Transparency of the Regulatory System
The New Zealand government creates transparent policies and effective laws that foster market-based competition on a non-discriminatory basis. Laws governing competition are consistent and transparent and establish “clear rules of the game.” 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 – serves as a basis to much public policy in the country. For more information on Treaty principles, please visit:
The New Zealand government does not discriminate against U.S. or other foreign investors. Regulations are overseen by the Ministry of Business, Innovation, and Employment (MBIE), a government department responsible for 17 regulatory systems that cover about 140 statutes. Standards are developed through Standards NZ and are set in coordination with Australia. For more information about regulations, including the Overseas Investment Regulatory System, please visit: https://www.treasury.govt.nz/information-and-services/regulation
Accounting standards are issued by the New Zealand Accounting Standards Board, which fully adheres to international standard. For more information about foreign companies whose securities are publicly traded in New Zealand: https://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-jurisdiction/view-jurisdiction/new-zealand/
From January 1, 2023, legislation will make climate-related disclosures mandatory for financial institutions with assets greater than NZD 1 billion (USD 650 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. There have been some criticisms of the New Zealand government occasionally choosing to follow a “truncated” or shortened public consultation process or adding a substantive legislative change after public consultation. 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. 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 February 2022, MBIE announced a public consultation process on the occupational regulation regimes of service providers within the construction industry. The consultation proposes further improvements for architects and engineers, construction workers, and electricians and plumbers.
No new regulatory enforcement reforms have been announced since the last ICS. Regulatory reform efforts announced in recent years, such as the 2018 introduction of Regulatory Systems Amendment Bills (RSABs), legislative vehicles used by MBIE and other regulatory agencies to improve regulatory systems. The key thrust of these vehicles is ‘repairs and maintenance’ of existing legislation. For more information on amendments to the regulatory system: https://www.mbie.govt.nz/cross-government-functions/regulatory-stewardship/regulatory-systems-amendment-bills/
The general implications of recent reforms, such as the 2019 omnibus RSAB for Economic Development, Workforce, and Housing, are improvements to insolvency, takeovers, trademarks, and limited partnerships. In June 2020, following a consultation process by MBIE, New Zealand’s Cabinet agreed to recommendations to amendments to improve the functionality of the Patents, Trademark, and Design Acts. Amendments are technical in nature and will facilitate best practice in innovation and business.
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. Investors have raised concerns that the law is unequally applied between jurisdictions because of the lack of implementing guidelines. Several amendments have attempted to reform the Act, with the latest round of reforms proposed in 2023. While the objectives of the amendments are to reduce complexity and increase productivity, the RMA remains an unpopular and restrictive piece of legislation. For more: https://environment.govt.nz/what-government-is-doing/areas-of-work/rma/resource-management-system-reform/
The Covid pandemic 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. 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
As part of the Single Economic Market with Australia, the New Zealand government has introduced laws to enhance regulatory coordination with Australia.
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.
New Zealand is a Party to the WTO Agreement on Technical Barriers to Trade (TBT). New Zealand is required to notify other WTO members of proposed technical regulations.
Legal System and Judicial Independence
New Zealand law uses the English common law system. Legislation underpins the legal enforcement of contracts through contract law.
The Contract and Commercial Law Act of 2017 defines contractual and commercial processes. The court system consists of four levels: District (where a large number of civil cases are heard), High Court (where the amount in dispute is in excess of NZD $350,000), the Court of Appeal, and the Supreme Court. Specialty courts include Employment, Environment, and the Māori Land Court, as well as the Waitangi Tribunal (ruling on matters related to the Treaty of Waitangi), the Coroners Court, and the Courts Martial Appeal Court.
The judicial system is independent of the executive branch and is generally transparent and effective in enforcing property and contractual rights. New Zealand has well-defined and consistently applied commercial and bankruptcy laws. Arbitration is a widely-used dispute resolution mechanism. Regulations and enforcement actions are appealable and adjudicated in the national court system.
Laws and Regulations on Foreign Direct Investment
Foreign investment is an important source of financing for New Zealand. The Overseas Investment Act (OIA) is the principal tool for regulating foreign investment. Under the OIA is the Overseas Investment Office (OIO), a dedicated unit that screens overseas investments for sensitivity.
In 2020, the OIA underwent a series of reforms that essentially restricted real estate investment by non-citizens, though measures were also introduced to reduce the regulatory burden of the investment screening process for inward foreign investment. In August 2022, in response to calls from the private sector to remove the forestry exemption from the OIA, the government passed legislation removing forestry conversions from the special forestry test under the Act.
For more, please visit Land Information New Zealand, a website with information on foreigners investing in overseas assets and how “sensitive New Zealand assets” are defined:
Competition and Antitrust Laws
The Commerce Commission reviews transactions and conduct for competition-related concerns. In 2020, the Commerce Commission signed a multilateral assistance and cooperation framework to enhance international cooperation on competition enforcement with Australia, Canada, the UK, and the United States. For more: https://comcom.govt.nz/news-and-media/media-releases/2020/commerce-commission-signs-multilateral-framework-enhancing-international-cooperation-on-competition-enforcement
In 2022, the Commerce Amendment Bill was passed, strengthening the prohibition against misuse of market power. The key thrust of the amended legislation is to safeguard section 36 of the Commerce Act, which addresses New Zealand’s anti-monopolization prohibition and had previously been difficult to enforce. The Amendment also repeals safe harbor provisions protecting some IP arrangements from competition law scrutiny.
The Commission adheres to fair and transparent norms and procedures.
The Commission’s decisions can be appealed to the courts.
Expropriation and Compensation
Expropriation is generally not an issue in New Zealand, and there are no outstanding cases.
Under the Public Works Act 1981, the New Zealand government can 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. For more information: https://www.linz.govt.nz/guidance/crown-property/acquisitions-public-works
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. For more information: https://www.legislation.govt.nz/act/public/2020/0042/latest/whole.html
To date, there have been no cases involving compulsory acquisition of residential property, nor has the issue been of great concern.
ICSID Convention and New York Convention
New Zealand is a party to the ICSID (Washington) Convention and to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
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.
Investor-State Dispute Settlement
Although there is no ISDS agreement built into New Zealand’s RCEP, NZ-UK, or NZ-EU free trade agreements, the country has signed side letters with five CPTPP partner countries that will exclude compulsory ISDS settlement. The side letters have the same treaty-level status as the CPTPP Agreement.
New Zealand does not have a free trade agreement with the United States. New Zealand does not have a Bilateral Investment Treaty with the United States.
Investment disputes are rare, and there have been no major disputes in recent years involving U.S. companies. In 2022, following a complaint lodged by the Digital News Publishers Association against Meta to pay local news outlets for content, the Commerce Commission found in favor of collective bargaining rights.
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).
New Zealand courts support a general presumption in favor of the enforcement of foreign arbitral awards. Forms of dispute resolution available in New Zealand include formal negotiations, mediation, expert determination, court proceedings, arbitration, or a combination of these methods.
There are currently no publicly reported cases of SOEs involved in investment disputes. New Zealand SOEs are set up to operate on a level playing field with privately owned companies and are subject to domestic competition laws.
Bankruptcy is addressed in the Insolvency Act 2006, the Receiverships Act 1993, and the Companies Act 1993. New Zealand bankruptcies 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. Under insolvency provisions of the Companies Act 1993, subcontractors have rights as unsecured creditors.