seeking expert legal advice.
More information on the NSPO regime and how to make a notification, as well as other aspects of the Overseas Investment Act is available on the OIO website, and our team is available to answer questions about whether a proposed investment falls within the NSPO regime.
We recommend contacting us before making a notification so we can help to clarify the information we need and make the process smoother and faster. You can get in touch with us via our website: www.linz.govt.nz
Toitu Te Whenua Land Information New Zealand’s Overseas Investment Office is responsible for regulating overseas investment into New Zealand. The OIO manages the process for receiving and assessing applications and notifications from overseas investors, supporting the ministers who make decisions on applications, and making some decisions under delegated authority.