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Controversial Westland Milk sale goes to court 

11 September 2020

by Chris Leitch, Leader, Candidate for Whangarei

The Government’s involvement in the controversial decision to approve the sale of Westland Milk Products to Hong Kong Jingang, a company wholly owned by Chinese conglomerate Inner Mongolian Yili, will be under the spotlight in the High Court next week.

The hearing of Social Credit’s judicial review of last year’s Overseas Investment Office decision to approve the sale is set to start on Monday.

The judicial review challenges the basis on which the Overseas Investment Office made its decision last year to approve the sale.

Social Credit’s position is that the Overseas Investment Office applied the wrong legal test.

If the correct test had been applied the decision should have been made by the responsible ministers, not officials in the Overseas Investment Office.

“If we prevail with the judicial review, Hong Kong Jingang’s consent may be declared to be unlawful and potentially invalid”.

“The Government would then have to decide what to do, but the decision on a new application would likely being taken by the ministers responsible – the Hon David Parker, Associate Minister of Finance, and the Hon Eugenie Sage, Minister for Land Information, not the OIO”.

Social Credit prevailed in the first round of its High Court challenge, with the court in August dismissing an application by Westland and Hong Kong Jingang for it to come up with a $40,000 surety, and awarding it costs.

Social Credit subsequently made a settlement offer in which it said it would discontinue the proceedings if:-

  • Jingang agreed to apply for a new consent;


  • the responsible Ministers agreed that they (not the OIO) would consider Jingang’s application;


  • the parties agreed that the (correct) “benefit to New Zealand test” (as set out in sections 16 and 17 of the Overseas Investment Act 2005) would be applied in determining Jingang’s application.


That settlement offer was rejected.

“Given the role of OIO as the ‘gatekeeper’ to acquisition of New Zealand assets by overseas entities, our aim is to ensure that it applies the proper legal test, that it has sufficient information to determine which test should be applied to a particular application for consent, and that all necessary matters are taken into consideration when it assesses applications”.

“In our view the OIO failed to properly make its decision when it consented to the Westland Milk takeover, hence our application for a judicial review which we lodged last September”.

The sale of one of New Zealand’s dairy cooperatives to a foreign buyer was a controversial one.

While at the time NZ First and Labour MPs bemoaned the sale prospect, and questioned the big bonus payouts to the company's executives, they did nothing to avert either the short term or long-term consequences.

Regional Economic Development Minister and Associate Finance Minister, Shane Jones, claimed, in a report in the Herald on July 18th last year that “as steward of the Provincial Growth Fund, I was never approached [by Westland directors] as to whether or not we could look at restructuring and help shore up that company.”

But Radio New Zealand reported on July 8th that it “understands ministers might be breathing a sigh of relief that farmer-shareholders gave Yili the thumbs up. That is because rejection of the Yili deal might have left the taxpayer being forced to pick up the tab.

“The taxpayer would never have needed not pick up the tab”.

“What we have had clearly demonstrated in recent months is that the government could have used the capacity of the Reserve Bank, which is currently creating $100 billion, to rescue the company and keep it in New Zealand hands”.

“It could have put in place an arrangement similar to the 1% overdraft that the Dairy Board had access to from 1936 to the mid 80's, and made it available to Westland Milk – the solution Social Credit proposed at the time”.

“That would have enabled the co-operative to swap its expensive commercial bank created debt for much cheaper Reserve Bank created debt and allowed the company to use its income for the benefit of West Coast farmers rather than interest payments to Australian owned banks”.

“Such an arrangement would not have resulted in an increase in the country's money supply, nor would it generate any inflation, because repaying the commercial bank debt would have simply wiped it out of existence”.

“Such a scheme would have been a win-win for all the New Zealand parties involved, and the country, and would have ensured that New Zealand's dairy processing was retained in New Zealand hands”.

Social Credit has a long standing policy of opposing foreign takeover of land and businesses by overseas buyers and would seek to reinstate New Zealand ownership of strategic assets.

The Party is seeking financial support in its fight. Donations can be made to this account - Kiwibank 38-9000-0601245-001 or made on the Give-A-Little page set up for the legal challenge ( Westland Milk Sale Judicial Review ).

The judicial review challenges the Overseas Investment Office handling of the decision to approve the sale of Westland Milk Products to Hong Kong Jingang, a company wholly owned by Chinese conglomerate Inner Mongolian Yili.
Our contention is that the ‘test’ applied by the OIO in making the decision was incorrect.

The judicial review, to be heard by the Court in September, seeks to have the decision overturned and sent back to the OIO for the correct test to be applied.
That test would require the appropriate ministers to make the decision whether to approve the application for the takeover, not the OIO under delegated powers.
Inner Mongolian Yili is the largest milk processor in China and is 25% owned by the Chinese government. The takeover has left Fonterra the only significant New Zealand owned processor of milk products.

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