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Overseas investments and New Zealand’s strategic interests
Rebecca McAtamney, LINZ’s Head of Regulatory Practice and Delivery, describes the role of the National Security and Public Order regime in overseas investments in Strategically Important Businesses are in New Zealand’s interests.
New Zealand’s defence forces and intelligence agencies play a pivotal role in ensuring our country’s national security.
As a country we need to maintain a credible defence force to protect our people and the natural resources that underpin our economy and play our part in multi-national operations. We need to be able to carry out search and rescue operations on land and far out to sea, as well as respond when disaster strikes - at home or across the region.
We need intelligence to help us identify threats to the safety and security of New Zealanders, both shorter term threats of violence and longer-term efforts to interfere with our society and democracy. We also need to protect our critical infrastructure, important institutions and the intellectual property that will drive our future economic success.
The people who go to work in defence and intelligence help ensure our country’s national security and public order and are committed to making a difference. They can’t and don’t do it alone though. Our agencies rely on businesses across the country that supply them with the equipment, technology and support services they need to perform their role.
These businesses are likely to be an attractive investment proposition to overseas investors. Most investors have good intentions and see a quality investment that aligns with their business. They often also bring benefits to New Zealand such as access to new technology and expertise. Some, however, may have other motivations.
As a country we need to make sure overseas investments are in our national interest, particularly when the investment involves a business that is strategically important.
Protecting New Zealand’s interests and security The Overseas Investment Act is in place to ensure overseas investments are in New Zealand’s interests and sets out rules and approval requirements for investments into sensitive 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 $100million into Strategically Important Businesses, where particular thresholds are met.
This applies to businesses that are critical direct suppliers to the New Zealand Defence Force or intelligence agencies and to producers of military and dual-use technology. The system also applies to major financial institutions, businesses that hold sensitive information about New Zealanders, as well as important infrastructure such as ports, airports, and the electricity system, and the businesses that operate them.
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 Minister of Finance power to, where necessary, call in an investment for closer scrutiny and for the Government to take action to mitigate risks if a foreign investment is assessed as presenting a significant national security risk. There is a high bar for taking action, but there are powers to impose conditions, and even unwind transactions and order the disposal of assets where that is needed to mitigate risk.
Strategically important businesses
Some suppliers are particularly important to our defence forces and intelligence agencies being able to perform their roles and are listed as Critical Direct Suppliers under the Overseas Investment Act. These businesses have access to information, supply equipment and services, and may have access to bases and facilities.
These Critical Direct Suppliers are Strategically Important Businesses under the Overseas Investment Act. Some suppliers are published on the Overseas Investment Office website, but some are deliberately unpublished due to the confidential nature of their involvement. Businesses that are unpublished Critical Direct Suppliers are aware of their status and are responsible for advising any prospective investor.
Businesses that produce, research, or maintain military or dual-use goods and technologies are also strategically important.
So too are businesses that supply services to government agencies important to New Zealand’s security and international relations. This includes any business that holds information on the staff, operations, or information holdings of the Ministry of Foreign Affairs and Trade, Department of the Prime Minister and Cabinet, or an intelligence agency.
Mandatory notifications
It is a legal requirement under the Overseas Investment Act to notify the OIO of any overseas investment in a Critical Direct Supplier to the New Zealand Defence Force, New Zealand Security Intelligence Service or Government Communications Security Bureau.
It is also mandatory to notify the OIO of any overseas investment in a business that produces, researches, develops or maintains military or dual-use goods or technologies.
Notifications are free and must be made before the investment takes place. The OIO will assess the proposed investment, usually within 15 working days, and if there is no significant risk identified will give a ‘Direction Order’ to proceed.
Voluntary Notifications recommended
Notifying the OIO of overseas investments in other types of strategically important business, including businesses that hold data sets about the staff and operations of listed government agencies, is voluntary but recommended. It is free to notify, and initial assessments are usually completed within 15 working days. Again, further assessment is only needed if a significant risk is identified.
A notification can be made before an investment takes place or up to six months afterwards. If a notification is made, and the OIO gives a Direction Order to proceed, the investment will receive ‘safe harbour’ and will not be subject to further overseas investment scrutiny. If no notification is made, the investment can be scrutinised at any point in the future.
Large investments
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.
Get in touch
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. Our team is also 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 via our website: www.linz.govt.nz
Toitū 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.
