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Australia; New Zealand: Historic Investment Protocol Signed

(Feb. 22, 2011) On February 16, 2011, the Prime Ministers of Australia and New Zealand signed an Investment Protocol to the Closer Economic Relations Trade Agreement. (Press Release, Hon. Julia Gillard, Australia and New Zealand Sign Historic Investment Protocol (Feb. 16, 2011),
; Press Release, Hon. Bill English, Govt Welcomes Investment Agreement (Feb. 16, 2011),

The Protocol increases the screening thresholds above which foreign investments require regulatory approval in each country. In Australia, the screening threshold for New Zealand investors will increase from AU$231 million (about US$233.6 million) to AU$1.005 billion (about US$1.016 billion), and in New Zealand, the screening threshold for Australian investors will increase from NZ$100 million (about US$76 million) to NZ$477 million (about US$362 million). The Protocol provides for these thresholds to be updated annually, based on changes in Gross Domestic Product in the country where the threshold is set. (English, supra.)

The new screening thresholds apply only to investments in “significant business assets.” That is, non-land investments such as shares, plant, and equipment, which involve a 25% or more ownership stake in a company that is worth more than the screening threshold. The thresholds that apply with respect to investments in sensitive land and fishing quotas remain unchanged. (Id.)

The Australia-New Zealand Closer Economic Relations Trade Agreement entered into force in 1983 and provides the “basis on which the two governments have built an extensive array of agreements and arrangements.” (New Zealand Ministry of Foreign Affairs & Trade [MFAT], New Zealand-Australia Closer Economic Relations,
(last visited Feb. 17, 2011). According to the New Zealand Ministry of Foreign Affairs and Trade, the Protocol “maintains the status of CER [closer economic relations] as the highest quality free trade agreement that New Zealand or Australia has with any trading partner, widely recognised as the most comprehensive bilateral free trade agreement in the world.” (MFAT, New Zealand-Australia Closer Economic Relations Investment Protocol,
(last visited Feb. 17, 2011); see also MFAT, Factsheet: New Zealand-Australia Closer Economic Relations Investment Protocol,
(last visited Feb. 17, 2011).)

Australia is the largest source of foreign investment in New Zealand, while New Zealand is the sixth largest source of foreign investment in Australia. (Factsheet, supra.)Current accumulated investment between the two countries is more than AU$110 billion (about US$111 billion). (Gillard, supra.)The two governments said that the Protocol will deliver substantial benefits to investors in both countries by reducing compliance costs and red tape and improving legal certainty. (Gillard, supra & English, supra.)

The Protocol is expected to come into force during the second half of 2011, following parliamentary examination and implementation procedures in each country. (MFAT, New Zealand-Australia Closer Economic Relations Investment Protocol, supra.)