Bombshell ruling on Crafar deal

Judge orders rethink

The rules of foreign investment have been tipped on their head after a controversial Chinese bid for the Crafar farms was sent back to officials for a rethink.

The High Court ruling of Justice Forrest Miller on the farms dropped like a bombshell at Parliament yesterday, with Labour claiming vindication in its campaign against the sale of the 16 farms and the Government warning of far-reaching implications.

‘‘Through the court ruling, there is now a different interpretation of this law and it has big implications,’’ Prime Minister John Key said.

‘‘Clearly, the test is very different and so, therefore, the decisions made by the Overseas Investment Office may be very different.’’

Despite the impact of the ruling, Mr Key said it was ‘‘very unlikely’’ to be appealed. A law change to clarify the rules was possible, however.

The office approved the $210 million-plus sale of the Crafar farms to Chinese company Shanghai Pengxin last month and it was supported by Government ministers Maurice Williamson and Jonathan Coleman.

But Justice Miller said the ministers must reconsider the application. Mr Williamson, the Land Information Minister, said the ruling did not jeopardise any past decisions of the office. However, any future or current decisions would come under either the tougher test suggested by Justice Miller or a new law that further clarified how the economic benefits of a bid were considered.

The office will now reconsider its earlier approval of the Shanghai Pengxin bid. The Chinese consortium last night was already talking to Landcorp, which would run the farms for it, to address problems raised by Justice Miller and get its bid back on track.

The office’s original approval, however, was soundly struck down by Justice Miller’s ruling, which found it had ‘‘materially overstated’’ the economic benefits of the Chinese bid. The office had ‘‘treated as irrelevant the likely behaviour of any alternative purchaser’’, Justice Miller found.

‘‘The error was not a mere technicality. No-one suggested that the farms are likely to remain in their present unsatisfactory state, whoever purchases them. Any solvent purchaser can be expected to bring their production up to its potential,’’ he ruled.

The office expected to offer an updated recommendation to ministers within days.