Transparency of the Regulatory System
New Zealand laws governing competition are transparent, non-discriminatory, and consistent with international norms. The country ranks high on the World Bank’s Global Indicators of Regulatory Governance, scoring 4.25 out of a possible 5.0, but is marked down for lack of transparency at some government departments responsible for communicating regulatory plans that are in the pipeline. Draft bills and regulations, including those related to FTAs and investment law, are generally made available for public comment through a consultation process. The Treaty of Waitangi – New Zealand’s founding document that commits to protect the indigenous Māori culture and to enable Māori to live in New Zealand as Māori – is foundational to public policy in the country. Governing the Crown’s relationship with Māori, the Treaty’s impact on regulation and investment has resulted in a focus on equitable outcomes for Māori in relevant sectors. For more information on Treaty principles, please visit:
https://www.mbie.govt.nz/business-and-employment/employment-and-skills/employment-strategy/maori-employment-action-plan/te-tiriti-principles/
More information about regulations, including The Overseas Investment Regulatory System and a regulatory timeline can be found here: https://www.treasury.govt.nz/information-and-services/regulation
Most standards are developed through Standards New Zealand, a business unit within MBIE. And most standards in New Zealand are set in coordination with Australia. Regulations are developed by “Order in Council,” or law made by someone other than Parliament, that give effect to the government’s decisions. Orders in Council are the main method the Government uses to put into action the decisions that need legal force, such as new or amended regulations.
MBIE is responsible for the stewardship of 16 regulatory systems covering about 140 statutes. In June 2019, MBIE released a discussion paper on the proposed IP Laws Amendment Bill, an omnibus bill that is intended to make technical amendments to the Patents Act 2013, the Trademarks Act 2002, and the Designs Act 1953 to ensure that they remain workable. 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. More information about these proposed amendments can be found here: https://www.mbie.govt.nz/have-your-say/proposed-intellectual-property-laws-amendment-bill/
Accounting, legal, and regulatory procedures are transparent and widely available online. New Zealand accounting standards are issued by the New Zealand Accounting Standards Board. International Financial Reporting Standards (IFRS) are adopted via New Zealand equivalents, which fully adhere to IFRS. These Standards are developed by the International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB). Foreign companies whose securities are publicly traded in New Zealand are required to apply NZ IFRS, although the Registrar of Companies and the Financial Markets Authority can give exceptions in certain circumstances. For more information, please visit: https://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-jurisdiction/view-jurisdiction/new-zealand/
New Zealand does not have a government-mandated Environmental, Social, and Governance (ESG) sustainability reporting framework or standard. In October 2021, the government approved legislation for a mandatory climate disclosure law that will require financial entities with assets greater than NZD 1 billion (USD 700 million) to report the expected impact of climate change on businesses, such as how they will manage climate risks.
Draft bills and regulations including those relating to FTAs and investment law, are generally made available for public comment, through a public consultation process. In a few instances there has been criticism of New Zealand governments choosing to follow 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.
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.
The Regulatory Quality Team within the New Zealand Treasury is responsible for the strategic coordination of the Government’s regulatory management system. 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 major regulatory departments are the Department of Internal Affairs, IRD, MBIE, Ministry for the Environment, Ministry of Justice, the Ministry for Primary Industries, the Ministry of Transport, and the Financial Markets Authority.
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.
In 2018, the government introduced three omnibus bills that contain amendments to legislation 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. In June 2019, MBIE released a discussion paper on the proposed IP Laws Amendment Bill, an omnibus bill that is intended to make technical amendments to the Patents Act 2013, the Trademarks Act 2002, and the Designs Act 1953 to ensure that they remain workable.
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. In 2020, the Resource Management Act was amended under the RMA Act 2020. The objectives of the amendment were to reduce the complexity of the RMA, increase certainty, restore public participation opportunities, and improve RMA processes. For more information: https://environment.govt.nz/acts-and-regulations/acts/resource-management-amendment-act-2020/#overview-of-the-changes
The Covid pandemic has encouraged New Zealand’s efforts to boost the digitization of government services. In 2022, the Digital Identity Program was introduced, which aims to incorporate the country’s long-term strategy for a digital public service. The Program offers a regulatory framework that sets out rules for the delivery of digital identity services. It modernizes the digital identity system by innovating how people access and share their information. And under the concept of mutual recognition, it aligns with other likeminded countries such as Australia and Canada in its provision of digital identity services. The Program also touches on free trade agreements by considering a digital trust framework that promotes privacy and security, and allows for easier electronic transacting, thereby reducing barriers in digital trade. For more information, please visit: https://www.digital.govt.nz/digital-government/programmes-and-projects/digital-identity-programme/about-the-digital-identity-programme/
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.
On December 1, 2020, the Privacy Act 2020 came into force, replacing the Privacy Act 1993. The Privacy Act 2020 provides the rules in New Zealand for protecting personal information and puts responsibilities on agencies and organizations about how they must go about fulfilling this statutory requirement. The Act has 13 Information Privacy Principles and requires agencies to report to the Privacy Commissioner if they have a “notifiable privacy breach.”
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.
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 by the Overseas Investment Office (OIO). The OIO, a dedicated unit located within Land Information New Zealand (LINZ), administers the Overseas Investment Act, which sets out the criteria for assessing applications for foreign investment. The government ministers for finance, land information, and primary industries 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 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.
In 2017 the Government announced a reform of the Overseas Investment Act shortly after being elected and has already implemented Phase One 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 Two 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 2020, in response to the economic impact of COVID-19, the Government agreed to further changes to the OIA. Measures were introduced to reduce the regulatory burden of the screening process for inward foreign investment and implementations from Phase Two reforms were delayed. In February 2022, the private sector called on the OIO to remove its “Forestry Pathway” exemption due to over-investment in the sector by foreign investors who are reportedly sidelining farmland for forestry, a situation that is also impacting New Zealand’s access to domestic carbon credits.
In February 2020 New Zealand reported its first conviction under the Overseas Investment Act. The offender was charged for obstructing an OIO investigation that was initiated because he had not obtained OIO consent for his property purchase and for later submitting a fraudulent application. A second criminal conviction was reported in June 2020 after the offender was found to have submitted a fraudulent loan agreement.
The Land Information New Zealand (LINZ) website reports on enforcement actions 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 .
Competition and Antitrust 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. The Commerce Commission also 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.
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 finalized and passed on August 6, 2020.
This amendment aims to 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 will also limit Fonterra’s discretion in calculating the base milk price. It also requires Fonterra’s dairy companies to enable supplying shareholders to transfer their shares to share milkers by agreement.
The Commerce Commission is also charged with monitoring competition in the telecommunications sector and motor fuel market. It has a regulatory role to promote competition within the electricity industry, which has natural monopolies in the transmission and distribution businesses. In March 2020, the Commission completed a project that set a default to determine price caps that will apply to the 17 electricity distributors in New Zealand from April 2020 to March 2025.
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. 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.
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, to prevent dominant firms misusing market power by enforcing their patent rights in a way they would not do if there were 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.
Expropriation and Compensation
Expropriation is generally not an issue in New Zealand, and there are no outstanding cases.
The government’s KiwiBuild program aims to build 100,000 affordable homes by 2028, with half being in Auckland. The NZD 3.8 billion (USD 2.7 billion) Housing Acceleration Fund also targets the national housing shortage with an infrastructure fund of public and private developments. Recent and legacy legislation has made it easier for the government and developers to acquire and develop land, particularly in high-density urban areas.
Under the Public Works Act 1981, the New Zealand government has the ability to force landowners to sell in order to facilitate public works projects. There is little public dissent over the issue; New Zealanders are generally satisfied with the Act’s provisions for fair market value compensation, although there have been high-profile disputes over sacred Māori land that have been litigated in court. In August 2020, the Urban Development Act (UDA) was passed into law. The Act established powers for Kainga Ora, a newly created Crown Agency that provides rental housing for families in need and facilitates urban development through residential building projects. Under the UDA, compulsory acquisition powers were created for Kainga Ora, who can theoretically make a forced acquisition of residential land after meeting critical thresholds, such as the establishment of a Special Development Project process that has government oversight. In December 2021, the Resource Management Act was amended, weakening the consent process required in order to build residential developments in medium- to high-density urban areas. While the aim of the Act was to urgently address the housing shortage, for which there is bipartisan agreement, there was some concern that the consultation process was overly swift. Overall, the thrust of all three pieces of legislation is to support needed development. The most recent legislation makes this process easier for residential development. To date, there have been no cases involving compulsory acquisition of residential property, nor has the issue been of great concern.
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 landowners and the lack of any compensation for uninsured owners. One offer made by the government to uninsured Christchurch 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 Christchurch Residential Red Zone (RRZ) and can temporarily agree short-term leases of this land under the Greater Christchurch Regeneration Act 2016. 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 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.
Bankruptcy Regulations
Bankruptcy is addressed in the Insolvency Act 2006, the Receiverships Act 1993, and the Companies Act 1993. 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. 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 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, and exemptions for compliance, due to the COVID-19 pandemic.