World Watch - International Law and New Zealand

Sanctions/counterterrorism

An Expert Advisory Group chaired by Colin Keating, a former New Zealand Ambassador to the UN, recommended in March this year that New Zealand follow the other Five Eyes members and introduce a full autonomous sanctions regime. 

The Government has yet to make any announcements in relation to the Group’s recommendations. Although the Group was appointed by the previous Labour Government, senior National MP and now Speaker, Gerry Brownlee has twice (in 2017 and 2021) sponsored private member’s Bills that would allow New Zealand to impose sanctions autonomously, outside of the UN.

On 30 October, the Ministry of Foreign Affairs and Trade (MFAT) announced it is reviewing the Russia Sanctions Act 2022 across a range of areas to determine its effectiveness and whether it is fit for purpose. The review is a statutory requirement of the Act, which was passed under urgency in 2022 without public input. Submissions closed on Monday 16 December 2024. 

MFAT sought feedback on 70 questions. Several of these questions offer particular opportunity for input from business, including whether the Act strikes the appropriate balance between the risk of sanctions evasion in New Zealand and the Act’s compliance costs. The issue of whether New Zealand should adopt a fully autonomous sanctions regime is outside the review’s scope. 

The consultation is an opportunity to provide feedback on the practical workability of the regime for businesses.  MFAT is unlikely to have full visibility of the extent of compliance costs, ranging from additional resourcing to dispute resolution, and affected revenue, at the individual business level.
Laura Green, Senior Associate

Measures undertaken this year under the Act include implementing a price cap on Russian-origin oil, originally agreed in December 2022 by G7 countries plus Australia, and the further addition of individuals and entities to the Schedule of sanctioned persons. The most recent additions (28 November 2024) target individuals and entities assisting the deployment of chemical weapons or facilitating the development, or transfer from Iran, of military equipment for Russia to use against Ukraine.

Under other existing policy frameworks, the Government has also issued instructions through border control to impose travel bans on extremist Israeli settlers who have committed violent attacks against Palestinians in the West Bank and designated the entirety of Hamas (political and military wings) as a terrorist entity under the Terrorism Suppression Act 2002.

Implementation of the Russia Sanctions Act has also been sharpened through new or updated guidance on:

• compliance, due diligence and understanding in relation to evasion risk in the Russia sanctions context (12 April 2024);
• notifying customers of an asset freeze or blocked transaction (13 May 2024); and
• prohibited services for maritime transport of Russian oil (18 June 2024).

Sanctions remain a key risk area for banks and other financial institutions.  The interconnected global economy means that financial institutions frequently interact with sanctions regimes around the world, each with their own unique obligations, meaning a vigilant approach is needed to ensure compliance.  This complexity will only be increased if New Zealand introduces a full autonomous sanctions regime.
Emma Peart, Senior Associate

MFAT and Trade continues to process applications for exemptions under the Russia sanctions regime, with seven issued in 2024.

Responsible investment and modern slavery

A recent report by the UN Working Group responsible for promoting, disseminating, and implementing the UN Guiding Principles on Business and Human Rights has highlighted the need for heightened human rights due diligence in situations of armed conflict. The UN Guiding Principles provide a global standard for preventing and addressing the risk of adverse human rights impacts linked to business activity. 

Guiding Principle Seven provides that because “the risk of gross human rights abuses is heightened in conflict-affected areas”, companies’ due diligence activities should be “heightened accordingly”. The Working Group report states that in relation to conflict-affected areas, investors should request that investees provide evidence that they have undertaken intensive human rights due diligence in their value chain and provide information on the actions they have taken to identify, prevent, mitigate, and account for human rights impacts with which they are involved, including in relation to all relevant stakeholders.

To assist investors, Responsible Investment Association Australasia published an Investor Toolkit on Human Rights and Armed Conflict last year, as explained further in our December 2023 International Trade Trends and Insights publication.

Modern slavery legislation is no longer a Government priority. In July, the Government confirmed it had disbanded a leadership group set up in July last year to provide advice on the development of modern slavery legislation that would require businesses to publicly report on their work to address exploitation risks in their operations and supply chains. MBIE’s extensive consultation on potential legislation which would have introduced a modern slavery regime wider than those currently in force in Australia and the UK will not progress further at this time.

The Government’s decision not to pursue modern slavery legislation has been met with perhaps unexpected regret by business leaders and particularly New Zealand fund mangers, with concerns that modern slavery legislation is necessary to bring New Zealand in line with key trading partners and to meet the expectations of domestic and international consumers.
Nicola Swan, Partner

Call to Action on ‘shadow fleet’ activities

On 28 November, New Zealand released a joint statement with Australia raising concerns about the rise in Russian and DPRK sanctions-evading ‘shadow fleet activity’, and acknowledging that collective action is needed. New Zealand and Australia have endorsed the UK-initiated Call to Action on the Shadow Fleet, an initiative aiming to promote practices that ensure compliance with international standards for safety, environmental protection, and insurance.

Red Sea attacks – impact on global trade

The Houthi armed group in Yemen has been attacking commercial shipping in the Red Sea, significantly affecting global trade passing through the Suez Canal.

Although the Cape of Good Hope provides a safe alternative route, the transit time is markedly longer and not be suitable for all goods. The disruption to shipping routes is compounding existing disruptions in the Black Sea (due to the Russia/Ukraine war) and in the Panama Canal (due to drought).

The New Zealand Customs Service has reported New Zealand exporters experiencing shipping delays, rising transportation costs, and, in some cases, cancelled export orders as a consequence. 

New Zealand initially responded in January, with a Cabinet decision agreeing to a request from the United States to deploy a small number of personnel to an international coalition conducting military action against the Houthi armed group. The deployment has since been extended and is mandated to end on 31 January 2025.

New Zealand looking to double its exports by value

Trade Minister, Todd McClay has reiterated the Government’s ambitious goal of doubling the value of New Zealand’s exports in ten years. Minister McClay has repeatedly emphasised that the Government’s plan to do so involves:

• securing new, diversified, and high-quality trade agreements (of which three have been secured this year);
• upgrading and enhancing the implementation of the agreements that New Zealand has already entered into; and
• targeting Non-Tariff Barriers and Technical Barriers to Trade.

In addition to trade agreements concluded this year (see below), in 2024 there were eight trade missions representing 128 businesses to Brazil, China, Japan, Malaysia, The Philippines, Singapore, South Korea, Thailand and the United States. The Government is planning to complete over 20 missions in its term.

The Government has also resolved 16 barriers to trade that were affecting over $733 million worth of exports and is targeting over $900 million in non-tariff barriers in 2025.

Trade Agreements 

Agreement on Climate Change, Trade and Sustainability (ACCTS)
Concluded by New Zealand, Costa Rica, Iceland and Switzerland on 2 July 2024, and signed on 16 November 2024, ACCTS aims to deliver trade commitments that contribute to addressing environmental challenges, including climate change, loss of biodiversity and pollution. Minister McClay stated the benefits for New Zealand will include: 

• removal of tariffs on key exports including 45 wood products and wool;
• removal of tariffs on hundreds of other products including recycled paper, LED lamps, and rechargeable batteries; and
• support for New Zealand’s renewable energy sector by establishing rules to prevent harmful fossil fuel subsidies, and setting guidelines for ecolabelling.

The Parties note in their Joint Ministerial Statement on the Conclusion of Negotiations that they have invited other World Trade Organization (WTO) members to join the agreement and that their ambition is to rapidly increase the ACCTS membership in order to drive momentum at the WTO.

NZ and UAE conclude trade agreement

New Zealand and the United Arab Emirates (UAE) concluded negotiations on a Comprehensive Economic Partnership Agreement (CEPA) in just over four months, heralded as one of the fastest negotiations to date.

Minister McClay described the UAE as “a key export destination and hub in the Gulf region”, with two-way trade in the year to June 2024 being valued at NZ$1.3 billion. Minister McClay said the CEPA will eliminate duties on 98.5% of New Zealand’s exports immediately on entry into force, rising to 99% within three years. 

NZ-EU FTA now operative

The NZ-EU FTA entered into force on 1 May 2024, with Minister McClay stating the agreement would increase New Zealand’s total exports to the EU by $1.8 billion annually and provide an annual boost to GDP of up to $1.4 billion. Minister McClay announced the FTA will “level the playing field for Kiwi businesses, increase the resilience of our economy, and contribute to the Government’s target of doubling our export value in 10 years”. 

Minister McClay said the EU was already New Zealand’s fourth largest trading partner pre-FTA with two-way trade of $20.2bn. The key export sectors that are expected to obtain an immediate benefit from the increased access include horticulture, fish and seafood, honey, wine and manufactured products.

For details on tariffs and customs procedures, geographic indications, and innovative provisions, including on sustainability, gender, and Māori trade, see our commentary earlier this year.

NZ seeks trade agreement with India 

The National Party campaigned on obtaining an FTA with India in its first term and is now seeking to make good on this promise, with Minister McClay meeting with India’s Minister of Commerce and Industry in person five times in nine months. India is an important trading partner for New Zealand, with two-way trade totalling $2.83 billion annually and New Zealand exporting $520 million dollars’ worth of goods to India.

Minister McClay has indicated that agri-tech cooperation may provide an avenue to progress talks. Prime Minister Christopher Luxon met with India’s leader Narendrea Modi in October at the East Asia Summit in Laos, and intends to visit India in 2025.

New Zealand’s principal exports to India are logs and wood products, fruit and nuts, and education services.

NZ concludes trade deal with the Gulf Cooperation Council (GCC)

New Zealand and the six-nation GCC concluded a trade agreement on 31 October 2024, opening up opportunities for New Zealand exports to the Gulf region, which were at $2.6 billion in the year to June 2024. Minister McClay stated the agreement will deliver duty free access for 99% of New Zealand exports over ten years. The agreement includes provisions to give New Zealand’s primary exporters preferential access, streamline customs processes, and reduce trade barriers.

Sustainability provisions

Non-regression clauses relating to environmental protection now feature in many of New Zealand’s trade agreements, including the NZ/China FTA, the NZ/UK FTA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Non regression clauses are provisions that prevent parties from weakening or rolling back existing standards and regulations to ensure that progress made in these areas is not undone over time. The clauses are receiving increased academic and other attention but, despite their emerging prominence, their interpretation and application remain untested. 

Article 19.6.2 of the NZ/EU FTA, for example, requires that New Zealand and the EU “effectively implement” the Paris Agreement without specifying what exactly this might entail. Although in theory, either party could use the dedicated dispute resolution provisions in the FTA if there is a view that the other has breached its Paris Agreement commitments, these types of obligations are expected to be used to increase diplomatic pressure between the countries, if one perceives the other as not living up to its obligations. 

US lifts ban on NZ fish exports

In April, the US Court of International Trade lifted a preliminary injunction against the importation into the US of nine fish species from New Zealand. This was the first time the Court has issued an injunction on environmental grounds, and the first time the Court has lifted such an injunction.

The case was brought against the US Government by the Sea Shepherd Conservation Authority in May 2020 and alleged that New Zealand measures to protect Māui dolphins did not meet US requirements for imported seafood products. 

The decision to lift the ban, which Oceans and Fisheries Minister Shane Jones estimates cost New Zealand around $2m in lost sales, followed an assessment undertaken by the US Government at the New Zealand Government’s request which found that the protections applying to the Māui dolphin met and even exceeded the standards under the US Marine Mammal Protection Act.

European Commission proposed to delay Deforestation-free supply chains Regulation

The European Commission delayed the implementation of the European Union deforestation-free supply chains Regulation (EUDR), which was passed in April last year and will require importers of certain commodities to prove their goods weren't grown on land deforested after 2020. This comes in response to concerns raised by EU member states, non-EU countries, traders and operators who said they would not be able to fully comply with the rules if they came into force at the end of 2024.

The EUDR was set to come into force at the end of this year, but on 2 October the European Commission proposed to delay implementation, with the regulations applicable from 30 December 2025 for large companies and 30 June 2026 for SMEs. The proposal to delay followed international criticism of the EUDR and aims to provide a transition period for affected businesses. 

In New Zealand, both red meat and forestry industry participants have welcomed the delay. Minister McClay said the proposal “is sensible, and would give New Zealand exporters confidence that shipments on their way to Europe will continue to be accepted”.

CPTPP – NZ and Canada

New Zealand’s trade dispute with Canada over dairy tariff quotas (TRQs) is threatening to spark back into life after Canada failed to meet an agreed deadline of 1 May 2024 to comply with a September 2023 ruling in New Zealand’s favour by an independent panel under the CPTPP dispute resolution process, which New Zealand invoked in May 2021.

The dispute arose after Canada allocated a significant portion of TRQs to Canadian processors, rather than retailers that might import dairy products. Canada also administered the TRQs in a way that was considered non-transparent and restrictive, creating barriers for foreign exporters.

Canada’s administration of the TRQs had been found to be inconsistent with its commitments under the CPTPP as the effect was to give its own domestic industry priority access to the detriment of New Zealand producers, and the independent panel’s decision required Canada to adjust its TRQ allocation and administration practices. Canada has made some changes to its approach but not enough to achieve full compliance or to satisfy New Zealand.

On 18 October, Minister McClay announced that, after seeking urgent legal advice, New Zealand had triggered mandatory negotiations with Canada after multiple meetings failed to result in a solution. If the parties cannot agree on compensation in 30 days of negotiations, New Zealand can then choose to suspend some of the benefits owed to Canada under the CPTPP.

On 19 October, the Canadian Government issued a statement demonstrating no intention to back down. It states, “[t]he Government of Canada will always defend our supply management, firmly standing up for Canada’s dairy industry”, and “[w]e are confident that Canada’s new policies fulfil Canada’s obligation”.

Ukraine v Russia

The International Court of Justice (ICJ), in a judgment delivered on 2 February 2024, has accepted one of Russia’s objections to the application filed by Ukraine in 2022 so will not now pursue Ukraine’s claims in relation to whether Russia’s actions in the war violate Articles I and IV of the Genocide Convention.

It will still, however, consider Ukraine’s challenge to Russia’s accusations that Ukraine is committing genocide in the Luhansk and Donetsk regions.

Russia had initially challenged the ICJ’s authority to hear the dispute, but the ICJ held in March 2022 that it had jurisdiction under Article IX of the Convention, to which both Russia and Ukraine are signatories. Russia meantime continues to ignore the ICJ’s order of March 2022 that it suspend military operations in Ukraine pending the Court’s final decision.

A number of States have intervened as third parties, including New Zealand, with the purpose of ensuring the proper interpretation of the Genocide Convention.

Rapid growth in global ESG reporting/sustainability trade measures

The escalation on a global scale of regulatory interventions requiring ESG disclosures and corporate sustainability practices is transforming the environment in which business must operate.  Our recent report for The Aotearoa Circle is a global first to survey all climate and sustainability reporting requirements, including climate-related disclosures, affecting New Zealand exporters. The report also surveys emerging trade measures that relate to climate change and sustainability, including the EU’s carbon border adjustment mechanism.

Key insights from that report:

• Mandatory climate reporting is increasingly widespread with over 60% of world GDP now subject to mandatory climate-related disclosures either proposed or already in force.
• The global ecosystem of private frameworks and standards, including the Global Reporting Initiative (GRI), Greenhouse Gas Protocol and the Science-based Targets Initiative (SBTi), is playing an increasingly significant role in setting market expectations. There is also increased uptake of voluntary reporting under initiatives such as the Task Force on Nature-related Financial Disclosures.
• Climate and sustainability are increasingly the subject of border levies and international trade negotiations.
• Increasing ESG related obligations create significant implications for New Zealand businesses, with our September updated showing that over 85% of New Zealand’s exports by value are going to markets with mandatory ESG reporting in force or proposed. Incoming US President Trump’s comments that he will roll back the US Security and Exchange Commission’s rule requiring climate-related financial disclosures are yet to play out, with strong state-level reporting requirements in California and New York already in place.

International shipping emissions

According to the New Zealand Climate Change Commission, emissions from New Zealand’s international shipping and aviation are equivalent to about 9% of New Zealand’s net domestic greenhouse gas emissions.

The Commission’s recent report (published 4 December 2024) of its review of New Zealand’s 2050 emissions target recommended amending the target to require net emissions of all greenhouse gases other than biogenic methane to reach at least net negative 20 MtCO2e by 2050, with emissions from international shipping and aviation included in this target.  According to the report, including these emissions:

• is feasible;
• would increase certainty, transparency, and accountability in New Zealand’s efforts to limit warming; and
• would align New Zealand with trading partners and international industry efforts to reduce these emissions.

ITLOS

The Advisory Opinion was delivered on 21 May 2024 in response to a request from the Commission of Small Island States on Climate Change and International Law (COSIS).

It is significant for two reasons:

• it interrogates the United Nations Convention on the Law of the Sea (UNCLOS) in the context of climate change and sets a clear legal imperative for States to take action; and
• it has a broad jurisdiction as 168 States are Parties to UNCLOS and even States that do not have Party status recognise UNCLOS provisions as part of customary international law.

ITLOS found unanimously that:

• greenhouse gas (GHG) emissions are a form of marine pollution under UNCLOS;
• States have a stringent duty of due diligence and responsibility to regulate GHG emitting activities and to reduce their emissions to protect the oceans;
• States have an obligation to keep temperature rise to no more than 1.5°C and may need to go beyond the Paris Agreement to meet their legal obligations on marine protection; and
• States with greater historic responsibility for the climate crisis must do more to address GHG emissions than states with smaller footprints.

Two other advisory opinions on climate change are now under consideration – one by the Inter-American Court of Human Rights and the other by the International Court of Justice.

Chapman Tripp (partner Nicola Swan) is acting as lead counsel for the COSIS in relation to COSIS’s separate intervention in the proceedings currently before the Inter-American Court of Human Rights.

The ITLOS opinion will likely inform those deliberations, both of which are also expected significantly to advance the international legal understanding of climate-related obligations.

Klimaseniorinnen v Switzerland - ECHR

The case was brought by four elderly women and KlimaSeniorinnen Schweiz (a Swiss seniors association) against the Swiss Government for failing to take sufficient action on climate change in violation of their rights under the European Convention on Human Rights.

The Court found unanimously that their right under Article 6 § 1 (right to a fair trial – access to court) had been violated, the applicants having failed to get any Swiss court to hear their complaint.

It also found by a 16 to one majority that their rights under Article 8 (right to respect for private and family life and home) had also been breached. This finding was based on the premise that the Convention encompasses a right to effective protection by the State from the serious adverse effects of climate change on lives, health, wellbeing and quality of life.

The Court underlined that States should be accorded a margin of appreciation regarding the choice of mitigation policies they adopted but considered that the Swiss Confederation had exceeded its discretion in this regard. In particular, there had been “critical gaps in the process of putting in place the relevant domestic regulatory framework, including a failure by the Swiss authorities to quantify, through a carbon budget or otherwise, national greenhouse gas (GHG) emissions limitations”.

The Court held it could not be “detailed or prescriptive” with regards to any actions to be implemented to comply with its judgment, leaving that to the Swiss Confederation with assistance from the Committee of Ministers, the Council of Europe’s decision-making body, to determine.

Judge Eicke disagreed (in a partly concurring partly dissenting opinion) with what he described as the imposition of “a new “primary duty” on Contracting Parties “to adopt, and to effectively apply in practice, regulations and measures capable of mitigating the existing, and potentially irreversible, future effects of climate change”. He considered that this applied to both emissions emanating from within Switzerland and to “embedded emissions” generated through the import of goods and their consumption – “none of which have any basis in Article 8 or any other provision of or Protocol to the Convention”.

Duarte Agostinho and Others v Portugal and 32 Member States

In contrast, on 4 September 2024, the European Court of Human Rights refused to accept the application in Duarte Agostinho and Others v Portugal and 32 Member States. The six applicants, young Portuguese nationals residing in Portugal, had submitted that Portugal and the other European states were responsible for harm from climate change.

The Court acknowledged that States have ultimate control over activities generating emissions in their territories, that there are international law commitments they have incorporated domestically, and that there is a causal relationship between the emissions generated in one country and the rights and wellbeing of people residing in other countries.

However, the Court refused to admit the claim as admissible on the basis that these considerations could not serve as a basis for a novel expansion of extraterritorial jurisdiction. Nor had the applicants exercised all domestic remedies, such that their case could not be admissible before the ECHR. 

Towards a UN plastic treaty

The Fifth Session of the Intergovernmental Negotiating Committee to develop an internationally legally binding instrument on plastic pollution wrapped up on 1 December. There were over 3,360 delegates in attendance, representing 170 Member states and over 440 Observer organisations, making this the largest Intergovernmental Negotiating Committee gathering to date. Negotiators failed to reach an agreement, and plan to resume the talks next year. 

New Zealand has agreed to support an instrument that establishes an effective global regime to reduce plastic waste and eliminate plastic pollution on a global scale, covering the full lifecycle of plastics. 

Pandemic treaty negotiations

Efforts continue on the world’s first pandemic treaty, a World Health Organization (WHO) initiative that began in March 2021 with a statement of commitment from 24 countries, although the negotiations are now running behind schedule.

The Intergovernmental Negotiating Body had hoped to finalise an agreement this year but have failed to produce a final draft. The negotiations will continue in 2025, with the goal of concluding an agreement by May next year at the World Health Assembly.

UN cybercrime treaty agreed

On 9 August, the UN Ad Hoc Committee reached an agreement on the Draft UN convention against cybercrime. The draft text will be submitted to the UN General Assembly for formal adoption later this year. If adopted, the draft convention would become the first global legally binding instrument on cybercrime.

Minister Watts at COP29

The 29th annual United Nations Climate Change Summit (COP29) was held in Baku, Azerbaijan. Climate Change Minister, Simon Watts, attended with the objective of strengthening New Zealand’s position in navigating the global economic transition to a low emissions future and to support resilience in the Pacific. 

The Minister co-chaired negotiations on carbon markets alongside Minister Fu of Singapore and co-chaired the annual Pacific Ministers Roundtable. A deal was reached on carbon markets (Article 6) with all 196 Parties agreeing to the final text. It is hoped that this decision will provide the necessary confidence in carbon markets to facilitate the trading of high quality carbon credits, with technical rules being sorted in 2025.

Minister Watts announced New Zealand’s $10 million contribution to the new Fund for Responding to Loss and Damage at COP29. The Fund was set up at COP28 to help developing countries respond to economic and non-economic loss and damage caused by the adverse effects of climate change.

AUKUS

While visiting Australia in August, Prime Minister Christopher Luxon delivered a significant speech on foreign policy to the Lowy Institute. In this speech, Prime Minister Luxon stated, in relation to regional security, that New Zealand “must be a participant and a contributor – not an interested bystander”.  

The Joint statement of the Australia-New Zealand Leaders’ Meeting 2024 states that the Prime Ministers affirmed AUKUS is an initiative that would enhance regional security and stability. They acknowledged New Zealand’s interest in exploring potential collaboration on advanced capability projects under AUKUS Pillar 2. New Zealand is not involved in Pillar 1, which will deliver a conventionally armed nuclear-powered submarine capability to Australia. Pillar 2 involves cooperation on advanced technologies, including cyber.

Pacific Islands Forum

Tonga hosted the 53rd Pacific Islands Forum Leaders Meeting in August 2024, the theme was “Transformative Resilient Pasifiki: Build Better Now”. Forum members were Australia, New Zealand and 16 other island States. 

Guam and American Samoa have observer status and have recently been given permission by the US Government to become non-voting associate members but are unable to exercise decision-making powers as they are under US jurisdiction.