The government appears to have been blindsided by iwi leaders' decision to reject its latest proposal to establish the Kermadec Ocean Sanctuary.
Former prime minister Sir John Key announced the sanctuary in 2015, but pushback from iwi and political parties has stalled progress since.
The sanctuary covers a 620,000 square kilometre area in New Zealand's exclusive economic zone around the Kermadec Islands, northeast of the North Island.
The latest government proposal included renaming the area to Ngā Whatu-a-Māui Ocean Sanctuary, and suggested a review into the sanctuary be conducted every 20 years.
Iwi organisations on Tuesday voted overwhelmingly to reject that proposal, at a meeting hosted by Te Ohu Kaimoana, the guardian of Māori fishing interests. Forty-two voted against, one in support and two abstained.
Te Ohu Kaimoana chairperson Rangimarie Hunia said an indigenous-led approach is the only way forward.
"If we continue conversations under this current framework imposed upon us by the Crown, we do not believe this creates the opportunity for a meaningful outcome for iwi or the Crown.
"There must be a conversation held that is based upon mana, tikanga and kawa before we can progress, and that conversation must be led by iwi."
Iwi yesterday said there was an opportunity for them to be able to design and lead on a solution to the health and wellbeing of the marine environment, Hunia said.
"We weren't given that opportunity with the sanctuary."
It was critical that the rights and interests given to iwi as a result of the fisheries settlement were protected, she said.
"There were two pieces yesterday that iwi were focused on: one let's design an indigenous approach, secondly let's protect the rights and interests provided for in the fisheries settlement, that takes with us 58 tribes across the country."
Environment Minister David Parker said he was "very disappointed" by that decision.
"Only recently, it had been indicated to us that the parties were close to agreement on the sanctuary."
The government had worked "closely and carefully" with Te Ohu Kai Moana and northern iwi representatives to establish the sanctuary since 2017, Parker said.
"By contrast, the previous National government failed to engage properly with Māori interests before it introduced the Kermadec sanctuary bill in 2016. This government tried hard, and in good faith, to rectify that initial mistake and seek agreement with the interested parties.
"The government had been clear that it was prepared to consider compensation for fishing rights that would have been suspended by the sanctuary. The cost of that would have been relatively modest, given that little commercial fishing takes place in the sanctuary area.
"Iwi interests indicated they did not want such compensation, but the draft supplementary order paper for the bill would have nonetheless reversed National's earlier decision to stop iwi seeking compensation through the courts."
The minister said he wanted to understand why the "unexpected decision" was made before deciding how to proceed.