The Waitangi Tribunal has been told the Government's preference to deal with an iwi superstructure on freshwater reforms is pulling Maori apart because hapu are shut out of important decision-making.
The tribunal is holding an urgent hearing as the Government prepares to sell a 49% stake in some state-owned assets, including power companies that have hydro schemes.
The Maori Council has filed a claim to the tribunal that seeks recognition of water rights and a recommendation to freeze Crown share sales in the companies.
The chair of Waikato sub-tribe Pouakani told the hearing that it is barred from taking part in in top-level discussions.
The Government has been clear that it prefers to hold regular meetings with the Iwi Leaders Group.
Pouakani chairman Tamati Cairns says he tried to join one of the meetings on water, but was turned away.
"Now I'm not against iwi leadership - don't get me wrong - nor am I against the Iwi Leaders Group, but it's the issues that start pulling us apart."
Mr Cairns says when one group decides one thing, and another group decides another, Maori are in trouble.
He says the Crown's approach is diminishing the mana of of sub-tribes because hapu have authority over water, not iwi.
The Maori Council, which sought the urgent Waitangi Tribunal hearing, says there are times when the Crown must deal with hapu - and the water debate is one of them.
Co-chair Sir Eddie Durie says all Maori voices should be heard and suggests the Crown needs to work on the way it carries out consultation with Maori.
Tribunal hears proposal for Maori water allocation body
A member of central North Island iwi Ngati Rangi suggested at the tribunal that a Maori-run body is set up to decide how water is allocated to hydro power schemes.
Toni Waho was called by the Maori Council to explain what has happened to the rivers in his tribal rohe (district) since European settlement and said the rivers are now polluted and some river flows have been redirected.
Mr Waho says Maori society should create and run an organisation authorised by statute to decide who is allowed to use water commercially.
He suggests having a national or tribal authorities to make the decisions, in the same way there are district and regional councils
Mr Waho says another option would be that those wishing to use water would have to obtain a double sign off - a stamp from Maori and a stamp from the local or regional council.
The Waitangi Tribunal continues hearing submissions on Thursday and the Crown gives evidence on Friday.