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East Timor has lodged an arbitration case against Australia to invalidate treaty arrangements which govern the shared resource.
It says it has proof Australia engaged in "covert operations" during the treaty negotiations.
Correspondent: Karon Snowdon
Speakers: Alfredo Pires, Timor Leste's Minister for Petroleum and Minerals; Gary Gray Minister Resources and Energy, Australia
SNOWDON: East Timor initiated arbitration in April over the 2006 treaty called Certain Maritime Arrangements in the Timor Sea or CMATS.
It splits revenue from the lucrative Greater Sunrise oil and gas field 50-50 between the two nations.
It also delays for fifty years any claims of jursidiction or deciding on a permanent maritime boundary.
East Timor is unhappy with the current boundary which favours Australia.
To invalidate CMATS East Timor is claiming Australia engaged in "covert operations" during its negotiation.
Timor's Minister for Petroleum and Resources Alfredo Pires says the claims of espionage against Australia are serious.
PIRES: During the negotiations for CMATS there were some covert operations on the part of Australia, which allowed Australia to obtain some confidential information from the Timor Leste side.
SNOWDON: What was the precise nature of that problem as you've identified it. Was it getting hold of documents they shouldn't have or was it wire tapping or what?
PIRES: This is very legal at the moment but its along those lines. What we're saying we will present the proof in due course.
SNOWDON: So documents or telephone tapping?
PIRES: Whatever evidence is required for us to prove that those things were carried out.
SNOWDON: Under the treaty either side can cancel CMATS at any time.
But Alfredo Pires says that would jepardise other treaties as well and throw up massive legal uncertainty over territorial boundaries and commercial contracts
The outcome of arbitration is binding and he expects to be able to renegotiate if East Timor wins its case.
PIRES: And what we do afterwards we'd like to sit down and talk.
SNOWDON: And if CMATS is cancelled out, you will be renegotiating the maritme boundaries?
PIRES: I'm not saying at this stage but I'm saying we're open for all sorts of discussion. Our big objective here is to have permanent certainty for the companies in the Timor Sea. The treaty is proving as it is anyone can stand up and say a few words and everything becomes shaky.
SNOWDON: Australia has previously rejected Timor's claim of espionage.
Resources Minister Gary Gray says the treaty is fair and remains valid.
GRAY: And we believe the continued operation of CMATS is in the interests of both countries.
SNOWDON: There's a good chance you might lose that arbitration?
GRAY: Well the process of arbitration is for the process of arbitration. It would be inappropriate of me to make any comment speculative or otherwise about that process of arbitration.
SNOWDON: The Minister says East Timor is creating uncertainty.
GRAY: Certainty and transparency are important to investors, that importance cannot be understated. I said that in the context of Timor and I said that in the context of investment.
SNOWDON: Earlier in a speech to an international conference the Minister went further, criticising East Timor's tax rules and accountability.
GRAY: Uniform, understandabale and predictable legal and commercial arrangements are critically important to investors. Transparency means holding ourselves to account so that agreements on tax and fiscal arrangements bring certainty and predictabliility
SNOWDON: Similar sentiments have been expressed by Conoco-Philips -- the developer of the Bayu-Undan field and a 30% stakeholder in the yet to be developed and richer Greater Sunrise.
They were part of its submission to an Australian government inquiry into Australia's relationship with East Timor.
After years of failed talks, the company has lodged a court case claiming Timor has breached agreements with inconsistent tax treatment and double taxation.
Conoco-Philip's Australian President Todd Creeger wrote the dispute raises questions over governance, adding it directly impacts the bilateral relationship and impinges on Australia's sovereignty.
PIRES: He's a company man and shouldn't even be talking about this unless he decides to run for Prime Minister of Australia and takes Julia's job. My advice is for him to stick his job, he's not doing a bad job, but the relationship with Australia firm.
SNOWDON: Woodside, the operator of Greater Sunrise which has its own dispute with Timor says in its submission the investment regime risks becoming unstable
Claims Alfredo Pires also rejects.
But the stakes are high for all sides -- East Timor's reputation and billions of dollars of investment by some very big companies.
PIRES: I have no problems attracting other companies to come and develop Greater Sunrise if the current companies feel uneasy and prefer to invest somewhere else. But we're not into that we respect the contracts we have
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Updated 24 May 2013
www.radioaustralia.net.au
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