Story: Law and the economy

Page 1. Setting the framework

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An inherited legal system

Many of New Zealand’s laws, including the ones that govern economic activity, were inherited from Britain. In 1858 a law was passed that applied all English law to the colony. This was backdated to 1840, the year New Zealand was annexed by Britain. This law effectively overrode any Māori customary law of that time, despite the fact that the Treaty of Waitangi was signed in 1840.

New Zealand also embraced English common law – law that developed from customary practice and judges’ decisions, rather than from written statutes.

Parliament’s role in creating law

Parliament makes New Zealand’s laws. New Zealand’s Parliament has only one chamber or house, so there is no scrutiny of the decisions of one chamber by another. Unlike in some other countries such as the US, in New Zealand the law courts are not superior to Parliament. There is no external check on Parliamentary legislation in New Zealand, whereas, for example, the actions of parliaments of European Union member states are reviewed by the European Court of Justice.

Property rights in economic activity

Economic activity involves interactions such as the exchange of goods and services among individuals, groups and entities such as companies. These interactions usually involve money, but economic activity also includes non-commercial activities.

English common law addressed a wide range of conflicts between individuals, groups and other entities. Common law came to embrace the idea that individuals have a right of action over their own property, and so developed a system of property rights.

Property rights mean the right to use that property, to benefit from income generated from legally permitted rights, to exclude others from using these rights, and to transfer control of some or all of the property rights to other owners for payment. Property rights need not entail ownership. They can apply to transactions involving intangibles such as intellectual property, ideas, and creative works; and tangibles such as physical assets.

Human property rights

Article 17 of the United Nations’ Universal Declaration of Human Rights states that ‘Everyone has the right to own property alone as well as in association with others’, and ‘No one shall be arbitrarily deprived of his property.’

Property rights are included as a human right in the United Nations’ Universal Declaration of Human Rights and many countries take this stance in their constitution or human rights legislation. New Zealand is the only OECD country that has not enshrined recognition of property rights in legislation.

Legislation versus common law

New Zealand’s Parliament has generally been sceptical of judicial interpretation and so has restricted the ‘common-law’ approach, by setting its own legislation to govern the legal framework for economic activity. This is well illustrated by the legal framework for contracts, regulation and employment in New Zealand.

How to cite this page:

Lewis Evans, 'Law and the economy - Setting the framework', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/law-and-the-economy/page-1 (accessed 24 June 2017)

Story by Lewis Evans, published 11 Mar 2010