A political party headquartered in Northland is challenging a government decision to allow the sale of financially-embattled Westland Milk Products to a Chinese dairy giant.

Social Credit, led by Whangārei-based party leader Chris Leitch, filed an application in the High Court this week for judicial review and sought to overturn a decision by the Ministers for Land Information and Finance for the sale to go ahead.

Inner Mongolian Yili, which is 25 per cent owned by the Chinese government and is Asia's biggest dairy producer, bought the Rolleston-based company in a deal worth $588 million.

The takeover, Social Credit argues, would leave Fonterra as the only significant New Zealand-owned processor of milk products.


"Ministers knew of the proposal very early in the process and the 'region's champion' Shane Jones had even announced funding of $10m from the Provincial Growth Fund for Westland Milk," Leitch said.

That was subsequently withdrawn when the sale agreement with Yili was signed in March, he said.

"Yet the Government chose to sit on its hands and watch while the takeover went ahead".

Leitch said his party is concerned that the Overseas Investment Office may have failed to apply a much stricter set of criteria under the Overseas Investment Act 2005 which would have seen ministers, not the OIO, make the final decision.

He said few would disagree, and it was important for Kiwis to have confidence that the OIO, which was the gatekeeper for overseas investment in this country, was applying the rules properly.

"We want to see New Zealanders reaping the benefits of that world leadership in the primary sector, not overseas shareholders. Massive chunks of the overseas exchange that our country earns from that world leadership, are lost when those overseas owners claim their profits.

"There's a tidal wave of applications from overseas entities that want to snap up the best agricultural land and agricultural and horticultural businesses that New Zealand has, so we're taking a stand on the issue," Leitch said.