Saudi sheep deal: The two-year hunt for the 'legal advice'

2:20 pm on 15 September 2017

Analysis - After two years of battling for transparency over the Saudi sheep deal Tim Watkin got some answers this week, but he still has plenty of questions.

Foreign Minister Murray McCully attends a meeting with his Chinese counterpart Wang Yi in Auckland on February 10, 2017.

Murray McCully's repeated claims that he had received legal advice from MFAT have turned out to be untrue. Photo: AFP

It was August 2015 when I first wrote to the Ministry of Foreign Affairs (MFAT). If it helps, that was before Adele released her album 25. Or, for a younger generation, about the time Justin Bieber released 'What Do You Mean?' It was a while ago.

I sent an email asking for "all and any legal advice" received by MFAT and/or the Minister of Foreign Affairs on the Saudi sheep deal. My memory is that it was late on a Saturday afternoon, but it was so long ago I can't be sure. I'd been meaning to send the email for a while.

I was executive producer of The Nation at the time and my interest sprung from an interview we'd done some weeks earlier with Foreign Minister Murray McCully. Never an easy man to get to agree to an interview, we had taken the opportunity to ask him about the controversial Saudi sheep deal, in which the government had paid Saudi businessman Hamood Al Ali Al Khalaf $11.5 million to appease his complaints that he had lost money when New Zealand banned live sheep exports in 2003.

McCully had claimed he was cleaning up a toxic relationship with business and government partners in the Gulf States left by the previous Labour government and that without the deal Al Khalaf could sue New Zealand for $20-30m. He had said as much in a 2013 cabinet paper that led his National Party colleagues to back the deal and in Parliament.

But questions were being asked whether the threat of a lawsuit was idle and if there was any law we could be sued under. Was Al Khalaf bluffing? Why shouldn't a sovereign state change its law? Had McCully paid for a farm in Saudi Arabia and handed over $4m in taxpayers' cash for no reason?

On The Nation we asked McCully what legal advice he had received. Was the threat of a lawsuit "real and live"? Who provided the advice? What did it say? McCully had numerous opportunities to say there was no advice. Instead, he said "it's the Ministry's advice", refused to release it and that "the advice was that those circumstances outlined did provide such a basis" for a lawsuit.

McCully, however, added that MFAT was entitled to release the advice if it wanted. So I took up his invitation and asked.


The story began with the banning of live sheep exports in 2003. Photo: RNZ

MFAT replied that "legal advice provided to Ministers is legally privileged and will not be released". I argued that the minister could waive privilege and by referring to the contents of the advice on national television and giving MFAT the permission to release it, he had effectively done just that. Again, MFAT said no. Exactly as the minister would have expected.

So I complained to the Ombudsman, making the same arguments and adding that given the amount of public money involved and the controversy over its use, more transparency should be expected.

MFAT then played its trump card: Section 6(a) on the OIA, which says official information can be withheld from the public if its release could "prejudice the security or defence of New Zealand or the international relations of the Government of New Zealand".

It's a 'get out of jail free' card, but for that very reason should only be used on the most serious occasions. The thing about that section is that it draws a line under any further debate.

As the ombudsman explained in his letter to me: "In effect Parliament has decided that where section 6 applies, withholding the information is justified, and that is the end of the matter… there is no requirement to consider whether there are any countervailing public interest considerations which would outweigh the need to withhold information to protect the relevant interest."

It looked like I had hit a wall. In the meantime, Phil Vine had done an in-depth investigation into the deal for The Nation and had spoken to Al Khalaf's right-hand man in this part of the world, George Assaf. That aired in July 2016, when Major Lazer was number one with 'Lean On'. Thanks to a bit of leaning, new facts had been gleaned. Notably, Assaf had told Phil: "We may get a legal opinion but we had no appetite, no ambition to take any government to court, let alone New Zealand."

So doubt about the need for the deal had only grown. Yet what else could anyone do to get answers?

Then, in November 2016, Auditor-General Lynne Provost came to my rescue.

Her report into the deal found "significant shortcomings" and it opened the door just a crack for another approach to the ombudsman.

Provost said, "we saw no evidence of internal or external legal advice being sought on the extent of the risk of the claim for compensation from the Al Khalaf Group against the government".

Did "no evidence" mean there was actually no advice? Why then had McCully repeatedly referred to the ministry's advice? And why had the ombudsman's letter implied it had seen legal advice if the Auditor-General hadn't?

So I went back to the ombudsman and argued this report changed things and asked him to reconsider.

I wrote that section six was intended by Parliament to be only used in the most extreme cases, not for political expediency. That New Zealanders should be trusted with full disclosure so they could make up their own minds. That hiding such deal actually did more harm to our international reputation than good.

But most significantly, I wrote:

"Your provisional ruling suggests you have seen some advice, yet the Auditor-General has been unable to find evidence of any. The only way to clarify what's going on here is for the advice to be released."

The ombudsman replied that he could not take the Auditor-General's comments into account because he could only rule on the ministry's and minister's decision at the time it was made.

Another wall. But I tried one more approach. I made a new OIA request, this time adding the Auditor-General's findings to my request. Again, MFAT said no. Again, I complained to the ombudsman. But this time he had to take the Auditor-General's report into account. This was 10 days before Christmas, 2016. Bruno Mars was about to hit number one with '24K Magic'.

It was April before I had a reply. In it, the ombudsman's office acknowledged it was investigating my complaint in light of the Auditor-General's report. It felt like progress. I crossed my fingers and waited.

Then last week the phone call came. In short, section 6(a) had again stumped me and the legal advice would not be released. But that wasn't the end of it. The ombudsman was concerned that there be no suggestion of a gap between his office and the Auditor-General's. Quite rightly, he wasn't comfortable with the implication that he had seen legal advice that Provost's office hadn't. He had gone back to MFAT to discuss a clarification.

I waited on tenterhooks to see what would come out of those negotiations. I got the answer this week. Finally.

An email from MFAT once again invoked section 6(a) to withhold all and any legal advice. It's clear by now that some legal advice on the deal does exist. But the final paragraph at last dragged from them the telling and damning confirmation.

"Following discussion with the Chief Ombudsman, the Ministry advises it did not seek or provide advice on the extent of the risk of a claim in the New Zealand courts for compensation from the Al Khalaf Group against the government".

All the legal advice on the lawsuit McCully referred to, the advice relied on to justify the purchase of a farm in Saudi Arabia and a $4m cash payout, the advice he said belonged to MFAT, the advice MFAT refused to release because it might prejudice New Zealand's reputation - it didn't exist. No advice on the lawsuit was ever sought by the Ministry.

We await McCully's response. Could there be other advice, even though the Auditor-General saw no evidence of it? Is there yet an explanation? And we await what MFAT might say about why it took two years, an Auditor-General's report and the direct intervention of the ombudsman for it to simply say that there was no advice on the lawsuit.

It's easy to forget during a campaign, especially one when such large amounts of spending are being promised by almost all sides, that politicians are asking our permission to spend taxpayers' money and take charge of our country's reputation. And just how serious a duty that is. It is our job to be vigilant of just how our politicians are discharging that duty. Hence, all those requests.

It's now September 2017. Taylor Swift is at number one with her song, 'Look What You Made Me Do'. Looking back over this two year battle for some transparency, it seems like an apt title.

* Tim Watkin is RNZ's Series and Podcasts executive producer and a former executive producer of The Nation.

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