Saudi sheep deal: Govt accused of cover-up

The Government is being accused of a "cover up" as fresh allegations over the Saudi sheep deal emerge.

Despite what was claimed by the Government at the time, there was no legal advice provided by the Ministry of Foreign Affairs (MFAT) underpinning the decision to send pregnant ewes to the Saudi desert, an RNZ OIA request has revealed. 

The Green Party's James Shaw says the legal threat was invented to justify the decision to send 900 sheep to the desert, and Labour's David Parker says the Government hasn't been truthful because they were "deeply embarrassed" about the $11.5m of spending.

The revelation will leave then-foreign affairs minister Murray McCully with some serious explaining to do.

He's repeatedly claimed he received legal advice from officials at MFAT.

During an interview on Three's The Nation in 2015, Mr McCully was pressed on where the legal advice mentioned in the Cabinet paper came from. He said it came from the Ministry. He refused to say who the advice came from specifically, whether he had read it himself or what it said.

Below is a short exchange from that interview. You can read the entire exchange at the end of this article.

Lisa Owen: What evidence did you have of that threat, that it was real and live? 

Murray McCully: Well, the paper records precisely what the officials in the Ministry of Foreign Affairs advised me of and what I observed from my own discussions. We had been asked to release the legal advice on that, and we've said- I've said that's a matter for the Ministry. It's their advice, and the Ministry said no, they're not going to prejudice their position by doing so. But I want to take you back to the- 

Owen: Who gave-? Who gave the legal advice, Minister? Who gave-? Who provided the legal advice? 

McCully: Well, it's the Ministry's advice. Ask the Ministry.

Green Party co-leader James Shaw told Newshub that shows the minister lied.

"They made up a legal threat and used that legal threat to justify a sheep farm in the middle of the Saudi desert," he said.

"This is the kind of thing that should just not happen in New Zealand."

Labour's spokesperson for foreign affairs David Parker says the Government has dragged MFAT into a cover up.

"They hid the $4m [cash] payment from the public, then they blamed it on the opposition;  said it was to cover off a legal risk, and then they said that was supported by legal advice which we now know never existed."

"Now the truth is out, and it shows the Government has not been truthful with the New Zealand public," he said.

"This is an example of more than $10m of wasted expenditure by the Government that they were deeply embarrassed about and didn't want to come out."

The Nation transcript 27 June 2015

Lisa Owen: Minister, I want to move on to another issue  the Saudi sheep farm. Now, you've said we needed to do this deal for this farm; otherwise we faced a lawsuit- potentially $20-30 million lawsuit. So what evidence have you got that this legal threat was real and still live when you went to Cabinet in 2013 wanting approval for this deal? 

Minister Murray McCully: Actually, it's not what I said. It's what some media reported, and I'm not accusing TV3 of this- 

Owen: Well, Minister, I've got the Cabinet paper right here, and in it you- it refers to the fact that the Saudi parties want compensation, $20-30 million for losses. 

McCully: That's correct. And if you look at the pages immediately before that, you'll see that they highlight two or three other quite big problems first. So, yes, there was the issue of potential litigation by the Saudi parties against the New Zealand government, and as the paper records, that was a $20-30 million issue. We were advised- 

Owen: So what evidence do you have-? What evidence did you have of that threat, that it was real and live? 

McCully: Well, the paper records precisely what the officials in the Ministry of Foreign Affairs advised me of and what I observed from my own discussions. We had been asked to release the legal advice on that, and we've said- I've said that's a matter for the Ministry. It's their advice, and the Ministry said no, they're not going to prejudice their position by doing so. But I want to take you back to the- 

Owen: Who gave-? Who gave the legal advice, Minister? Who gave-? Who provided the legal advice? 

McCully: Well, it's the Ministry's advice. Ask the Ministry. What I'm saying to you, though, is that- 

Owen: But as the minister who went to Cabinet- as the minister who went to Cabinet with this proposal, wouldn't you have looked at that? Wouldn't that have been due diligence on your part to have a look at that legal advice? 

McCully: Of course, but it is the ministry's advice, but I want to go back to your question. What I said to you is what I said to Cabinet that there were other bigger issues then the prospect of litigation, and they recorded  you've got the Cabinet paper there. Look at the couple of pages preceding it  they point to much bigger problems. The prospect of the Saudi existing Saudi trade of $1.5 billion being impacted by this, the wider prospect of the GCC trade of $4.5 billion a year being impacted, and on top of that the fact that the GCC free-trade agreement discussions, which were very well advanced, had been brought to a shuddering great halt by this. That is a $5 billion to $6 billion a year problem we had to fix, so I wish people would look at the paper and report faithfully the fact that these were a mix of problems of which the potential litigation was actually by far not the biggest. 

Owen: But this is really important, and I want to get it clear for our viewers here. So did you read the legal advice? You saw it. Who was it from and what did it say?

McCully: I'm not going to release the ministry's legal advice. It is theirs, and as far as the Cabinet 

Owen: Could you just tell us what was in it? Can you just explain what was in it? 

McCully: No. What's in the Cabinet paper is the summary of it that was given to Cabinet. It wasn't drafted the paper wasn't drafted by me. It was drafted by officials across a number of agencies, and I have every confidence in the veracity of the comments in the paper. It's over to the ministry 

Owen: So what was the basis for the legal action? Can you tell us what the basis for the claim was, then? 

McCully: I can tell you that, in pretty simple terms, the Saudi parties had been, since the 1990s, investing in building up a cross-bred flock in New Zealand for exportation to Saudi Arabia. In 2003 by agreement, that practice was banned because of an unfortunate shipment experience out of Australia, but they were still told they should continue to invest and that the government of the day would set these matters right. That was reiterated to them again by both the Saudi government and the investors in 2007, and by the time they got to 2010 when the three-year rollover of the prohibition regulations came up. Relationships with not just the investors, and not just with the Saudi government, but with the other governments of the Gulf States have now become poisoned with this process. 

Owen: But, Minister, with respect, none of those grounds that you've just listed with respect, none of those grounds that you've just listed are legal grounds for a lawsuit, so what was the legal basis for the lawsuit? 

McCully: That will actually the advice was that those circumstances outlined did provide such a basis 

Owen: Against a particular minister? Against a particular minister or the government generally? 

McCully: Look, this was advice to the Ministry of Foreign Affairs. They've got their own legal division, and it's a very experienced legal division. If the ministry wants to release any information, it's fully entitled to do so. I'm not going to do so on their behalf. That is not the way to deal with New Zealand's legal interests or New Zealand's international trade interests. 

Owen: This matters because it prompted you to spend $11 million on a farm, didn't it?

McCully: Well, actually, you'll see from the paper that it was a somewhat more complex process than that. 

Owen: Okay, well, this farm, can you describe it to me? What does it look like? Is there grass there? What is it like? 

McCully: I have not visited the farm, and it's not my job to do so. My job is to make sure that the arrangements that have been put in place are lawful and that they are appropriate, and that they are agreed to by the authority of the Cabinet, and that's what's been done here. 

Owen: Minister, Mr Al-Khalaf, he seemed to be under the expectation that we were moving towards resuming live-sheep exports. So is there any possibility that we could resume live-sheep exports for slaughter? 

McCully: This whole process is, in my view, an acknowledgement that the New Zealand policy is very unlikely to change  certainly under this government. 

Newshub.

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