On Why The Regulatory Standards Bill Should Be Dumped

Scoop

04-06-2025

If you blinked on a recent Friday afternoon, you might have missed the passing under urgency of the first reading of the Regulatory Standards Bill. The Bill purports to be a kind of legislative WOF test that all of us should welcome, right?
If you blinked on a recent Friday afternoon, you might have missed the passing under urgency of the first reading of the Regulatory Standards Bill. The Bill purports to be a kind of legislative WOF test that all of us should welcome, right?
Not really. Instead, shouldn't we all be feeling a bit worried by the fact that – if this Bill gets passed – then nearly all of our existing laws and nearly everything that future governments might want to do will henceforth need to be vetted by ACT Party leader Davd Seymour and the members of his hand-picked, un-elected Regulatory Standards Board?
Meaning: the aims and the effects of this Bill seem to be fundamentally un-democratic. That concern, however, was only one of the points raised by submitters during a two month consultation period timed by the government to coincide with the Christmas/New Year holidays, when people were otherwise occupied.
Even so, 23,000 submissions were received and reportedly, 88% of them were opposed to the Bill. Besides the affront to democracy, the other objections cited by submitters were that the Bill is a solution to a non-existent problem, that it will duplicate existing review mechanisms and will make law-making more complex, more costly, less timely and less efficient by adding a needless extra layer of bureaucracy.
Submitters were particularly concerned about the lack of recognition of any Treaty of Waitangi rights and interests, or of human rights concerns, or of the competing social, environmental and economic interests that should also (surely) be considered fundamental to the process of making good law. If it gets passed, the Bill will come into effect on 1 January next year.
Courting trouble
One of the prime concerns with this Bill is that it seems to bestow on corporations (whose 'property 'has been taken or suffered 'impairment' as a result of government law or regulation) the power to sue for compensation. Problem being, the word ' property' in this context means not simply the taking of land or buildings, but 'impairment' of profit expectations as well.
Alarmingly, this compensation would be sought first from the prime beneficiaries of the relevant laws or regulations. Inevitably, this possibility would have a chilling effect on the activities of, for example, iwi or environmental groups. Ultimately, the aggrieved 'owner' could also sue the government for compensation.
The text of the Regulatory Standards Bill can be found here. The section to do with 'owners' and 'impairment' and the right to compensation is set out at Part 2, Subpart 1, clauses 8c (i) (ii )and (iii). As background: the justification for treating corporates as having the same legal rights as human beings is recognised by the Companies Act 1993, and is based on something called the Salomon Principle. This yardstick was derived from an 1897 case that's widely regarded as the foundation stone of modern company law.
So keep all that in mind when you read those 8c clauses that essentially seek to prohibit legislation that takes or impairs 'property' without the owner's consent unless 'fair compensation for the taking or impairment is provided to the owner; and compensation is provided, to the extent practicable, by or on behalf of the persons who obtain the benefit of the taking or impairment.'
So to repeat: if say, the law or regulation primarily benefits an iwi, or Greenpeace or a local community group, the disgruntled investor can go after them first – and since the Bill is spectacularly silent on Treaty obligations, the iwi in question would be in the firing line without a leg to stand on. Especially since the Bill is vocal about an 'equality' that takes no account of privilege, historical injustice or any other socio- environmental factors. Only private property, widely defined, is treated as sacrosanct.
True, the same section of the Bill does say there has to be 'good justification' for the taking or the impairment – but ultimately, who will get to decide whether regulatory actions are 'good' and /or are 'justified' ? Why… that would be the handpicked, un-elected Regulatory Standards Board. Not for the first time, justice will be a flat circle.
Thankfully, plenty of people are becoming aware of this risk. Last week, Waikato University academic Ryan Ward published on Newsroom a concise, well argued account of the risks posed by the 'takings' aspect of the Bill. Ward's article is entitled 'How the Regulatory Standards Bill Could Leave Taxpayers On The Hook.' Exactly.
Back to the MAI
This is not a fresh concern. The ACT Party has tried (and failed) to get much the same legislation across the line in 2006, 2011, and 2021. Before, ACT had tried to give the courts the power to declare legislation to be out of sync with its own regulatory preferences, but the new version hands these same powers to the appointed Board.
In fact, the history of this gambit dates back even further than 2006. The attempt to provide foreign investors with the ability to sue, intimidate and restrict sovereign governments goes back at least as far as 1997. That was when a draft version of the Multilateral Agreement On Investment (MAI) being secretly negotiated by the OECD got leaked to the public.
The subsequent global protest movement ended in the defeat and withdrawal of the MAI. A few years later, the same toxic MAI provisions re-surfaced in the Trans Pacific Partnership (TPP, now CPTPP), and again, these provisions sparked widespread protests.
Nearly 30 years ago, I wrote two articles outlining the threat to sovereign goverments posed by the similar MAI provisions now being enshrined in the Regulatory Standards Bill:
…The MAI gives foreign investors one important advantage. They will be able, under stated procedures, to sue governments for compensation if the government enacts policies that the foreign investor feels will affect it unfairly. Under almost all international treaties – the North American Free Trade Agreement (NAFTA) is the other exception – only states can sue each other. Under the MAI, however, multinationals can bring actions against governments. Even the threat of litigation from a multinational with deep pockets, as the British Columbia submission points out, may be enough to deter some governments or local bodies. Such disputes then go to a panel of unelected experts, for binding arbitration.
Footnote: Interestingly in the light of the current government's willingness to roll back the Crown's Treaty of Waitangi obligations, I had written in the same 1997 article how the 'stand-still' and 'rollback' provisions of the MAI ( ie. no new laws and regulations, and a phased reduction in current investment restrictions over time) might enable future governments to amend the Treaty of Waitangi.
On the reservation for the Treaty of Waitangi…, for instance, [then MFAT chief Richard ]Nottage says, it is 'just about inconceivable' that we would roll this back.
Inconceivable? Well, could a future Act/National government conceivably desire to limit some rights currently enjoyed under the Treaty of Waitangi? If so, the MAI rollback proviso gives an excellent rationale – because it amounts to a promise to the world that we will do so.
Footnote Two: In the late 2000s, I also recall arguing with then-ACT leader Rodney Hide about the Colorado precedents that Hide was seeking to implement here – like, for example, his attempt to try and impose a sinking lid on local government spending.
This legal stratagem would have involved imposing a spending cap on local councils, largely based on their previous year's expenditure, and with any excess revenue having to be returned to ratepayers as an annual rebate.
This Colorado-style spending cap-and-rebate scheme that ACT tried – and failed – to get accepted into law here 20 years ago would have essentially stopped councils from addressing extra social needs, fixing core infrastructure or diverting more than 1% of their annual revenue to meet emergencies.
This isn't (entirely) ancient history. It forms a key part of the whakapapa of the same political party pushing the Regulatory Standards Bill, and is entirely consistent with it. Famously, these Colorado libertarian experiments in fiscal self-starvation came to a climax in the deeply conservative city of Colorado Springs, which the Politico website wrote about in 2017, in an article called 'The Short Unhappy Life of a Libertarian Paradise.'
In that case, the city's local government spending was cut back so harshly that citizens eventually had to club together to adopt and fund the street lights in their neighbourhoods, were forced to cut the grass in public parks themselves, and had to go out and hire sufficient police and firefighters. After three years of this, Colorado Springs saw the errors of its libertarian ways, and the public voted to increase taxes.
Point being: the same ACT Party that thought the above disaster was an experiment worth repeating here is now trying to impose on us the Regulatory Standards Bill – which, on the face of it, would give investors the power to sue for compensation if their profit margins are affected when we exercise our right to make laws that primarily benefit us, and not them.
Muddled messages
True, the Bill does claim ( Subpart 5, clause 24 (1) that it 'does not confer a legal right or impose a legal obligation on any person that is enforceable in a court of law.' Yet the 'Principles' section of the Bill says ' Most of the Bill does not confer or impose any legal right or obligation on any person that is enforceable in a court of law.' [My emphasis.] There is – for starters – a legally enforceable duty on state agencies to supply information on request to Seymour's Regulatory Standards Ministry.
Meaning: under this Bill, 'commercial sensitivity' seems to be a one way street by which aggrieved investors who have the ear of the Regulations Ministry can hope to gain access to information relevant to their commercial activities.
Hopefully, the select committee hearings will clarify the terms of disclosure for the commercially valuable information that liable state agencies will -apparently – be legally required to hand over to Seymour's Ministry.
If we're very lucky, the select committee hearings will also clarify whether the Regulatory Standards reports will be enforceable. Or will it be possible for Parliament to blithely ignore them, just as Parliament does when it ignores reports on the incompatibility of some of its laws with the Bill of Rights. (Denying prisoners the right to vote breaches their human rights. So what? Parliament says.)
Currently, that's the main muddled message being conveyed by the Regulatory Standards Bill. If it is enforceable, the Bill poses a serious threat to democracy. If it isn't, and is mere virtue signalling by the ACT Party to its corporate masters, then it is an expensive and redundant waste of taxpayer time and money. What sort of beast is it?
Retrospective, Much?
Finally, the Bill isn't supposed to be a retrospective piece of legislation. Yet plainly it is. Part 3 (2c) (i) empowers the Regulatory Standards Board to:
…Inquire into whether existing [my emphasis] legislation is consistent with the principles of responsible regulation;
Likewise, Part 2 (b) (ii) provides for —
the review of the consistency of proposed and existing legislation with the principles of responsible regulation; and
(ii) the disclosure of the reasons for any identified inconsistencies;
What to do? On the evidence to date, the Regulatory Standards Bill should be rejected outright. Fat chance. National seems committed to this Bill, unlike its prior stance on the Treaty Principles Bill. It is also probably too much to hope that the fish-hooks in this dangerous piece of ideological dogma will be remedied at select committee.
It would be an uphill fight. In the name of a bogus ' equality' before the law, the coalition government continues to act as if Māori have no special rights as indigenous people, and that the Crown has no special duties towards them. The Treaty, and customary law, say otherwise.
Even the Regulations Ministry itself (at clause seven in its heavily-redacted impact report on the Bill) baulks at this glaring omission:
Of significance is that the proposals do not include a principle related to the Treaty/te Tiriti and its role as part of good law-making, meaning that the Bill is effectively silent about how the Crown will meet its duties under the Treaty/te Tiriti in this space. While this does not prohibit the Crown from complying with the Bill in a manner consistent with the Treaty/te Tiriti, we anticipate that the absence of this explicit reference may be seen as politically significant for Māori and could be perceived as an attempt by the Crown to limit the established role of the Treaty/te Tiriti as part of law-making.