First, kill all the commercial lawyers

By Peter V O'Brien

Friday 24th September 2004

The time has come for a serious debate about the roles of regulatory agencies, the courts, semi-public bodies and the government in general in business activities.

Hardly a week goes by without a regulatory agency making some decision on a business proposal, an affected organisation appealing the decision to the courts, or individuals taking action to protect what they perceived as their legitimate interests.

It can almost be guaranteed that appeals would be made to the judiciary when a regulatory agency's decision was unfavourable to a party involved in a proposal. Commercial lawyers must be slavering over their bank statements as clients pay bills for advice and the costs of appearances at hearings.

The issue peaked this week when the High Court upheld a Commerce Commission decision to decline approval of an alliance between Air New Zealand and Qantas.

Both airlines said they would not appeal the High Court decision and Finance Minister Michael Cullen said the government (Air New Zealand's majority shareholder) was disappointed at the ruling but would not legislate to permit the alliance.

Air New Zealand said the exercise had cost the company over $20 million, although chief executive Ralph Norris put the amount into the perspective of a $3.5 billion annual revenue.

Norris was probably indirectly expressing his frustration at the decision when he talked about appeals lining lawyers' pockets when interviewed on radio and television but he had a valid point. The costs of dealing with regulatory agencies and courts on commercial matters are horrendous, to the extent that few, if any, individuals would take action.

Decision-making bodies are government-funded, whether directly through public appropriations for their operations or indirectly in public sector financing of their legal fees.

Procedures for courts to award costs have become a sop. Costs rarely cover private sector bills and are another inhibitor on individuals proceeding to assert "rights," irrespective of the Companies Act's provisions for companies to cover shareholders' costs.

It is obvious that operators in commercial transactions should be held to account if they broke the law but the current situation has too many bodies nibbling at the regulatory cake.

A stock exchange-listed company, for example, could find a single action subject to rules of, and investigation from the New Zealand Stock Exchange (NZX), the Commerce Commission, Securities Commission, Takeovers Panel and eventually the courts.

The Air New Zealand/Qantas case could have involved the lot, if one airline tried to acquire the other and would have brought in a similar duplication of Australian agencies.

Cullen's, and presumably therefore the New Zealand government's, disappointment at the court decision on the proposed alliance did no more than emphasise anomalies in current procedures. We can infer from Cullen's "disappointment" that the government favoured the alliance.

The government's independent; quasi-judicial Commerce Commission said no and the independent judicial High Court upheld that negative.

National airlines worldwide are either falling over, or retrenching, the latest being Air Italia.

The New Zealand government would know that but it empowered its agencies through government enactments to ignore reality, while telling others to consider the national interest.

Those matters went beyond airlines, as shown in the extraordinary, and probably expensive battle over Auckland energy company Vector's attempt to move from a trust structure. That has been in the courts and was there again at the time of writing.

The Takeovers Panel jumped on the deal between Dorchester Pacific managing director and Bridgecorp, the latter involving 1980s high-flyer Rod Petricevic. That exercise was clearly within the panel's brief but other agencies could get involved, possibly including NZX, due to Dorchester being a listed company.

These matters were no reflection on any, or all, agencies, each of which operated within its legal sphere. (They could reflect on overpriced, greedy commercial lawyers, whom the Law Society could sort out if it had the nerve.)

The issue is overlapping jurisdictions between authorities, some of which seem to prefer analysis of trivia to expediting business reality. Analysis of trivia has resulted in heavy business costs.

Business also has a responsibility to avoid appeals against decisions of regulatory tribunals where the appeal procedure was used as a delaying tactic and as a bet that a judge could be favourable to the cause where there were blurred legal niceties.

Even judges have social and economic leanings when the law may be uncertain. High-living commercial lawyers probably see no problem with the regulatory structure. Those who pay and have to cut through the regulatory brambles have a different outlook.

High-living commercial lawyers probably see no problem with the regulatory structure

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