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TImor Sea Dispute

The Timor Sea dispute may be the most important international dispute that no one has ever heard of. The dispute centers over rights to oil and gas deposits on the floor of the Timor Sea. Of the claimants, Australia seems to have the better argument. Timor's economy and nascent democracy are utterly dependent on oil revenue, which will evaporate around the year 2025 in the absence of a favorable resolution of this disptute. Timor's population is exploding, and if oil revenue collapses, thousands and thousands of Timorese will hop into boats to make the short voyage to Australia. Europe's boat people crisis of 2015 would provide a preview of coming attractions. The challenge to Australia's government is to find a solution [joint resource development?] that preserves Australia's rights, while keeping the Timorese in Timor.

Timor-Leste and Australia face each other across the Timor Sea, about 250 nautical miles apart at the closest point and nowhere more than 400 nautical miles apart. The physical continental shelf in the Timor Sea is very shallow for over 200 nautical miles from the northern Australian landmass until it reaches the deep and narrow Timor Trough. This part of the shelf is known as the Bonaparte Basin, a major sedimentary basin and a highly prospective zone which includes the Sunrise and Troubadour gas-condensate deposits (together known as Greater Sunrise).

The maritime zones recognized under international law include internal waters, the territorial sea, the contiguous zone, the exclusive economic zone, and the continental shelf. Each coastal State may claim an Exclusive Economic Zone (EEZ) beyond and adjacent to its territorial sea that extends seaward up to 200 nm from its baselines (or out to a maritime boundary with another coastal State). Each coastal State has a continental shelf that is comprised of the seabed and subsoil of the submarine areas that extend beyond its territorial sea throughout the natural prolongation of its land territory to the outer edge of the continental margin. Timor likes the 200 nm split the difference approach, while Australia likes the continental shelf approach.

Between the two countries lie the Timor Sea, home to the Joint Petroleum Development Area (JPDA) that is rich in oil and natural gas deposits. Next to the JPDA are the Sunrise and Troubadour gas fields, collectively known as Greater Sunrise, that are worth an estimated $40 billion. These fields are at the heart of the maritime dispute that has weighed on bilateral relations and holds the potential to accelerate the nascent Timorese economy.

According to industry estimates, unless new oil reserves are developed, oil production is expected to decline further and cease by 2023. The impact of persistently low oil prices on fiscal spending is limited in the short run due to the buffer provided by the Petroleum Fund (PF), as about 80-90 percent of the oil reserves has been extracted and transformed into financial assets of the PF. However, over the long run, low oil prices would delay potential investment in new oil fields and weaken the prospects for developing the petroleum sector. Fiscal revenues will be highly dependent on the investment returns of the PF.

Timor-Leste's known oil and gas resources provide a one-generation window to build the country. The total value of reserves is estimated to be between $14 billion and $20 billion, to be expended on a sustainable basis if the government continues to abide by the strictures of the Petroleum Fund. To date, petroleum revenue has financed a massive ten-fold increase in government spending. Recurrent expenditures such as wages and salaries still make up the majority of the budget, but the share allotted to capital expenditure and development projects is growing.

Among other tasks the increased revenue enabled Timor to buy its way out of two sources of instability by offering one-time buyouts to the veteran petitioners and resettlement bonuses to IDPs. Additionally, it also enabled the government to establish a very popular welfare system for the elderly, veterans, and the infirm; to make an enormous purchase of rice to guard against food riots that occurred in the past; and to afford a large number of overseas scholarship programs for Timorese students.

On 23 April 2013, the Republic of Timor-Leste instituted arbitral proceedings at the Permanent Court of Arbitration (PCA) against the Commonwealth of Australia under Paragraph (b) of Annex B to Article 23 of the Timor Sea Treaty between the Government of East Timor and the Government of Australia of 20 May 2002. The Permanent Court of Arbitration acts as Registry in the arbitration.

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Between the historic vote for independence in 1999 and the restoration of independence in May 2002, the United Nations was responsible for administrating East Timor, as Timor-Leste was known at the time. During this transitional period, in July 2001 Australia and the United Nations Transitional Administration in East Timor (UNTAET) signed a resource-sharing arrangement in the Timor Sea. The agreement purported to give Australia rights over resources extending up to the Timor Trough, around 50 nautical miles from Timor-Lestes shores far beyond what Australia would have been entitled to under international law if a maritime boundary was drawn by applying the equidistance / relevant circumstances approach [and ignoring the extent of the seabed].

  • 2002 Timor Sea Treaty established the Joint Petroleum Development Area (JPDA) to enable petroleum development in an area claimed by both Australia and Timor-Leste. It apportions 90 per cent of JPDA petroleum to Timor-Leste and 10 per cent to Australia. It established a Joint Commission to oversee management of the resources cooperatively. As a result of joint oil and gas development in the JPDA Timor-Leste received US$12.02 billion in revenue (as of April 2016) and accrued a National Petroleum Fund worth US$16.6 billion (as of March 2016). Australia received US$1.35 billion (as of April 2016).
  • 2003 International Unitisation Agreement for Greater Sunrise created the framework to develop the Greater Sunrise fields as a single unit. This was necessary because 20.1 per cent of Greater Sunrise lies within the shared JPDA and 79.9 per cent in exclusive Australian seabed jurisdiction. Under the agreement, companies may propose development plans for Greater Sunrise, and the Australian and Timor-Leste Governments are to approve a plan that, amongst other things, develops the Greater Sunrise resources to the best commercial advantage consistent with good oilfield practice. To date, no plan has been approved.
  • 2006 Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS) splits future Greater Sunrise petroleum revenue 50/50 between Australia and Timor-Leste despite nearly 80 per cent being within Australias exclusive seabed jurisdiction. It establishes a moratorium on a permanent maritime boundary and on proceedings relating to maritime boundaries for 50 years or five years after exploitation of the Greater Sunrise gas field ceases, whichever occurs earlier. It provides Timor-Leste with water column jurisdiction (for activities such as fishing) within the JPDA.
  • 2006 Timor-Leste and Australia negotiated the terms of the Treaty on Certain Maritime Arrangements in the Timor Sea and the Agreement between the Government of the Democratic Republic of Timor-Leste and the Government of Australia relating to the Unitisation of the Sunrise and Troubadour Fields (Unitisation Agreement).

Timor-Leste Ministry of Foreign Affairs media release, 23 October 2005 stated "It is the view of the two sides that we should observe a moratorium on maritime boundary delimitation for a period coinciding more or less with the life of Greater Sunrise while [at] the same time we would have a 50-50% share of the resources."

On 11 April 2016, the Timor-Leste Government initiated compulsory conciliation under the United Nations Convention on the Law of the Sea (UNCLOS) with the aim of concluding an agreement on permanent maritime boundaries with Australia. Compulsory conciliation is a procedure under UNCLOS (Annex V, Section 2) in which a panel of conciliators assists State parties to try to reach an amicable settlement of their dispute. This procedure can be used in circumstances where no agreement has been reached between neighboring States and one State has made a declaration excluding the jurisdiction of binding dispute settlement bodies on maritime boundaries, as Australia has done. Compulsory conciliation can help a State like Timor-Leste try to resolve a maritime boundary dispute when it has no other option. The conciliation is conducted by a panel of five independent conciliators, known as the conciliation commission. The commission seeks to understand the facts and legal position of each State.

If Australia and Timor-Leste cannot reach agreement, the conciliation commission will provide a report to the Secretary General of the United Nations with recommendations to assist resolution. Australia and Timor-Leste would then be obliged to negotiate in good faith on the basis of the commissions report.

In March 2002, two months before Timor-Lestes restoration of independence, Australia withdrew from the compulsory dispute settlement procedures related to maritime boundaries under UNCLOS and the International Court of Justice. This excludes the possibility of an international court or tribunal deciding the maritime boundaries between Timor-Leste and Australia. This meant that Timor-Leste was not able to ask an international court or tribunal to give a binding determination on its permanent maritime boundary with Australia. A permanent maritime boundary with Australia can only be achieved through bilateral negotiations.

Timor-Leste notified Australia of the commencement of compulsory conciliation on 11 April 2016 and appointed two conciliators. Timor-Leste has proposed that the Permanent Court of Arbitration (PCA) administers the conciliation. The Permanent Court of Arbitration is an intergovernmental organization established by the 1899 Hague Convention on the Pacific Settlement of International Disputes.

On 3 December 2013, Australian security intelligence officers seized Timor-Lestes documents and data which were in the possession of one of Timor-Lestes lawyers, including legal documents relating to the arbitration which was underway between the two States. The Australian Government refused to return these materials.

An Application was filed with the International Court of Justice Registry on 17 December 2013, the Democratic Republic of Timor-Leste (hereinafter Timor-Leste) instituted proceedings against Australia with respect to a dispute concerning the seizure on 3 December 2013, and subsequent detention, by agents of Australia of documents, data and other property which belonged to Timor-Leste and/or which Timor-Leste has the right to protect under international law. In particular, Timor-Leste claimed that these items were taken from the business premises of a legal adviser to Timor-Leste in Narrabundah, in the Australian Capital Territory, allegedly pursuant to a warrant issued under section 25 of the Australian Security Intelligence Organisation Act 1979. At least part of the documents and data seized by Australia related to the Timor Sea Treaty Arbitration, or to possible future negotiations on maritime delimitation between the Parties.

On 3 March 2014, the International Court of Justice handed down interim orders which went beyond Timor-Lestes expectations and ordered Australia not to interfere in the communications between the Timor-Leste Government and its legal advisers. Australia has since recognised the need for all States to respect the confidentiality of communications between States and their legal advisers.

In September 2014, Timor-Leste and Australia agreed to suspend both the espionage arbitration and document seizure case for six months in order to reach an amicable settlement of their dispute. No agreement was reached in that time. While Timor-Leste sought to engage with Australia in structured negotiations on permanent maritime boundaries, Australia expressed its unwillingness to discuss the permanent maritime boundary issue. On 12 May 2015, over one year after the raid on Timor-Lestes legal offices, Australia returned the seized documents and data. Having achieved this positive result, Timor-Leste discontinued the document seizure proceedings in the International Court of Justice.

Permanent Court of Arbitration conciliation proceedings concern the maritime boundary between Timor-Leste and Australia and were initiated by Timor-Leste on 11 April 2016 by way of a Notification Instituting Conciliation Under Section 2 of Annex V of UNCLOS addressed to Australia pursuant to Article 298 and Annex V of the Convention. On 2 May 2016, Australia submitted Australias Response to the Notice of Conciliation to the PCA. The five-member Conciliation Commission was constituted on 25 June 2016 and is chaired by H.E. Ambassador Peter Takse-Jensen (Denmark). The other members of the Commission are Dr. Rosalie Balkin (Australia), Judge Abdul G. Koroma (Sierra Leone), Professor Donald McRae (Canada and New Zealand), and Judge Rdiger Wolfrum (Germany).

Timor-Leste proposed a creative solution which may involve a resource sharing arrangement in lieu of hastily attempting to resolve the complex and sensitive issues involved in agreeing to a permanent maritime boundary.



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