Transparency of the Regulatory System

The New Zealand government policies and laws governing competition are transparent, non-discriminatory, and consistent with international norms.  New Zealand ranks high on the World Bank’s Global Indicators of Regulatory Governance, scoring 4.25 out of a possible 5, but is marked down in part for a lack of transparency in some departments’ individual forward regulatory plans, and the development of the government’s annual legislative program (for primary laws), for which the Ministers responsible do not make public.

While regulations are not in a centralized location in a form similar to the United States Federal Register, the New Zealand government requires the major regulatory departments to publish an annual regulatory stewardship strategy.

Draft bills and regulations, including those relating to FTAs and investment law, are generally made available for public comment.  In a few instances there has been criticism of the government using a “truncated” or shortened public consultation process or adding a substantive legislative change after public consultation through the process of adding a Supplementary Order Paper to the Bill.

The Regulatory Quality Team within the New Zealand Treasury is responsible for the strategic coordination of the Government’s regulatory management system.  The Treasury exercises stewardship over the regulatory management system to maintain and enhance the quality of government-initiated regulation.  The Treasury’s responsibilities include the oversight of the performance of the regulatory management system as a whole and making recommendations on changes to government and Parliamentary systems and processes.  These functions complement the Treasury’s role as the government’s primary economic and fiscal advisor.  New Zealand’s seven major regulatory departments are the Department of Internal Affairs, IRD, MBIE, Ministry for the Environment, Ministry of Justice, the Ministry for Primary Industries, and the Ministry of Transport.

In recent years there has been a revision to the Regulatory Impact Assessment (RIA) requirements in order to help New Zealand’s regulatory framework keep up with global standards.  To improve transparency in the regulatory process, RIAs are published on the Treasury’s website at the time the relevant bill is introduced to Parliament or the regulation is published in the newspaper, or at the time of Ministerial release.  An RIA provides a high-level summary of the problem being addressed, the options and their associated costs and benefits, the consultation undertaken, and the proposed arrangements for implementation and review.

MBIE is responsible for the stewardship of 16 regulatory systems covering about 140 statutes.  In 2018 the government introduced three omnibus bills that contain amendments to legislation administered by MBIE, including economic development, employment relations, and housing:  https://www.mbie.govt.nz/cross-government-functions/regulatory-stewardship/regulatory-systems-amendment-bills/.  The government’s objective with this package of legislation is to ensure that they are effective, efficient, and accord with best regulatory practice by providing a process for making continuous improvements to regulatory systems that do not warrant standalone bills.  In November 2019, the Regulatory Systems (Economic Development) Amendment Act 2019 passed and amended about 14 Acts including laws regarding business insolvency, takeovers, trademarks, and limited partnerships.

Most standards are developed through Standards New Zealand, which is a business unit within MBIE, operating on a cost-recovery basis rather than a membership subscription service as previously.  The Standards and Accreditation Act 2015 set out the role and function of the Standards Approval Board which commenced from March 2016.  Most standards in New Zealand are set in coordination with Australia.

The Resource Management Act 1991 (RMA) has drawn criticism from foreign and domestic investors as a barrier to investment in New Zealand.  The RMA regulates access to natural and physical resources such as land and water. Critics contend that the resource management process mandated by the law is unpredictable, protracted, and subject to undue influence from competitors and lobby groups.  In some cases, companies have been found to exploit the RMA’s objections submission process to stifle competition.  Investors have raised concerns that the law is unequally applied between jurisdictions because of the lack of implementing guidelines.  The Resource Management Amendment Act 2013 and the Resource Management (Simplifying and Streamlining) Amendment Act 2009 were passed to help address these concerns.

The Resource Legislation Amendment Act 2017 (RLAA) is considered the most comprehensive set of reforms to the RMA.  It contains almost 40 amendments and makes significant changes to five different Acts including the RMA and the Public Works Act (PWA) 1981.  Its aim is to balance environmental management with the need to increase capacity for housing development and to align resource consent processes in a consistent manner among New Zealand’s 78 local councils, by providing a stronger national direction, a more responsive planning process, and improved consistency with other legislation.  Further amendments to the RMA are expected during 2020 to reduce regulatory barriers in order to reduce the time for significant infrastructure projects to gain approval.

The PWA enables the Crown to acquire land for public works by agreement or compulsory acquisition and prescribes landowner compensation.  New Zealand continues to face a significant demand for large-scale infrastructure works and the PWA is designed to ensure project delivery and enable infrastructure development.  In December 2019, a NZD 12 billion (USD 7.8 billion) upgrade fund was announced, amounting to 4 percent of New Zealand’s GDP.  Further funding was added in the Government’s Budget delivered in May 2020.  Compulsory acquisition of private land is exercised only after an acquiring authority has made all reasonable endeavors to negotiate in good faith the sale and purchase of the owner’s land, without reaching an agreement.  The landowner retains the right to have his or her objection heard by the Environment Court, but only in relation to the taking of the land, not to the amount of compensation payable. The RLAA amendment to the PWA aims to improve the efficiency and fairness of the compensation, land acquisition, and Environment Court objection provisions.

The Land Transfer Act 2018 aims to simplify and modernize the law to make it more accessible and to add certainty around property rights.  It empowers courts with limited discretion to restore a landowner’s registered title in cases of manifest injustice.

The Government of New Zealand is generally transparent about its public finances and debt obligations.  The annual budget for the government and its departments publish assumptions, and implications of explicit and contingent liabilities on estimated government revenue and spending.

International Regulatory Considerations

In recent years, the Government of New Zealand has introduced laws to enhance regulatory coordination with Australia as part of their Single Economic Market agenda.  In February 2017, the Patents (Trans-Tasman Patent Attorneys and Other Matters) Amendment Act took effect creating a single body to regulate patent attorneys in both countries.  Other areas of regulatory coordination include insolvency law, financial reporting, food safety, competition policy, consumer policy and the 2013 Trans-Tasman Court Proceedings and Regulatory Enforcement Treaty, which allows the enforcement of civil judgements between both countries.

The Privacy Bill which, if enacted, would repeal the existing Privacy Act 1993, aims to bring New Zealand privacy law into line with international best practice, including the 2013 OECD Privacy Guidelines and the European General Data Protection Regulation (GDPR).

In 2016 the Financial Markets Authority issued the Disclosure Using Overseas Generally Accepted Accounting Principles (GAAP) Exemption and the Overseas Registered Banks and Licensed Insurers Exemption Notice.  They ease compliance costs on overseas entities by allowing them under certain circumstances to use United States statutory accounting principles (overseas GAAP) rather than New Zealand GAAP, and the opportunity to use an overseas approved auditor rather than a New Zealand qualified auditor.

In August 2019, the government passed the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Act to better align New Zealand’s financial markets law with new international regulations, to help strengthen the resilience of global financial markets.  The Act amended several pieces of legislation relating to financial market regulation to help financial institutions maintain access to offshore funding markets and help ensure institutions – that rely on derivatives to hedge against currency and other risks – can invest and raise funds efficiently.

New Zealand is a Party to the WTO Agreement on Technical Barriers to Trade (TBT).  Standards New Zealand is responsible for operating the TBT Enquiry Point on behalf of MFAT.  From 2016, Standards New Zealand became a business unit within MBIE administered under the Standards and Accreditation Act 2015.  Standards New Zealand establishes techniques and processes built from requirements under the Act and from the International Organization for Standardization.

The Standards New Zealand TBT Enquiry Point operates as a service for producers and exporters to search for proposed TBT Notifications and associated documents such as draft or actual regulations or standards.  They also provide contact details for the Trade Negotiations Division of MFAT to respond to businesses concerned about proposed measures.  See https://www.standards.govt.nz/international-engagement/technical-barriers-to-trade/

The government has a dedicated website to provide a centralized point of contact for businesses to access information and support on non-tariff trade barriers (NTB).  New Zealand exporters can report issues, seek government advice and assistance with NTBs and other export issues. Exporters can confidentially register a trade barrier, and the website serves to track and trace the assignment and resolution across agencies on their behalf.  It also provides the government with an accurate and timely report of NTBs and other trade issues encountered by exporters, and involves the participation of Customs, MFAT, MPI, MBIE, and NZTE.  See: https://tradebarriers.govt.nz/

New Zealand ratified the WTO Trade Facilitation Agreement (TFA) in 2015 and it entered into force in February 2017.  New Zealand was already largely in compliance with the TFA which is expected to benefit New Zealand agricultural exporters and importers of perishable items to enhanced procedures for border clearances.

Legal System and Judicial Independence

New Zealand’s legal system is derived from the English system and comes from a mix of common law and statute law.  The judicial system is independent of the executive branch and is generally transparent and effective in enforcing property and contractual rights.  The highest appeals court is a domestic Supreme Court, which replaced the Privy Council in London and began hearing cases July 1, 2004. New Zealand courts can recognize and enforce a judgment of a foreign court if the foreign court is considered to have exercised proper jurisdiction over the defendant according to private international law rules.  New Zealand has well defined and consistently applied commercial and bankruptcy laws.  Arbitration is a widely used dispute resolution mechanism and is governed by the Arbitration Act of 1996, Arbitration (Foreign Agreements and Awards) Act of 1982, and the Arbitration (International Investment Disputes) Act 1979.

Legislation to modernize and consolidate laws underpinning contracts and commercial transactions came into effect in September 2017.  The Contract and Commercial Law Act 2017 consolidates and repeals 12 acts that date between 1908 and 2002.  The Private International Law (Choice of Law in Tort) Act, passed in December 2017, clarifies which jurisdiction’s law is applicable in actions of tort and abolishes certain common law rules, and establishes the general rule that the applicable law will be the law of the country in which the events constituting the tort in question occur.

Laws and Regulations on Foreign Direct Investment

Overseas investments in New Zealand assets are screened only if they are defined as sensitive according to the definitions within the Overseas Investment Act 2005, as mentioned in the previous section.  The OIO, a dedicated unit located within Land Information New Zealand (LINZ), administers the Act.  The Overseas Investment Regulations 2005 set out the criteria for assessing applications, provide the framework for applicable fees, and criteria to determine if the investment will benefit New Zealand.  Ministerial Directive Letters are issued by the Government to instruct the OIO on their general policy approach, their functions, powers, and duties as regulator.  Letters have been issued in December 2010 and November 2017. Substantive changes, such as inclusion of another asset type within “sensitive land,” requires a legislative amendment to the Act.  New Zealand companies seeking capital injections from overseas investors that require OIO approval must meet certain criteria regarding disclosure to shareholders and fulfil other responsibilities under the Companies Act 1993.

The government ministers for finance, land information, and primary industries (where applicable) are responsible for assessing OIO recommendations and can choose to override OIO recommendations on approved applications.  Ministers’ decisions on OIO applications can be appealed by the applicant in the New Zealand High Court.  Ministers have the power to confer a discretionary exemption from the requirement for a prospective investor to seek OIO consent under certain circumstances.  For more see: http://www.linz.govt.nz/regulatory/overseas-investment

The OIO Regulations set out the fee schedule for lodging new applications which can be costly and current processing times regularly exceed six months.  In recent years, some foreign investors have abandoned their applications, due to the costs and time frames involved in obtaining OIO consent.

The OIO monitors foreign investments after approval.  All consents are granted with reporting conditions, which are generally standard in nature.  Investors must report regularly on their compliance with the terms of the consent.  Offenses include: defeating, evading, or circumventing the OIO Act; failure to comply with notices, requirements, or conditions; and making false or misleading statements or omissions.  If an offense has been committed under the Act, the High Court has the power to impose penalties, including monetary fines, ordering compliance, and ordering the disposal of the investor’s New Zealand holdings.

The LINZ website reports on enforcement actions they have taken against foreign investors, including the number of compliance letters issued, the number of warnings and their circumstances, referrals to professional conduct body in relation to an OIO breach, and disposal of investments.  For more see:  https://www.linz.govt.nz/overseas-investment/enforcement/enforcement-action-taken.

In February 2020 New Zealand reported its first conviction under the Overseas Investment Act.  The offender was charged for obstructing an OIO investigation which was initiated because he had not obtained OIO consent for his property purchase and for later submitting a fraudulent application.

In 2017 the Government announced a reform of the Overseas Investment Act shortly after being elected and has already implemented Phase 1 reforms with strengthened requirements for screening foreign investment in residential houses, building residential housing developments, and farmland acreage.  Screening for investments in forestry were eased slightly to help meet the Government’s One Billion Tree policy.  Phase 2 began in 2019 when the Government consulted on and released details for the introduction of a National Interest test to the screening process to protect New Zealand assets deemed sensitive and “high-risk.”

In December 2017, the government introduced regulatory changes that place greater emphasis on the assessment of significant economic benefits to New Zealand.  For forestry investments, the OIO is required to place importance on investments that result in increased domestic processing of wood and advance government strategies.  For rural land, importance is placed on the generation of economic benefits which were previously seldom applied for lifestyle rural property purchases that previously relied on non-economic benefits to gain OIO approval.

New rules reduced the area threshold for foreign purchases of rural land so that OIO approval is required for rural land of an area over five hectares, rather than the previous metric of farm land “more than ten times the average farm size,” which was about 7,146 hectares for sheep and beef farms, and 1,987 hectares for dairy farms.  Foreign investors can still purchase rural land less than five hectares, but the government said it intends to introduce other measures to discourage “land bankers,” or investors holding onto land for speculative purposes.

The government issued new rules regarding residency for overseas investors intending to reside in New Zealand, that they move to New Zealand within 12 months and become ordinarily resident within 24 months.

In 2018, the Overseas Investment Amendment Act passed in order to help address housing affordability and reduce speculative behavior in the housing market.  The 2005 Act was amended to bring residential land within the category of “sensitive land.”  Residential land is defined as land that has a category of residential or lifestyle within the relevant district valuation roll; and includes a residential flat (apartment) in a building owned by a flat-owning company which could be on residential or non-residential land.

Since October 2018, the Overseas Investment Act generally requires persons who are not ordinarily resident in New Zealand to get OIO consent to purchase residential homes on residential land.  Australian and Singaporean citizens are exempt due to existing bilateral trade agreements.  To avoid breaching the Act, contracts to purchase residential land must be conditional on getting consent under the Act – entering into an unconditional contract will breach the Act.  All purchasers of residential land (including New Zealanders) will need to complete a statement confirming whether the Act applies, and solicitors/conveyancers cannot lodge land transfer documents without that statement.

Overseas persons wishing to purchase one home on residential land will need to fulfill a “Commitment to Reside Test.”  Applicants must hold the appropriate non-temporary visa (those on student visas, work visas, or visitor visas cannot apply), have lived in New Zealand for the immediate preceding 12 months and intend to reside in the property being purchased.  If the applicant stops living in New Zealand they will have to sell the property.  OIO applicants not intending to reside will generally need to show: (1) they will convert the land to another use and demonstrate this would have wider benefits to New Zealand; or (2) they will be adding to New Zealand’s housing supply.  Applicants seeking approval under the latter – the “Increased Housing Test” – must intend to increase the number of dwellings on the property by one or more, and they cannot live in the dwelling/s once built (the “non-occupation condition”).  Applicants must then on-sell the dwellings, unless they are building 20 or more new residential dwellings and they intend to provide a shared equity, rent-to-buy, or rental arrangement (the “On-Sale Condition”).

The Amendment also imposes restrictions on overseas persons buying into new residential property developments.  Where pre-sales of the new residential dwellings are an essential aspect of the development funding, overseas purchasers may be able to rely on the “Increased Housing” Test, although they will be subject to the on-sale and non-occupation conditions.  Otherwise, individual purchasers must apply for OIO consent and meet the “commitment to reside test,” or make their purchase conditional on receiving an “exemption certificate” held by an apartment developer.  According to the OIO Regulations, developers can apply for an exemption certificate allowing them to sell 60 percent of the apartments “off the plan” to overseas buyers without those buyers requiring OIO consent but whom would have to meet the non-occupation condition.

Ministers may exercise discretion to waive the on-sale condition if an overseas person is applying for consent to acquire an ownership interest in an entity that holds residential land in New Zealand, if they are acquiring less than a 50 percent ownership interest, or if they are acquiring an indirect ownership interest.  Exemptions can also apply for long-term accommodation facilities, hotel lease-back arrangements, retirement village developments, and for network utility companies needing to acquire residential land to provide essential services.  In 2019 the OIO issued several warnings and fines to overseas buyers of residential property who had failed to apply for OIO consent.

The government coalition formed after the 2017 elections indicated that forestry would be a priority in boosting regional development.  In March 2018, the government announced forestry cutting rights would be brought into the OIO screening regime, similar to the requirements for investment in leasehold and freehold forestry land.  In addition to residential land, the Overseas Investment Amendment Act 2018 classified “forestry rights” within the asset class of “sensitive land.”

Overseas investments involving the purchase up to 1,000 hectares of forestry rights per year or any forestry right of less than three years duration do not generally require OIO approval.

Overseas investors can apply for consent to buy or lease land that is in forestry, or land to be used for forestry, or to buy forestry rights.  In addition to meeting the “Benefit to New Zealand Test,” applicants wishing to buy or lease land for forestry purposes, convert farmland to forestry land, or purchase forestry rights, must meet either the “Special Forestry Test,” or the “Modified Benefits Test.”

The Special Forestry Test is the most streamlined test, and is used to buy forestry land and continue to operate it with existing arrangements remaining in place, such as public access, protection of habitat for indigenous plants and animals, and historic places, as well as log supply arrangements.  The investor would be required to replant after harvest, unless exempted, and use the land exclusively or nearly exclusively for forestry activities.  The land can be used for accommodation only to support forestry activities.

The Modified Benefits Test is suitable for investors who will use the land only for forestry activities, but who cannot maintain existing arrangements relating to the land, such as public access.  The investor would need to pass the Benefit to New Zealand Test, replant after harvest, and use the land exclusively or nearly exclusively for forestry activities.

By 2019 the OIO issued several warnings and fines to overseas investors purchasing forestry rights for failing to comply with conditions or failing to apply for OIO approval.

Phase 2 Reforms

In April 2019, the government signaled it would consider a “national interest” restriction on foreign investment.  It issued a document for public consultation and, in November 2019, decided on New Zealand’s most “strategically important assets.”  The government aims to bring New Zealand in line with international best practice by applying a National Interest Test to overseas investors wishing to purchase New Zealand high-risk, sensitive or monopoly assets such as ports and airports, telecommunications infrastructure, electricity, and other critical infrastructure.

Current legislation does not provide for the review of National Security or Public Order investments under NZD 100 million (USD 65 million).

A “call in” power would apply to the sale of New Zealand’s most strategically important assets, such as firms developing military technology and direct suppliers to New Zealand defense and security agencies.  This would apply to assets not currently screened under the Overseas Investment Act.  The tests could also be used to control investments in significant media entities if they are likely to damage New Zealand security or democracy.

Phase 2 includes other measures to protect New Zealand’s interests announced in November 2019, such as equipping the OIO with enhanced enforcement powers and increasing the maximum penalties for non-compliance NZD 300,000 (USD 195,000) to NZD 10 million (USD 6.5 million) for corporates.  The legislation will also include a requirement that overseas investors in farmland show substantial benefit to New Zealand, by adding something substantially new or creating additional value to the New Zealand economy.  In recognition of complaints regarding cost and time to gain OIO consent, the government will set specific timeframes to give investors greater certainty and exempt a range of low risk transactions, such as some involving companies that are majority owned and controlled by New Zealanders.

There has been controversy and concern about water extraction investment by overseas investors in New Zealand, particularly water bottling to export, earning overseas companies profits from a high-value New Zealand resource without paying a charge.  Under Phase 2 the Government will require overseas investors in water extraction take into consideration the environmental, economic, and cultural impact of their investment, and its effect on local water quality and the overall sustainability of a water bottling enterprise.

In February 2020, the Treasury released all documents online, including the Cabinet Paper that recommended the Phase 2 reform.

Phase 2 Reforms – Fast-Tracked Legislation

On May 14, 2020, the government fast-tracked those elements of Phase 2 deemed necessary to protect key New Zealand assets from falling into foreign ownership as business values suffered during the COVID-19 pandemic.  It introduced the Overseas Investment Amendment Bill (No 3), which quickly passed its first reading and and then moved to the Select Committee stage with public submissions closing August 31.  The Overseas Investment (Urgent Measures) Amendment Bill also moved quickly to the Select Committee stage with public submissions closing May 17.  The Committee amended the bill so that 45 days after the emergency regime has been in force, the Government will consider the operation of the emergency power and if necessary, options to improve its efficiency and effectiveness.  The bill passed its third reading on May 29, and once it receives Royal Assent it will become law after 14 days, around mid-June.  For more see: https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_97807/overseas-investment-amendment-bill-no-3 and https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_97805/overseas-investment-urgent-measures-amendment-bill

The changes bring forward the introduction of a national interest test to strategically important assets, and the temporary application of that test to any foreign investments that result in more than a 25 percent ownership interest, or that increases an existing interest to or beyond 50 percent, 75 percent or 100 percent in a New Zealand business, in each case regardless of dollar value.

The temporary power will operate as a simple notification requirement and is designed to ensure investment is not unduly delayed while protecting New Zealand businesses during a vulnerable time.  It will be reviewed every 90 days and remain in place as long as the pandemic and its economic aftermath continue to have significant impact. Certain other investments in strategically important assets will also have to be notified to protect New Zealand’s national security.  Once the temporary measures end, a national interest test will remain for business transactions at a minimum threshold of NZD100 million (USD 65 million) (or higher for certain countries with which New Zealand has negotiated trade agreements), as well as investments in sensitive land and fishing quota.

The Bill and supporting regulations will help meet New Zealand businesses’ increased demand for capital and will also ensure that many low-risk transactions are no longer screened. This includes purchases by “fundamentally New Zealand companies” and small changes in existing shareholdings.  In addition, the Government will use regulations to extend existing exemptions and remove screening from two further classes of low risk lending and portfolio management transactions.

Non-OIO Legislation Governing Foreign Investment

Outside of the OIO framework, the previous government passed the Taxation (Bright-line Test for Residential Land) Bill to apply to domestic and foreign purchasers of residential land in part to counter criticism that New Zealand’s lack of a tax on capital gains was fueling house price inflation.  Under this Act, properties bought after October 1, 2015 will accrue tax on any gain earned if the house is bought and sold within two years, unless it is the owner’s main home.  The bill requires foreign purchasers to have both a New Zealand bank account and an IRD tax number and will not be entitled to the “main home” exception.  The purchaser will also need to submit other taxpayer identification number held in countries where they pay tax on income.  To assist the IRD in ensuring investors – foreign and domestic – meet their tax obligations, legislation was passed in 2016 that empowered LINZ to collect additional information when residential property is bought and sold, and to pass this information to the IRD.

In March 2018, the new government passed legislation to extend the “bright-line test” from two to five years as a measure to further deter property speculation in the New Zealand housing market.

In November 2018, the government passed the Crown Minerals (Petroleum) Amendment Act, to stop new exploration permits being granted offshore and onshore outside of the Taranaki province on the west coast of the North Island.  The policy is part of the government’s efforts to transition away from fossil fuels and achieve their goal to have net zero emissions by 2050.  The annual Oil and Gas Block Offers program has been operational since 2012 to raise New Zealand’s profile among international investors in the energy and mining sector and has been a significant source of government revenue.

There are currently about 20 offshore permits covering 38,000 square miles that will have the same rights and privileges as before the law came into force and will continue operation until 2030.  If those permit holders are successful in their exploration, the companies could extract oil and gas from the areas beyond 2030.

Competition and Anti-Trust Laws

The Commerce Act 1986 prohibits contracts, arrangements, or understandings that have the purpose, or effect, of substantially lessening competition in a market, unless authorized by the Commerce Commission, an independent Crown entity.  Before granting such authorization, the Commerce Commission must be satisfied that the public benefit would outweigh the reduction of competition.  The Commerce Commission has legislative power to deny an application for a merger or takeover if it would result in the new company gaining a dominant position in the New Zealand market.

In addition, the Commerce Commission enforces certain pieces of legislation that, through regulation, aim to provide the benefits of competition in markets with certain natural monopolies, such as the dairy, electricity, gas, airports, and telecommunications industries.  In order to monitor the changing competitive landscapes in these industries, the Commerce Commission conducts independent studies, currently including fiber networks (https://comcom.govt.nz/regulated-industries/telecommunications/regulated-services/fibre-regulation/fibre-services-study), mobile phones (https://comcom.govt.nz/regulated-industries/telecommunications/projects/mobile-market-study), and retail petrol (https://comcom.govt.nz/about-us/our-role/competition-studies/market-study-into-retail-fuel).

The Commerce Amendment Act 2018 empowers the Commerce Commission to undertake market (“competition”) studies where this is in the public interest in order to improve the agency’s enforcement actions without having to go to court.  The Government introduced a market studies power to align the Commerce Commission with competition authorities in similar jurisdictions.  The Act allows settlements to be registered as enforceable undertakings so breaches can be quickly penalized by the courts and saves the Commission from the expense and uncertainty of litigation.  The amendment also strengthens the information disclosure regulations for airports.

The Dairy Industry Restructuring Act of 2001 (DIR) established dairy co-operative Fonterra Co-operative Group Limited (Fonterra).  The DIR is designed to manage Fonterra’s dominant position in the domestic dairy market, until sufficient competition has emerged.  A review by the Commerce Commission in 2016 found competition insufficient, but the findings from a subsequent review in 2018 resulted in the introduction of the DIR Amendment Bill (No 3) which passed its first reading in August 2019, and was advanced to the Select Committee stage for scrutiny on March 20, 2020.

This amendment, if passed, will ease the requirement that Fonterra accept all milk from new suppliers, allowing the cooperative the option to refuse milk if it does not meet environmental standards or if it comes from newly converted dairy farms.  The bill would also limit Fonterra’s discretion in calculating the base milk price.

The Commerce Commission is also charged with monitoring competition in the telecommunications sector.  Under the 1997 WTO Basic Telecommunications Services Agreement, New Zealand has committed to the maintenance of an open, competitive environment in the telecommunications sector.

Following a four-year government review of the Telecommunications Act 2001, the Telecommunications (New Regulatory Framework) Amendment Act 2018 establishes a regulatory framework for fiber fixed line access services; removes unnecessary copper fixed line access service regulation in areas where fiber is available; streamline regulatory processes; and provides more regulatory oversight of retail service quality.  The amendment requires the Commerce Commission to implement the new regulatory regime by January 2022.

Chorus won government contracts to build 70 percent of New Zealand’s new ultra-fast broadband fiber-optic cable network and has received subsidies.  Chorus is listed on the NZX stock exchange and the Australian Stock Exchange but is subject to foreign investment restrictions.  From 2020, Chorus and the local fiber companies are required under their open access deeds to offer an unbundled mass-market fiber service on commercial terms.

The telecommunications service obligations (TSO) regulatory framework established under the Telecommunications Act of 2001 enables certain telecommunications services to be available and affordable.  A TSO is established through an agreement under the Telecommunications Act between the Crown and a TSO provider.  Currently there are two TSOs.  Spark (supported by Chorus) is the TSO Provider for the local residential telephone service, which includes charge-free local calling.  Sprint International is the TSO Provider for the New Zealand relay service for deaf, hearing impaired and speech impaired people.  Under the Telecommunications (New Regulatory Framework) Amendment Act, the TSOs which apply to Chorus and Spark will cease to apply in areas which have fiber.  Consumers in these areas will have access to affordable fiber-based landline and broadband services.

Radio Spectrum Management (RSM) is a business unit within MBIE that is responsible for providing advice to the government on the allocation of radio frequencies to meet the demands of emerging technologies and services.  Spectrum is allocated in a manner that ensures radio spectrum provides the greatest economic and social benefit to New Zealand society.  The allocation of spectrum is a core regulatory issue for the deployment of 5G in New Zealand.  The Commerce Commission completed a two-year study in September 2019 of mobile network operators (MNOs) in New Zealand in order to assess the process for 5G spectrum allocation and whether it will impact the ability of new mobile network operators to enter the market.  It found no case to support regulatory intervention to promote a fourth national MNO to enter the market, but that the spectrum allocation process should not preclude new parties from obtaining spectrum.

In March 2019, the government announced it freed up space on the spectrum for a fourth mobile network operator to compete with the three existing ones.  In order to do so, the three existing operators lost parts of their spectrum, for which sources criticized the government, claiming they supported competition in principle but questioned the ability of the New Zealand market to cope with another operator.  The Government claims it needs to keep some of that spectrum in reserve to retain flexibility and it might be used for new technologies or by the emergency services network.

The Government’s first auction of 5G spectrum planned for 2020 – and ready for use by November 2022 – was cancelled in May due to the COVID-19 pandemic.  The Government directly allocated spectrum to the three MNOs, with these rights expiring in October 2022 after which the scheme will switch to long-term rights that will be gained in a separate auction process.  The government determined the allocations in such a way as to prevent a single operator to prevent monopolistic behavior, but it also to set aside spectrum to deal with potential Treaty of Waitangi issues.

The Commerce Commission has a regulatory role to promote competition within the electricity industry under the Commerce Act 1986 and the Fair Trading Act 1986.  As natural monopolies, the electricity transmission and distribution businesses are subject to specific additional regulations, regarding pricing, sales techniques, and ensuring sufficient competition in the industry.  The Commerce Commission completed a project in March 2020 that set the default price-quality path to determine the price caps that will apply to the 17 electricity distributors in New Zealand from April 1, 2020 to March 31, 2025.  Due to increased expenditure for distributors to accommodate new technology, the Commerce Commission also recommended new recoverable costs to incentivize ongoing innovation in the electricity sector.

The New Zealand motor fuel market became more concentrated after Shell New Zealand sold its transport fuels distribution business in 2010 and Chevron sold its retail brands Caltex and Challenge in 2016 to New Zealand fuel distributor Z-Energy.  Z-Energy holds almost half of the market share in New Zealand.  A two-year study by the Commerce Commission was completed in December 2019 that evaluated whether competition in the retail fuel market is promoting outcomes that benefit New Zealand consumers over the long-term.  They found that the lack of an active wholesale market in New Zealand has weakened price competition in the retail market and that the major fuel companies’ joint infrastructure network and supply relationships gave them an advantage over other fuel importers.  The wholesale supply relationships, including restrictive contract terms between the majors and resellers, limits the ability of resellers to switch supplier.

The Commerce (Cartels and Other Matters) Amendment Act 2017 empowers the Commerce Commission with easier enforcement action against international cartels.  It created a new clearance regime allowing firms to test their proposed collaboration with the Commerce Commission and get greater legal certainty before they enter into the arrangements.  It expanded prohibited conduct to include price fixing, restricting output, and allocating markets, and expands competition oversight to the international liner shipping industry.  It empowers the Commerce Commission to apply to the New Zealand High Court for a declaration to determine if the acquisition of a controlling interest in a New Zealand company by an overseas person will have an effect of “substantially lessening” competition in a market in New Zealand.

The Commerce (Criminalization of Cartels) Amendment Act was passed in April 2019 to align New Zealand law with other jurisdictions – particularly Australia – by criminalizing cartel behavior.  Individuals convicted of engaging in cartel conduct – price fixing, restricting output, or allocating markets – will face fines of up to NZD 500,000 (USD 325,000) and/or up to seven years imprisonment.  For companies, the fines can be up to NZD 10 million (USD 6.5 million), or higher based on turnover.  Business have been given two years to ensure compliance before the criminal sanctions enter into force.  While not a significant issue in New Zealand, the government believes criminalizing cartel behavior provides a certain and stable operating environment for businesses to compete, and aligns New Zealand with overseas jurisdictions that impose criminal sanctions for cartel conduct, enhancing the ability of the Commerce Commission to cooperate with its overseas counterparts in investigations of international cartels.

In January 2019, the Government announced proposed amendments to section 36 of the Commerce Act, which relates to the misuse of market power.  The government is seeking consultation on repealing sections of the Commerce Act that shield some intellectual property arrangements from competition law, in order to prevent dominant firms misusing market power by enforcing their patent rights in a way they would not do if it was in a more competitive market.  It also seeks to strengthen laws and enforcement powers against the misuse of market power by aligning it with Australia and other developed economies, particularly because New Zealand competition law currently does not prohibit dominant firms from engaging in conduct with an anti-competitive effect.  Section 36 of the Act only prohibits conduct with certain anti-competitive purposes.

The Commerce Commission has international cooperation arrangements with Australia since 2013 and Canada since 2016, to allow the sharing of compulsorily acquired information, and provide investigative assistance.  The arrangements help effective enforcement of both competition and consumer law.

In May 2020, the Commerce Commission issued guidance easing restrictions on businesses to collaborate in order to ensure the provision of essential goods and services to New Zealand consumers during the COVID-19 pandemic.

Expropriation and Compensation

Expropriation is generally not an issue in New Zealand, and there are no outstanding cases.  New Zealand ranks second in the World Bank’s 2020 Doing Business report for “registering property” and third for “protecting minority investors.”

The government’s KiwiBuild program aims to build 100,000 affordable homes over ten years, with half being in Auckland.  The government has indicated it will use compulsory acquisition under the PWA if necessary, to achieve planned government housing development.

The lack of precedent for due process in the treatment of residents affected by liquefaction of residential land caused by the Canterbury earthquake in 2011 resulted in prolonged court cases against the Government based largely on the amount of compensation offered to insured home and/or land owners and the lack of any compensation for uninsured owners.  Several large areas of residential land in Christchurch were deemed Residential Red Zones (RRZ) meaning there had to be significant and extensive area wide land damage, the extent of the damage required an area-wide solution, engineering solutions would be uncertain, disruptive, not timely, and not cost-effective.  One offer made by the government to uninsured Christchurch RRZ landowners for 50 percent of the rated value of their property was deemed unlawful in the Court of Appeal in 2013.  A later offer was made by the government to uninsured residents, but only for the value of their land and not their house.

In 2018, the government opted to settle with a group of uninsured home and landowners, but some objected to the compensation because it was based on 2007/08 rating valuations.  There were also reports some insurance companies paid out less to policy holders than the full value of some houses if they found based on the structural characteristics of the house that it was repairable, even though the repairs would be legally prohibited if in the RRZ.

LINZ currently manages Crown-owned land in the RRZ and can temporarily agree short-term leases of this land under the Greater Christchurch Regeneration Act 2016 but does not make offers to buy properties from RRZ residents. From June 2020 ownership and management of the land is progressively transitioning from the Crown back to the Christchurch City Council, according to the terms under an agreement made in September 2019 and to be legislated as an amendment to the 2016 Act.  LINZ must review the interests of each of the 5,500 titles in the RRZ to check if anyone has rights to the land, such as an easement, a covenant, or a mortgage.  For more see: https://www.linz.govt.nz/crown-property/types-crown-property/christchurch-residential-red-zone.

Dispute Settlement

ICSID Convention and New York Convention

New Zealand is a party to both the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Washington Convention), and to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Proceedings taken under the Washington Convention are administered under the Arbitration (International Investment Disputes) Act 1979.  Proceedings taken under the New York Convention are now administered under the Arbitration Act 1996.

Investor-State Dispute Settlement

Investment disputes are rare, and there have been no major disputes in recent years involving U.S. companies.  The mechanism for handling disputes is the judicial system, which is generally open, transparent and effective in enforcing property and contractual rights.

Investment disputes brought against other foreigners by the New Zealand government have been largely due to investors failing to comply with the conditions of their OIO approval, failure to comply with the Overseas Investment Act, or failure to gain OIO approval before making their investment.

Most of New Zealand’s recently enacted FTAs contain Investor-State Dispute Settlement (ISDS) provisions, and to date no claims have been filed against New Zealand.  The current Government has signaled it will seek to remove ISDS from future FTAs, having secured exemptions with several CPTPP signatories in the form of side letters.  ISDS claims challenging New Zealand’s tobacco control measures – under the Smoke-free Environments (Tobacco Standardized Packaging) Amendment Act 2016 – cannot be made against New Zealand under CPTPP.

International Commercial Arbitration and Foreign Courts

Arbitrations taking place in New Zealand (including international arbitrations) are governed by the Arbitration Act 1996.  The Arbitration Act includes rules based on the United Nations Commission on International Trade Law (UNCITRAL) and its 2006 amendments.  Parties to an international arbitration can opt out of some of the rules, but the Arbitration Act provides the default position.

The Arbitration Act also gives effect to the New Zealand government’s obligations under the Protocol on Arbitration Clauses (1923), the Convention on the Execution of Foreign Arbitral Awards (1927), and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958).  Obligations under the Washington Convention are administered under the Arbitration (International Investment Disputes) Act 1979.

The New Zealand Dispute Resolution Centre (NZDRC) is the leading independent, nationwide provider of private commercial, family and relationship dispute resolution services in New Zealand.  It also provides international dispute resolution services through its related entity, the New Zealand International Arbitration Centre (NZIAC). The NZDRC is willing to act as an appointing authority, as is the Arbitrators’ and Mediators’ Association of New Zealand (AMINZ).

Forms of dispute resolution available in New Zealand include formal negotiations, mediation, expert determination, court proceedings, arbitration, or a combination of these methods.  Arbitration methods include ‘ad hoc,’ which allows the parties to select their arbitrator and agree to a set of rules, or institutional arbitration, which is run according to procedures set by the institution.  Institutions recommended by the New Zealand government include the International Chamber of Commerce (ICC), the American Arbitration Association (AAA), and the London Court of International Arbitration (LCIA).

The Arbitration Amendment Act 2016 empowered the Minister of Justice to create an “appointed body” to exercise powers which were previously powers of the High Court.  It also provides for the High Court to exercise the powers if the appointed body does not act, or there is a dispute about the process of the appointed body. The Minister of Justice has appointed the AMINZ the default authority for all arbitrations sited in New Zealand in place of the High Court.  In 2017 AMINZ issued its own Arbitration Rules based on the latest editions of rules published in other Model Law jurisdictions, to be used in both domestic and international arbitrations, and consistent with the 1996 Act.

The Arbitration Amendment Act 2019 was passed to bring New Zealand’s policy of preserving the confidentiality of trust deed clauses in line with foreign arbitration legislation and case law.  The amendment means arbitration clauses in trust deeds are given effect to extend the presumption of confidentiality in arbitration to the presumption of confidentiality in related court proceedings under the Act because often such cases arise from sensitive family disputes.

Bankruptcy Regulations

Bankruptcy is addressed in the Insolvency Act 2006, the Receiverships Act 1993, and the Companies Act 1993.  The Insolvency (Cross-border) Act 2006 implements the Model Law on Cross-Border Insolvency adopted by the United Nations Commission on International Trade Law in 1997.  It also provides the framework for facilitating insolvency proceedings when a person is subject to insolvency administration (whether personal or corporate) in one country, but has assets or debts in another country; or when more than one insolvency administration has commenced in more than one country in relation to a person.  New Zealand bankrupts are subject to conditions on borrowing and international travel, and violations are considered offences and punishable by law.

The registration system operated by the Companies Office within MBIE, is designed to enable New Zealand creditors to sue an overseas company in New Zealand, rather than forcing them to sue in the country’s home jurisdiction.  This avoids attendant costs, delays, possible language problems and uncertainty due to a different legal system.  An overseas company’s assets in New Zealand can be liquidated for the benefit of creditors.  All registered ‘large’ overseas companies are required to file financial statements under the Companies Act of 1993.  See: https://www.companiesoffice.govt.nz/companies/learn-about/overseas-companies/managing-an-overseas-company-in-new-zealand

The Insolvency and Trustee Service (the Official Assignee’s Office) is a business unit of MBIE.  The Official Assignee is appointed under the State Sector Act of 1988 to administer the Insolvency Act of 2006, the insolvency provisions of the Companies Act of 1993 and the Criminal Proceeds (Recovery) Act of 2009.  The Official Assignee administers all bankruptcies, No Asset Procedures, Summary Installment Orders, and some liquidations by collecting and selling assets to repay creditors.  The bankrupt or company directors will be asked for information to help identify and deal with the assets. The money recovered is paid to creditors who have made a claim, in order according to the relevant Acts.  Creditors can log in to the Insolvency and Trustee Service website to track the progress of their claim and how long it is likely to take.

In the World Bank’s Doing Business 2020 Report New Zealand slipped in the rankings for “resolving insolvency” from 31^st last year to 36^th.  Despite a high recovery rate (79.7 cents per dollar compared with 70.2 cents for the average across high-income OECD countries), New Zealand scores lower based on the strength of its insolvency framework.  Specific weaknesses identified in the survey include the management of debtors’ assets, the reorganization proceedings, and the participation of creditors.

The government has recognized the need for more insolvency law reform beyond the 2006 Act which repealed the Insolvency Act 1967.  The Regulatory Systems (Economic Development) Amendment Act which passed in November 2019 included amendments to the Insolvency Act that strengthened some regulations and assigned more powers to the Official Assignee.  After the previous government established an Insolvency Working Group in 2015, MBIE published a proposed set of reforms in November 2019, based on the group’s recommendations from 2017.  The current government plans to introduce an insolvency law reform bill in early 2020. The omnibus COVID-19 Response (Further Management Measures) Legislation Bill passed on May 15 included provisions to provide temporary relief for businesses facing insolvency due to the COVID-19 pandemic.

Investment Incentives

New Zealand has no specific economic incentive regime because of its free trade policy.  The New Zealand government, through its bodies such as Tourism New Zealand and NZTE, assists certain sectors such as tourism and the export of locally manufactured goods.  The government generally does not have a practice of jointly financing foreign direct investment projects.

In the Media and Entertainment sector, the New Zealand Film Commission administers a grant for international film and television productions on behalf of the Ministry for Culture and Heritage and MBIE.  Established in 2014, the New Zealand Screen Production Grant provides rebates for international productions of 20 percent on specified goods and services purchased in New Zealand. An additional five percent is available for productions that meet a significant economic benefit points test for New Zealand.

Callaghan Innovation is a stand-alone Crown Entity established in February 2013.  It connects businesses with research organizations offering services, and the opportunity to apply for government funding and grants that support business innovation and capability building.  Callaghan Innovation requires businesses applying for any of their research and development grants to have at least one director who is resident in New Zealand and to have been incorporated in New Zealand, have a center of management in New Zealand, or have a head office in New Zealand.  For more information see: http://www.business.govt.nz/support-and-advice/grants-incentives.

The government does not have a state policy on issuing guarantees on foreign direct investment projects.  It provides some opportunities and initiatives for overseas investors to apply for joint financing mainly if the projects involve R&D, science and innovation that will ultimately benefit the New Zealand economy.

Foreign Trade Zones/Free Ports/Trade Facilitation

New Zealand does not have any foreign trade zones or duty-free ports.

Performance and Data Localization Requirements

The government of New Zealand does not maintain any measures that are alleged to violate the Trade Related Investment Measures text in the WTO.  There are no government mandated requirements for company performance or local employment, and foreign investors that do not require OIO approval are treated equally with domestic investors.  Overseas investors that require OIO approval must comply with legal obligations governing the OIO and the conditions of its approval including: satisfying the benefit to New Zealand test through local employment, using domestic content in goods, or promising the introduction of a new technology to New Zealand.

Investors requiring OIO approval also must maintain “good character”, and reporting requirements.  Investors are generally required to report annually to the OIO for up to five years following approval, but if benefits are expected to occur after that five-year period, monitoring will reflect the time span within which benefits will occur.  Failure to meet obligations under the investors’ consent can result in fines, court orders, or forced disposal of their investment.  A government-commissioned independent review in 2016 found the good character test to be robust after questions were asked whether it was being used consistently and accurately

In 2019 the New Zealand High Court imposed civil penalties on a director for breaching the good character conditions of his company’s consent when it bought a controlling interest (50.2 percent) in New Zealand’s largest agricultural services company in 2011.  The breach arose because the director was investigated by the United States Securities and Exchange Commission (SEC) and found to have violated United States securities law.  As part of the settlement reached with the OIO, the director’s company agreed to divest its interest in the company below 50 percent (to 46.5 percent).

Businesses wanting to establish in New Zealand and seeking to relocate their employees to New Zealand will need to apply for and satisfy the conditions of the Employees of Relocating Business Resident Visa:  https://www.immigration.govt.nz/new-zealand-visas/apply-for-a-visa/about-visa/relocating-with-an-employer-resident-visa.  These conditions include providing evidence the business is up and running, have the support of NZTE, and provide a letter from the business CEO.  Immigration New Zealand may grant temporary work visas to key employees to get the business established and resident visas once the business is operating.  Applicants must provide evidence the business is up and running, such as a certificate of incorporation, tax records, and documents showing a business site has been purchased or leased.  Immigration New Zealand also considers if the relocation benefits New Zealand, if the business is trading profitably (or has the potential to do so in the next 12 months), and contributing to economic growth by, for example introducing new technology, management or technical skills; enhancing existing technology, management or technical skills; introducing new products or services; enhancing existing products or services; creating new export markets;  expanding existing export markets; creating at least one full-time job for a New Zealander.  Visa holders can bring family, and after meeting conditions of the visa may be eligible to live and work in New Zealand indefinitely.

As part of the KIWI Act U.S. Public Law 115-226, enacted on August 1, 2018, accorded nationals of New Zealand to E-1 and E-2 status for treaty trader/treaty investor purposes if the Government of New Zealand provides similar nonimmigrant status to nationals of the United States. The State Department confirmed that New Zealand offers similar nonimmigrant status to U.S. nationals and E visas may be issued to nationals of New Zealand beginning on June 10, 2019. https://travel.state.gov/content/travel/en/us-visas/visa-information-resources/fees/treaty.html#16

New Zealand supports the ability to transfer data across borders, and to not force businesses to store their data within any particular jurisdiction.  While data localization and cloud computing is not specifically legislated for, all businesses must comply with the Privacy Act 1993 to protect customers’ “personal information.”  Under certain circumstances, however, approval is required from the Commissioner of Inland Revenue to store electronic business and tax records outside of New Zealand, and under Section 23 of the Tax Administration Act 1994.  Alternatively, taxpayers can use an IRD authorized third party to store their information without having to seek individual approval.  It remains the taxpayer’s responsibility to meet their obligations to retain business records for the retention period (usually seven years) required under the Act.

Under CPTPP the New Zealand government has retained the ability to maintain and amend regulations related to data flows with CPTPP countries, but in such a way that does not create barriers to trade.  These rules come with a “public policy safeguard”, which gives CPTPP governments the discretion to control the movement and storage of data for legitimate public policy objectives to ensure governments can respond to the changing technology in areas such as privacy, data protection, and cybersecurity.

As part of CPTPP, New Zealand has committed not to impose ‘localization requirements’ that would force businesses to build data storage centers or use local computing facilities in CPTPP markets in order to provide certainty to businesses considering their investment choices.  Another provision requires CPTPP countries not to impede companies delivering cloud computing and data storage services.

New Zealand is considering e-commerce issues in trade agreements beyond CPTPP, including upgrades of existing FTAs, and in January 2019 joined other WTO members to launch negotiations on E-Commerce.

The Digital Economy Partnership Agreement (DEPA) which is yet to enter into force for Singapore, New Zealand and Chile, includes a series of modules covering measures that affect the digital economy.  Module 4 on Data Issues includes binding provisions on personal data protection and cross-border data flows that build on the CPTPP.  In addition to the CPTPP obligations, DEPA encourages the adoption of data protection trust-marks for businesses to verify conformance with privacy standards.  The agreement is an open plurilateral one that allows other countries to join the agreement as a whole, select specific modules to join, or replicate the modules in other trade agreements.

The Customs and Excise Act 2018 allows customers who are required to keep Customs-related records to apply to Customs New Zealand, to store their business records outside of New Zealand.  Under the repealed 1996 Act it was an offence for businesses to not store physical records in New Zealand or their electronic records with a New Zealand-based cloud storage provider.  Under the Act, a business can apply for permission to keep their Customs-related business records outside New Zealand, including in a cloud storage facility that is not based in New Zealand.  Businesses denied permission must still be required to store business records in New Zealand, including with New Zealand-based cloud providers.

In March 2018, the government introduced the Privacy Bill to repeal and replace the Privacy Act 1993.  The bill which passed its second reading in August 2019, aims to strengthen the protection of confidential and personal information and modernize privacy regulations.  It also aims to incorporate provisions included in the European General Data Protection Regulation (GDPR), however the select committee report on the bill released in March 2019 advised against strict alignment with the GDPR.

In its current form, the Bill would apply to all actions by a New Zealand agency regardless of where that agency is located, and would apply to all personal information collected or held by a New Zealand agency regardless of where that information is collected or held, or where the relevant individual is located.

The bill extends the current law to apply to agencies located outside of New Zealand as long as that agency is “carrying on business in New Zealand.” It would apply to personal information collected in the course of such business, again regardless of where the agency is located and where the information is held.  Additionally, it will apply regardless of whether that agency charges monetary payment or makes a profit from its business in New Zealand. The intent is to ensure that global businesses doing business in New Zealand, irrespective of where the individual or the agency is located, comply with the new Privacy Act.

For most businesses, the most notable change in the new Act will be the introduction of a requirement to report serious privacy breaches. Notifiable privacy breaches will require organizations to notify the Privacy Commissioner and any affected individuals if there is a breach that has caused serious harm or poses a risk of causing someone serious harm. In March 2020, an amendment to the bill was proposed to all the new legislation apply from November 1, 2020.

A provision affecting cloud service providers places the onus of liability for privacy breaches on the customer, as long as the provider is not using or disclosing that customer’s information for its own purposes.  The Search and Surveillance Act 2012 includes powers to search and notification requirements of search power in connection to a “remote access search” defined in the Act as a search of a thing such as an Internet data storage facility that does not have a physical address that a person can enter and search.  Such mandatory demands as mentioned are legal obligations that must be complied with and are made under a search warrant.  The Privacy Act permits disclosure in such a case. The organization can only disclose the information requested and any excess information provided will be in breach of the Privacy Act unless it is able to be provided as part of a voluntary request.

New Zealand does not have any requirements for foreign information technology (IT) providers to turn over source code or provide access to encryption.  There may be obligations on individuals to assist authorities under Section 130 of the Search and Surveillance Act 2012. An agency with search authority in terms of data held in a computer system or other data storage device may require a specified person to provide access information that is reasonable to allow the agency exercising the search power to access that data.  This could include a requirement that they decrypt information which is necessary to access a particular device. The search power cannot be used to require the specified person to give information intending to incriminate them. Failure to assist a person exercising a search power under section 130(1), without reasonable excuse, is a criminal offence punishable with imprisonment for up to three months.

The Customs and Excise Act 2018 sets specific legal thresholds for Customs officers to search passengers’ electronic devices and imposes a fine of NZD 5,000 (USD 3,250) if they refuse to hand over passwords, pins, or encryption keys to access the device.  The officer must have “reasonable cause to suspect,” that the passenger has been or is about to be involved in the commission of relevant offending.

There is not a particular government agency that enforces all privacy law, however the Office of the Privacy Commissioner is empowered through the Privacy Act 1993 and has a wide ability to consider developments or actions that affect personal privacy.  Separately, New Zealand courts have developed a privacy tort allowing individuals to sue another for breach of privacy.

U.S. firms have not identified corruption as an obstacle to investing in New Zealand.  New Zealand is renowned for its efforts to ensure a transparent, competitive, and corruption-free government procurement system.  Stiff penalties against bribery of government officials as well as those accepting bribes are strictly enforced.  The Ministry of Justice provides guidance on its website for businesses to create their own anti-corruption policies, particularly improving understanding of the New Zealand laws on facilitation payments.

New Zealand consistently achieves top ratings in Transparency International’s Perceptions of Corruption Perception Index.  In 2019 Transparency International ranked New Zealand 1^st out of 183 countries and territories, scoring 87 out of 100.  An area of concern noted by Transparency International is New Zealand being one of several top-ranking countries that conduct “moderate and limited enforcement of foreign bribery.”

Transparency International NZ has had concerns with the historical inconsistency in the level of public accessibility and Parliamentary oversight and application of secondary legislation which is law made under powers delegated by Parliament to 150 government agencies, entities, and local government.  New Zealand hast 550 Acts, which delegate power to make secondary legislation.

In December 2019 the government introduced the Secondary Legislation Bill to improve and support the law relating to the making of secondary legislation by applying and adjusting the framework of access to, and Parliamentary oversight of, secondary legislation provided for in the Legislation Act 2019.  It is currently with at the select committee stage: https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_93428/secondary-legislation-bill

New Zealand joined the WTO Government Procurement Agreement (GPA) in 2012, citing benefits for exporters, while noting that there would be little change for foreign companies bidding within New Zealand’s totally deregulated government procurement system.  New Zealand’s accession to the GPA, came into effect in August 2015. New Zealand supports multilateral efforts to increase transparency of government procurement regimes.  New Zealand also engages with Pacific island countries in capacity building projects to bolster transparency and anti-corruption efforts.

New Zealand has regulations to counter conflict-of-interest in awarding contracts and government procurement.  As mentioned in the previous section, MBIE operates a transparent procurement process using the Government Electronic Tenders Service (GETS) platform and their revised Procurement Rules which must be followed by New Zealand government departments, the Police, the Defense Force, and most Crown entities. All other New Zealand government agencies are encouraged to follow the Rules.

New Zealand has signed and ratified the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and the UN Convention against Transnational Organized Crime.  In 2003, New Zealand signed the UN Convention against Corruption and ratified it in 2015.

The legal framework for combating corruption in New Zealand consists of domestic and international legal and administrative methods.  Domestically, New Zealand’s criminal offences related to bribery are contained in the Crimes Act 1961 and the Secret Commissions Act 1910.  For the bribery offences under sections 99 to 106 of the Crimes Act, New Zealand authorities have jurisdiction where any act or omission takes place in New Zealand.  If the acts or omissions alleged relate to Person of Position and occur outside New Zealand, proceedings may be brought against them under the Crimes Act if they are a New Zealand citizen, ordinarily resident in New Zealand, have been found in New Zealand and not been extradited, or are a body corporate incorporated under the law of New Zealand. Penalties include imprisonment up to 14 years and foreign bribery offences can incur fines up to the greater of NZD 5 million (USD 3.3 million) or three times the value of the commercial gain obtained.

The New Zealand government has a strong code of conduct, the Standards of Integrity and Conduct, which applies to all State Services employees and is rigorously enforced.  The Independent Police Conduct Authority considers complaints against New Zealand Police and the Office of the Judicial Conduct Commissioner was established in August 2005 to deal with complaints about the conduct of judges.  New Zealand’s Office of the Controller and Auditor-General and the Office of the Ombudsman take an active role in uncovering and exposing corrupt practices. The Protected Disclosures Act 2000 was enacted to protect public and private sector employees who engage in “whistleblowing.”

The Ministry of Justice is responsible for drafting and administering the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) legislation and regulations.  It also provides guidance online to companies and NGOs in how to combat corruption and bribery. The New Zealand Police Financial Intelligence Unit collates information required under AML/CFT legislation.

The Anti-Money Laundering and Countering Financing of Terrorism Amendment Act 2017 extends the 2009 Act to cover lawyers, conveyancers, accountants, real estate agents, and sports and racing betting. Businesses that deal in certain high-value goods, such as motor vehicles, jewelry and art, will also have obligations when they accept or make large cash transactions.

Businesses had two years to comply with the Act and compliance costs are estimated to be USD 554 million and USD 762 million over ten years.  The New Zealand Police Financial Intelligence Unit estimate that NZD 1.35 billion (USD 878 million) of domestic criminal proceeds is generated for laundering in New Zealand each year, driven in part by New Zealand’s reputation as a safe and non-corrupt country.  The Department of Internal Affairs is working on a solution for businesses that are facing difficulty meeting their AML/CFT obligations during COVID-19.

Following the “Panama Papers” incident in April 2016, an independent inquiry found New Zealand’s tax treatment of foreign trusts to be appropriate but recommended changes to the regime’s disclosure requirements, which were subsequently legislated to dispel concerns New Zealand was operating as a “tax haven.”  The Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 changed foreign trust registration and disclosure to deter offshore parties from misusing New Zealand foreign trusts, and to reaffirm New Zealand’s reputation as being free of corruption.

In July 2019, the government passed the Trusts Act and repealed the Trustee Act 1956 and the Perpetuities Act 1964 to make trust law more accessible, clarify and simplify core trust principles and essential obligations for trustees.  It also aims to preserve the flexibility of the common law to allow trust law to continue to evolve through the courts.  It applies to all trusts including family trusts and those for corporate structures.  New Zealand has one of the highest per capita number of trusts in the world due to favorable tax treatment and the absence of estate duty, gift duty, stamp duty, or capital gains tax.  It is estimated that there are between 300,000 and 500,000 trusts in New Zealand.

After a standard review of the 2017 general election and 2016 local body elections, the Justice Select Committee conducted an inquiry in 2019 of the issue of foreign interference through politicized social media campaigns and from foreign donations to political candidates standing in New Zealand elections.  New Zealand intelligence agencies acknowledged political donations as a legally sanctioned form of participation in New Zealand politics, but raised concerns when aspects of a donation is obscured or is channeled in a way that prevents scrutiny of the origin of the donation, when the goal is to covertly build and project influence.

In December 2019 the government passed the Electoral Amendment Act under urgency to ban donations from overseas persons to political parties and candidates over NZD 50 (USD 32.50) down from the previous NZD 1,500 (USD 975) maximum, to reduce the risk of foreign money influencing the election process.  It also introduces a requirement for party secretaries “to take all reasonable steps to satisfy themselves that a donation over NZD 50 is not from an overseas person.”

The Act requires party secretaries to reside in New Zealand, and extending the existing offense of promoting anonymous advertisements relating to an election “so that it applies to all advertising mediums, including online advertising, in order to deter misleading anonymous online advertisements.”

Resources to Report Corruption

The Serious Fraud Office and the New Zealand Police investigate bribery and corruption matters.  Agencies such as the Office of the Controller and Auditor-General and the Office of the Ombudsmen act as watchdogs for public sector corruption.  These agencies independently report on and investigate state sector activities.

Serious Fraud Office
P.O.  Box 7124 – Wellesley Street
Auckland, 1141
New Zealand
www.sfo.govt.nz

Transparency International New Zealand is the recognized New Zealand representative of Transparency International, the global civil society organization against corruption.

Transparency International New Zealand
P.O.  Box 5248 – Lambton Quay
Wellington, 6145
New Zealand
www.transparency.org.nz