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SEP 22 2020
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Environmental Challenges to Overseas Investments

In Coromandel Watchdog Hauraki (Incorporated) v Minister of Finance and Associate Minister of Finance [2020] NZHC 2345, the High Court has stated the narrow scope of relevant factors to consider when consents are granted under Overseas Investment Act 2005 (OIA).

Background

Oceana Gold (New Zealand) Limited (Oceana Gold), a subsidiary of a Canadian Mining company, was granted consent under the OIA to acquire 178ha of farmland near Waihi.  This was for the purpose of constructing secure ‘ponds’ to store toxic waste material produced from its nearby gold mine operations.  The ponds allowed Oceana Gold to extend the life of its current mines for a further 9 years, which it expected would require the employment of 340 full time staff and generate $2 billion in export receipts.

In granting consent, the deciding Ministers were satisfied that the acquisition was “likely to… benefit New Zealand”, as required by section 16(e)(ii) of the OIA.  Whether the overseas investment was “likely to benefit New Zealand” was determined by consideration of several prescriptive factors in section 17 of the OIA, including whether the proposed investment by Oceana Gold would create jobs and generate export receipts.

Coromandel Watchdog Hauraki (Incorporated) (Coromandel Watchdog) sought judicial review of the Ministers’ decision.  It argued that in granting Oceana Gold OIA consent, the Ministers did not consider the detrimental environmental impacts of the ponds. This included soil contamination from the toxic waste, the removal of native vegetation, increased greenhouse gas emissions and climate change.  Such factors were required to be considered as part of a “holistic assessment” to determine whether Oceana Gold’s proposed investment would be “likely to benefit New Zealand”, even though environmental impacts were not mandated as a factor to consider in section 17.

Coromandel Watchdog accordingly sought that Oceana Gold’s consents be set aside, with the Ministers directed to re-review Oceana Gold’s application whilst considering the environmental costs of the ponds. 

The OIA framework

In the High Court, Justice Clark found that the OIA did not permit the Ministers to consider environmental impacts in granting OIA consent, when these considerations were not mandated to be considered by the OIA.  Rather, the criteria the Ministers were required to consider when making decisions to grant OIA consent were “unusually prescriptive”. The criteria to decide whether Oceana Gold’s ponds would be “likely to benefit New Zealand” therefore could only be determined by reference to the express criteria in section 17.  Section 17 did not include environmental impacts, nor did section 17 provide any basis to consider any criteria that was not specifically prescribed in that section and its associated regulations.  Accordingly, Coromandel Watchdog’s application was dismissed.

The Court also stated that any consideration of the environmental factors put forward by Coromandel Watchdog may expose the Ministers’ decision to adverse judicial review proceedings for taking into account “irrelevant considerations” – a ground of judicial review (which would be available to Oceana Gold) that provides an avenue to challenge public decisions where they take into account matters which are not within the legally permitted scope of a decision maker’s power.

Environmental challenges

Given the increasing impacts of climate change, environmental challenges may become more frequent where consents issued under the OIA have obvious climate outcomes.  However, the High Court’s guidance makes clear that any environmental considerations can only influence a decision to grant consent where these considerations are specifically permitted by the legislation under which the decision is made.  Whilst other Acts (such as the Resource Management Act 1991) may mandate such considerations, section 17 of the OIA does not.

ANDERSON CREAGH LAI LIMITED
Article written by Edward Fox
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