Earlier this month, former solicitor-general Una Jagose KC warned that legislating away Mike Smith’s climate case against Fonterra would do nothing to stop climate litigation. It would simply put a target on the Crown’s own back. She was proven right within weeks. Dutch environmental group Both ENDS has lodged the first formal environmental complaint under the NZ-EU free trade agreement’s strengthened single entry point mechanism. It alleges New Zealand has breached the climate commitments attached to a deal covering $21 billion in two-way trade.
This is no longer a domestic argument about oil permits and tort law. It is a question of whether Brussels decides Wellington has broken the bargain behind preferential access for our meat, dairy and horticulture.
A slow fuse, not a tariff
Exporters should not panic. The complaint suspends nothing. The European Commission must first decide whether to take it up. Law professor Jane Kelsey and Both ENDS trade policy head Fernando Hernandez set out the sequence in July. If the Commission proceeds, the matter goes to Wellington through the agreement’s committees, then formal consultations, and “failing those, an independent panel of experts whose public report the parties are obliged to act on.”
What makes this deal different is the end of that road. It is the first EU agreement where failing Paris Agreement obligations can, as a last resort, cost a country its trade concessions. That is a years-long process with plenty of exits. But it is now formally under way, and it is a test case other EU trading partners will be watching.
The EU is not alone in looking. In June, the UK was examining whether New Zealand’s oil and gas support breached similar clauses in the UK-NZ deal. At the time, Trade Minister Todd McClay said: “We honour our commitments in free trade agreements, and we are within our rights to decide how we meet international obligations.”
The own goal in the drafting
The complaint cites three things: reopened oil and gas exploration, fast-tracked extraction, and the law that retrospectively extinguished Smith v Fonterra after the Supreme Court cleared it for trial. The first two are policy choices a sovereign government is entitled to make. Plenty of business owners will think a tort claim against seven emitters was the wrong tool for climate policy in the first place.
The third is the problem. The FTA bars weakening environmental protection to encourage trade or investment. Kelsey and Hernandez argue the government’s own regulatory impact statement and ministerial announcements describe the bill’s purpose “in exactly those terms.” A blanket, retrospective, uncompensated immunity, expressly extended to overseas investors and justified as investment protection, is close to a textbook fit for the clause. In July, Kelsey warned that weakening climate litigation protections could be read as a breach of the agreement’s environmental commitments. The government pressed ahead anyway.
McClay’s response this week is that New Zealand is compliant and that “it is not for overseas countries, organisations or lobby groups to tell New Zealand how to meet its obligations.” That is fine as a sovereignty principle. It is weak as a legal defence, because New Zealand chose to sign a treaty that invites exactly this kind of scrutiny.
The emissions record is not the weak point
The irony is that the aggregate numbers are defensible. The Ministry for the Environment’s latest inventory puts 2024 net emissions at 54.8 Mt CO2e, down 2% on 2023. The picture is not spotless. Energy emissions rose 0.8% and forestry removals fell 5.1%. In February 2026, Stats NZ reported that the economy’s emissions intensity was 38.3% lower than in March 2010.
That is a record ministers could have taken to Brussels with confidence. Instead, the fight will turn on a narrower legal test about specific laws, where the government’s own paperwork may be its biggest liability.
What exporters have riding on it
The stakes are not abstract. Goods and services exports hit $32.5 billion in the June 2026 quarter, up from $28.5 billion a year earlier, with meat values up 10% and dairy up 2.9%. Those sectors had the most to gain from the EU deal. Fonterra, the named defendant in the case that triggered the immunity law, sits at the centre of it.
Kelsey and Hernandez put the trade-off plainly in July. They said honesty requires weighing “the modelled cost of a remedy that may never be ordered” against the real value of preferential access. You do not have to share their politics to accept the arithmetic.
The next step is the Commission’s decision on whether to take the complaint up. If it does, Wellington should stop treating this as activist theatre and start engaging, because consultations are the cheapest place to resolve it. Exporters with EU contracts should be asking their industry bodies what the government’s plan is. Relying on bluster to see off a formal treaty process is a poor bet with market access at stake.
Sources
- Newsroom: Formal complaint that NZ climate backsliding breaches Europe trade deal (2026-09-29)
- Newsroom: UK probes whether NZ oil and gas investment breaches trade deal (2026-06-24)
- University of Auckland: Banning climate lawsuits could risk billions (2026-07-22)
- Waatea News: Climate lawsuit ban could put NZ-EU trade deal at risk, legal expert warns (2026-07-28)
- Ministry for the Environment: New Zealand’s Greenhouse Gas Inventory 1990-2024 snapshot (2026-04-16)
- Stats NZ: Greenhouse gas emissions (industry and household): September 2025 quarter (2026-02-05)
- Stats NZ: International trade: June 2026 quarter (2026-09-03)
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