Acting Prime Minister Winston Peters says using diplomatic immunity to get out of a rental dispute might be a "disgrace", but there is nothing the Government can do about it.
The Tenancy Tribunal has ruled EU deputy head of mission Eva Tvarozkova could not be asked to repay $20,000 in unpaid rent and damages to Wellington landlord Matthew Ryan because she had diplomatic immunity in New Zealand.
Peters said the Government's hands were tied due to diplomatic immunity.
"It might be a disgrace, but if you have got your diplomatic staff offshore in any country and they become victims of a local legal or political attack, have their lives threatened, or property taken over by the state even though New Zealand paid for it, you realise diplomatic immunity is very important.
"There are massive upsides to it, but every now and again you get a downside."
If a New Zealand diplomat found themselves in the same situation overseas, Peters said New Zealand would front up.
"Yes we would cough up, for our reputation we would."
Ryan called the decision released yesterday a travesty.
"It gives a really poor message to landlords," he told Newstalk ZB's political editor Barry Soper.
"It states very clearly that landlords have no rights.
"And it sends a message out to all diplomats that they can behave appallingly ... and there will be no redress for them because the Tenancy Tribunal puts it hands up and says 'We can't assist you'."
Tvarozkova, from Slovakia, was told by the tribunal in April she had to pay Ryan $20,000 for unpaid rent and damaged property at a $1.5m Wellington townhouse, which she had rented for $1500 a week.
However, the tribunal did not consider Tvarozkova's automatic immunity as a diplomat.
The Ministry of Foreign Affairs and Trade asked the EU delegation in New Zealand to waive immunity, but it declined.
A rehearing was granted in May, and the tribunal's ruling was released yesterday.
"The [landlord's] application is dismissed for want of jurisdiction," adjudicator Rex Woodhouse said.
In a further blow to the landlord, the tribunal said the $6000 bond could be paid back to Tvarozkova if her lawyers requested it.
"I think the entire decision is a travesty," Ryan said.
It would have ramifications for all diplomats wanting to rent properties in New Zealand, he said.
He was hopeful of an out-of-court settlement, which the diplomat's lawyers had indicated was possible during the hearings.
At the centre of the dispute was whether the lease of the Karaka Bay property could be defined as a commercial transaction.
In two recent cases in Canada, judges ruled that immunity did not apply to commercial transactions, including unpaid rent.
However, Woodhouse did not agree with those rulings.
"I am not persuaded that they present a correct interpretation of the law to be accepted as authoritative," he said.
Tvarozkova, who has been posted in New Zealand since 2014, had a fixed-term lease at the property until September but left the property early.
Ryan successfully applied to get back the unpaid rent until the house was tenanted again – a total of $17,357.
He also successfully applied for the costs of damage to blinds and an internal lift, and the cost of an alarm callout when the tenant was overseas.
But after MFAT alerted the tribunal to Tvarozkova's immunity, it agreed that a miscarriage of justice had taken place.