Armstrong on Auckland Airport

John Armstrong reviews the latest move by the Canadians:

An unadulterated shareholding of 40 per cent is widely considered to amount to control. However, the act’s criteria refer to “control” – not “ownership”. The distinction is important because the ministers’ decision is open to judicial review.

I am sure the Canadians were aware of this point.

The Prime Minister, who declined to comment on CPP’s move, yesterday suggested a 25 per cent stake fell within the definition of control if the remaining shareholding was widely dispersed, as it is in Auckland Airport’s case.

However, limiting CPP’s voting rights to 24.9 per cent would give the pension fund less influence than that of the Auckland and Manukau City Councils when their two holdings are combined – arguably not control.

The PM’s knowledge and experience of commercial law is limited, to say the least. As Armstrong points out two local Councils will have a combined greater controlling stake.

What is interesting is that her comments strongly suggest it is purely about politics, and not about any actual concern about control of strategic assets.

The law requires the two ministers to decide on the basis of Overseas Investment Act criteria – not political factors. Yesterday’s move by CPP effectively makes it that much harder for Parker and Cosgrove to say “no” without sounding political and ending up in the courts.

I have little doubt it will go to court, if turned down. The comments by all the other Ministers, the off the record briefings, and the decisions by Cabinet to keep changing the rules will make it almost impossible for the Ministers to argue they were not affected by political factors.

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