Norman Russel William: Regulatory Standards Bill — First Reading 
Norman Russel William: Regulatory Standards Bill — First Reading 
[Volume:673;Page:19758] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I rise to speak on the first reading of the Regulatory Standards Bill a bill put up by the ACT Party and apparently being voted for by the National Party. This bill has so many things wrong with it that it is hard to know where to start so I thought I would start in the middle and talk about the issue of takings. I think that is an interesting issue which this bill very much brings to the fore. 
The way that this bill works is that when a bill comes to Parliament the Minister and the chief executive have to sign a piece of paper that says the bill meets the regulatory principles or if it does not there is public interest in it not meeting those principles. There is a set of principles and I want to talk about one of those principles which is the issue in regard to takings and property. Basically the bill states that legislation cannot take someone’s property or impair someone’s property unless that is in the public interest and that person or corporation is compensated in the process. That is essentially what it says. If we were to take some case studies to flesh out what this would mean I think it would demonstrate the problem with this kind of approach to lawmaking. 
For example we can talk about the plain packaging of tobacco products. If a Government were to introduce the plain packaging of tobacco products certain tobacco companies would argue that their property rights had been impaired as a result of that. Philip Morris could come out and say it used to be able to use its Marlboro brand and all the rest of it but it cannot any more so therefore its property rights had effectively been impaired. Philip Morris could say that if the Government thinks there is a public interest case so be it but the Government would have to compensate Philip Morris if the Government were to follow the principles in this bill. That would mean that before the Government could move to introduce the plain packaging of tobacco products it would be required to compensate Philip Morris for the entire impairment of the intellectual property rights around its branding. If this sounds vaguely familiar the reason is that Philip Morris is currently launching a case against the Australian Government under the provisions of a bilateral investment treaty between Australia and Hong Kong that uses exactly the same principles. Over there it is termed “expropriation” or “indirect expropriation” but it has exactly the same meaning. 
My challenge is to the Labour Party actually. While Labour was in Government it signed a whole bunch of trade treaties that had exactly the same provisions which enable multinational companies to sue our Government through bilateral investment treaties. Those provisions are within the China free-trade agreement and a bunch of other bilateral investment treaties have those provisions as well. It seems to me that signing up to trade agreements or passing law that enables corporations to sue Governments for their actions is a very very bad idea. If we were for public health reasons to require the plain packaging of tobacco then I think that would be just too bad for Philip Morris. I do not think we should compensate Philip Morris for the fact that it would lose some money in the process. I say to National that if it introduces this kind of law the onus would then be on the Government whenever we wanted to introduce a regulation that would impair someone’s property rights to compensate them if we were to be consistent with the principles of this bill. I ask whether that is really what the Government wants to do. 
We know the answer to that question and it is that the National Government does not want to do this because this is not the first time that this kind of legislation has come to Parliament. In fact a bill that came to Parliament under the name of Gordon Copeland previously did a similar kind of thing. At the time the National minority view opposed it. Chris Finlayson was leading the opposition to it at that time. He said the amendment would “have far-reaching implications and could well be the cause of a great deal of litigation against the Crown” if we were to introduce this kind of principle. He meant that if we introduce the kinds of laws that say we cannot pass a law without compensating someone whose property is impaired then all of a sudden we could be sued by a whole bunch of corporations whenever we tried to pass legislation that they did not like. The National members of the Justice and Electoral Committee went on to state: “compensation issues should not be simply left to the courts. There should always be a proper statutory basis for compensation.” It should not be left to the the courts and the process through the courts for corporations to sue the Government or Parliament if we try to introduce rules. 
There is a bunch of other rules that we could talk about—for example those on building standards. Building standards are a very relevant issue because New Zealand has just had the leaky houses crisis. One estimate is that the leaky houses crisis has cost our country $20 billion because of the poor regulatory framework that was set up around the building industry. The weak building regulations have had to be strengthened in recent years as a result of the disaster of the leaky housing crisis. There would be those involved in the industry who would argue that if we tried to strengthen building standards and that resulted in their products—for example monolithic cladding; James Hardie’s comes to mind—no longer being used or not being used as much as previously because we had strengthened the building regulations then they could sue us as a result of the impairment of their property. James Hardie’s could say the Government’s new building regulations would result in its monolithic cladding—which was one of the causes of the leaky housing disaster but not the only one—no longer being used because everyone was going for weatherboard and therefore the Government had cost it an awful lot of money and it wanted compensation. James Hardie’s could say that under this Regulatory Standards Bill which Parliament had been silly enough to vote for the firm had the right to sue the Government for compensation because it has closed up the rules around leaky houses. 
The reason that this issue is particularly apposite on this occasion is that the chair of the working-group that put the basis of this bill together was none other than Graham Scott who more than any other person in New Zealand is responsible for the leaky houses crisis. I like to call him our “$20 Billion Man” because he was the head of Treasury when all the relaxation of the building standards was pushed through. Treasury was very active under Mr Scott in relaxing the standards around building. It is in fact the ACT Party and Mr Scott who can be blamed for the $20 billion leaky houses crisis. If there could ever be an example of a situation where regulations are important and necessary the leaky houses disaster is probably the most obvious one. There are many other examples but that is one example of a situation where having good strong regulations can be expensive upfront because it means the houses costs a little more to build but actually is in the long-term best interests of the country—and especially of the people who are now living in rotting houses and having their life savings whittled away because National weakened the standards around buildings back in 1991 with its Building Act. 
If this bill were actually to become law then it would become difficult to tighten up the rules around building standards. If we discovered that a mistake had been made that allowed a bunch of bad products and bad practices to result in a leaky housing disaster and we wanted to tighten the rules those companies that lost money as a result—and some would—could rightly sue the Government for compensation. We can imagine the chilling effect that it would have on the Government if every time that we wanted to fix up a regulatory problem we had to compensate everyone who had lost property or had their property impaired as a result of that process. It would make it much more difficult. 
Think for example about environmental standards which are another classic problem. Climate change—by introducing a carbon tax there are winners and losers. Those people who have carbon-intensive products would sell less of their product as a result of a carbon tax and their businesses would be worth less. They could rightly argue that their property rights had been impaired and therefore could sue the Government for compensation if we tried to restrict greenhouse gas emissions in New Zealand. The Government would have to compensate them. Every business would line up in the courts and seek compensation if these kinds of principles were put into law. 
There is so much that is wrong with this bill and I have focused on just one particular aspect. We could also talk about the way that the judiciary would be dragged into the policy process. We could talk about the way that the neutrality of the Civil Service would be compromised because senior public servants would have to basically sign off on political processes. We could talk about the fact that this bill will not even necessarily help business because it would make the process of lawmaking and regulation much more difficult. But I think that it is worth thinking particularly about the property compensation issues because they have relevance not just for this bill but also for the bilateral investment treaties that Labour and National are both very keen on. Thank you.