The High Court’s decision to send the decision on the Crafar farms’ sale back to the Overseas Investment Office raises the question of how could a foreign buy be better than a local one.
Shanghai Pengxin was committed to spending $14m or more if necessary to bring the farms up to scratch economically and environmentally.
It also agreed to set up an on-farm training facility for dairy farm workers and provide a couple of scholarships for trainees.
A New Zealand buyer could do all this and more but could isn’t would.
If Shanghai Pengxin was able to buy the farms it would have to fulfill its commitments local buyers would not.
This means a local buyer could get a property at a lower price than a foreign buyer was prepared to pay then do less with it.
Business New Zealand says the court ruling raises concerns over fairness and neutrality.
Chief Executive Phil O’Reilly says the decision seems to imply that future overseas investors would find it harder to succeed against a local bidder, even if the overseas investor was prepared to offer substantially more.
“If a local bidder could show that they would meet the same Overseas Investment Act criteria as an overseas bidder, then, according to the High Court decision, the overseas bidder would not be able to succeed.
“This is because the criteria in the Overseas Investment Act do not include the bidding price.
“This implies that a lower offer by a local bidder would trump a higher offer by an overseas bidder, where both bids met the OIA criteria.
“Great legal uncertainty would result from potential overseas investors meeting numerous stringent criteria then finding themselves having to meet local legal challenges.
“This could have a severe impact on the willingness of overseas interests to invest in New Zealand, just at a time when New Zealand needs every ounce of overseas capital to get our economy more productive and successful.
“This implied disadvantage against overseas investors is serious and requires scrutiny and possibly amendment to the Overseas Investment Act to ensure a fairer, more commercially neutral set of criteria,” Mr O’Reilly said?
The ruling calls into question all other decisions made by the OIO.
It will also be concerning anyone contemplating a farm sale in the near future because as Rob Hosking points out it will rule out some potential buyers.
That might please people who think land prices are too high but it will also mean bigger losses for creditors waiting for money from the sale of distressed assets.