The 13,800ha Lochinver Station, in the Taupo region.
The 13,800ha Lochinver Station, in the Taupo region.
It was a big call for Chinese billionaire Jiang Zhaobai to seek a judicial review of the NZ Government's decision to veto a $88 million bid by one of his companies to buy Lochinver station.
Chinese companies think long and hard before resorting to legal challenges to foreign governments. Particularly when they have a half billion dollar investment footprint in the nation concerned and other investments in the pipeline which may yet require ministerial sign-off.
But Jiang - who personally gave the approval to Shanghai Pengxin's NZ legal adviser Chapman Tripp to go ahead with the review application - wanted more clarity. For him - like the many investors queued up in front of the Overseas Investment Office waiting for their applications to be assessed - time is money.
Dakang New Zealand Farm Group, which is 55 per cent owned by Shanghai Pengxin, earlier cited OIO delays as one of the reasons for its cancellation of a sale and purchase agreement to buy the Northland Pinny farms for $42.7 million.
It wasn't prepared to spend 14 months in front of the OIO - as happened with Lochinver - and get nowhere.
Jiang is not commenting publicly.
But it is inconceivable that the Pinny agreement would have been cancelled if the Chinese firm had retained confidence in how its application would be assessed. Mere delays would not have been enough to cause the cancellation if confidence that the application was likely to be approved had been retained. Pengxin had after all been approved to buy the Crafar farms and take a major stake in Synlait Farms with OIO pre-approval granted in the latter case to go to 100 per cent of the South Canterbury company.
It's also unthinkable that Jiang would not have taken soundings on the Chinese side before launching the judicial review.
The issue was raised by Chinese Vice-Premier Wang Yang in Beijing recently when he asked Economic Development Minister Steven Joyce if the veto signalled a change in policy by New Zealand. Joyce said that wasn't the case. But it was subsequently raised by Chinese Vice Commerce Minister Wang Shouwen who said he hoped it was a "one off". The decision to torpedo the Lochinver bid was made by Government ministers Paula Bennett and Louise Upston.
But it is interesting that within China it is being reported as a NZ Government decision - not one by two Government members exercising delegated authority under the Overseas Investment Act.
We do not believe that the correct counterfactual was adopted when assessing our application.
The Xinhua news agency report on the judicial review bid has now been widely published - unlike the initial rejection.
Pengxin's legal advisers gave the Government a heads-up that judicial review proceedings would be launched.
This probably led Joyce to choose his words carefully when questioned on the Lochinver decision at this week's Infinz conference in case he was later cited in court.
Behind the scenes politicians and officials have indicated that "complexities" created by Pengxin's developing company structures have been a factor in the delay.
Bennett and Upston said there was not sufficient substantial benefit to NZ from Pure 100 Farm's Lochinver application.
But the Pengxin company reckons the wrong test was applied.
Its NZ representative Terry Lee says the real issue is the "counterfactual" test the OIO used when considering the sale of non-urban land of greater than 5ha to foreign buyers.
In a statement, Lee said the OIO assesses applications to buy farms on sensitive land against 21 factors which are laid out in the Overseas Investment Act and the Overseas Investment Regulations. These benefits are assessed relative to what would have occurred if this particular investment was not to occur that is 'the counterfactual'.
"We do not believe that the correct counterfactual was adopted when assessing our application," Lee said. If the court finds that the Overseas Investment Office erred in the application of the counterfactual test it could conceivably throw the way open to the Lochinver sale to proceed.
