We have 6 lawyers and 4 investigators in the Enforcement Team at the Overseas Investment Office. The total size of the Overseas Investment Office is around 50 staff, of whom nearly two-thirds are lawyers!
The Overseas Investment Act recognises that it is a privilege for overseas people to own sensitive New Zealand property. The Overseas Investment Office assesses applications from overseas people and organisations wanting to invest in sensitive land, significant business assets and fishing quota. Each year around $15 billion NZD (or 15%) of all foreign direct investment requires consent from the Overseas Investment Office.
Our enforcement function is about making sure overseas people who own or control New Zealand sensitive property have consent to do so, keep the commitments they make when they are granted consent, and give us truthful and complete information about themselves and their plans.
We carry out our enforcement function through a range of activities including education, monitoring, site inspections, investigations and enforcement. Where enforcement action is appropriate, we may require a person to dispose of their property. We may also seek a range of civil and criminal penalties from the Court, including fines of up to $300,000 or three times the quantifiable gain from the sale of the investment, or up to 12 months prison.
Taking enforcement action ensures fair treatment for those who comply, as well as ensuring that those who do not comply are held to account and that others are deterred from doing so. It also gives the New Zealand public confidence in the integrity of the regime.
What changes in the last 12 months have impacted the team, its focus and workloads?
The two main impacts have come from amendments to the Overseas Investment Act and increased resourcing for enforcement action.
The Act was amended in October 2018 and imposed new restrictions on buying residential land, as well as changes to forestry investment and large developments. Given the recent changes, the Enforcement Team is initially increasing compliance through raising awareness and education.
Increased Crown funding for monitoring and enforcement has also seen an increase in the size of our team and the number of enforcement activities. There are now two teams responsible for compliance activities: our Enforcement Team (10 staff) and a new Monitoring & Intelligence Team (8 staff). This increase has helped result in the 36 enforcement actions that we took over the past 12 months.
What have been your most recent successes and challenges as a legal function?
Successes
This year we obtained two High Court judgments, both of which received significant media attention.
In July the Court ordered nearly $3m in penalties and fines for overseas owners who failed to obtain consent for the purchase of two Auckland properties. This included $2.3m in gains from the sale of one of the properties.
In March the Court imposed $220,000 civil penalties for breaches relating to Agria Corporation’s investment in PGG Wrightson. This was for “good character” breaches resulting from alleged violations of United States securities law.
Successes like these help boost awareness of the regime and give confidence that we are doing our job well.
Challenges
Our Team plays an important regulatory stewardship role. There are government and public expectations that we need to meet around fairness and natural justice. This includes maintaining a transparent compliance and enforcement strategy that is evidence-informed, risk-based, responsive, and proportionate to the risks or harms being managed.
We have an advantage in that the Enforcement Team is multi-disciplinary, with both lawyers and investigators working closely together.
I know that some regulators use a separate legal team, which runs the risk of late (or no) legal involvement in investigations. Our approach is for each case to involve both legal and investigative staff from the outset. We have an added advantage in that some of the investigators in the team are also legally trained.
How do you see the role of the public sector in-house lawyer evolving and what impact does this have on the team?
Ben W Heineman, in his book The Inside Counsel Revolution, neatly summarised the role of in-house lawyers as: “fusing high performance with high integrity and sound risk management”. What does this mean?
Increasingly organisations are looking to their in-house lawyers for guidance on not only whether something is “legal”, but also whether it is “right”. In other words, playing the role of both partner and guardian. I see this as really positive and playing to the strengths of in-house lawyers who are well placed to provide a leadership role in ethical matters.
At the same time, the public sector is expected to bring a much more commercial focus to how it operates. In-house lawyers within not only Crown Entities and SOEs, but also government departments, are required to also bring a corporate risk and business lens to our advice.
The implications of this for public sector lawyers in 2019 is that we need to be aware our organisations are usually not seeking ‘pure’ legal advice, but workable solutions to their most vexing problems. These problems often intersect law, business, technology, politics and moral judgment. An effective in-house public sector legal team is one that can collectively draw upon a wide range of skillsets and experience to help solve these problems.
The impact of these changes on the Enforcement Team means we need to continually look for ways to improve, challenge and support each other. What worked in 2019 may not work in 2020. It also means looking beyond ourselves, our Team and our organisation to learn from others. This is summed up in the values here at LINZ: “Bold, Expert, Stronger Together (BEST)”.