Editorial: Treaty tie in hardly takes shine off gilt

Pita Sharples (left) and John Key hongi. Photo / Mark Mitchell

A partnership, as people in business well know, can mean making room for different priorities. When something is vitally important to one partner though disliked by the other, it must be accommodated if the partnership is to endure. The Maori Party wants partially privatised companies to be bound by section 9 of the State-Owned Enterprises Act which states, "Nothing in this Act shall permit the Crown to act in a manner that is inconsistent with the principles of the Treaty of Waitangi."

What that means in commercial practice is not clear. There appears to have been no case law on the subject since the Court of Appeal's 1987 ruling that the "principles of the Treaty" meant an obligation on the partners to deal with each in good faith, particularly where land transfers are concerned. So it may mean the state electricity companies the Government proposes to partially float on the sharemarket will be constrained in land dealings, though no more than they are now.

The Maori Party regards this provision as so important that it says it would consider withdrawing from its partnership with the Government if the clause is not retained in some form in legislation that will govern the partially privatised companies. It may be that the practical effects of the clause are less important to the Maori Party than the symbolism at stake. But symbolism can be important, legally and politically. The Maori Party needs more symbolic victories in this Parliament than it won in the last if it is to improve its standing in Maori electorates.

There may be symbolism also in the Government's resistance.

The Prime Minister says that although he does not think section 9 could be carried over to mixed-ownership companies, legislation for those companies could include a more specific clause that would make it clear private shareholders were not bound. The private sector has been kept strictly off limits to Treaty claims so far. It may be the Government fears a simple continuation of section 9 for public-private partnerships would be symbolically ominous.

But in practice it is hard to see much harm coming from it. When private investors buy a minority stake in a state-owned company they are buying into some public obligations. It is hard to believe this would lower the price they are willing to pay when they weigh up a Treaty obligation against the security of a state-backed asset. They will be buying a gilt-edged stock; a duty on the shareholders to deal in good faith with Maori hardly takes the shine off the gilt.

It is also hard to see that much would be gained, in practical terms, from the Prime Minister's suggested compromise that would bind the company to the Treaty but not its private shareholders. Individual shareholders are not in a position to offend the Treaty. Decisions will be made by directors acting for all shareholders and they can hardly overlook a legal obligation borne by the majority shareholder, the state. The political rhetoric about asset sales, on both sides of the debate, tends to make no distinction between partial privatisation and full privatisation.

To a degree this is valid because even partial privatisation requires directors to act in the best commercial interests of the company and its shareholders collectively. The law is an effective buffer to political influences.

But the fact remains that partially privatised companies are going to be more than partially state-owned and their charter ought to make provision for the Government's wider responsibilities.

State-owned enterprises have operated with section 9 without apparent difficulty for 25 years; public-private partnerships can do the same. And a more important partnership for New Zealand's future would be saved.