The EPA approved an application by Scion, the Crown forestry research institute, against the advice of the EPA's staff, which said it was GM.
Scion's application to the EPA said the science was "an alternative approach to creating mutant lines". It said it could create a mutation in a cell without introducing new DNA.
Papers filed in the High Court said the EPA was legally wrong when it said the new technique did not create genetically modified organisms.
Sustainability Council executive director Simon Terry said it was a case of scientists finding ways to "invent around the law". He said most countries had yet to rule whether it was genetic modification and the EPA's decision was wrong in law.
"It would be a strategic blunder for New Zealand to be out in front allowing products of ZFN-1 to go uncontrolled into the food supply chain." He said it could lead to New Zealand losing its status as a GM-free food producer.
Scion general manager for bioproducts Elspeth MacRae rejected links to genetic modification.
She would not talk about the specific case but said she was commenting about the science. "It's like having a pair of scissors and glue to put it back together again. It is mimicking what happens in nature." She said the technology allowed targeted changes to DNA which were predictable by the scientists doing the work.
Rotorua-based Crown Research Institute Scion has been at the forefront of GM research and debate in New Zealand, often making it a target for protest.
Gene work with ZFN-1
What is zinc finger nuclease?
In general terms, it is a biochemical that can make changes to DNA by making breaks at specific places in the DNA. The breaks can then be used to make insertions or deletions. That is, genes can be added or removed.
How does it work?
It uses a protein to target specific parts of DNA, cutting into it to effect a specific alteration which may change the function of that specific part of DNA.
What can it be used for?
It can be used to create specific mutations in genes - effectively specific alterations to plants, animals and insects. For example, HIV researchers used it to alter DNA in mice to make the mice reject the virus.
What problems does it pose?
Off-target changes to DNA can have unintended consequences, with random effects and cell-death at the extreme end of possibilities.