An appeal against the Overseas Investment Office's (OIO) decision to decline the sale of Lochinver Station shows how much the body needs to be reformed, Labour says.
The jilted Chinese would-be buyer is seeking a judicial review of the Government decision to turn down its purchase of the 14,000 hectare farm near Taupo.
Last month Land Information Minister Louise Upston and Associate Finance Minister Paula Bennett declined Pure 100 Farm Limited's application to buy it for $88 million.
Pure 100, a subsidiary of Shanghai Pengxin, wants clarification on the method used to assess the benefits of the sale of land greater than five hectares to overseas investors.
The issue relates to the counterfactual - the benefits of the sale to a foreign buyer assessed against what would happen if the purchase did not proceed.
"We do not believe that the correct counterfactual was adopted when assessing our application," Milk NZ director Terry Lee said.
"The judicial review will seek to obtain clarity for all parties on what constitutes a viable counterfactual and this will, we believe, do a great deal to restore confidence and certainty amongst investors and sellers."
When turning down the application the ministers said they were not satisfied of a substantial benefit to New Zealand from the sale.
The OIO had given the deal the green light but it needed ministerial approval to proceed.
The owner of Lochinver, Stevenson Group, said at the time it was miffed why the property was being treated differently to others that had been approved.
Prime Minister John Key says if the appeal finds against the Government, they would reflect on the decision and honour the law.
Labour's land information spokesman Stuart Nash says the current law is vague and leaves the responsible ministers open to appeals such as this.
"This drags out a process that has taken over a year for Lochinver and now averages almost two months per consent request. Meanwhile funding and staffing for the Office has stalled for the last four years.
"Sellers and buyers have no certainty and don't know where they stand. This is no way to get the right foreign investment into our country."
Labour wants to create a publicly accessible register of foreign owners to make sure investors are held to account for job creation as well as spot audits.
3 News / NZN