The Court has now decided that the OIO’s decision was a poor one. I’m no lawyer, but the key point of the decision seems to be that the OIO used the wrong counterfactual in assessing the benefits to New Zealand.
For any cost-benefit analysis, such as the OIO has to conduct, one of the most important elements is the baseline that you assess the projected costs and benefits against. It is called the counterfactual, because it is the situation that you you think will prevail if you don’t do the thing you’re assessing. One of the most basic mistakes in such analyses is to compare future benefits to the current situation, since it is extremely unlikely that the current situation will be unchanged in the future. For example, if Milk NZ doesn’t buy the farms then someone else will at some stage, and they will then do some work and try to turn a profit from the land. Thus, the land won’t remain in its current state if Milk NZ’s purchase is blocked by the government; yet, that is exactly what the OIO assumed would happen!
So it sounds like a good decision by the Court and I’m really surprised that Key has been saying that the test has changed, unless he’s referrring to a different part of the decision. If the OIO is routinely conducting CBAs by comparing the factual to the current state then its hard to have much confidence in their assessments. Hopefully that is not the case and this was merely an oversight. Either way, this isn’t a decision against Milk NZ and Pengxin: it reflects poorly only on the OIO’s work and probably won’t change the final outcome.
Update: Bill Kaye-Blake thinks about it a little more generally.