The government’s relationship with the Maori Party over the partial selldown of the state’s four energy companies is not yet terminal, but it is looking extremely untidy. Last week’s battle over the government’s attempt to exempt private investors from Treaty obligations over these SOEs has now been further complicated by a Maori Council Treaty claim for fresh water rights compensation with respect to those sales.

As yet these two developments look less like threats than like invitations to negotiate. The government would have looked far more competent if it had invited these negotiations, rather than appearing as if it is being dragged kicking and screaming to the negotiating table. The only winner in the current situation is the Maori Party, which at least looks like it knows what it is doing.

Going back for a moment to last week’s battle over whether private investors can, or can’t be tied to the legal obligations of the sort currently contained in the SOE Act, and which prohibit actions inconsistent with Treaty principles… Key has tried to suggest that these obligations merely exist on paper – they are he claims, only ‘largely symbolic’ in meaning – but this is not an accurate description.

As Andrew Geddis has pointed out on Pundit, “Section 9 of the SOE Act serves as a shield to stop any action by the Crown that would be in breach of Treaty principles… saying that s9 is "largely symbolic" because it hasn't (because it can't) be used in Court to force the Government to do something positive is plain wrong. The potential power it gives to Maori to stop Government plans for SOE's is considerable.” In the past, that power has deterred successive governments from taking certain courses of action, and induced them to seek negotiated solutions.

The government’s attempt to downplay the importance of the provisions it wants to change – and its related attempt to argue that it could not bind private investors to the current provisions – looks peculiar in other respects as well. I remember doing an interview in the 1990s with then Overseas Trade Minister Lockwood Smith about New Zealand’s list of exemptions during the WTO Uruguay Round. Smith told me that this country’s then-MFAT trade negotiator Tim Groser had negotiated a small list of exemptions for New Zealand from those WTO rules for investment, and these included the Crown’s Treaty obligations.

Which raises the question – if New Zealand can require foreign investors under the Uruguay Round and Doha Rounds to observe the existing legal array of Treaty obligations as a condition of investment, how come it can’t expect the same of the private shareholders in the four energy companies now being readied for sale – especially when, allegedly, the vast bulk of them will be New Zealanders?

As things stand, it's hard to square how we can require Treaty compliance from WTO-consistent foreign investors – apparently without significantly affecting the price they are willing to pay – while saying it would be impossible to impose a similar burden on a group comprised primarily of domestic investors. If, as promised, a weaker Treaty compliance clause is inserted in a rewritten SOE Act it is hard to see how this would not have the effect of watering down the conditions on foreign investors under current WTO rules and exemptions. Anything less would, in itself, be WTO-inconsistent. Sparing foreign investors may be the real purpose of the proposed section 9 changes – but if so, where is the evidence that the Treaty burden that foreign investors have faced for nearly 20 years is so intolerable that it now has to be removed?

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