This week the Waitangi Tribunal issued an interim direction that the Crown should not proceed with its Mixed Ownership Model (MOM) share sales programme until the Tribunal completes its substantive report on Stage One of its National Fresh Water and Geothermal Resources Inquiry (which is expected in September), and the Crown has considered that report.  As part of a claim brought in respect of the rights and interests in fresh water and geothermal resources protected by the Treaty of Waitangi, the Tribunal was asked to formally recommend that the shares sale not proceed until that report was issued.  The Tribunal has not made that recommendation, but has instead directed that the Crown "should" delay asset sales until release of the Stage One report in September (but the Crown is not obliged to do so). 

A two stage process

Given both the Crown's determination to begin share sales in Mighty River Power before early December and the claimants' intention to resolve the Treaty issues before shares are sold, the Tribunal sought to accelerate the claim by splitting it into two stages.

Stage One, which the Tribunal heard from 9 to 20 July, includes the following two questions:

  • What rights and interests (if any) in water and geothermal resources are guaranteed and protected by the Treaty of Waitangi?
  • Would the sale to private owners of shares in companies with significant rights over fresh water and geothermal resources restrict the Crown's ability to recognize any Treaty rights over those resources, and to provide a remedy for any past or ongoing breach of those rights?

Stage Two will consider whether those rights have been and are adequately recognized and provided for genrerally, beyond the MOM share sales programme.  In this stage the Tribunal will consider whether there are any current Treaty breaches in this area, and whether and how these breaches are addressed by reforms in the governance of fresh water (such as the Fresh Start for Fresh Water programme) and geothermal resources.

The grounds for making the interim direction

This week's memorandum from the Tribunal amounts to the Tribunal's own, non-binding assessment that the Crown should hold off on share sales until it has received and considered the Tribunal's final report on the Stage One, MOM-related matters.

The Tribunal considered that in deciding whether to make its interim direction it should adopt a similar approach to a Court granting an interim injunction.  In broad terms, this requires that: •there be a serious question to be inquired into; and •the balance of convenience favours a direction that the Crown should preserve the status quo.

As to the first element, the Tribunal drew on a number of its previous reports that found Treaty rights of a proprietary nature in specific freshwater bodies.  The Crown also did not challenge the existence of such rights, but argues that the rights cannot amount to 'ownership' of a freshwater resource. The Tribunal also noted that the Courts have left open the possibility that the common law may also recognise such rights. Accordingly, the Tribunal concluded that the first question was a serious question to be inquired into.

However, those rights would only be relevant to the MOM programme if the claimants can successfully argue that the share sales would restrict the Crown's ability to recognize those rights under and remedy any breach.  Amongst other things, the claimants argued that actions of the Crown that may be needed to fulfil its obligations under the Treaty could cause New Zealand to breach its obligations under international investment treaties in respect of foreign investors who hold shares in MOM companies. The Tribunal did not engage with the parties' competing arguments on this critical point and had little authority to draw on. However, the Tribunal also concluded that the claimants' position was not implausible and the second question warrants serious inquiry.

On the second, 'balance of convenience' element, the Tribunal concluded that the potential disadvantage caused to claimant Māori by proceeding with share sales in ignorance of the Tribunal's findings on Stage One would be greater than any potential harm caused to the Crown by delaying the share sales. The Tribunal noted that the Mighty River Power float is planned for sometime between September and early December, so a September report is unlikely to cause significant (if any) delay.  Indeed, the Tribunal heard Crown evidence that Treasury is waiting for the Tribunal's report on Stage One before it completes the risk section of the Mighty River Power prospectus.

Next steps

The Prime Minister has said the Government will take official advice and consider the Tribunal's interim direction in good faith (dealing with the Treaty partner in good faith being a Treaty principle).  The Government will also consult with the Māori Party before issuing its response.

The Tribunal's interim direction should not of itself cause material delay to the MOM share sales programme and is non-binding (as the Prime Minister has recently highlighted).  The more salient risk for the Government is what the Tribunal's Stage One report in September may contain.  Any recommendations made by the Tribunal would also be non-binding, but a finding that share sales would restrict the Crown's ability to recognize any rights, and to provide a remedy for any breach of those rights, would be unhelpful for the Crown.  It would cause a political headache in light of the central importance the Government has given to the implementation of the MOM as part of its economic agenda, and could heighten the risk of further Treaty litigation against the Crown.