June 27 (Bloomberg) -- The rule is: Racehorses must have actual sex for their foals to be thoroughbreds. In an era of widespread artificial insemination, Australian breeder Bruce McHugh says that’s wrong and has sued to void the rule in his country. If he wins, he might change horse breeding worldwide.
The requirements that horses, in effect, get a stable and go at it “are in restraint of trade” and thus unenforceable, McHugh, former chairman of the Sydney Turf Club said in a complaint filed in the Federal Court of Australia.
Artificial insemination is common in other types of breeding, he argued. Two-thirds of U.S. dairy cows and three quarters of the pigs in 2005 were produced through that method, according to Steve Blezinger, a nutritional and management consultant in Texas. Even humans use artificial insemination to reproduce without penalty.
A win “will bring thoroughbred racing into the 21st century,” McHugh said of his case, which is set to go to trial in Sydney Aug. 29.
The lawsuit is rattling a multibillion-dollar global industry, where a thriving breeding trade has developed. Each year owners of the world’s most-prized horses, including Dubai’s ruler Sheik Mohammed bin Rashid al-Maktoum, send so-called shuttle stallions around the globe to breed with mares, collecting fees which have exceeded $330,000 per mating episode.
A court victory for McHugh could make Australia a trend- setter, tempting stud book operators around the world to follow its lead in allowing the registration of offspring from artificially inseminated mares and saving money in the process.
Alternatively, if no one followed Australia’s lead, that country might find itself shut out of the racing industry.
U.S., British and other regulators might ban the progeny of Australia’s artificially inseminated mares from their tracks, said Paul Higgins, owner of Baerami Thoroughbreds in Hunter Valley, New South Wales, the world’s second-biggest horse- breeding region after Kentucky.
“I think the initial stance would be very hard,” Higgins, who has as many as 300 horses on 1,000 acres of rolling fields near Denman, New South Wales, said at his ranch home. “Things will soften very quickly, and they’ll eventually be saying we’re at the forefront.”
Higgins said he’s not taking a position in this dispute.
Horse breeders “are motivated by recognition and pursuit of prestige,” said Gerald Ng, lawyer for the Australian Racing Board Ltd., one of the defendants in the suit. Owners had also used the breeding operations as tax write-offs, he told federal court judge Alan Robertson at a June 22 hearing in Sydney.
“Brood mare owners are not necessarily profit-maximizing economic agents,” Ng said at the hearing, where Robertson dismissed his request for access to tax returns of Tony Hartnell. Hartnell, a former chairman of the Australia Securities and Investment Commission, plans to testify in support of McHugh.
Ng had sought to show Hartnell used the losses from the horse venture to reduce his income taxes.
To be eligible to race, thoroughbreds must be registered in a recognized stud book. In Australia the stud book dates back to 1878, when the first one was compiled by William C. Yuille, sporting editor of the Melbourne Weekly Times, according to the organization’s website.
The book preserves an official record and ensures the integrity of the thoroughbred breeding industry, the organization said. Racing associations in other countries keep stud books. More than 70 Stud Book Authorities are members of the International Stud Book Committee.
The prohibition of any form of artificial insemination was one of the first issues discussed when the committee met for the first time in Paris in 1976.
The international committee has always recognized that a challenge to the ban on artificial insemination may come, “but in common with Racing Authorities, has maintained that it would not be in the interest of the industry to change,” the group said on its website.
Michael Ford, keeper of the Australian Stud Book, had told the Brisbane Times in 2009 that it would be “definitely foolish” for Australia to allow artificial insemination unilaterally and face international bans on horses produced in the country.
Livia Bartoletti, general counsel for the Australian Turf Club which co-owns the stud book, said Ford couldn’t comment because the McHugh case is pending.
McHugh, a would-be breeder, said in court papers that allowing artificial insemination will reduce costs for both owners of stallions and mares, since transportation of the horses for a physical get-together could be eliminated.
“Direct breeding involves transportation costs, and agistment costs as well as servicing fees,” McHugh said in the court papers, using the industry’s phrase for grazing. “Transport increases the risk of injury to the mare.”
With artificial methods the number of mares a stallion could impregnate could rise five- or six-fold, costing much less as the increased supply would reduce prices, Higgins said. Currently stallions can generally mate with about 80 mares each breeding season, he said.
There is already an oversupply of horses in Australia, and the use of artificial insemination would “exacerbate the disequilibrium,” Ng said at the June 22 hearing.
The American Quarter Horse Association dropped its ban on registration of foals produced through embryo transfers, a form of artificial insemination, as part of an out-of-court settlement in 2002 after a Texas judge ruled the restrictions violated the state’s antitrust law.
The Thoroughbred Breeders’ Association of Australia has successfully applied to be included as a party in the Sydney lawsuit on the defendants’ side. The association opposes artificial insemination, saying it would endanger the Australian industry.
The case is Between Bruce McHugh and the Australian Jockey Club Ltd. NSD1187/2009. Federal Court of Australia (Sydney).
--Editors: Douglas Wong, Patrick Oster
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