Saudi sheep deal: No evidence of legal threat from Saudi businessman

Former Foreign Affairs Minister Murray McCully said a $11.5m deal with a Saudi businessman Hmood Al Khalaf was partly to remove a legal threat by the businessman. Photograph by Mark Mitchell

The National-led Government never received legal advice from its Foreign Affairs Ministry about the risk of being sued by a Saudi businessman, newly-released documents show.

Those documents directly contradict former Foreign Affairs Minister Murray McCully's claim that the Ministry of Foreign Affairs and Trade (MFAT) had received advice that it was at risk of being sued in relation to New Zealand's ban on live sheep exports.

The National Government signed a controversial $11.5m deal with businessman Hmood al Khalaf to create a sheep farm in Saudi Arabia.

Al Khalaf had been unhappy about the previous Labour-led government's ban on live sheep exports in 2003 and McCully said the deal was partly to remove the threat of legal action.

Al Khalaf could have sued for up to $30 million, McCully said in 2015. However, he has declined to release any advice about the potential legal threat.

Documents obtained by Radio New Zealand have now confirmed that MFAT "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".

The documents were released following discussion with Chief Ombudsman Peter Boshier.

Opposition parties have long argued that there was never a realistic threat of legal action and it has been used by the Government as justification for the deal.

An investigation by Auditor-General Lyn Provost into the Saudi sheep deal also found no evidence that MFAT sought or received advice on any legal threat.

In a report released last year, she said her office "saw no evidence of internal or external advice being sought on the extent of the risk of a claim for compensation from the Al Khalaf Group".

Provost's report concluded that the deal was not corrupt but that it had "significant shortcomings".

"Public money was spent within the necessary financial approvals. That said, I share many New Zealanders' concerns about the arrangements," she said.

The $11.5 million in Government money was spent on sending New Zealand sheep and equipment to Al Khalaf's farm in Saudi Arabia.

That included $6 million spent on establishing the farm, including equipment and technology, and a $4 million payment to the Al Khalaf Group.

A key motivation for the Government for the deal was to help progress a free trade deal with the Gulf states.

Labour MP David Parker said the documents confirmed the National Government had squandered millions of dollars and misled the public and Parliament.

"They've wasted $11.5 million. They've flown sheep to the other side of the world.
They've clearly lost their moral compass," Parker said.

He said the Government had spent the past two years fighting to block the release of documents which showed they had not told the truth.