Curse of 'The Hobbit' strikes again as actors threaten to walk off set

As any proper J R R Tolkein fan knows, it takes bravery, patience, and a little bit of luck to complete a journey to Middle Earth. Peter Jackson certainly boasts the first two, but judging by the fate of his long-running efforts to bring a film version of The Hobbit to the big screen, he's sadly lacking in the third.

Fifteen years, millions of dollars, one director, and a virtually bankrupt movie studio after he announced plans to make a prequel to his blockbusting The Lord of the Rings trilogy, the Oscar-winning film-maker finds himself at the centre of an ugly labour dispute after acting unions told their members to refuse to work on the project due to a pay dispute.

The International Federation of Actors, representing the most powerful acting unions, went public at the weekend with its objections to the conditions being foisted on performers Sir Peter has hired for minor roles in the film, which is due to begin shooting in New Zealand in the spring. They complained that the non-union contracts being offered to extras "provide no minimum guarantees of wages or working conditions", no payments for future broadcasts of the film, and no cancellation payments.

Saying it is "time for action to be taken," the Federation added: "no member of any FIA affiliate will agree to act in the theatrical film The Hobbit until such time as the producer has entered into a collective bargaining agreement providing for satisfactory terms and conditions for all performers employed on the productions."

The studios co-financing the project – MGM and New Line Cinema – would be well-advised to take the complaint seriously. In 2008, industrial action by the writers union shut down most of Hollywood for several months.

The dispute also throws the participation of the film's biggest stars into doubt. As a prominent Labourite, Sir Ian Mckellen, who has agreed to reprise the role of Gandalf, would be at odds with his personal principles if he were to cross a picket line. Other prominent lefties in the star-studded cast, including Cate Blanchett and Andy Serkis, would also be required to search their souls.

All of which has exasperated Sir Peter, who won a Best Director Oscar for his work on The Lord of the Rings. On paper, The Hobbit ought to be a commercial slam-dunk, to the big screen. But filming, originally due to start in 2009, has been delayed by a financial crisis afflicting MGM. The studio, once one of the most affluent in Hollywood, has recently fallen $3.7bn in debt and is searching for a buyer.

In June, the ongoing failure of the studio to find sufficient capital to give the go ahead to the project prompted its original director, Guillermo Del Toro, who had been working on pre-production for two years, to resign, "with great regret" since he could no longer afford to keep his career in limbo waiting for filming to start.

The usually media-shy director issued a four-page statement last night saying he was "not anti-union in the slightest" and accusing acting unions of exploiting minor disagreements over pay and conditions on The Hobbit to gain new members. "I feel growing anger at the way this tiny minority is endangering a project that hundreds of people have worked on over the past two years, and the thousands about to be employed for the next four years, [and] the hundreds of millions of dollars that is about to be spent in our economy," he said, adding that losing The Hobbit would leave New Zealand: "humiliated on the world stage".