Zoran Rakovic: When the Crown Stands Alone

What if Treaty obligations returned to the Crown—where they belong? Explore why iwi may soon rush to settle, not because of impatience, but insolvency.

There is an unwritten maxim among distressed creditors: settle while the pot still has something in it. This principle, though rarely invoked by name in Treaty politics, may prove to be the most important yet unspoken factor in determining the pace and finality of Crown–iwi settlements in the years ahead. Māori iwi, long accustomed to protracted negotiations with the Crown, may discover that when the burden of Treaty obligations is reloaded back onto the Crown—where it legally belongs—rather than endlessly diffused among councils, businesses, and ordinary citizens, their incentive structure to hold out indefinitely will collapse. For as long as the Crown is permitted to socialise its fiduciary debts—to pay them not from its own coffers but through the energies, rates, and regulatory concessions of citizens—Treaty settlements risk becoming a perpetuity, not a closure. But if that circuit is broken, then economic logic, not cultural metaphysics, will shape the settlement timeline.

As economist Douglas Baird famously put it in his bankruptcy work, “when a common pool of assets is available, and multiple claimants descend on it without coordination, the result is a race to the courthouse.” His insight was directed at commercial creditors, but it carries profound implications for New Zealand’s constitutional moment. When iwi believe the Crown is flush and politically cornered into repeated acts of cultural generosity, they hold out for more. When they believe the coffers are shrinking, and the goodwill of the governed no longer matches the promises of the governors, they rush to settle.

Lucian Bebchuk, in his seminal work on financial claims, argues that when the paying party (in this case, the Crown) faces future uncertainty or insolvency, claimants tend to accept less than they would otherwise demand. This “early settlement effect” emerges from rational fears: that others will grab the lion’s share, or that by holding out, the pool of available redress may vanish altogether. The Treaty process, currently unbounded in scope and duration, has been artificially propped up by a widespread illusion: that the Crown's capacity is infinite, and that every new round of obligations—whether in co-governance models, cultural consultancies, or environmental concessions—can be sustained indefinitely because the burden is shared silently by non-Crown actors. Citizens pay the consulting fees, councils interpret planning law through cultural lenses, engineers and teachers undergo training, businesses fund dual-language signage, and ratepayers finance Treaty-based infrastructure conditions. The Crown may be party to the Treaty, but its cost is widely disbursed to you and me, ordinary Kiwis.

In the 2020s, this model still functions because few question it. The Crown, in effect, outsources its obligations—not through explicit legislative transfer, but by institutional habit and moral framing. But when the public begins to refuse this arrangement, to assert that Treaty duties are not theirs to bear, the load returns to where it lawfully belongs. In that moment, iwi will see the Crown as it is: a finite entity, not a metaphysical benefactor. At that point, settlements may speed up.

Oliver Hart’s work on incomplete contracts sheds more light on this. No constitutional document, he observes, can perfectly anticipate future states of the world. When applied to Treaty obligations, his theory suggests that the inability to define the scope of “redress” creates constant renegotiation. The more uncertainty, the more renegotiation. But if the financial and political constraints of the Crown are made stark—if it can no longer pass its promises onto others—then the incentive to demand more softens. The risks of “getting nothing later” begin to outweigh the hope of “getting everything eventually.”

This is not to diminish the legitimacy of redress, nor to cast aspersions on those seeking settlement. It is, rather, to ground the conversation in reality. As Robert Vishny and Andrei Shleifer have shown in their analysis of distressed entities, liquidity crises force actors to sell not because they want to, but because they must. Fire sales are not reflections of value, but of timing and desperation. The same will hold for Treaty claims if the pot begins to look empty. If claimants see other iwi settling, if the climate for redress cools, and if the Crown is no longer able to extract fresh payments from citizens, then the long game will collapse. Settlement will become a now-or-never proposition, and with it, the possibility of finality returns.

There is also the behavioural dimension, explained elegantly by Richard Thaler. He noted that individuals exhibit loss aversion far more strongly than gain-seeking. When iwi perceive that the pie is shrinking, they will prefer a smaller but certain settlement now rather than risking a total loss later. This psychological factor may do more to hasten the resolution of Treaty grievances than any constitutional reform. The illusion of a limitless Crown, propped up by the limitless goodwill and obedience of the public, has been the real driver of negotiation in recent decades. Once gone, so too goes the leisurely pace of historical justice.

One need only consider how these dynamics played out in high-profile business collapses. Lehman Brothers' creditors who settled early took a hit, but walked away with cash. Those who held out ended up in litigation purgatory. In the Christchurch earthquake, policyholders who feared insurer insolvency settled fast, often for less than full replacement value. Others, emboldened by principles, found themselves stranded. These patterns are not anecdotes; they are economic laws of behaviour under scarcity. Treaty settlements, when viewed through this lens, are not exempt.

Howard Marks, the legendary investor, once wrote that you can’t do good deals with bad counterparties. This is the lesson that will inevitably dawn upon iwi if the Crown is isolated as the sole bearer of Treaty promises. As long as they can transact with non-Crown institutions—councils, agencies, even private entities acting under compulsion—there is confidence. But if those actors begin to demur, to say “this is not our Treaty,” the Crown becomes the sole counterparty. And as the liabilities mount, the quality of that counterparty falls. Marks continues: “When the tide goes out, you discover who’s been swimming naked.” This is where the present framework leads: to a recognition that the Crown, stripped of its citizen-hosts, is a vastly overpromised entity.

Nassim Nicholas Taleb might call the current model a form of negative optionality. Treaty claimants have been holding a call option on an ever-growing, ever-yielding Crown backed by unwilling and unwitting Kiwi-citizen guarantors. The strike price—acceptance of a final settlement—has been continually deferred, because the underlying has kept rising. But if the public resists, and the Crown must carry its debts alone, that underlying value drops. The option becomes worthless if it is never exercised. At that point, action is taken—not because justice has been fully served, but because further delay becomes irrational.

And here is the sting: the Crown likely knows this. Its slow but deliberate offloading of Treaty obligations onto citizens, councils, schools, businesses and charities is not merely administrative convenience. It is survival. Without this network of implementation partners, the Crown’s promise to Māori is unaffordable. The offloading is not benign; it is a form of fiscal camouflage. It is the reason new Treaty-related expectations—co-governance boards, planning vetoes, cultural audits—proliferate. Each new obligation is only viable if someone else pays. The public’s silent compliance is the subsidy upon which the whole machinery rests.

Should that compliance end, the Crown may become what Warren Buffett called a counterparty under stress. He warned that when capital runs short, ethics often follow. Promises made in eras of plenty are not always honoured in times of decline. Māori leaders know this. Some have perhaps already settled in anticipation of future scarcity. Others may believe the pot is infinite. But if citizens begin to push Treaty obligations back to the Crown, where it belongs—legally, respectfully, and consistently—that illusion may not survive much longer.

This is not a cynical view. It is a sober one. It rests on a principle familiar to every Māori hapū and every settler household: do not promise what you cannot deliver. In economic terms, we must ask: who holds the liability? Who holds the right to negotiate? And who holds the cash? At present, these three things are misaligned. The Crown holds the legal obligation. Iwi hold the negotiating right. But the cash—the cost—is increasingly borne by the citizens of this country. That is not justice. It is merely a redistribution of guilt, dressed up as cultural humility.

Oliver Hart would say: this is what happens when contracts are incomplete and asymmetric. No party has a full view of the costs, and no party bears the full burden. So the contract—Te Tiriti o Waitangi—becomes a floating signifier, a pretext for infinite renegotiation. The path to peace is not to devalue the Treaty, nor to diminish its moral force, but to restore its structure. That means acknowledging that only the Crown owes, and only the Crown can pay. If citizens wish to act in solidarity, they may do so voluntarily. But they must never again be conscripted by regulation, planning codes, funding conditions, or moral shaming.

If this clarity is restored, iwi will face a different kind of “partner”—not one with infinite capacity and infinite guilt, but one with limited means and a public watching. At that point, settlements will accelerate. The logic of game theory, economics, and human psychology will conspire to say: settle now, before the pot is empty. And with that, we may find something approximating closure.

The alternative is endlessness—what Taleb might call an open exposure to ruin. Not for Māori. Not even for the Crown. But for the relationship itself. For its sanctity. For the promise of finality. For a generation that longs to build without inheriting the unpayable invoices of the past.

The road to true reconciliation, then, may lie not in widening the Treaty’s reach, but in narrowing it. Back to its lawful domain. Back to its original signatories. Back to the principle that one pays what one owes—and not what others wish to feel.

If we can find that clarity, iwi will no longer need to wait. And perhaps, in that moment, we will all find a new kind of peace. One not of obligation, but of honour. One not of policy, but of truth.

Zoran Rakovic is a structural engineer with nearly 30 years of experience, who has helped design and strengthen buildings across New Zealand—particularly in Christchurch’s earthquake recovery - while balancing life as a dad, granddad, and outdoor enthusiast. He blogs HERE.