The Court of Appeal has been told the Environmental Risk Management Authority does not have the right to reject applications for genetic modification.
AgResearch is appealing against a High Court ruling which struck out its application to expand its animal research programme.
The Crown Research Institute wants to investigate a range of animals to produce pharmaceutical products through their milk.
But after a challenge from the lobby group GE-Free New Zealand, the High Court last June found the application was too vague and it criticised ERMA for considering it.
On Tuesday, three Court of Appeal judges heard arguments by AgResearch that the court has no right to invervene in the process and should leave it to qualified scientific experts.
AgResearch says it would have provided more information at the hearing stage.
The hearing is set down for two days.