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Foreign Investment Good Character Clauses Needed

28 August 2000

GOOD CHARACTER CLAUSES NEEDED IN NZ’S FOREIGN INVESTMENT LAWS

Dear MP,

The Government has recently instituted “smart sanctions” against the criminals responsible for the Fiji coup. It was also reported to be investigating law changes, or introducing new laws, to enable the seizure of any New Zealand assets owned by George Speight and co. This is very commendable.

As you know, CAFCA has, this year, launched a campaign calling for an Inquiry into, and the seizure of, New Zealand assets owned by Indonesia’s Suharto family and cronies. We have previously written to you about this. To our pleasant surprise, the Government has taken up the issue, to some degree, and offered to help the Indonesian government should assistance be requested to have some of those NZ assets seized.

What is required is more than an ad hoc response to criminals such as George Speight and the Suhartos. New Zealand’s foreign investment laws need overhauling, as does the Overseas Investment Commission (OIC), the body that administers them. One specific area that needs drastic improvement is the need for “good character” clauses in those laws, to prevent the likes of the Suhartos and their cronies (or Speight and co) ever being able to invest in NZ in the future.

On each of its monthly decision sheets approving a foreign investment proposal, the OIC routinely states that the applicant is “of good character” . We challenged this once, and presented the OIC with pretty good evidence that the applicants definitely weren’t of good character. The OIC’s response took more than a year, and concluded that nowhere in New Zealand law is “good character” defined. Needless to say, it rejected our complaint. This year, the Ministry of Fisheries objected to several of the (unidentified) foreign fishing companies bidding to buy Brierley’s stake in Sealord, because it deemed them not to be of good character and enclosed evidence to back it up. In every case, the OIC overrode those objections from a Government Ministry, and recommended to the Government that every single applicant was of good character (as it turned out, the Government vetoed any sale). Something needs to be done to tighten up this farcical situation

There is a model that New Zealand can follow. A number of individual states in the US have “Good Character” (or “Bad Boy”) laws. A corporation’s good character, or lack thereof, is considered to be important in deciding whether or not to allow that company to invest in the American state. A corporation's “culture” can become the basis for denying business opportunities. These laws give US states the right to refuse licences and permits to companies that have a history of violating the law - criminal, civil or environmental. And these laws are applied. Waste Management (best known in NZ for urban wheelie bins and controversial rural landfills) is one of the giant transnational corporations that have fallen foul of them. Indiana is one state that refused a permit to it; in the first half of 2000, communities in both California and New York declared Waste Management unfit for business, and had their decisions upheld in court.

CAFCA would be happy to supply you with details on this. One point to note – the American laws take into consideration the corporate good character of the applicant; New Zealand only considers the individual good character of those owning or controlling the applicant.

We urge you to ensure that “good character” clauses are inserted into New Zealand’s foreign investment laws; and that those laws be reviewed, overhauled and strengthened.

As a model for regulating foreign investors, we enclose our Corporate Code of Responsibility *. We would be happy to discuss it with you, and welcome your views on the subject we have raised.

Best wishes

Murray Horton Secretary/Organiser

* The Corporate Code of Responsibility can be found on CAFCA's Website http://canterbury.cyberplace.org.nz/community/CAFCA

CAFCA Campaign Against Foreign Control of Aotearoa PO Box 2258, Christchurch email: cafca@chch.planet.org.nz

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