Australia and Timor-Leste border dispute: can Conciliation help good neighbours stay good friends

Australia and Timor-Leste's dispute over rights to the oil and gas rich reserves of the Timor Sea is now before a Conciliation Commission in the Hague.  Timor-Leste wants to have its maritime boundaries with Australia officially delineated, despite having signed a treaty that puts a 50 year stop on deciding the boundary in 2006.  

Timor-Leste and Australia commenced conciliation proceedings under Article 298 and Annex V of the United Nations Convention on the Law of the Sea (UNCLOS) , to which both are a signatory. This is the first ever Conciliation process under Article 298 and Annex V of UNCLOS.  The result of this process is likely to have ramifications for Australia's border negotiations with Indonesia. 

Conciliation is one of the methods available under UNCLOS for resolution of disputes.  
Conciliation is a process of dispute resolution, similar to mediation.  It is a voluntary and flexible, interest based process (like mediation)  through which the parties seek to reach an amicable dispute settlement with the assistance of the conciliator, who acts as a neutral third party.

It is not a formal process, (like Arbitration) with arguments being put before a Tribunal, leading to a legally binding decision. In disputes between individuals conciliation is a way of resolving things without the need to go to court. It involves an independent third party (a mediator) who helps both sides come to an agreement. 

For this dispute between countries a Conciliation Commission has been set up of mutually acceptable experts.  The Commission engages with the parties to resolve the issues in question and it may make proposals and recommendations. Australia and Timor-Leste appointed two commissioners each, who  then chose the Chair.  Ambassador Peter Taksøe-Jensen, of Denmark was chosen to Chair, and the other Commissioners are Rosalie Balkin from Australia, Abdul G. Korma of Sierra Leone, Canadian Donald McRae and Rüdiger Wolfram of Germany.  

The Timorese argue that the 2006 treaty should be scrapped on the grounds that it was disadvantaged during the negotiations because Australia had bugged Timorese cabinet rooms during negotiations.

Australia and Timor Leste - who should decide?

If, like me, you have been wondering on who would best decide on the maritime border dispute between Australia and Timor Leste, we may soon have the answer. Timor Leste has asked the UN to do just that, but the question remains - by what mechanism?  I read recently that Timor-Leste has launched a compulsory conciliation process under the 1982 UN Convention of the Law of the Sea (UNCLOS).  Its aim is to get Australia to the negotiating table in order to conclude an agreement on permanent maritime boundaries.

Part IX of UNCLOS provides that the conciliation procedure can be used where one party in the dispute has withdrawn from the UNCLOS compulsory dispute settlement procedures (as Australia did in 2002), two months before Timor-Leste’s independence.  Australia has refused to accept that a binding settlement on sea boundaries should be decided by international tribunal. But under the conciliation process, a commission would hear the parties arguments and both would then be obliged to negotiate in good faith on the basis of its report, which (while not binding) carries political pressure.

Part XV of UNCLOS requires Parties to settle their disputes by the peaceful means indicated in the UN Charter. However, if that fails to reach a settlement, they are obliged to resort to the compulsory dispute settlement procedures entailing binding decisions, subject to certain limitations and exceptions. 

Article 298 allows exceptions for three types of disputes and only disputes concerning sea boundary delimitation are subject to compulsory conciliation.  A State making an Article 298 declaration is also obliged to submit to conciliation. However, excluded from this obligation are disputes that arose before the entry into force of UNCLOS. So,… is this a dispute that arose before the entry into force of UNCLOS? That is a very good question!

The question of delimitation of the maritime boundaries in the Timor Sea came up when Portugal withdrew as administering authority and Indonesia subsequently annexed East Timor in 1975.  Australia’s recognition of Indonesian sovereignty over East Timor in 1979 paved the way for negotiations between Australia and Indonesia on the area known as the ‘Timor Gap’ which had been left undelimited by the 1972 seabed treaty between Australia and Indonesia.

As Australia and Indonesia could not agree on a permanent seabed boundary, they entered into a joint development agreement which provisionally dealt with the area in dispute, called the ‘Timor Gap Treaty’. Upon East Timor’s independence on 20 May 2002, Australia and East Timor signed the ‘Timor Sea Treaty’ which entered into force in April 2003. It also created a joint development area to enable exploitation to continue pending final delimitation of the maritime boundary.

It is quite clear that there was a dispute between Australia and Indonesia in that each State’s claim regarding the boundary was opposed by the other. But is the current dispute with East Timor is merely a continuation of that old dispute with Indonesia and thus as a past dispute excluded from the UNCLOS compulsory conciliation, or whether East Timor’s independence creates a break in the chain. 

The effect of state succession on the question of ‘past disputes’ has not been tested. However, as a new State is involved in the matter, its likely to be considered a new dispute. So the case is unlikely to qualify for exclusion on this basis.

In the event that all the prerequisite requirements were to be satisfied, and if none of the exclusions apply, conciliation can be instituted, by written notification addressed by one party to the dispute to the other party or parties. The other party to the dispute is obliged to submit to such proceedings. The conciliation commission can be established under Article 3 of Annex V whether or not the other party is willing to cooperate in the appointment of the members of the commission.  The commission is required to report within 12 months of its constitution.  However, even if all this occurs, here's the clincher the report of the commission, including its conclusions and recommendations, is not binding upon the parties. Analysts say that such a report would carry with it significant political pressure.

East Timor-Australia maritime border to be negotiated before United Nations: Careful what you wish for

Reports about my hospitalisation for post Easter stomach-pumping have been greatly exaggerated. Who knew that the human body had an upper limit of tolerance for chocolate?

My physician has advised a drastic reduction in chocolate consumption - impossible when you live in Switzerland.  It seems that my dream of living inside chocolate heaven and eating my way out would has a dark side.

So what else has been going on in the world ..... there have been developments on my favourite maritime border dispute with huge implications for oil and gas resources in Australia. It looks like East Timor is going to get what they have wished for.  Today Matthew Doran writes in SMH that Timor is taking Australia to the United Nations to solve the dispute over its maritime border under international maritime law. Timor has long argued current arrangements mean it is missing out on billions of dollars in revenue from offshore oil and gas fields. It has now approached the UN to begin a formal conciliation process conducted by an independent panel of experts.

Timor has been trying to wriggle out of its current Treaty arrangements and to settle the border dispute for some time. There have been a number of protest rallies in East Timor, the last  one reportedly taking place on 30 March, according to the SMH and the Guardian.  The Timorese claim that they have lost $6.6 billion in oil and gas revenues to Australia under the current Treaty arrangements for resource sharing. Instead, Timor believes that if the maritime boundary was at the half way point between the two countries, most of the oil and gas reserves in the Timor Sea would lie within their territory.  In response, there is no particular response from the Australian government, who is happy to talk but not about the border dispute.  Julie Bishop was busy touring Indonesia and opening the new embassy building in Jakarta, the largest constructed by Australia. DFAT updated its travel advice on 21 March (asking travellers to exercise a high degree of caution). Apparently, some some embassy employees from Dili got gardening leave back in Canberra.  Never mind, they can enjoy, along with Witness K, the Kingston cafes and the balmy autumn sunshine that Canberra is known for at this time of year.

Why is this all so hard? Well, Timor believes if the maritime boundary was decided under the UN Convention on the Law of the Sea (UNCLOS),  most of the oil and gas reserves in the Timor Sea would lie within their territory.  However, Australia has withdrawn from the maritime boundary jurisdiction of UNCLOS.  In 2002 Australia made a declaration excluding the setting of maritime boundaries from compulsory dispute resolution, the view being that any maritime boundary dispute is best settled by negotiation rather than litigation.

So what does that mean? - a Convention is an agreement between countries, usually developed by the UN or other international organizations. Governments that ratify Conventions have to incorporate them into their own (domestic) laws and to make sure that they are applied and respected. At the time of agreeing to a Convention, Governments can also say that they do not agree with certain parts of its text.  These are called distinctions, restrictions, exclusions, etc.  So even once ratified, Conventions will not apply to exclusions.  This means that although Australia applies UNCLOS, they do not agree that those mechanisms described in it, will be applied by Australia for maritime boundary issues.  This is important for this case,  because the first problem to be solved is to decide who can make the decision on where the border between Australia and East Timor lies.

Lets face it, I could make the decision, but nobody would listen to me - so it has to be an authority that both sides will respect.  Timor latest attempt is to ask the UN to begin a formal conciliation process conducted by an independent panel of experts.
So watch this space...  This opens up a whole lot of other questions - like how will this panel operate, who is qualified to be on this panel, and is it possible for Timor to get a better deal than they already have... and  many more.

Browse, North West Shelf back on the shelf - implications for other possible white elephants

Australia's hopes of the resources boom continuing have well and truly faded.  There was further bleak news with the announcement by Woodside and its energy giant partners, last week that they would put the $40 billion Browse back on the shelf, indefinitely.  Pardon the pun! Its no joke.

The North West Shelf is an extensive oil and gas region off the coast of Western Australia, in the Indian Ocean.  The region has estimated hydrocarbon reserves of 33 trillion cubic feet (930 km3).  It is Australia’s largest resource development project and has a considerable number of oil and gas wells, pipelines, production areas and support facilities.  It involves the extraction of petroleum at offshore production platforms, onshore processing and production and export of liquefied natural gas. This was the largest engineering project in the world in the early 1980’s with investments so far of around $A 25 billion.  Only about one third of the reserve is estimated to have been produced to date. Woodside is the project operator, along with five other partners: BHP Billiton; BP; Chevron; Royal Dutch Schell (which also owns 24% of Woodside through Shell Australia); Japan Australian LNG (a venture between Mitsubishi and Mitsui).  There's a nice map on Wikipedia.

The main reason given for this delay is the current low oil price and the LNG price in a similar slump, combined with the large volumes of LNG currently coming onto the market from other Australian projects.  Large volumes are also expected from the US in the coming years.  The circumstances have conspired to create a situation of over-supply and weak demand.

A recent report in the International NY Times (INYT) suggests that similar shelving could be on the cards for other 'potential white elephant' projects in Canada and Mozambique, for example.  The INYT also reports that Australia's woes have been exacerbated by an LNG price war with Qatar, and predicts that demand for LNG will not improve until after 2023.

Those following this blog would know of my preoccupation with the development of the Greater Sunrise area.  My recent prediction that the joint development between Australia and Timor L'Este is likely to languish in the ‘too hard’ basket, or the 'white elephant' basket, might just come true.  I said in my previous post, some commentators are projecting that thirty years from now there will be a huge amount of oil available – but no buyers. Maybe we won't have to wait that long for that to be a reality.

Australia and Timor-Leste: a brawl between neighbours or rules-based international order?

The debate about Australia's border dispute with Timor-Leste continues to entice bloggers, reporters, experts and others to put forward emotional positions.

These are based on imagination and occasionally rational thought and sometimes (very rarely) on principles of international law.  

Australia says it is committed to rules-based international order, according to Prime Minister Turnbull.  Unilateral actions are in nobody’s interest. They are a threat to the peace and good order of the region on which the economic growth and national security of all our neighbours depend. These differences should be resolved by international law.  

He might have been talking about the border dispute with Timor-Leste.

Allastar Cox says that Australia's treaties with Timor-Leste in fact form part of the Government's commitment to a rules-based international system. 

Australia and East Timor: this dispute between neighbours seemingly without end. Will the sun rise over Sunrise or is the gap too wide?

Protesters have gathered outside Australia's embassy in Dili  demanding an end to the dispute with Timor-Leste over undersea oil and gas fields, according to the SMH. 

The dispute is about who owns the highly valued oil and gas reserves under the sea between these two neighbours.  It goes back to the 2002 Timor Sea Treaty (TST) and the 2006 Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS).  Timor-Leste maintains that the second Treaty was invalid because Australia had bugged the cabinet room in Dili during the negotiations in 2004, and so managed to get the wording to favour Australia.  Anthony Bergin's piece from 2013, has a good summary of the history.

Each word in these Treaties is very important to both countries because they form the basis on which highly valuable offshore oil and gas resources in the Greater Sunrise area will be shared. Bergin's view is that, although Timor-Leste had the option of cancelling the Treaty, it decided to try to secure a decision that it had never really existed, thus allowing the possibility for permanently resolving the maritime boundaries. These have never been fully settled, and theTreaties do not resolve it. 

According to treaty law, under Article 49 of the Vienna Convention on the Law of Treaties (to which both Australia and Timor-Leste are party): 

a state that is induced to conclude a treaty by the fraudulent conduct of a negotiating state may invoke the fraud to invalidate its consent to be bound by the treaty.  

Spying to gain advantage in treaty negotiations may be defined as deceitful behaviour. What is not certain is whether this deceitful behaviour actually induced Timor-Leste to enter the CMATS treaty.  If Timor is able to prove deceitful inducement, that may be a way out.  Australia might also have the dubious distinction of being the first known state to have a treaty declared invalid on account of fraud, according to Professor Don Anton in ASIL.

This is just the latest lump of mud to be slung across the fence between these two neighbours.  Back in 2011, New Matilda published accusations based on information from Wikileaks, that Australia had deliberately incited unrest in Timor-Leste, for its own ends.  As they say, good fences make good neighbours, but these two have not yet agreed where the fence should be built.   

Since it is Australia's position that it is not valid for the International Court of Justice (ICJ) to decide on such disputes or for them to be settled through the dispute settlement provisions of the United Nations Law of the Sea Convention (LOSC), Timor's only option was to invoke the TST dispute settlement provisions to challenge its own consent to the CMATS treaty.

Timor brought a dispute to the ICJ at The Hague in January 2014. The ICJ is the principal judicial organ of the UN, established to adjudicate on disputes between States. In March 2014, the ICJ ordered that certain documents apparently taken from Timor-Leste by Australian security should be kept 'under seal'. It seems that on 3 December 2013 Australian security had seized documents and data from the offices of Timor's legal representative.  

Could there be smoke for Timor's accusation of espionage during Treaty negotiations? 

In September 2014, it was agreed to suspend the ICJ proceedings and instead to proceed with settlement negotiations. In March 2015, Australia agreed to return the documents in question and did just that in May 2015.  In turn, Timor-Leste asked the ICJ to discontinue the case, on 11 June 2015.  There's a good time-line of events on Lexology. 

But, that as not the end of it! On September 24th 2015, the Timor government submitted another dispute to an arbitration Tribunal.  This issue is not going to be over this year and certainly not before February 2017.The CMATS Treaty can be terminated if a development plan for the Greater Sunrise area has not been approved within six years of the entry into force of the Treaty.  That deadline passed in 2013 and Timor could have terminated CMATS.  CMATS can also be terminated if production from Greater Sunrise has not commenced within ten years of its entry into force.  Since CMATS was brought into force on Friday 23 February 2007, that 10 years won't be up until February 2017. That is just one important date in this story!

The duration of CMATS is until 2057, and because it piggy backs onto TST, it also extends the TST until 2057.  Significantly, it also establishes a moratorium on claims to sovereign rights and jurisdiction and maritime boundaries for the period of the treaty and excuses the parties from any obligation to negotiate in good faith over permanent boundaries until 2057.  These arrangements do not sit comfortably with Timor, so they are trying to get out!

If they secured a ruling that CMATS was never valid, what would Timor do then? For one, it would be possible to re-negotiate resource exploitation arrangements and possibly with a different partner.

Commentators say that everything hinges on settling the unresolved boundary dispute. Last November Reuters also reported that Timor is unhappy with the split of taxes it gets from current production.  This part of the dispute relates to the pipeline which goes to the refining plant in Darwin. The refining operations are where the real money and economic development comes from.

So, Timor wants the border to be half way mark between it and Australia, but Australia wants it to follow the line of its Continental Shelf.  In 2008 Australia got a a ruling from the UN on the size of its continental shelf from the CLCS, (the UN's Commission on the Limits of the Continental Shelf, which administers the LOSC).  This ruling was made on the basis of geological evidence that Australia's continental shelf extends farther than previously defined. The implications being that any border between the two is a lot closer to Timor's mainland and therefore gives Australia greater proportion of the shared resources under the sea.  For Timor this line is an uncomfortable fit.

Opening the border dispute might result in an uncomfortable result for all.  There are fears that it may also prompt Indonesia to enter the conversation, and possibly even gain ownership of the oil fields in question. Its a risky move for a number of reasons. Invalidating CMATS would not provide an incentive to develop Greater Sunrise area, in my view, it’s more likely to result in the development languishing in the ‘too hard’ basket, or there might just be a lack of interest.   

As I said in my previous post, some commentators are projecting that thirty years from now there will be a huge amount of oil available – but no buyers!

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The full text of  CMATS can be found on austlii.

Is the party over? Australian oil and gas companies report huge losses

Is the golden age of the oil and gas industry almost over? ...

Looking at the downturn in global oil prices it might seem that way for Australia.

Oil and gas companies are reporting losses, the industry is shedding jobs and oil prices continue to
decline.

Production was 7% up for the year but because of the lower crude prices, profits are down according to Santos, as they posted a 99% fall in profits for the 12 months to December 2015. The dramatic fall in profit also includes write downs on various assets of A$3.92bn over the year, according to the BBC.

They're not the only ones! 

Recently the BBC reported that Woodside put its dramatic decline in profits down to the global fall in oil prices (down by over 45% in 2015).

Is this a case of price fluctuations due to global political manoeuvring, inappropriate regulation crippling the industry in Australia, or is the oil age coming to an end because of a lack of demand?

Royal Dutch Shell is laying off thousands of workers and its chief executive is preparing the company to try and be profitable if there is an extended period of low oil prices according to City A.M. If you look at all the major oil and gas players, in Australia they have shed a good number of employees, according to Peter Botten, Managing director of the Australian listed Oil Search, in an interview with the ABC. He says that a quarter of the oil and gas industry jobs have gone (during 2015) based on numbers of employees employed directly by oil and gas companies.

A year ago, the news of world oil price falls were shocking (as oil prices fell from over $100 to around $50 a barrel). Because there was so much being pumped out of the ground and not enough industrial demand in the world to use it all – people thought this dip in prices would be temporary.

But those hopes have now faded!

Some cmmentators have projected that thirty years from now there will be a huge amount of oil – and no buyers.

Oil will be left in the ground.
The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.





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Note: How is the global crude price decided? Brent crude has overtaken WTI as the global crude price index, as Energy and Capital Explains. International benchmark Brent crude this morning is up by around two per cent at $33.08, however US West Texas Intermediate jumped by over over four per cent to $32.84, up from under $30 at the close of oil trading on Friday 19th February 2016, according to City A.M. comparing the current price comparing the two benchmarks.





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