Timor Sea Justice Campaign 'A fair go for East Timor' www.timorseajustice.org
info@timorseajustice.org Submission to the Senate Economics Legislation Committee

Timor Sea Justice Campaign

March 16 2004.

The Timor Sea Justice Campaign welcomes the opportunity to make a submission to the Senate Economics Legislation Committee regarding the Greater Sunrise Unitisation Agreement Implementation Bill 2004.

However, we are disappointed by the extremely short timeframe for submissions, hearing and report of the Committee.

Particularly in light of this short timeframe, we would welcome the opportunity to make additional oral submissions to the Committee. Summary

The Greater Sunrise Unitisation Agreement Bill implements the Greater Sunrise Unitisation Agreement signed by East Timor and Australia.

This agreement gives Australia almost 82% of the approximately USD 7US$7 billion of government revenues likely to flow from the field (compared with 18% for East Timor), despite the fact that both countries claim all of the field and that the field is twice as close to East Timor as it is to Australia.

The Timor Sea Justice Campaign recommends the following to the Committee:

1) The Greater Sunrise Unitisation Agreement Implementation Bill 2004 (the Bill) not be passed by the Senate immediately, as:

* there is no economic imperative to rush the bill through parliament without fully considering its ramifications as the ramifications. The Greater Sunrise field will not be on line until at least 2009, and a delay of a few months will not jeopardize the development at this point;

* in the absence of good faith negotiations or international arbitration with the East Timorese government, the Bill will lead to billions of dollars of revenue that should belong to East Timor being appropriated by Australia.

2) The Bill be amended to ensure that: all Australian Government revenue from Greater Sunrise be placed into trust, and that when permanent maritime boundaries are finalised the trust funds automatically be distributed according to the entitlement of each country.

3) It be made clear that Australia is treating this arrangement as an interim one, as agreed with the Government of East Timor, which will be renegotiated in accordance with future permanent maritime boundaries between East Timor and Australia

The Timor Sea Justice Campaign

The Timor Sea Justice Campaign is an independent campaign based in Melbourne aiming to change Australian government policy in relation to the Timor Sea. The campaign was initiated in January 2004, and is made up of concerned individuals of various ages and various professions on a voluntary basis.

The Timor Sea Justice campaign believes that, as a sovereign nation, East Timor has the right to settle its boundaries with neighbouring countries and to benefit from its natural resources, including those in the Timor Sea. As a new and small country, East Timor particularly needs the revenue from resources in the Timor Sea to develop and provide its citizens with basic services such as schools and hospitals.

The Timor Sea Justice campaign aims to lobby the Australian government to be a friendly and cooperative neighbour to East Timor, building on the goodwill between the two nations, and to respect the economic, social and cultural rights of the East Timorese and East Timor's full sovereign rights under international law.

Greater Sunrise Unitisation Agreement Implementation Bill 2004

The Greater Sunrise Unitisation Agreement Bill implements the Greater Sunrise Unitisation Agreement signed by East Timor and Australia.

Greater Sunrise: Greater Sunrise is the largest oil and gas field so far discovered in the Timor Sea, containing with an estimated worth of between USD 22US$22 billion and $25 billion, of which the combined government share is approximately USD 7US$7 billion. Although the field is wholly claimed by both East Timor and Australia, it is in fact approximately twice and as close to East Timor as to Australia.

The field is unlikely to come on line for some time, and the development partners are still searching for a market and considering the basic design of the development. There is therefore no imperative to rush the Unitisation Bill through parliament, as this would not adversely affect the development at this point, and any suggestion that a more careful
consideration of the bill will cost East Timor money cannot be sustained.

Revenue allocation: The Unitisation Agreement currently allocates almost 82% of revenues from the field to Australia, compared with just over 18% to East Timor. This is a source of concern given that:

* the field is twice as close to East Timor as it is to Australia;

* both Australia and East Timor claim the field;

* the billions of dollars of revenue available to governments from the Greater Sunrise field would fund a substantial portion of East Timor's annual budget. This would give the East Timorese government the chance to build schools, hospitals and other facilities and services without going into debt. By contrast, this revenue would have negligible impact on Australia's standard of living.

Sunrise Negotiations: The Greater Sunrise Unitisation Agreement was signed on 6 March 2003. The agreement was signed through a process of coercion and undue pressure rather than through good faith negotiations between equal partners.

Australia refused to ratify the Timor Sea Treaty, which it had signed almost one year earlier, until East Timor signed the Sunrise Unitisation Agreement. East Timor needed Australia to ratify the Timor Sea Treaty immediately so that production on the smaller Bayu Undan field could begin and East Timor could get access to revenues urgently needed for its budget. Australia refused to ratify this treaty, which it had signed almost one year earlier, until East Timor signed the Sunrise Unitisation Agreement.

Through this process, Australia effectively forced East Timor to give away potentially billions of dollars in future revenues to which it is entitled under international law, in order for East Timor to get access to the immediate revenues it needed under a treaty both countries had already signed.

The Timor Sea Justice Campaign believes that agreements should be reached by fair negotiation or arbitration based on rules of international law, not by bullying or by using East Timor's need for resources in the short term to deprive them of more in the future.

A satisfactory interim arrangement?: The Greater Sunrise Unitisation Agreement only functions as a satisfactory interim arrangement if it is accompanied by boundary delimitation in good faith in accordance with contemporary principles of international law. If Australia negotiated boundaries within the next three to five years, with arbitration by the International Court of Justice (ICJ) or the International Tribunal on the Law of the Sea (ITLOS) if necessary, there is no doubt that maritime boundaries would be finalised before Sunrise comes online.

If the Australian government continues its tactics of delay, of unsupportable claims and of withdrawing from international arbitration mechanisms, no fair boundaries will be decided before the project commences. Australia could profit from oil and gas that, under future boundaries decided under the appropriate international law, will almost
certainly belong to East Timor.

Even if boundaries were finalised and gave a greater proportion or all of Greater Sunrise to East Timor, an Australian government acting in bad faith could continue to appropriate revenues that belong to East Timor. The Unitisation Agreement only requires the governments to reconsider the agreement in the case of final boundary determination, and both nations must agree to vary the proportions. In the absence of an undertaking to act in good faith and to ensure that Greater Sunrise Unitisation will be varied as required by the positioning of maritime boundaries between East Timor and Australia, the Greater Sunrise Unitisation Agreement is not a fair or reasonable interim measure.

Revenues in trust: The Timor Sea Justice Campaign therefore suggests that all Australian revenues from Greater Sunrise be placed in trust, or escrow, until maritime boundaries are finalised between the two countries, with the trust to be distributed in accordance with these boundaries at that time. This removes any incentive for Australian governments to delay and removes the possibility of Australia being unjustly enriched at the expense of East Timor.

Recommendations

The Timor Sea Justice Campaign calls for the Committee to recommend that:

1) The Greater Sunrise Unitisation Agreement Implementation Bill 2004 (the Bill) not be passed by the Senate immediately

Despite any commercial pressure on the Government, there is no urgency to pass this Bill now as oil and gas production in the Greater Sunrise area could not begin until at least 2009.

The sudden introduction of the Bill without warning into both Houses on 10 March 2004 appears to be yet another move by the current Government to pressure and coerce the East Timorese Government in the negotiations planned for next month.

This Bill is only appropriate as an interim agreement if accompanied by good faith negotiations or arbitration to expeditiously settle fair maritime boundaries with East Timor. Otherwise, it appears to be making permanent arrangements for the administration of disputed territory. There has been no good faith negotiation or arbitration by appropriate international arbitration bodies of the maritime boundaries between East Timor and Australia.

2) The Bill be amended to ensure that: all Australian Government revenue from Greater Sunrise be placed into trust, and that when permanent maritime boundaries are finalised the trust funds automatically be distributed according to the entitlement of each country.

3) It be made clear that Australia is treating this arrangement as interim one, as agreed with the Government of East Timor.

All political parties should show their acceptance of this as an interim arrangement through clear public statements. The Bill should also be amended by the addition of a purposes section to this effect at the start of the Bill.

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