UPDATED 3.14PM The Maori Party says it has "grave concerns" about the impact of a proposed marine sanctuary on Treaty rights and will not rule out walking away from the National-led Government over the issue.

However, the party's co-leaders say they are optimistic that a solution can be found over the Kermadec Ocean Sanctuary without taking this step.

The Maori Fisheries Commission, Te Ohu Kaimoana, said today that the breach of Maori fishing rights in the Kermadec Ocean Sanctuary Bill was as serious, if not more serious, than the foreshore and seabed legislation.

They made the comments after negotiations on the issue between the Crown and iwi failed, and urged the Maori Party to walk away from its relationship with National.

Maori Party co-leader Te Ururoa Flavell agreed today that the impact on Treaty rights was "very serious", but would not go as far as comparing it to the foreshore and seabed debate.

Asked whether the Maori Party would cut ties with National over it, he said: "What we have said is we will assess that situation when it gets to that.

"Obviously the breakdown in negotiations is something that's pretty serious."

Flavell said the Prime Minister had called him this afternoon to invite his party for further talks on the Kermadec sanctuary.

"We have the opportunity ... to get back to the table and continue the discussions in good faith. We intend to honour that.

"We've had a good relationship which is based on the ability to talk to one another. Sure we have ups and downs, but today ... we have a commitment to get back to the table, bring the parties back to the table and continue the discussions."

Earlier today, the failure to reach an agreement on the matter prompted Te Ohu Kaimoana) chair Jamie Tuuta to send a strong warning to the Government, saying the Kermadecs issue was "this Government's foreshore and seabed".

The Maori Party's executive is holding a meeting this evening to discuss its relationship with National.

Te Ohu director Ken Mair, a former vice president of the Maori Party, said its co-leaders should "seriously consider" the relationship.

"We've had discussions with the two co-leaders and the president of the Maori Party this morning, and made it clear to them this issue is exactly the same as the seabed and foreshore issue."

Urgent negotiations have been held between Te Ohu and Government ministers over the past week in a bid to prevent the matter heading to court.

Tuuta said today it was "extremely disappointing" that iwi and the Government had been unable to resolve "major" Treaty differences.

The Government rejected a proposal in which iwi would have voluntarily shelved their fishing quota around the Kermadec Islands in exchange for the preservation of their Treaty rights.

Te Ohu has already filed papers in the High Court, claiming it was not adequately consulted on the sanctuary, north-east of New Zealand, and it overrides iwi fishing rights.

Iwi had worked hard to find a compromise that allowed the sanctuary to go ahead but did not extinguish Treaty rights, Tuuta said.

The offer to shelve existing Maori quota while maintaining these rights was a "constructive and reasonable solution".

"Unfortunately, the [Environment] Minister Nick Smith accepts nothing but legal nullification of all Maori rights in the Kermadec region.

"We have made it abundantly clear, over a number of meetings, that such a position is unacceptable to iwi.

"We therefore have no choice but to step back from discussions."

Speaking at a press conference in Wellington this morning, Tuuta said Te Ohu would continue its legal action against the Crown.

He said if the Government had worked closely with Maori on the sanctuary, it could have been "Aotearoa's gift to the world".

"Instead it is just Nick Smith and John Key's."

The establishment of the sanctuary was a "new environmental ideology" that cut across fishing rights, he said/

It set a dangerous precedent that could be applied to other marine environments.

Te Ohu said it was not concerned about the costs of legal action. It has set aside a large war-chest to fund its court battle.

The creation of the sanctuary was the first time that the Crown had legislated over the top of a full and final Treaty settlement.

"This action calls into question the durability of all Treaty settlements," Tuuta said.

Smith said this afternoon that the Government was disappointed it could not reach an agreement with Te Ohu, "despite length negotiations". Ministers had held 10 meetings with iwi over 10 months, he said.

Smith said the Government remained committed to the new sanctuary, which he claimed did not undermine the 1993 Fisheries Settlement, known as the Sealord deal.

"The Government always retained the right to create protected areas where fishing would be disallowed and has done so in over 20 new marine reserves, many of which had far more impact on settlement and customary fishing rights."

He reiterated that Maori had not "caught a single tonne" of fish at the Kermadecs. But Te Ohu says it is not the scale of the fishery that matters, but the precedent of removing fishing rights.

During negotiations, Smith offered to acknowledge the Crown's error in not consulting with iwi and said he would apologise.

The minister also proposed to amend the Kermadec Ocean Sanctuary Bill to acknowledge Maori fishing rights and the impact of the sanctuary on those rights.

Te Ohu said this did not go far enough because it did not provide protection to its rights.

"Acknowledging dispossession doesn't make the taste any less sour," Tuuta said.

"A right that cannot be used is not a right at all."

The legislation which governs the sanctuary is waiting for its second reading. It has the numbers to pass into law.

Te Ohu criticised Opposition parties for not taking a stronger stand on defending Maori rights. Mair said Labour had been "deathly silent" on the issue.

The proposed sanctuary, which is set to open in November, would easily be New Zealand's biggest no-take reserve.

It would cover 15 per cent of New Zealand's exclusive economic zone and would include 39 species of sea birds, 35 species of whales and dolphins, three species of endangered turtles, and 150 species of fish.

The proposal was announced at the United Nations last year by Prime Minister John Key, just hours after iwi were told about it for the first time.