By Dr George Venturini  

(Much of the material in this page is drawn from the work of La’o Hamutuk, the Timor-Leste Institute for Development Monitoring and Analysis, which has monitored and campaigned for Timor-Leste’s rights for two decades. For more detailed information on this and related issues, see www.laohamutuk.org. Current and updated information on the maritime boundary dispute with Australia is at  https://www.laohamutuk.org/Oil/Boundary/18ConcilTreaty.htm).

On 27 December 2012 Timor-Leste ratified, in Portuguese, the United Nations Convention on the Law of the Sea, and on 8 January 2013, it formally became the 165th country to accede to U.N.C.L.O.S. On the same day Timor-Leste also became a party to the Vienna Convention on the Law of Treaties, which it had ratified in 2004. In late January 2013 Timor-Leste officials signalled that they were likely to invoke the C.M.A.T.S. termination option, as reported by the local newspapers on 28 January. Petroleum Minister Alfredo Pires clarified his views a few days later, indicating that either Australia or Timor-Leste could withdraw from C.M.A.T.S. after 23 February, but as far as he knew, neither country had yet decided to do so. On 7 February 2013 Australian Senators asked then Foreign Minister Bob Carr whether Australia intended to give notice of C.M.A.T.S. termination and if Australia was prepared to negotiate maritime boundaries with Timor-Leste. Senator Carr responded: “Timor-Leste and Australia freely entered into CMATS in 2007. Australia will honour the treaty. We expect Timor-Leste to do the same.” People in Timor-Leste felt unable to understand the Minister’s comment, as invoking C.M.A.T.S. article 12.2 on termination would not dishonour the treaty any more than Australia did when it invoked its legal – if not moral – right to withdraw from U.N.C.L.O.S. and the International Court of Justice boundary dispute resolution processes in March 2002.

On 11 February 2013 a Timor-Leste organisation published an article in local newspapers on the ‘Implications for Timor-Leste of terminating C.M.A.T.S.’, and maintained its position in an interview with Radio Australia on 13 February. Many media reports on this issue on both sides of the Timor Sea were rather inaccurate or incomplete, so the same organisation prepared a briefing for local journalists on 21 February and organised a public meeting on the subject. Among the issues which seemed hard to understand were:

1) There were no boundaries or borders in the Timor Sea between Australia and Timor-Leste to redraw. During the 12 years of Timor-Leste’s sovereignty, Australia had never agreed to define a maritime boundary. The three agreements signed up to then were about managing petroleum development and revenues. Many people in Timor-Leste and elsewhere felt that the country’s struggle for independence was incomplete until its actual borders – which involve many more issues than oil and gas – were defined. In effect, Australia was seen as continuing to occupy maritime territory which would be part of Timor-Leste under a fair, legal boundary determination prolonging illegal territorial control taken during Indonesia’s illegal occupation of Timor-Leste’s land.

2) The C.M.A.T.S. clause allowing unilateral termination would have become available if no Sunrise development plan had been formally approved by Australian and Timor-Leste regulators by 23 February 2013. A development plan is a detailed engineering and commercial analysis, much more complex than just agreeing on the basic concept of where the gas should be liquefied.

3) There appeared to be a complex linkage among the Timor Sea Treaty – signed in 2002, ratified in 2003 – the Sunrise International Unitization Agreement – I.U.A., signed in 2003, ratified in 2007 – and the C.M.A.T.S. Treaty – signed in 2006, ratified in 2007. In brief, Timor-Leste needed the Timor Sea Treaty in 2002 so that Bayu-Undan could go ahead, but Australia refused to ratify the Timor Sea Treaty until Timor-Leste signed the I.U.A. in 2003 – something which Australian Greens Senator Bob Brown termed “blackmail.” Timor-Leste then declined to ratify the I.U.A., which it had signed under duress. In the C.M.A.T.S. compromise four years later, Timor-Leste ratified the I.U.A. and acquiesced with a ‘gag rule’ on boundary discussions in return for 50 per cent of Sunrise upstream revenues.

4) The Greater Sunrise contracts between Woodside – and its joint venture partners – and the governments of Timor-Leste and Australia were signed in 2003, replacing contracts with Australia and Indonesia during the illegal Indonesian occupation. The C.M.A.T.S. Treaty was signed in 2006 and came into force on 23 February 2007. Its termination would not have affect contracts signed five years earlier. Those contracts were unfortunately secret, but it was understood that they would have been in force until at least 2037, unless the four companies and two governments agreed to amend them. C.M.A.T.S. termination could have been a consideration in analysing the project’s risks and future prospects, but Article 27.3 of the I.U.A. said that the contractual terms for the companies “shall continue under terms equivalent to those in place under [the I.U.A.]” even if a permanent maritime boundary had been decided.

5) If Timor-Leste or Australia had decided to exercise its right under C.M.A.T.S. Article 12 to terminate the treaty at any time after 23 February, processes to establish a maritime boundary could have resumed. The C.M.A.T.S. Treaty would have come back into force – restoring the 50-50 Sunrise revenue sharing – if and when Sunrise production would begin in the future.  It was unclear how termination of C.M.A.T.S. would have affected the Timor Sea Treaty.

6) Under international law, the parties to a bilateral treaty can always decide to cancel or modify the treaty. In other words, if Australia had been willing to discuss maritime boundaries at any time since 2006, both governments would have agreed to revoke the C.M.A.T.S. ‘gag rule’. The Timor Sea Treaty and I.U.A. had specific articles providing that they “may be amended or terminated at any time by written agreement between Timor-Leste and Australia,” but these were unnecessary, as this principle applies to all agreements between governments, as spelled out in the Vienna Convention on the Law of Treaties. The government of Timor-Leste was still hoping that Australia would be ready to deal fairly with its neighbour, without imposing a ‘gag rule’ to bar discussion of particular topics. Timor-Leste also hoped that Australia felt bound by the rule of law – allowing courts or arbitration to settle the boundary when inherently unbalanced negotiations – due to the relative size, wealth, power and experience of the parties – are unable so to do. Timor-Leste was calling Australia to practice an often vaunted ‘fair go’. Law – Timor-Leste remarked – exists to protect the weak from the strong and to ensure that everyone’s basic rights are respected. On 21-22 February 2013 the then Australian Minister of Resources and Energy Martin Ferguson visited Dili, meeting with Timor-Leste Minister for Petroleum and Mineral Resources Alfredo Pires and others. The visit, as well as the pending possibility of terminating C.M.A.T.S., were the occasion for an usually large amount of misleading and uninformed coverage in the Australian and Timorese media – for example: Timor-Leste removes Australian company from gas project, East Timor risks all in oil dispute, Woodside gas deal could redraw Australia-East Timor borders. After a cabinet reshuffle in Australia the following month, Minister Ferguson was replaced by former Woodside executive Gary Gray. Mr. Gray, the new federal resources minister, had been a ‘principal strategic adviser’ with Woodside from 2001 to 2007, before entering parliament. A few months later, Labor would lose the election and a new government would come to power in Australia. After their meeting, both ministers Ferguson and Pires declined to give specifics in public, although Mr. Pires said that Timor-Leste was still deciding whether to give notice of C.M.A.T.S. termination. He explained that the Foreign Ministries of the two countries would be the appropriate participants in such discussions, as the C.M.A.T.S. Treaty was signed in 2006 by Foreign Ministers José Ramos-Horta and Alexander Downer. Mr. Pires also said Timor-Leste was concerned about the long duration of the Treaty, and was considering various options, while Mr. Ferguson said that discussions would continue and Australia continued to want to work with Timor-Leste and the petroleum industry to advance Timor-Leste’s development. On 28 February 2013 The Australian newspaper published an opinion piece by Mr. Tom Clarke, an organiser with the Timor-Sea Justice Campaign in 2005, entitled Australia holding back East Timor. Clarke concluded: “The only thing standing between East Timor and what it is legally entitled to is the Australian government. Australia could and should put an end to decades of hard-nosed greed and offer to negotiate in good faith with East Timor. Permanent maritime boundaries will provide more economic certainty for both countries and for the companies seeking to exploit the oil and gas resources. But, more than this, setting permanent boundaries in accordance with international law is the right thing to do. It would also bring some closure to the Timorese people’s long and determined struggle to become an independent and sovereign nation complete with maritime boundaries.” The lead editorial in the March 2013 Petroleum Economist magazine, entitled ‘Going for broke’, discussed the failure of Timor-Leste’s oil revenues to improve the lives of the people.

The publication urged Prime Minister Xanana Gusmão to “be pragmatic … and focus on ensuring Sunrise is developed and the revenues are used to underwrite the sustainable, long-term development of Timor-Leste’s non-oil economy. If this does not come to pass, it is hard to avoid the conclusion that Timor-Leste is a failed state-in-waiting.” On 28 March 2013 The Global Mail published Hamish McDonald’s comprehensive article about petroleum history between Timor-Leste and Australia, including ‘Sunrise: It’s tiny, poor, and very possibly not going to take it anymore.’

On 23 April 2013 Timor-Leste’s government formally notified Australia that it was exercising its right to arbitration under Annex B of the Timor Sea Treaty, arguing that C.M.A.T.S. should be declared invalid because Australia had conducted espionage in 2004 and did not negotiate the treaty in good faith. Although the notification had not been made public, Timor-Leste reportedly accused Australia of bugging Australian hotels and Dili government offices while Timor-Leste’s negotiators were discussing their strategy. Timor-Leste named former British supreme court judge Lawrence Collins as its representative on the three-person arbitration panel. Australia would select another, and those two would select the third. Appointing the panel could take six months, and the arbitrators have another six months to issue a ruling by majority vote. The legal issue was fraught with difficulties. Of particular importance, the C.M.A.T.S.: 1) established a tax sharing mechanism in respect of upstream revenues derived from the Greater Sunrise field – 50/50 between Australia and Timor-Leste; and 2) placed a moratorium on maritime boundary claims in respect of the area comprising the Greater Sunrise field – Australia and Timor-Leste would not “assert, pursue or further by any means in relation to the other party” its claims to sovereign rights, jurisdiction and maritime boundaries for the period the C.M.A.T.S. remained in force. Under the terms of the C.M.A.T.S., if a development plan for the Greater Sunrise field had not been jointly approved by February 2013, either party could terminate the treaty on giving three months’ notice. Since no development plan had been agreed as of such date, an observer may wonder why Timor-Leste had initiated arbitration proceedings in favour of its right of termination. This is because the C.M.A.T.S. continued to apply, notwithstanding termination, if the Greater Sunrise field was produced at any time following such termination. If the C.M.A.T.S. were to be held invalid, the position in respect of the Greater Sunrise field would have reverted to the position under the Timor Sea Treaty.

Under the Timor Sea Treaty, Australia and then East Timor agreed to distribute production from the Greater Sunrise field on the basis that 20 per cent of the reserves were attributed to the J.P.D.A. – which in turn would entitle East Timor to a 90 per cent share of those reserves under the Timor Sea Treaty – and 80 per cent were attributed to Australia. However, the invalidation of the C.M.A.T.S. would also have extinguished the moratorium in respect of the mentioned maritime boundary claims. This would have entitled either country to initiate a dispute as to the jurisdiction over the Greater Sunrise field. The decision to initiate the arbitration proceedings may well have been intended as a point of leverage to renegotiate the tax sharing mechanism under the C.M.A.T.S. To this end, there is a view that the equal distribution of revenue agreed under the C.M.A.T.S. was unfair to the Timorese. The arbitration appeared to be a high-risk strategy for the Timorese since, if unsuccessful, the decision would have been final and binding on the parties. In that case, the revenue sharing mechanism and the moratorium on maritime boundary claims would more than likely have been the regulatory backdrop against which the Greater Sunrise field was developed. The Australian government and media reported the notification on 3 May. On 6 May 2013 Timor-Leste Petroleum Minister Alfredo Pires explained his reasoning, and the business press reported corporate reactions. An Australian Jesuit lawyer, Frank Brennan, a long-time supporter of Timor-Leste, visited Dili and wrote ‘Time to draw the line between Australia and Timor-Leste’ on 13 May. The controversy was covered in as diverse places in Australia and overseas.

Continued Saturday – The spying on Timor-Leste case … et cetera (part 3)

Previous instalment – The spying on Timor-Leste case … et cetera (part 1)