The Campaign Against Foreign Control of Aotearoa (CAFCA) congratulates the Government for announcing that it is implementing something that CAFCA has long called for - namely, applying its proposed national interest test to all foreign investment applicants, not just those in certain specified sectors, and not just those over the existing $100 million threshold (the current level above which official approval is required). This Overseas Investment (Urgent Measures) Amendment Act came into effect in June 2020.

It is dealing with a real situation, not a merely hypothetical one; namely foreign buyers snapping up bargain NZ buys courtesy of a Covid-caused value crash. Case in point - the May 2020 Overseas Investment Office (OIO) Decisions included approval for Australian private equity fund Centuria buying Augusta Capital. "The Investment will provide benefit to New Zealand as the Applicant will use its investment experience and stronger financial position to provide financial stability and accelerate the growth of Augusta as it recovers from the economic impacts of Covid-19". Linda Hill, who writes up the OIO Decisions for Watchdog, translates that into plain English: "And Centuria actually says it is snapping up a Covid bargain, and considers that a benefit to NZ" (e-mail to CAFCA, 3/7/20).

But the Government made clear that this Act will only be a temporary measure to ensure that there will not be a fire sale of NZ companies and assets by transnational corporations (TNCs) taking advantage of the economic carnage wrought by the coronavirus pandemic. This is a mistake and the national interest test should be permanently (not temporarily) applied to all foreign investment applicants.

Run Ruler Over Those Already Here

And there is a glaring loophole - it will only apply to new applications from foreign applicants, not to the transnational corporations already deeply embedded into, and dominating, the New Zealand economy. To use a good old phrase, they are grandfathered. Why? How come they don't get subjected to a national interest test? The most glaring example is the Bluff aluminium smelter. Rio Tinto, the transnational corporation which is its majority owner, has announced that it will be closed in 2021.

But until that time it will carry on doing what it has been doing for nearly half a century. The good news is that the Government has finally decided that continuing to submit to Rio Tinto's blackmail and prop up the smelter with even more corporate welfare using taxpayers' money (for current evidence against Rio Tinto, see the articles "Good Riddance To NZ's Biggest Bludger" and "Sort Out The Dross", elsewhere in this issue). It should be noted that Rio Tinto is dictating the timing of its own departure, instead of being thrown out on its arse by the Government. Indeed, it should never have been allowed here in the first place.

How can it be in the national interest to have a cabal of four Australian banks totally dominate banking in NZ, extracting and exporting record profits every year, whilst behaving in a way more suited to the Wild West? Case in point - ANZ, headed by Sir John Key. The Government has resisted all appeals, from right across society, to follow its Australian counterpart and hold an inquiry into the banks (see my article "Banksters Still Living It Up In Wild West", in Watchdog 152, December 2019).

How can it be in the national interest to have transnational fishing companies treating their workers like modern slaves in NZ's waters? For a very detailed look at this, see the 2012 Roger Award Judges' Report. The Roger was won that year by a fishing transnational.

What about transnational forestry companies whose sub-contracted workers are among those most at risk of death or injury while at work? How can it be in the national interest to allow the likes of SkyCity to operate here, with its (quite literal) casino capitalism deal of getting more pokies in return for the Auckland convention centre deal and then expecting its staff to carry on working despite large numbers of them falling ill from smoke inhalation from the December 2019 major fire there? These are only a few examples. The list goes on and on (transnational insurance companies, anyone? Ask the people of post-quake Christchurch and, now, post-quake Wellington).

CAFCA recommends that the Government takes the same legal approach to TNCs already in place here as it does to all people who hold a driver's licence and/or own a vehicle. Vehicles have to be regularly inspected and pass a warrant of fitness. Because that is in the national interest and the common good of public safety. There are also legal provisions for drivers to have to re-sit their licences, in certain circumstances. Drivers are also subject to constant scrutiny via the road rules. Because that is in the national interest.

So, let's do the same with the TNCs already here - apply the national interest test to them. Make them re-sit their licences and renew their warrants of fitness. CAFCA predicts that plenty of them would fail the test. The proposed national interest test is a result of the Government's stage 2 review of the Overseas Investment Act. CAFCA was involved in that and our submission can be read on the Submissions page of our Website.

Urgent Measures

The Overseas Investment (Urgent Measures) Amendment Act, which came into effect in June 2020, isn't only about the national interest test. To quote from the Overseas Investment Office (press release, "New Rules Around Overseas Investment Support Economic Recovery", 16/6/20): "There are four broad changes to the Act:

• A new temporary notification scheme requires investors to tell the Overseas Investment Office about investments in more than 25% of a New Zealand business or more than 25% of a New Zealand business’ assets. Increases to existing shareholdings beyond 50% or 75% or to 100% must also be notified. Most investors will know within ten working days if their transaction can proceed. A small number of transactions may be called in for closer inspection against a national interest assessment, and those investors should know within a further 30 working days if their investment can proceed. This temporary scheme will be reviewed every 90 days and only remain as long as necessary to protect national interests through the economic aftermath of Covid-19.
• A separate national interest assessment has also been introduced for some transactions that are already screened under the Act. This assessment is to ensure investment in strategically important assets is in line with New Zealand's national interests.
• The existing rules have been simplified so that some low risk transactions no longer need consent. These changes especially help listed companies and investments that adjoin sensitive land.
• The Office has been given stronger enforcement powers to act against investors who do not follow the law. The focus is to ensure that promises made by investors to produce benefits to New Zealand are realised".

"The changes will give the Office, as the regulator, increased ability to take action against those who break the rules, which includes seeking injunctions through the courts. The maximum fines available have been increased to $500,000 for an individual and $10 million for corporates. The Office also has a range of new tools to manage investors who pose significant national security and public order risk".

National Security

The phrase "national security" caught my attention (it's long been a subject dear to my heart), so I decided to have a look at this Urgent Measures Act. I came across this intriguing section: "Who are critical direct suppliers (1) The Minister may identify a person as a critical direct supplier (CDS) if the Minister is satisfied that: (a) the person is a direct supplier of goods or services to an intelligence or security agency (my emphasis); and (b) the goods or services are integral to the functioning of the agency as an intelligence or security agency; and c) the supply of those goods or services cannot readily be replaced.

(2) The Minister must (a) notify a person that they are a critical direct supplier; and (b) either (i) publish that person's name in a list of critical direct suppliers on an Internet site maintained by or for the regulator; or (ii) if subsection (3) applies, notify the person that they are an unpublished CDS (my emphasis). (3) The Minister may defer or dispense with publication if the Minister is satisfied on reasonable grounds that good reason for withholding the publication would exist under the Official Information Act 1982". The Act is worth a read.

The whole national security theme (which is brand new territory for the Overseas Investment Office) is further spelled out in the Office's June 2020 newsletter (Pānui), with a section on its Monitoring and Intelligence team. "The team has been fully staffed and operational since January 2019. It was established to support a number of key shifts within the Office to improve its regulatory stewardship as part of the Phase One legislative reforms (of the Overseas Investment Act)...".

"Our team is made up of a range of different but complementary skill sets - intelligence analysts, research analysts and operations advisors all support our varied functions. We have established valuable relationships with many other regulatory, enforcement and intelligence agencies across Government (my emphasis). We leverage these relationships by using a variety of lawful information collection and sharing mechanisms to help the Office really understand its operational environment and the broader strategic overseas investment landscape..."".

In recent times there has been evidence of the Office actually taking its oversight and enforcement functions a bit more seriously. In May 2020 it was revealed that it had forced a rich American couple to sell their Bay of Islands property while under threat of prosecution for breaching the current Overseas Investment Act (they sold it for $600,000; they'd bought it in 2013 for $1.73 million).

In June the High Court ordered a foreign-owned company to pay nearly $540,000 (plus $15,000 costs to the Office). The company had bought Auckland land in 2013, without seeking OIO consent, and sold it in 2018. The Court ordered it to forfeit to the Crown the profit gained from the sale. It had been taken to court by the OIO. And the relevant Ministers have been more hands on in declining some applications - for example, in March 2020, Ministers Sage and Clark refused retrospective consent to a Korean spiritual leader who wanted to buy many Northland properties for a retreat.

The Overseas Investment (Urgent Measures) Amendment Act is, by definition, an emergency law to deal with the unforeseen and unprecedented national and global economic situation arising from the coronavirus pandemic. Similar measures are being taken by governments all around the world. But the Government has been undertaking a review of the foreign investment regime since it came to power in 2017 and the resulting Overseas Investment Amendment Bill (still going through the Parliamentary process at the time of writing) is the result of that.

CAFCA has been following that process and indeed, for the first time ever, has been part of it, since 2017. I refer you to my articles: "Putting A Human Face On Capitalism" in Watchdog 146 (December 2017); "Is Control Of Foreign Control Within Our Grasp?" (Watchdog 148, August 2018); "Hell Freezes Over. Treasury Consults CAFCA On Government's Review Of Overseas Investment Act" (Watchdog 149, December 2018); "One Step Forward, Two Steps Back. Overseas Investment Act Reform Aimed At Making Life Easier For TNCs" (Watchdog 151, August 2019); and, most recently, "Must Try Harder. CAFCA's Report Card On Government & Foreign Control" (Watchdog 153, April 2020).

Throughout, the Government has been quite open that the legislative aim is to make things easier for the transnational corporations (TNCs) and other foreign applicants. Don't take my word for it. The introductory wording on the Overseas Investment Amendment Bill says: "The purpose of this Bill is to ensure that risks posed by foreign investment can be managed effectively while better supporting productive overseas investment by reducing the regulatory burden (my emphasis) of the screening process".

Good Character

But there are some aspects of this new Bill of which CAFCA approves and has been advocating for many years. The national interest test is one major example. Another first is to broaden the scope of the "not of good character" test from just covering the individuals who own or control an applicant company to the company itself. If you type the key words "good character" into the CAFCA Website search tool, you'll find pages of references. Here is an extract from one such Watchdog article, which gives a small taste of the scale of the problem:

"For the details on this see "'Goodfellas'. The OIO And The Nature Of Being A 'Good Character'" by Quentin Findlay, in Watchdog 124, August 2010 and his earlier article in Watchdog 123, May 2010, 'Monkeys With Rubber Stamps. The Overseas Investment Office'. Also in that same issue: 'Waste Management: Another 'Good Character' Test From The CAFCA Archives', Murray Horton, and 'Tommy Suharto. One Who Was Never Put To 'Good Character' Test', Murray Horton".

"Nor was it only CAFCA that was getting the run around from the country's foreign investment rubber stampers. Back in 2000 Ministers in the (Clark) Labour government overrode advice from (what was then called) the Overseas Investment Commission (OIC) and refused permission for Brierley's to sell its stake in Sealord to foreign fishing companies. We got the whole file from the OIC and Government, which revealed that the OIC consistently rejected advice and evidence from relevant Ministries that several of the applicants did not meet the good character provisions ('Sealord Sale. OIC Exposed', Bill Rosenberg, Watchdog 95, December 2000)".

"So, there is a long, long history of the OIC and OIO rejecting any complaints (which were always backed up with evidence) about the lack of good character of various applicants. In the early 1990s the OIC approved Tommy Suharto, a notorious criminal, to buy Lilybank Station in the Mackenzie Country. Whenever CAFCA raised this subject their only 'defence' was that they approved him before the good character requirement was included in the Overseas Investment Act".

"The OIO has consistently defended the 'good character' of all the various 'characters' who have applied to it. Kim Dotcom is the most high profile recent example (this was written up, in great detail, by James Ayers in Watchdog 130, August 2012 ('Kim Dotcom And The Good Character Test; Money Versus Power')".

Here is the relevant section of the Overseas Investment Amendment Bill: "The investor test factors are - Character (a) the following, whether in New Zealand or any other jurisdiction: (i) whether A has, at any time, been convicted of an offence for which A has been sentenced to imprisonment for a term of five years or more, or for an indeterminate period capable of running for five years or more: (ii) whether A has, at any time in the preceding ten years, been convicted of an offence for which A has been sentenced to imprisonment for a term of 12 months or more, or for an indeterminate period capable of running for 12 months or more:"

"(iii) if A is not an individual (my emphasis), whether A has, at any time in the preceding ten years, been convicted of an offence for which A has been sentenced to pay a fine: (iv) whether A has been ordered, in the preceding ten years, by a court, any other court in New Zealand, or any equivalent body overseas to pay a civil pecuniary penalty in respect of a contravention of any enactment: (v) whether, at any time in the preceding ten years, a court has imposed a penalty on A for a contravention of this Act or the regulations:"

"(vi) whether any other proceedings have been begun against A, and have not been completed, for any offence, or contravention of an enactment, that carries a penalty corresponding to those listed in subparagraphs (i) to (v): (vii) whether A has entered, in the preceding ten years, into an enforceable undertaking or an equivalent agreement with any regulator in respect of any contravention or alleged contravention of any enactment".

"(b) whether A is an individual of a kind referred to in section 16 of the Immigration Act 2009 (certain persons not eligible for visas or entry permission under that Act): Capability (c) whether A is a person prohibited from being a director or promoter of, or concerned in the management of, an incorporated or unincorporated body under the Companies Act 1993, the Financial Markets Conduct Act 2013, or the Takeovers Act 1993: (d) whether A is a person subject to a management banning order under the Financial Markets Conduct Act 2013 or the Takeovers Act 1993 or is subject to an order under section 108 of the Credit Contracts and Consumer Finance Act 2003:"

"(e) whether A has become liable, in the preceding ten years, to pay a penalty in respect of any of the following: (i) an abusive tax position under section 141D of the Tax Administration Act 1994 or an equivalent enactment in another jurisdiction: (ii) evasion or a similar act under section 141E of the Tax Administration Act 1994 or an equivalent enactment in another jurisdiction:"

"(f) whether A, at the date on which the application is made, has outstanding unpaid tax of $5 million or more due and payable in New Zealand or an equivalent amount due and payable in another jurisdiction (where the amount is converted into New Zealand currency by applying the close of trading spot exchange rate on the date or dates on which the tax became due and payable)".

For decades CAFCA has called for the Overseas Investment Act to have an actual definition of what constitutes "not of good character" and for that section of the Act to be applied to companies as well as individuals. So, these changes are good (if long overdue). And it is good to see tax dodging - either in NZ or overseas - is also added to the list of offences covered by the definition of not of good character.

Rare Opportunity To Reverse Trend

So, there are some positive aspects in the new legislation, which has been in the works since the Government came to power in 2017. And the global economic crisis brought about by the coronavirus pandemic has forced the Government to take emergency measures to protect the NZ economy. Those measures are decades overdue but, hey, better late than never. The battle now is to have them cemented in and added to, rather than have them discarded as temporary once the crisis is deemed to have passed.

Because the fact of the matter is that NZ is still an economy that is overly welcoming to foreign buyers, be they corporations or individuals; is still an economy that is heavily dominated by transnational corporations; and still has a legislative structure that is aimed at serving the foreign buyers, rather than the NZ people. The pandemic crisis presents a rare opportunity to reverse the historic trend towards New Zealanders becoming tenants in our own country. We must not let it slip through our fingers.