Steps after settlement

by Kathryn Crossley01 Mar 2015
Work towards settlement of historical Treaty of Waitangi claims continued in 2014, but for many practitioners working in the Māori law area, activity in the post-Treaty settlement arena is increasingly coming to the fore.
Once settlement deeds are signed, the attention of iwi, government and their lawyers turns to structuring, up-skilling for iwi clients, co-governance arrangements and new investment opportunities.
Getting the structure right
Setting up structures to enable iwi to best manage assets received in the settlement to benefit their community has been a significant area of work for lawyers practicing in this area.
“When you hit signing of a deed of settlement it’s actually not completed at that stage; there’s a lot of work post the signing of the deed of settlement to establish your post-settlement governance entity and to receive the settlement assets,” explains Kensington Swan solicitor David Jones, whose iwi affiliations are Rongowhakaata and Ngāti Kahungunu.
Chapman Tripp partner Nick Wells agrees: “When these groups go to settle with the Crown, there’s a big step up in the level of governance that they need. They might start off with a relatively small asset base but following settlement they actually need to reorganise,” he says.
The adopted structure typically needs to accommodate both a commercial arm and a charitable arm that runs health and education programs. According to Wells, New Zealand has looked to the limited partnership regime often used in the Australian venture capital scene, but broadened the model for use by iwi. “They work very well in the venture capital and private equity contexts and they also work especially well in the Iwi context for those that are either charitable or Maori Authorities for a variety of tax and practical reasons,” he says.
Client up-skilling
The role of lawyers working in this area typically involves some up-skilling of iwi clients in commercial management to assist in dealing with assets received as part of settlements.
“They’re basically just normal Māori people and then all of a sudden they’ve entered this quite massive commercial world,” says Kensington Swan solicitor Tai Ahu, whose iwi affiliations are Tainui and Te Paatu.
“When you establish these entities, what we have to understand is that generally your transition from a pre-settlement iwi to a post settlement iwi is that you as an iwi are getting $50m-$100m and the first thing that you have to do is ensure that you have the infrastructure and the internal capabilities to manage that resource… then once that happens one of the key areas that we support our clients in is actually developing their own skills and their own understanding of what this deed of settlement is and what their obligations are as trustees of a multi-million dollar corporation,” says Jones, who is also a trustee for a post-settlement entity.
“When we’re providing advice to these trustees and managers, it is a very broad range of advisory services and it’s not only legal but it’s also strategic and commercial and sometimes business advice, but it also has to be culturally sound, commercially savvy and focused on sustainable outcomes, not only for today but for the future,” Jones says. “These trustees when they’re making decisions, they take a quadruple bottom line approach, and this quadruple bottom line approach takes into account cultural factors, environmental factors, social factors and commercial factors. It’s a balancing of all these together to come to a decision on issues and it’s not an easy thing,” he adds.
There is an element of trust that’s involved in working on these matters, Wells explains. While for a commercial client a firm may present several options to choose from, he says that in these matters it is often necessary to recommend which option to choose. “You actually have to go that little step further, which I suppose has a risk profile to the lawyer, but it is the right thing to do,” he says.
To build up the requisite commercial fluency, Chapman Tripp funds scholarships and teaches an iwi corporate governance paper at the University of Auckland. Kensington Swan has been developing workshops around some of the essential skills involved in running a commercial entity, such as governance and management structures, and making commercial deals.
“As a lawyer you have to develop strategies to meet those needs because at the end of the day the significant decision makers in the iwi are going to bear a significant risk if they can’t meet their trustee obligations,” Ahu says.
Relationships revisited
A growing area of work for lawyers has arisen in the area of co-governance arrangements.
“There’s been an evolution of the relationship between local government in New Zealand and Māori, particularly as Māori work through their Treaty settlements and look to reframe their relationships with local government,” Buddle Findlay partner Paul Beverley observes.
“Councils all around the country have different types of relationships with Māori, but we see them being formalised in different ways and different councils trying to grapple with how best to build and formalise a relationship with Māori that best suits their region or district,” he says.
A number of authorities have sought to establish co-governance and co-management regimes, often over a particular resource. According to Beverley, this has been driven in part by the movement in New Zealand towards having a stronger Māori voice in natural resource management.
“Part of that is delivered through Treaty settlements, but there are a number of local authorities who have, on their own initiative, developed and set up arrangements with iwi as well. We’re in a real period of exploring how that stronger voice for Māori can be accommodated and provided for,” he says.
In Beverley’s experience, one of the most challenging aspect of setting up a co-governance arrangement is finding a way for Māori to be properly represented in decision making over those resources in a manner that reflects the very strong historical and cultural associations with the resource in question, but balanced against the ongoing role of central and local governments in relation to the management of those resources. “It’s trying to bring together two world views,” Beverley says.
The Waikato River, the former Te Urewera National Park, and Auckland’s Tūpuna Maunga are three areas covered by such arrangements. “Some of the successes that those entities have had, even at an early stage, gives us an indication of what might be possible in terms of these co-governance arrangements, and that’s what’s really exciting.”
Investing for the future
Immediately following settlement, the preferred investments are land-based and fisheries-based, but Wells observes that iwi are tending to diversify over time. “You’ve got some iwi going out and making essentially what’s a private equity play, and I’d expect you will see more of that over time as the groups look to diversify their portfolio,” Wells says. “You need to allow a period of time, in my view, from settlement to make that progression,” he adds.
“As they progress and develop, the speed at which they diversify will increase and so there will be a lot more activity outside what we would call the traditional base of iwi, which is land-based activity… we will see a lot more in terms of the commercial activity as well,” he observes.
Wells predicts that there will be an increase in joint venture activity in the years to come, driven in part by the need to create scale, but also due to a string of recent successes, including ICP, a fisheries joint venture involving 12 iwi; and Ngai Tahu Holdings Corporation and Tainui Group Holdings’ $170m Go Bus acquisition.
Although there has been discussion of the potential for joint ventures between Māori and Chinese investors, Wells does not anticipate this to be the major source of joint venture activity. “While there’s a lot of talk about that and a lot of synergies, and there’s a potential for Chinese involvement because there’s an investment in agriculture from the Chinese in particular and it will continue to grow, but the first point of growth is actually iwi teaming up as between themselves,” he says.
Despite this, Wells does believe that there is scope for Asian investors to team up with iwi, particularly given the shared interest in agriculture and forestry assets and the longer term approach to investing.
In the view of Kensington Swan partner Deborah Edmunds, the changing approach to investments is also part of a generational shift: “Instead of being passive investors where land is quite often leased to third parties, Māori land holders are wanting to take control of their land. You have a younger generation who wants to introduce new, more modern business practices and you’re getting trusts that have been passive in the past wanting to engage in joint ventures with the private sector,” she observes.