Air New Zealand has lawyered up with a Queens Counsel now on board at CEO Greg Foran's direction to deal with the potentially serious legal ramifications of the "Saudi affair".
Foran wants to get to the bottom of why a controversial engineering contract to repair engines for the Saudinavy — that is now being investigated as to its legality — was not flagged up to senior executive level.
A Saudi-led air and naval blockade of Yemen, followed by a full-on military offensive, has resulted in hundreds of thousands of civilian deaths and has been described by the United Nations as causing the world's worst humanitarian crisis.
There is no question that the airline's gas turbine division knew the ultimate customer for the work it was assigned through a "third-party contract" with Germany's MTU was the Saudi Arabian navy.
That much has been ascertained by Air NZ's top brass.
The gas turbines business had delegated financial authority to sign contracts capped at $5 million before having to refer up to higher executive levels for approval. While the $3m contract sat within the $5m threshold, the critical issue is why wasn't it flagged further up the organisation given the potential ethical dimensions of refurbishing two GE turbine engines and a power plant for its ultimate customer, the Saudi navy.
The Air NZ CEO has apologised to the Government, banned the airline from forming further contracts on behalf of the Saudi navy and ordered the remaining turbine module sent back to the German contractor.
Foran is bringing in PwC to work alongside its internal reviewers to probe whether there were any red flags that senior executives missed that would have alerted them to dig deeper and earlier before the controversial contract was drawn to his attention some two weeks ago by Treasury's Crown Monitoring Unit.
That probe is expected to go as high as Air NZ directorate level through an examination of board papers during the relevant period.
If PwC are doing their job they will also probe whether there is any other work the engineering division has contracted which may be borderline.
There is considerable nervousness in the Air NZ camp as to whether the airline should have directly flagged the contract with the Ministry of Foreign Affairs and Trade (Mfat).
Mfat publishes a 300-plus page NZ Strategic Goods List which outlines particular military and dual-use goods and technologies where a permit is required for export.
In September 2019 — four months after Air NZ's gas turbine offshoot signed the contract with MTU — Mfat advised limiting the scope of NZ's catch-all controls to those few countries under a UN arms embargo was no longer sufficient to manage the risks from exports to military and police users in a wider set of countries of concern.
A Saudi Arabian frigate. Photo / Supplied
"Therefore a risk exists that goods or technology exported from New Zealand to a military or police end-user might contribute to a conflict, or human rights violations, support repressive regimes, or increase the capability of a state which is challenging our security interests.
"Failing to regulate exports in these cases poses security, political or reputational risks to New Zealand and its international relationships."
This gets to the heart of the investigation that Mfat is undertaking at the direction of Prime Minister Jacinda Ardern. Ardern has already pre-judged the investigation by saying the contract was "completely wrong" and "it just doesn't pass New Zealand's sniff test".
"This is something that has ramifications for New Zealand, its reputation, and that's why we are making sure we are across how it happened."
The whole issue will be centre-stage today with Air New Zealand's top brass in the spotlight for the airline's annual review by Parliament's transport and infrastructure committee. Air NZ chair Dame Therese Walsh will join Foran for the 45-minute review.
Labour's Greg O'Connor is committee chair; one of five Labour MPs on the committee.
Former Air NZ CEO Chris Luxon, who says he does not recall the contract, is one of two National MP committee members. At the time this column was filed, Luxon has yet to announce whether he would recuse himself given the obvious conflict of interest.
Julie Anne Genter is the sole Green MP but there is an expectation that Golriz Ghahraman may be "subbed" in for the review which gets under way at 11.15am.
The geo-strategic environment is complex. The US began providing "logistical and intelligence support" to the Saudi Arabia-led coalition in Yemen in March 2015.
It was only one week ago that US President Joe Biden announced an end to "all American support for offensive operations in the war in Yemen, including relevant arms sales".
Given the context, Ghahraman has stretched credulity by accusing Air NZ of war crimes.
But the airline is not out of the woods by any means.
