Crafar sale may have faced legal threat

The government could have faced an international law suit if it hadn't approved the sale of the Crafar farms to a Chinese company, an Auckland law professor says.

The sale of the 16 farms to Shanghai Pengxin was approved on Friday, sparking outrage from opposition party leaders who say they should have stayed in New Zealand hands.

Auckland University law professor Jane Kelsey says the free trade agreement between New Zealand and China carries a "most favoured nation" clause which means Chinese bidders can't be treated differently to those from any other country.

"Shanghai Pengxin's application pointed to numerous purchases of farmland by investors of other nationalities and claimed that rejection of its otherwise well-founded application would amount to anti-Chinese discrimination," she said on Monday.

"Such a dispute would have huge ramifications for New Zealand's diplomatic and economic relationship with China."

Ms Kelsey, an opponent of free trade agreements, says the United States is demanding even stronger protection in the Trans-Pacific Partnership trade liberalisation negotiations that are under way.

The government's approval of the sale drew strong criticism from the Labour Party and leader David Shearer says ministers are now accusing it of being anti-Chinese.

"Keeping Kiwi assets like the Crafar farms in New Zealand hands is a principle worth fighting for and one totally detached from racism and xenophobia," he says.

"What concerns me is that, by implication, National is labelling every New Zealander opposed to the sale as anti-Chinese and possibly racist simply because they oppose the sale of profitable New Zealand-owned assets to foreign interests."

Mr Shearer says surveys show 85 per cent of New Zealanders oppose the sale of land to foreigners.