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Crown cooks books to sell assets

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Jordan Winiata representing Ngati Paki and Ngati Hinemanu began today’s Waitangi Tribunal hearing. The claimants today are third parties to the primary claim taken by the New Zealand Maori Council.

Jordan’s primary emphasis was on the myriad spiritual and physical uses of the waters of Oruamatua and Kaimanawa by his peoples  - including karakia, uru pa, katiaki, pou whenua, rongoa mo te wairua, kohi kai, hauora, papakainga, kaukau, hoe waka, raranga, whakairo, and tamoko – and the myriad ways in which the uses had been damaged or denied by diversion for hydro, dams, pollution and metal extraction.

His people have raised the list of things damaging or denying appropriate relationship with the waters since 1898.

Crown ‘Misleading’

His evidence was followed by that of Cathy Ertel, a lawyer acting for the claimants. She first accosted the crown for its behavior that she described as ‘misleading and lacking in good faith’. She was extremely distressed by the actions and statements of the government in relation to the Tribunal, and was angry that the crown has failed to engage on the issues of water rights and ownership for many years and is now not engaged at all.

She explained her view that the issue of water rights was similar to the fisheries issue. No one owned the fish, she said, before the government wanted to allocate it to commercial interests. She said that all that was sought of the Tribunal was recognition that if 49% of the SOEs are sold, that Maori rights to claim the water is compromised. She said it was important to be explicit that when talking of ‘ownership of water’ that what was really being discussed was the exclusive power to manage and allocate water.

An Economist view

Dr Ganesh Nana, a well-known economist followed. While of a different hue altogether, Dr Nana’s evidence was equally compelling.  Earlier in the year, he did a paper on the economic outcomes of the sale of State assets. His conclusion was that it was overall a negative for the government’s books, and thus bad for New Zealand. This was from both the 1. Loss of income from the dividends and 2. The loss of income due to time lag between the sale and the receipt of any income from newly constructed assets.

He was extensively cross-examined by the crown who sought to debunk Dr Nana’s figures which differ from that of Treasury’s. Dr Nana was unfazed and said that while the figures were different, this was due to Treasury undervaluing state assets in order to be able to claim a net benefit to the country when they were sold. If appropriately valued, there would be no net gain, and indeed a loss to the country.

He further said that preserving a portion of shares of the state assets for Maori future claims on water without settling the fundamental issue of who owns the water does not in any way mitigate the uncertainty which could result in a significant share price devaluing. He said that if a portion of shares were held back (say 20% of the 49% to be sold) for future settlements, but the issue of who owns the water was still live, the uncertainty of the cost of water still exists – and thus the value of the share price remains uncertain.

International trade treaties and water

Dr Jane Kelsey outlined significant risks in relation to international trade treaties if water issues are not resolved in advance of the sale of assets.

She said that there had been exponential growth in investor-state disputes brought directly by investors in the past 10 years as a result of bi-lateral and multi-lateral trade agreements giving broad investor rights.

Dr Kelsey noted that investors were becoming increasingly aggressive in using these trade agreements, and that they were not just extreme cases in which these disputes were being brought.

Investors are challenging a range of regulatory regimes which seek to address ‘public goods’ such as public health and environmental conservation. In terms of the issues before the Waitangi Tribunal, such investor lawsuits are a significant risk to the crown being able to address Maori rights to water.

The tribunals through which these disputes are heard differ widely and are unpredictable in their outcome. Some tribunals are held in secret, without proper due process and do not follow logical precedents set by previous tribunals. In her experience, tribunal arbitrators pick and choose which cases they apply to a dispute they are investigating.  This was a significant risk because it was impossible to know what view a particular tribunal might take.

Moreover, Dr Kelsey said, law firms were engaging in ‘legalised profiteering’ by generating disputes in order to generate income for their firms. She quoted a figure of 48 bilateral disputes at a cost of $100 million/each over the past decade.

Dr Kelsey also talked of the ‘chilling effect’ on the government by the threat of litigation, and noted that corporations were not always interested in actually pursuing a dispute, but rather in influencing government policy which could have a negative (or positive) effect on their cash flow. In a number of cases internationally, states had chosen to settle with large investors rather than go through what could be a long and very expensive dispute resolution process.

Two additional risks Dr Kelsey noted that could manifest by a failure to address the water issue prior to any privatisation were 1. The impact on investor confidence in New Zealand should share prices be significantly affected by a post-sale redress to Maori and 2. The impact on the value of assets slated for future privatisation.

Finally, Dr Kelsey noted the very real risk that if the government then sells down a part of their 51% holding in order to meet claims, the claimants may be blamed for the government losing its majority stake.

Further claimants, including Hami Piripi from Te Rarawa in the far north, gave evidence late in the afternoon.

Mr. Piripi took the government, and John Key in particular, for suggesting that the water issues were being dealt with by the iwi leaders forum through the land and water forum. He said this was simply untrue, and that the Iwi Leaders forum completely supported the NZ Maori Council’s claim to the Tribunal as the appropriate place to deal with Treaty breaches.

 The enquiry continues tomorrow (Friday) with the crown’s evidence. Next week, there will be closing submissions.