The Prime Minister says he is considering the Waitangi Tribunal call for the Government's partial sale of state owned to be delayed until the debate over water rights is resolved.
The tribunal released its interim report on the issue today and has advised the Government to hold off on the planned sale of a 49% stake in Mighty River Power.
The tribunal is considering an urgent claim by the Maori Council on customary water rights ahead of the sale.
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The report was fast tracked at the Government's request so it could a make decision on selling assets in the next couple of weeks. While the tribunal reported back quickly, it did not deliver the report the Government was hoping for.
It says the Government cannot hope to address Maori concerns before the sell-down, expected later this year.
"The tribunal concluded that, in practical terms, the Crown will not be able to provide a meaningful form of rights recognition for Maori in respect of its water bodies after it sells the shares to private investors," the report said.
The tribunal found a link between shares in the power companies and Maori rights in the water resources, and is urging the Government to reach a settlement with Maori on the issue before pushing ahead.
"Because it cannot be stated with certainty that any other commercial rights recognition will actually come to pass, and since the opportunity exists here and now, the tribunal concludes that the sale should be delayed while an accommodation is reached with Maori," the report said.
Prime Minister John Key says he will consider the report before issuing his response.
"We thank the tribunal for the report, we will give it to our lawyers and come back to it in the fullness of time," he said.
Key has repeatedly said no-one can claim rights to water, and suggested the Government could ignore the findings of the tribunal.
But the Prime Minister can expect little sympathy from the opposition.
"We believe it (the Government) needs to junk the whole asset sales programme we believe it needs to delay while it looks at these claims further," Labour leader David Shearer told ONE News.
Green Party co-leader Russel Norman said that it is time for the Government to give up on its asset sale plan.
"It could ignore the Waitangi Tribunal's recommendations and find itself in court battles with iwi; it could attempt to cut a deal that would see it hand over millions of dollars' worth of shares in our energy companies to iwi, which may not settle the issue; or it can do the sensible thing and drop its asset sales agenda altogether."
Mana leader Hone Harawira agreed saying that the Government "needs to stop in its tracks".
"Unless John Key wants a messy battle in the courts he needs to listen."
Harawira questioned how the Maori Party would respond, saying the report had thrown "a spanner in the works".
"Water rights need to recognised and the sale of state assets stopped until those rights are sorted. The question is will the Maori Party stand united with Maori, even to the point of walking away from National? If the past is anything to go by then the answer is no," Harawira said.
Maori Council 'delighted'
Deputy chair of the Maori Council, Rahui Katene, said she was "delighted" with report.
"It's a total vinidication of all the work people have put in for many years."
She said the report was not one-sided.
"But what it comes to in the end is that what the Crown is saying and what their position is does not stack up and that is very good to see that they have recognised that.
"The tribunal recognises that Maori do have proprietary interests in water resources and secondly that if the Crown does go ahead with the sale of Mighty River Power it would be a breach of the Treaty."
She said there is still a long way to go, and the Maori Council wants to sit down with the Government and all interested parties so they can find a "way forward together".
The report said that it would be impossible to devise a comprehensive scheme for the recognition of Maori rights to water in the time available.
But, finding a solution could prove difficult as the tribunal says shares in the power companies are not a remedy. Instead they would need "enhanced power" over the companies that control and use water.