"If central government powers are used to deprive lawful owners of property rights, such owners are entitled to proper compensation for the deprivation of such rights," said the Colfo application for judicial review.
Colfo spokeswoman Nicole McKee said that Police Minister Stuart Nash applied the wrong tests when he decided what ammunition to recommend banning.
"All New Zealanders should be concerned by bans without compensation of legally purchased products. This sets a truly dangerous precedent," McKee said.
"Today it's ammunition and licenced firearms owners, but if politicians are able to ban things without financial remedy, there's no telling what's next."
Colfo's application said that Nash's recommendation on what to ban was irrational, asked the wrong questions, and failed to consider relevant matters including how relatively harmless some of the ammunition was.
The application said that the minister should have had higher regard to the purposes of the Arms Act, one of which was to prohibit items that pose an extraordinary risk to the safety of the public.
People found in possession of banned ammunition face up to two years' jail.
In court today, Colfo's lawyer Jack Hodder QC said gun and ammunition owners' property rights had been "extinguished".
"All the property rights of value are gone."
He compared the situation to a hypothetical Government ban on motorcycles that could exceed the speed limit, if such a ban made it illegal to own those motorcycles.
He said Colfo wanted to see a clear chain of reasoning in making the decision to ban the certain types of ammo, saying it was particularly important "when public powers are being used to create an area of criminalisation that wasn't there before".
He pointed to an affidavit from the Police Minister, which said the banned ammunition types were for a "predominantly military purpose", and was "intended to hurt people".
"But, of course, any ammunition fired at a person is intended to hurt the person," Hodder said.
"He contrasts that with genuine civilian use ... but the contrast that we're talking about is a lawful use and a use that creates danger by either being criminal or accidental."
The purpose of regulation was to enhance public safety in some way, and he said these prohibitions did not do that.
He also said Nash did not consider the cost of ammunition when making compensation orders, because ammunition was cheaper than firearms. But Hodder pointed out the cost was high for those who had stockpiled ammunition for various purposes.
Lawyer for the Minister, Austin Powell, said military ammunition was for soldiers.
"It's part of our fundamental structure of all western democracies that the soldiers act for us only externally, so we arm our soldiers differently to the way we arm our police or ourselves," he said.
The hearing continues tomorrow.
