Changes to New Zealand’s Foreign Investment Rules The recent announcement of New Zealand’s Overseas Investment Act Review findings has implications for those considering foreign direct investment in New Zealand. The review recommendations provide for some changes to investment requirements, screening procedures and criteria for investment approval in New Zealand. New Zealand’s foreign investment screening regime attempts to balance the need to protect New Zealand’s unique cultural and natural heritage, with the need to maintain and encourage foreign direct investment and minimise the compliance costs around this investment. Please note that New Zealand’s foreign investment screening regime applies only to those overseas investors seeking to purchase sensitive New Zealand assets. Such assets include land adjacent to the seabed or foreshore, land subject to heritage order or historic places trust registration or adjoining parks and reserves, land on the coastal islands of New Zealand, quotas for fishery resources, larger holdings of land (greater than 5 hectares) or local business assets greater than $NZ50 million in value. All other investments may occur without the need for Ministerial approval. The new operation of the overseas investment screening system will change from the existing system in four ways: Coverage – The definition of the strategic assets for which screening is required has been amended to increase the business asset threshold from $NZ50 million to $NZ100 million. Land adjoining some non-sensitive reserves, for example drainage and hospital reserves, will be removed from the purview of the Overseas Investment Act. Purchases involving land with an unimproved value of more than $10 million will no longer require consent where the land is not screened for other reasons. However sensitive properties such as foreshore and seabed land and sites subject to a heritage order will continue to be included within the scope of the regime. Criteria for screening – Currently an overseas purchaser must show economic development benefits for a purchase of land to be approved. Under the new proposals, a broader range of factors may be taken into account when approving foreign purchases of sensitive New Zealand land (i.e. land subject to the investment screening system). These factors include natural heritage (i.e. conservation), historic heritage and walking access provisions, in addition to economic development and the proposed residency of the purchaser. The relevant criteria will depend on the nature of the particular parcel of land. Finally, Ministers will consider whether the New Zealand Government has first been offered any foreshore and seabed land. Monitoring – Investors will be required to periodically confirm their compliance with the conditions of consent, every one or two years, after the consent is given. Monitoring will continue until all conditions of consent have been met. Enforcement – The New Zealand courts currently have the power to fine foreign investors that do not comply with conditions of consent. This will continue. In addition, New Zealand regulators will be given the power to impose administrative penalties if foreign investors fail to report regularly on how they are complying with the terms of their consent. These changes will be implemented through regulatory and statutory reform, and the establishment of a new dedicated regulatory unit within Land Information New Zealand (LINZ). LINZ is a New Zealand government agency. The final legislation is expected to be enacted by 1 July 2005. We will keep the investor community updated as the new investment screening criteria are implemented. Documentation related to the Overseas Investment Act review including the Cabinet Paper and background analysis of the issues involved are available at the following Website: http://www.treasury.govt.nz/release/fir/defaut.asp Key web contact addresses for further information are: http://www.oio.linz.govt.nz/ http://www.linz.govt.nz