Court action against the government's partial asset sale programme from the Maori Council is likely if it ignores a Waitangi Tribunal report calling for a delay to discuss Maori water rights.
In an interim report on a Maori Council the tribunal says Maori have residual property rights to water under the Treaty of Waitangi and these need to be sorted before state-owned energy companies are partially privatised.
"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," it says.
"We consider that the sale must be delayed while an accommodation is reached with Maori."
Prime Minister John Key said on the day the tribunal hearings started that the tribunal's recommendations were non-binding and it didn't have to adopt them, a statement which caused concern with its government allies, the Maori Party.
But Maori Council lawyer Rahui Katene says court action, which would have stronger legal force, was a possibility if the government doesn't act on the report.
"It's an option that we don't want to have to take up, but if we are forced to, we will have to."
Mr Key says he won't make any decisions on the report quickly.
"I think it makes much more sense for us to be thoughtful, go through the report, consider what it's saying, and decide whether the government wants to adopt its recommendations or not," he told 3 News.
"We'll have a chance to factor it into our thinking and for our lawyers to have a look at it and in the fullness of time to respond."
Opposition politicians from Labour, NZ First, the Greens and Mana were united in calling for the asset sale programme to be dumped after the decision.
"The government's asset sales plan has descended into a complete fiasco," Labour leader David Shearer said.
"The only sensible solution is to stop the asset sales."
