Letter is 'government hint of redress' for Saudi businessman over sheep exports

Foreign Minister Murray McCully is back in the country and has again faced questions over a controversial deal.

A letter to Foreign Minister Murray McCully indicates the Government suggested a Saudi businessman could take legal action against it over sheep exports, the Green Party says.

Foreign Minister Murray McCully is back in the country and has again faced questions over a controversial deal that saw more than $11 million spent on businessman Hamood Al Khalaf's farm in Saudi Arabia. Mr Al Khalaf lost millions when live exports of sheep were banned by Labour, with the ban then extended under National.

Mr McCully has said one reason for the deal was to defuse a legal threat, after advice sought by Mr Al Khalaf indicated he could sue for up to $30 million.

He blamed the previous Labour Government for knowingly misleading Mr Al Khalaf about a possible resumption of live sheep exports.

Negotiations towards the Saudi farm deal took that threat off the table, Mr McCully has argued. In doing so, it cleared away the basis of Saudi opposition to a regional free trade deal and established a demonstration base for Kiwi agribusiness.

Yesterday Green Party co-leader James Shaw said he had sighted a November 2011 letter from Brownrigg Agriculture to Mr McCully, written on behalf of Mr Al Khalaf. Despite that advocacy, the Hawkes Bay-based Brownrigg Agriculture subsequently won the tender to help set up the farm.

About 900 pregnant ewes were air-freighted from New Zealand to the farm late last year. The farm is due to be completed this month.

Mr Shaw said the letter from Brownrigg referred to the fact that progress in long-term negotiations to overturn the halt on live sheep exports had stalled.

The letter then stated: "He feels that if this is the case then he would have no option but to seek commercial redress, as indeed has been suggested by your Government as a last-resort option for him."

"It suggests that somebody in the Government had said legal action was a course of action that they thought Mr Al Khalaf and his associates could take, which does seem extraordinary," Mr Shaw said.

"Especially given that Murray McCully said in the House that the entire justification for doing the deal in the first place was the threat of legal action."

David Brownrigg, managing director of Brownrigg, said it was the company's understanding the Government had suggested commercial redress as an option for Mr Al Khalaf.

Asked if Mr Al Khalaf considered commercial redress as a response to National's actions, Mr Brownrigg said: "Yes, it is our understanding that Mr Al Khalaf considered commercial redress as a response to Governments' actions on live sheep exports over the previous seven years."

In response to questions, Mr McCully said the Government was aware that Mr Al Khalaf had advice he could pursue a claim.

"I have always taken the position that we should resolve the matter without recourse to litigation and I was clear that the Government was not prepared to be party to discussions about compensation."