Jan 31, 2012

Treaty won't stop asset sales (updated)

I was in a rush to write this post, so it's not as considered as I'd like. 

Despite Hone Harawira’s enthusiasm, I doubt s9 of the SOE Act can stop asset sales. From TVNZ:

Mana Party leader Hone Harawira is making a bold claim that the Treaty of Waitangi can be used to stop state owned asset sales and is calling on Maori to reject the necessary law change at a series of Government-organised Hui.

The Government has planned a series of hui to consult with Maori on legislative changes it considers necessary in order to float the minority shareholdings of four State Owned Enterprises (SOEs).

"Section 9 of the State Owned Enterprises Act says that the Crown must not act in a manner inconsistent with the Treaty. And to sell off assets that Maori still have claim over is inconsistent with the Treaty," Harawira told TV ONE's Breakfast.

"The Treaty is stopping the Government from flogging off the nation's assets, so they're gonna throw the Treaty out," claims Harawira.

The Waitangi Tribunal (WT) sets out the following principles: reciprocity and partnership, active protection, equity and options and redress. The Court follows, roughly speaking, the same principles. However, unlike the WT, the Court explicitly recognises the Crown’s right to govern and the duty to consult as stand alone principles.

A Maori claimant could lodge a claim with the WT, but a WT decision would have no binding effect. A claim would have to be filed in the High Court. In my opinion, a case exists, but not a very strong one.

If I were the claimant, I’d argue that the Crown is breaching the principle of active protection. Under this principle the Crown must take active steps to ensure Maori interests are protected. The sale of SOE’s runs contrary to Maori interests as, arguably, the Crown’s ability to offer redress is affected through the loss ongoing revenue and the loss of land that could be included in any settlement. A broader argument is that Maori consumers will be affected through higher power prices and decreased government services in the long run. The late Sir Robin Cooker, NZ’s greatest jurist, held that the Crown’s duty is “not merely passive but extends to active protection of Maori people in the use of their lands and waters to the fullest extent practicable”. As you can see, a strong obligation rests on the Crown.

The sale of state power companies will also impact on Maori relationships with their taonga. The WT holds that “The Treaty guarantee of rangatiratanga requires a high priority for Maori interests when proposed works may impact on Maori taonga. If the Crown is ever to be justified in exercising it’s power to govern in a manner which is inconsistent with and overrides the fundamental rights guaranteed to Maori in Article II, it should be only in exceptional circumstances and as a last resort in the national interest”. Reducing the deficit is in the national interest, however on any objective measure asset sales are not the option of last resort.

Selling state power companies will also affect the relationship Maori have with their waterways (i.e taonga). Maori will have fewer rights when it comes to determining the status and use of rivers, tributaries, dams and so on.

The debate around what, if any, rights Maori have in relation to water is still not settled. Given the Crown does not know exactly what rights Maori have, or should have, it would be unfair to pass off water rights to private entities. It is incumbent upon the Crown to actively give affect to and protect Maori property rights and management rights, however if water rights are passed onto private interests Maori customary rights will be diminished against private property rights. Clearly, if the government passes on water rights to private interests this will run against the principle of active protection.

These are just some of the arguments that can be made against the government. I have not taken into account previous decisions of the Court that may favour or harm a claim against the government. At the end of the day, the Crown has a right to govern as they see fit. I come back to Sir Cooke who said “the principles of the Treaty do not authorise unreasonable restrictions on the right of a duly elected government to follow its chosen policy. Indeed, to try and shackle the Government unreasonably would itself be inconsistent with those principles”. Hone Harawira can hope that the Treaty will stop asset sales, but if you ask me he’s hoping in vein.

UPDATE: I should add that it makes perfect commercial sense to exempt a treaty clause, meaning a s9 type clause, from the new legislation needed to sell shares in the SOEs. A treaty clause would add some uncertainty around the assets and drive the share price down. However, refusing to insert a treaty clause in the new legislation is probably a breach of the principles.


  1. since when has the crown ever been concerned about 'breaching the principles'?

  2. Kiaora.

    'Asset ownership is increasingly important for meaningful participation in society and the economy. Ownership enhances the ability of people to access opportunities and to invest
    in the future – by buying a house, financing education, and so on – and allows people to cope with shocks. Assets provide greater security, control, and independence. A broad distribution of ownership also generates enhanced social cohesion at a national level, and ensures that more New Zealanders obtain the benefits of economic growth. So
    helping all New Zealanders acquire assets will make a significant contribution to New Zealand’s economic and social future. In recognition of the increasing importance of asset ownership, many countries are introducing and expanding ‘asset based policies’ that assist and encourage people to
    accumulate wealth. Creating an ownership society, in which ownership of assets is broadly distributed through the population and in which all people are able to accumulate
    wealth over their lifetimes, is a policy priority across many countries. And such policies are advocated by governments and political parties from across the political spectrum; it is not a policy solely of the left or of the right.

    It's about ownership, not assets - Professor Tim Hazledine recently argued in the New Zealand Herald that it was rational for the public to oppose a partial sell-down of the Crown's ownership of SOEs because they "truly merit the designation of being 'strategic' businesses for our country". He also objected to earmarking the proceeds from a partial sale for particular spending projects. Those projects should stand or fall on their own merits.

    The debate over asset sales is a debate over ownership, not the assets. Economists widely agree that ownership matters. The argument that politicians make poor businessmen and women is so obvious as to scarcely need any elaboration. Politicians commonly have little or no commercial expertise, (unless your John Key, whom the former President of the U.S.A. Bill Clinton cited as a major player in the global financial meltdown) and their foremost incentive is to get re-elected. Board appointments are too often politicised, as may be an SOE's objectives and its investment, remuneration or pricing decisions. The absence of any market test of what is happening to the value of the firm or the return on capital, allows taxpayers' capital in SOEs to be destroyed non-transparently.



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