New Zealand Prime Minister John Key has stepped in in the fight over unionization of actorsNew Zealand Prime Minister {0} has stepped in in the fight over unionization of actors on {1}, and has offered to have government officials mediate the dispute between director-producer {2} and the union seeking to organize the production, according to {3}.

Government mediation of a unionization dispute is unusual in New Zealand, but in this case, the stakes for the country are high.

"I would be very, very concerned if (the production) moved offshore," Key said. Underscoring the risk to the local film industry, he added, "If you can't make The Hobbit here, frankly, what movies are you going to make here?"

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It remains unclear where the movie will be shot. Peter Jackson said late last week that Warner Bros., which is financing the two-part film "to the tune of hundreds of millions of dollars," is considering moving the project from New Zealand to Eastern Europe.

The union on the front lines, New Zealand Actors' Equity, said it had "no desire to jeopardize the production or create instability in any way." That union is the local unit of Australia's Media, Entertainment and Arts Alliance.

Adding to the film's troubles was a massive fire Friday that destroyed a miniatures facility Peter Jackson planned to use for the production. The cause remains under investigation.

The Hobbit's producers have asserted that unionization is impermissible because actors are classified as independent contractors rather than employees. Antitrust laws apply in the former case but not the latter.

MEAA counsel James Craig of Kiwi firm Simpson Grierson said "the producers could simply decide to engage the actors as employees." He added that "if this was done, then this would solve the issues under (New Zealand law)."

If the producers were to offer to sign a SAG agreement while continuing to resist unionization of local actors, the guild might be in the awkward position of maintaining a Do Not Work order against a production that actually would be in compliance with SAG rules.