A Settlement to the Timor Sea Dispute?

Harvard Asia Quarterly, Volume IX, No. 4. Fall 2005 

Written by Kathryn Khamsi

East Timor, the poorest country in Asia, desperately needs access to petroleum resources in the Timor Sea in order to establish itself as an economically self-sufficient state. Yet, a considerable portion of those resources have been caught up in a dispute with Australia that began long prior to East Timor’s independence. In mid-2005, however, the countries appeared to reach a settlement.  This paper argues that, although the form of the settlement is not traditional, and accommodates an Australian position that is legally baseless, the settlement is not only the best practical resolution to the Timor Sea dispute realistically available to Timor-Leste, but also one that, substantively, meets its objectives.
 

From October 2003 through January 2005, Kathryn Khamsi was a Legal Advisor to, and eventually also Coordinator of, the Timor Sea Office (TSO), in Timor-Leste’s Prime Minister’s Office. The TSO was the part of the Timor-Leste Government responsible for maritime boundary negotiations, as well as drafting the country’s petroleum investment regime. Khamsi is now with the International Development Law Organization in Afghanistan.

The views expressed in this paper are the views of the author. They do not necessarily represent the view of the Timor-Leste Government, or any part thereof.

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Introduction

The dilemma faced by East Timor is well expressed in a recent cartoon.1 The cartoon depicts East Timor Prime Minister, Marí Alkatiri, listening soberly to Australian Prime Minister, John Howard: “We’d like you to stand on your own two feet.” Alkatiri responds, arms raised in exasperation: “Well … how about some of our own oil back?” This elicits an angry “You haven’t got a leg to stand on!” from Howard.

East Timor desperately needs access to petroleum resources in the Timor Sea in order to establish itself as an economically self-sufficient state. Yet a considerable portion of those resources have been caught up in a dispute with Australia that began long prior to East Timor’s independence. In mid-2005, however, the countries appeared to reach a settlement. The goal of this paper is to evaluate the terms of this proposed settlement. I argue that, although the form of the settlement accommodates an Australian position that is legally baseless, the settlement is not only the best practical resolution to the Timor Sea dispute realistically available to East Timor, but also one that, substantively, is consistent with what international law might afford in terms of revenues and regulatory control.

This paper begins by providing some background to the dispute and explaining the respective claims advanced by East Timor and Australia. A detailed examination and evaluation of the proposed settlement follows.

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I. Background

East Timor declared independence in November 1975, after four centuries under Portuguese colonial rule. Indonesia invaded almost immediately thereafter, and purported to annex East Timor as its 27th province. The United Nations repeatedly condemned the Indonesian occupation as a violation of the East Timorese peoples’ right to self-determination.2 Yet it was not until May 1999 that Portugal, Indonesia and the United Nations reached a deal allowing for the exercise of that right.3 On 30 August 1999, almost 99% of the 450,000-strong Timorese electorate voted in a referendum – 78 % of voters favored full independence over autonomy within Indonesia. Widespread militia violence, abetted by the Indonesian army, ensued, resulting in 1,500 deaths, the displacement of 300,000 people, and the destruction of more than seventy percent of the country’s infrastructure. On 15 September 1999, the Security Council authorized an Australian-led international humanitarian intervention.4 On 19 October 1999, Indonesia renounced its claims to East Timorese territory,5 after which Security Council Resolution 1272 created the interim United Nations Transitional Administration in East Timor (UNTAET).6 UNTAET governed in consultation with the Timorese until 20 May 2002, when the international community celebrated the restoration of independence for East Timor – now called Timor-Leste.

Timor-Leste is one of the poorest countries in the world,7 and poverty is likely to increase.8 Although the country has benefited from significant international assistance, donor support has fallen considerably since peaking in 2000 and is expected to decline further.9

Timor-Leste’s best opportunity for economic independence rests with the petroleum wealth in the Timor Sea – the sea that lies between Timor-Leste and Australia. The problem is that Timor-Leste’s claims to these resources overlap with those advanced by Australia. Without a boundary apportioning their respective entitlements, or some other mutual arrangement, international law provides that the resources cannot be exploited.10

The Timorese leadership – and UNTAET, on its behalf – has been calling for maritime boundary negotiations with Australia since prior to the 1999 popular consultation, arguing that a boundary should lie mid-way between the two countries, at what is referred to as the “median” line.11

Australia has been reluctant to engage in maritime boundary negotiations on these terms, its goal seemingly to recreate, to the fullest extent possible, the arrangements it reached with Indonesia during its occupation. In 1989, Australia and Indonesia signed the Timor Gap Treaty, by which they purported to carve the Timor Sea into so-called “zones of cooperation”. In these areas, petroleum was jointly exploited and revenues were shared – on a 50-50 basis in zone of cooperation A (“ZOCA”), the largest of the zones.12

Both the Timorese leadership and UNTAET refused the possibility of Timorese succession to the illegal treaty.13 However, mindful of Timor-Leste’s need for revenues in the short term, UNTAET, in consultation with the Timorese leadership, negotiated a similar joint development agreement. On 20 May 2002, Australia and Timor-Leste signed the Timor Sea Treaty,14 an interim arrangement similar to the Timor Gap Treaty that allows for the shared exploitation of petroleum pending agreement on boundaries.15 It applies to an area of the Timor Sea defined as the Joint Petroleum Development Area (the “JPDA”, which corresponds to the ZOCA), petroleum from which is shared 90%-10% in favor of Timor-Leste.16

The vast majority of non-donor funds for the Timor-Leste national budget have been generated by petroleum resources in the JPDA – originally, from the Elang Kakatua fields and now from the world class Bayu-Undan field.17 However, if the Timor-Leste Government is to spend the petroleum revenues currently at its disposal in a responsible and sustainable manner, it can afford only about $125 per capita per year.18 These revenues are insufficient, argues Oxfam Community Aid Abroad, to prevent Timor-Leste from becoming a “failed state”.19

A boundary set according to international law, Timor-Leste argues, could triple its revenues – from $4 billion to $12 billion (not discounted, April 2004 valuation).20 Indeed, Timor-Leste has a strong argument at international law not only to the entirety of the JPDA, but also to areas east and west of it containing significant known reserves – most notably, the large Sunrise and Troubadour gas fields (“Greater Sunrise”) straddling the eastern perimeter of the JPDA, and the Buffalo and Laminaria-Corallina oil fields just west of the JPDA.

II. The dispute

According to the international law of the sea – as set out in the United Nations Convention on the Law of the Sea 1982 (UNCLOS) – Timor-Leste and Australia each have sovereign rights to explore for and exploit petroleum in defined maritime zones adjacent to their land territory.21

International law allows every state to claim an exclusive economic zone (“EEZ”) extending up to 200 nautical miles (“nm”) from its coast,22 in which it has sovereign rights to explore for and exploit natural resources in the sea-bed and superjacent waters.23 Every state also has a continental shelf entitlement extending to 200 nm from its coast, and may claim further rights “to the outer edge of the continental margin” (this being a scientific concept with a particular legal definition for purposes of UNCLOS).24 States also have sovereign rights over the continental shelf to explore and exploit natural resources.25 In the exercise of EEZ and continental shelf rights, states may license other entities, including petroleum companies, to exploit or share in the exploitation of resources, while retaining regulatory control over that exploitation and deriving revenues, for example by taxation.

Timor-Leste and Australia have both claimed the full extent of their respective EEZ and continental shelf entitlements. Timor-Leste legislation claims a 200 nm EEZ and continental shelf rights to at least 200 nm.26 Australia also claims a 200 nm EEZ,27 as well as continental shelf entitlements up to the Timor Trough (beyond 200 nm). The Timor Trough is a declivity in the continental shelf of significant depth, and Australia argues that it “breaks the continental shelf between Australia and Timor”.28 Because Timor-Leste and Australia are less than 400 nm apart, their sovereign entitlements overlap significantly. It is arguable, though, that Timor-Leste has conceded jurisdiction south of the median line to Australia,29 and that Australia has conceded to Timor-Leste jurisdiction north of the JPDA.30 Therefore, the main area in dispute in the Timor Sea lies between the northern edge of the JPDA and the median line.

In instances where claims overlap, international law requires that states delimit their respective entitlements by a maritime boundary.31 Timor-Leste is in the unique position of having to set not only a frontal boundary with Australia, but also lateral boundaries. This is because Australia and Indonesia have delimited seabed and water column boundaries in the Timor Sea that do not coincide. The 1972 Seabed Agreement between Australia and Indonesia set the seabed boundary between the two countries between the median line and the Timor Trough (the “1972 Line”).32 In contrast, a 1997 agreement (which has not been ratified) divides their water column rights at the median line.33 Timor-Leste must therefore negotiate with Australia to establish a frontal sea bed and water column boundary, as well as lateral sea bed boundaries on the east and west between the median line and the 1972 Line. The present discussion is concerned with the sea bed boundary.

Both in relation to the EEZ and the continental shelf, UNCLOS requires that delimitation of overlapping entitlements be effected “on the basis of international law … in order to achieve an equitable solution.”34 This involves a two-pronged analysis. The starting point for boundaries is a line, every point of which is located at an equal distance from the coast of each state – the “equidistance line”, also referred to as the “median line” where the states concerned are on opposite sides of the sea in question. This line should then be modified to take into account so-called “special circumstances.” 35 Examples of “special circumstances” found in the case law include such geographic features as significant disparity in coastal lengths,36 and islands or protruding points on a state’s coastline that affect the location of the equidistance line so as to significantly disadvantage one state.37

Timor-Leste argues that the frontal boundary should be set at the median line, as there are no special circumstances requiring departure therefrom.38 Australia argues that the Timor Trough separates two distinct continental shelves in the Timor Sea,39 and therefore disputes the application of UNCLOS Article 83 and of the settled methodology.40 Australia has not articulated a position on where the seabed boundary should lie.41 But it seems to have abandoned its historical position that the boundary should lie at the Timor Trough, presumably because developments triggered by UNCLOS have made it untenable.42 Despite UNCLOS, however, Australia continues to argue that the Timor Trough is “relevant to any seabed delimitation”, and has speculated that it might be so relevant as to place the boundary north of the Bayu-Undan field or further.43 The majority of informed opinion favors Timor-Leste’s position.44

In relation to the western lateral boundary, Timor-Leste argues that Tanjong We Toh (a cape on the Indonesian coast) is a “special circumstance”, in that it affects the equidistance line so as to cause closure, which would be inequitable. It argues that a boundary line perpendicular to the general direction of the coast should be adopted, as this is an accepted way of remedying this type of inequity.45 Indeed, such a boundary would intersect with the 1972 Seabed Agreement at the point (designated as A18) where Australia and Indonesia had envisioned their rights might cease in the event of a delimitation with Portuguese Timor.46 It would place the Laminaria-Corallina and Buffalo fields in Timor-Leste jurisdiction. Timor-Leste argues that special circumstances also exist in relation to the eastern lateral boundary. The equidistance line would be inequitable due to a combination of factors, including the short coastal lengths of the Indonesian islands east of Timor, their remoteness in relation to other more relevant islands, and the direction they face. It argues that a modified equidistance line, giving half-effect to these islands, should be adopted as the boundary, as this is an accepted way of remedying this type of inequity.47 Drawn this way, the boundary would place the entirety of the Greater Sunrise field in Timor-Leste jurisdiction (see map). There is substantial academic support for Timor-Leste’s position on these bases, as well as on other grounds.48

Australia, on the other hand, maintains that the areas beyond the lateral limits of the JPDA fall under Australian jurisdiction pursuant to its 1972 Seabed Agreement with Indonesia.49 Australia asserts that, as a consequence, its lateral boundaries with Timor-Leste are set and non-negotiable.50 In addition to this legal argument, Australia refers somewhat ambiguously to the 1989 Timor Gap Treaty, as well as to its political relationship with Indonesia, to justify its refusal to negotiate lateral boundaries. These arguments are addressed in detail below. It bears mention, however, that nowhere in the academic literature on the subject does Australia’s position that the lateral boundaries should be non-negotiable find support.51

In April 2004, when Australia and Timor-Leste finally sat down to what were supposed to be substantive maritime boundary talks, negotiations reached an impasse over Australia’s refusal to negotiate lateral boundaries. Timor-Leste already receives 90% of production from the JPDA under the Timor Sea Treaty. The maximum Timor-Leste could gain from negotiations on Australia’s terms – a frontal boundary set according to Timor-Leste’s position (i.e. at the median line, the bottom edge of the JPDA), with lateral boundaries at the eastern and western edges of the JPDA – would bring to Timor-Leste only the remaining 10% of JPDA production. This was valued at approximately $US 400 million (not discounted) by Timor-Leste at the time of the negotiations.52 Contrast this with the resources valued at approximately $US 8 billion (not discounted) by Timor-Leste at the time of the negotiations that lateral boundaries set according to Timor-Leste’s view would add.53

In mid-2004, however, a constellation of factors led to a breakthrough.

Since Greater Sunrise is partly within the JPDA and partly in the disputed area outside, further agreement on jurisdiction between Australia and Timor-Leste is required before it can be developed. Annex E to the Timor Sea Treaty notes that Timor-Leste and Australia “agree to unitise” the Greater Sunrise deposits, such that production shall be distributed “on the basis that 20.1% is attributed to JPDA and 79.9% is attributed to Australia”. On 6 March 2003, Australia and Timor-Leste signed the International Unitisation Agreement (IUA).54 Australia passed the legislation necessary to ratify the IUA on 29 March 2004.55 The IUA has not, however, been presented to the Timor-Leste National Parliament for ratification. Greater Sunrise cannot be developed until the IUA enters into force, which requires ratification by Timor-Leste.56

The IUA acknowledges Timor-Leste’s claims to the east and west of the JPDA.57 Since the IUA was signed, there has been continued exploitation of disputed resources under unilateral Australian license, and Australia has issued new licenses and advertised acreage in disputed areas.58 Australian government officials, in defending the IUA and related instruments before the Parliament and public, represented that Sunrise lies partly in an area of exclusive Australian jurisdiction, and that this is reflected in the IUA.59 Timor-Leste objected that Australian actions were “inconsistent with the spirit and the letter” of the IUA and contrary to international law.60 It indicated that the IUA would not be ratified unless Australia committed to a satisfactory time frame for negotiations and either ceased unilateral activity in disputed areas or took adequate measures to preserve Timor-Leste’s rights in these areas pending resolution of the dispute (e.g., placing revenues in escrow).61

In mid-2004, Woodside Energy Ltd. (“Woodside”), the operator of the Greater Sunrise field, announced that a commercial window was open for marketing Greater Sunrise gas. Woodside set a deadline of 31 December 2004 for Timor-Leste ratification of the IUA, after which it would abandon the project and invest elsewhere. Woodside conveyed this message to the Australian government, and both pressured Timor-Leste.62 Woodside is an Australian company with close ties to the Australian leadership.63 Evidently, the Australian government sees its interests and those of Woodside as aligned.64 It is likely that Australia felt some inclination to do what it could on Woodside’s behalf. At the very least, the perception that the government was acting contrary to Woodside’s interests would reflect badly on it in the eyes of Australian citizens.

At this time, the government of the Northern Territory, the northern Australian state, was also urging the federal government (the “Commonwealth Government”) to resolve the impediments to Timor-Leste’s ratification of the IUA.65 The Northern Territory considers the development of Greater Sunrise gas to be “of vital importance to the economic future of the Northern Territory”.66 It participated in the Timor Sea Treaty and IUA negotiations, and lobbied for their ratification, submitting that developing Greater Sunrise gas in Darwin would “create an extra 4,400 jobs, and $15 billion for Australia’s GDP”.67

These interests in Greater Sunrise, together with pressure from the Australian public68 and the international community (including the United States Congress and the European Parliament),69 meant that by mid-2004, the Timor Sea dispute – and more importantly, the fact that it stood in the way of Timor-Leste ratification of the IUA and the development of Greater Sunrise – became somewhat of an election issue. Australia’s opposition Labor party accused the Liberal government of jeopardizing the Greater Sunrise project, and the government responded in kind.70 The Liberal government needed to remove the obstacles to the Greater Sunrise project.

III. Proposed settlement

At an 11 August 2004 meeting, Timor-Leste’s Foreign Minister, José Ramos-Horta, and his Australian counterpart, Alexander Downer, agreed that their countries would explore a so-called “creative solution” to the dispute in the Timor Sea – a means of sharing Timor Sea resources (and therefore resolving competing claims standing in the way of IUA ratification) without setting a permanent maritime boundary (thereby side-stepping Australian arguments about Indonesia).71

Although the 11 August meeting seemed a breakthrough at the time, with officials on both sides expressing optimism,72 it became clear during the negotiations that followed that Timor-Leste and Australia had very different conceptions of what a “creative solution” might look like. Australia was offering cash in exchange for Timor-Leste setting aside its claims, either permanently or for a significant period.73 Timor-Leste’s position was that a creative solution had to more fully reflect its sovereign rights in the Timor Sea.74 Timor-Leste proposed joint development, whether by extension of the Timor Sea Treaty or otherwise, as the most obvious non-boundary solution to the dispute. It also suggested that the settlement could require gas from Greater Sunrise to be developed in Timor-Leste.75 Negotiations eventually broke down over Australian’s refusal to contemplate anything other than a cash settlement.76

At the end of May 2005, however, it appeared agreement had been reached. Timor-Leste’s Foreign Minister published an article in the Australian newspaper The Age, which outlined its terms.77 Under the settlement, there would be a “moratorium on maritime boundaries” for forty years, a period coinciding with the life of the Greater Sunrise field, during which Timor-Leste and Australia would agree not to pursue their claims.78 In return for this deferral of claims, which presumably would be understood to remove the impediment to Timor-Leste’s ratification of the IUA, Timor-Leste would “share equally the total tax and royalty revenues from petroleum produced in the Greater Sunrise area”. The agreement also provided that “[o]ther fields underlying Greater Sunrise field either wholly or partly would be treated in the same manner as the Greater Sunrise field.” The Timor Sea Treaty would continue in force for the duration of these arrangements. Finally, the settlement would be “without prejudice” to Timor-Leste and Australia’s respective claims and the position of the eventual maritime boundary.

IV. Analysis

Australian officials praise the settlement as one that safeguards Australian interests while being “generous” to Timor-Leste.79 Support for the settlement among the Timor-Leste leadership is somewhat more equivocal. While the Foreign Minister has steadfastly stood behind it,80 public support from the Prime Minister was longer in coming,81 and reports vary on the stance of the President.82 This paper argues in Part A, below, that the Timorese leadership is right to scoff at Australian suggestions of generosity, given Australia’s motives for settling, and their reflection in the form of the settlement. However, it argues in Part IV.B that the settlement affords revenues and a degree of control to Timor-Leste equivalent to what it would have under a boundary set according to international law. This is consistent with the intention of the Timor-Leste government to use its petroleum wealth not only as a source of revenues, but also as a springboard for broader development. Further, as noted in Part A, Timor-Leste’s ability to enforce international law – its judicial alternatives to the negotiated settlement – are limited. As such, this paper argues that the settlement should be regarded as a good result for Timor-Leste, and approved by the Timor-Leste National Parliament and President.83

A. In form

The Australian assertion of generosity is disingenuous, as it implies that the disputed Timor Sea resources belong to Australia, and that Timor-Leste’s claim is based on its relative poverty rather than its international right. Further, by the settlement, Australia achieves precisely what it sought to achieve. The settlement will enable the development of Greater Sunrise in the short term, which benefits Australia not only by generating revenues, but also by providing opportunities for Woodside and the Northern Territory. Australia achieves this with very little compromise. Timor-Leste gets nothing unless Greater Sunrise is developed, and gets only a percentage of revenues from that one field (and other fields underlying that field), rather than jurisdiction. Indeed, this structure accommodates Australian assertions about rights acquired from Indonesia. These assertions are legally unfounded, and although the settlement does not validate them, it risks reinforcing them.

The theme of Australian “generosity” has pervaded Australian rhetoric in relation to the Timor Sea negotiations. In May 2004, for instance, in an attempt to counter increasingly anti-Australian public opinion, Australian Foreign Minister Alexander Downer said of the Timorese argument: “It’s an argument that Mexico, being a poor country, might try with the US to take over Texas”.84 At every stage of the negotiations, Australia has claimed to be making “generous” offers.85

As mentioned before, the claim is disingenuous, as it implies that the disputed areas in the Timor Sea, and the resources they contain, belong to Australia. It denies Timor-Leste’s rights at international law, as well as Australia’s violation of those rights. Timor-Leste is painted as a beggar, ungrateful for Australian aid and peace-keeping assistance.86 Timor-Leste has taken pains to clarify that it is not seeking generosity, but rather respect for its rights under international law.87 (That said, Timor-Leste has argued that resolution of the maritime boundary dispute “is all the more pressing” because of its need of the disputed resources for national development.88)

The claim is also disingenuous because, without the need for Timor-Leste’s ratification of the IUA, Australia would have allowed maritime boundary negotiations to go on indefinitely, while continuing to exploit resources in disputed areas. Australian officials have clearly stated that Australia’s reason for negotiating the “creative solution” was to enable the development of the Greater Sunrise field in the short term.89

These motives are apparent from the fact that the settlement is centered on the development of Greater Sunrise. Timor-Leste receives a greater share of revenues from the field in exchange for putting aside its claims, presumably removing any legal obstacle to its ratification of the IUA, and thereby removing the legal obstacle to the field’s development. Indeed, the form of the settlement looks very much like what Northern Territory Chief Minister Clare Martin had urged in mid-2004.90 Timor-Leste does not appear to get anything under the settlement in exchange for its deferral of claims if the Greater Sunrise field is not developed.91

In addition to reflecting Australia’s motives, the structure of the settlement accommodates Australian assertions about rights acquired from Indonesia.

Australia argues that areas beyond the lateral limits of the JPDA fall under Australian jurisdiction, and therefore has been persistent in blocking any semblance of Timor-Leste jurisdiction outside the confines of the JPDA. It has supported this position by vague references to the 1972 Seabed Agreement and the 1989 Timor Gap Treaty, or equally vague assertions about an adverse political reaction from Indonesia.92 The Australian argument seems to be that boundaries with Timor-Leste cannot be negotiated, as they would allow Indonesia to re-open its boundary with Australia. The specter of an aggrieved Indonesia no doubt has a profound impact on the Australian psyche, which fears refugees arriving by the boatload (at best) or terrorist attacks (at worst) from its neighboring archipelago. However, despite their political effectiveness, Australia’s arguments are legally unfounded.

There is no legal basis upon which Indonesia could “re-open” negotiations on the maritime boundary it agreed with Australia in the 1972 Seabed Agreement.93 International law states that this agreement is binding, and must be followed in good faith.94 The fact that international law in relation to continental shelf delimitation may have evolved since then is of no import.95 Timor-Leste has never had boundaries with Australia, which means that setting a boundary does not require “re-opening” of any existing boundaries. Therefore, no boundary between Australia and Timor-Leste (whether at the median line or otherwise) can set a legal precedent for “re-opening” negotiations between Australia and Indonesia.

Even as a political point, as some authors see the Australian assertion,96 it is weak. The suggestion seems to be that a boundary with Timor-Leste that differs from the 1972 Line will awaken Indonesia to an injustice. However, to the extent that the 1972 Seabed Agreement did an injustice to Indonesia, this is no secret. Dr. Mochtar Kusamaatmadja, a law of the sea expert who had played a prominent part in negotiating the 1972 Seabed Agreement, claimed as early as 1978 (by which time he had become Foreign Minister) that Australia had “taken Indonesia to the cleaners” in these negotiations.97 Indonesia proceeded to take a significantly different stand with Australia in the ensuing Timor Gap negotiations. Further, although certain authors see the position of the 1972 Line as reflecting a point in the evolution of the law of the sea (and a particularly unfortunate one for Indonesia),98 it is better understood as a geopolitical trade-off.99 It is, therefore, difficult to see how Indonesia would have either a legal or a political argument to re-negotiate its 1972 Seabed Agreement with Australia.

Australia’s argument that a boundary with Timor-Leste would allow Indonesia to “re-open” negotiations deliberately confuses the question of frontal and lateral boundaries. There can be no question of Australia re-negotiating lateral boundaries with Indonesia, as they were never negotiated. Australia can rely on neither the 1972 Seabed Agreement with Indonesia nor the 1989 Timor Gap Treaty in this regard.100

The 1972 Seabed Agreement does not set a lateral boundary, but only a frontal one. No indication whatsoever is given as to the orientation of a lateral boundary. In fact, even the end points of this frontal boundary are flexible: Australia and Indonesia explicitly contemplated that a “further delimitation agreement […] between governments exercising sovereign rights […] in the area of the Timor Sea” might require adjustments.101 More importantly, it is a well established principle of international law that a treaty does not create either obligations or rights for a non-party without its consent.102 Portugal was not a party to the 1972 Seabed Agreement. (Indeed, while the agreement was being negotiated by Australia and Indonesia, Portugal requested negotiations with Australia. Australia refused, indicating that it preferred first to settle its boundary with Indonesia.103 It did so with willful blindness towards the Portuguese position, and potential entitlements appertaining to the territory of (then) Portuguese Timor.104) Nor has Timor-Leste become a party to the 1972 Seabed Agreement. Therefore, even if it did set lateral boundaries, Timor-Leste would not be bound by it.

Australia cannot rely on the 1989 Timor Gap Treaty either. That treaty was illegal, and therefore of no force or effect. UNTAET was very clear that it would not “retroactively legitimize, or give any legitimacy to the conclusion of” the Timor Gap Treaty.105 Australia has acknowledged that (at the very least) the treaty is no longer in force,106 which means that any boundaries it set no longer exist.107 Even if it were valid, by its terms, the Timor Gap Treaty was without prejudice to a permanent continental shelf delimitation, meaning that it could be relied upon in support of a particular placement of boundaries.108 Further, the treaty applied to zones of cooperation within which sovereign rights were shared; there is no reason to extrapolate that the edges of these zones should determine an area in which sovereign rights are exercised exclusively. Also, it spoke only to petroleum development,109 rather than the full spectrum of sovereign rights existing in the EEZ and continental shelf.

Despite their being legally unfounded, however, Australian assertions about Indonesia are accommodated in the settlement. Shy of setting a boundary, the most logical means of settling the Timor Sea dispute would have been expansion of the JPDA – the area covered by the Timor Sea Treaty. The settlement is striking in that this was not the solution adopted. Rather than sharing all benefits of jurisdiction over the disputed resources, the settlement contemplates sharing only revenues. Moreover, the settlement does not even contemplate the sharing of revenues from the entire area in dispute, but only from Greater Sunrise and underlying structures (which also means that past exploitation is not addressed).

This structure is not without a certain legal risk for Timor-Leste. Although the settlement will be “without prejudice” to maritime boundaries,110 it could be seen to reinforce a pattern of resource exploitation, which might influence a court eventually called upon to set lateral boundaries.111 The risk is that Timor-Leste’s legal argument after the 40-year term of the settlement would be weakened by entering into the settlement. It is difficult to quantify this risk, given that the legal principle is by no means clear, and the boundary question will not arise until after the life of the currently known resources. For the latter reason, however, consideration of this risk is subsumed in the discussion below, which weighs the revenues on offer against the revenues international law would afford, the estimation of which includes future discoveries.

B. In substance

1) Revenues

The proposed settlement would increase Timor-Leste’s share of Greater Sunrise revenues to 50%, from the 18% to which it would otherwise be entitled under the IUA coupled with the Timor Sea Treaty. Also, “fields underlying Greater Sunrise field either wholly or partly would be treated in the same manner as the Greater Sunrise field.”

In exchange for this, the settlement would require a “moratorium on claims” for forty years. What exactly this entails is somewhat unclear. Presumably, it does not mean that petroleum activities occurring in disputed territory under unilateral Australian license will cease. Presumably, though, it does mean that Timor-Leste will not take action against this activity – whether that be action in international fora against Australia, or action in domestic fora under Timor-Leste law against petroleum companies. Although the settlement may allow back-claims after the expiry of the moratorium, essentially Timor-Leste forfeits all revenues from disputed areas save for its entitlements from the JPDA and the extra percentage of Greater Sunrise and any underlying structures.

How does this exchange compare with what Timor-Leste might get from a maritime boundary set according to international law?

As discussed in Part II, Timor-Leste argues that international law would set a frontal boundary at the median line, a western lateral boundary perpendicular to the coast of Timor island, and an eastern lateral giving half effect to Indonesian islands. Such boundaries would give Timor-Leste sole jurisdiction over the JPDA (giving it the remaining 10% of production therefrom), the entire Greater Sunrise field (giving Timor-Leste 100% as opposed to 18% of the resource), and the Laminaria-Corallina and Buffalo fields. It would also give Timor-Leste jurisdiction to license exploration in these areas,112 and over the exploitation of future discoveries. Timor-Leste’s position on the boundaries is supported by Oxford Professor Vaughan Lowe, the leading expert on the law of the sea.113 On this view of international law, the settlement requires Timor-Leste to forfeit substantial revenues – most notably, 10% of JPDA revenues, 50% of Greater Sunrise revenues and those already generated by the Buffalo, and Laminaria-Corallina fields (the Buffalo field is finished, and there is very little remaining petroleum to be derived from the Laminaria-Corallina field).

Other authors, however, argue that a maritime boundary set in accordance with international law would give Timor-Leste somewhat less.

Nuno Marques Antunes, who has been examining and otherwise involved in the Timor Sea dispute for some time, argues that a “corridor solution”, where the lateral boundaries on the east and the west are essentially lines perpendicular to Timor-Leste’s coast, would be a likely outcome.114 On the west, this corresponds with Timor-Leste’s position on where the boundary should lie. On the east, however, it does not. Antunes’ eastern lateral would give Timor-Leste roughly 50% of Greater Sunrise, and not much more in terms of unexplored areas. On this view of international law, the settlement requires Timor-Leste to forfeit only compensation for the Buffalo, and Laminaria-Corallina fields and the remaining 10% of JPDA revenues.

In fact, though, Antunes argues elsewhere that “an equitable delimitation of the continental shelf boundary would be likely to divide the Greater Sunrise fields between Australia and East Timor on a rough 50/50-basis.”115 Indeed, even if maritime boundaries were set where Timor-Leste argues they should be, a court setting a boundary would not necessarily address past exploitation. Getting compensation for resources depleted prior to the delimitation would be an uphill battle.

According to international law, sovereign entitlements over the continental shelf are inherent and exclusive.116 This means that, pending the delimitation of overlapping claims by a boundary, both Timor-Leste and Australia have rights in the Timor Sea that are exclusive.117 There is a strong argument that Australia is violating Timor-Leste’s exclusive rights in unilaterally authorizing petroleum activities (just as, say, Canada would be violating Timor-Leste’s rights if it purported to issue licenses in the Timor Sea), and therefore acting illegally. This argument is buttressed by the existence of an obligation to cooperate,118 and an obligation to act in good faith.119 It would be all the more compelling from the vantage point of a maritime boundary having been set placing the resources being exploited under Australian license in Timor-Leste jurisdiction. Based on this argument, if Timor-Leste were to become a party to UNCLOS, it could seek compensation from the appropriate dispute resolution body for Australia’s unilateral licensing of petroleum activities.120 Timor-Leste estimates the government take from for the Buffalo, and Laminaria-Corallina fields to be in the order of $2.5 billion.121

This argument is not, however, without legal hurdles. Most importantly, Australia would no doubt argue that no ruling could be made without Indonesia present,122 and it is highly unlikely that Indonesia would consent to international adjudication of any matter even remotely touching on the legality of its occupation of Timor-Leste.

Given this reality, the settlement would put Timor-Leste in a situation very like Antunes’ view of international law, the significant difference being that Timor-Leste would have 100% rather than 90% of JPDA production under the latter.

Even Antunes’ view of Timor-Leste’s prospects under international law may be optimistic. Other authors argue, in relation to lateral boundaries in the Timor Sea, that there are no circumstances requiring divergence from the equidistance lines.123 Boundaries at the equidistance lines would roughly correspond with the lateral limits of the Timor Sea Treaty, which are simplified equidistance lines.124 Under such a scenario, although Timor-Leste would be entitled to 100% of JPDA production, it would receive only 18% of Greater Sunrise revenues. Timor-Leste would be worse off than under the proposed settlement.

What emerges from the present discussion is that international law does not clearly mandate a specific maritime boundary; there is a spectrum of possibilities. The settlement affords revenues consistent with a boundary within this spectrum, albeit on the lower end of it.

2) Regulatory control

Timor-Leste has indicated that it sees the petroleum sector not only as a source of government revenues, but also as a springboard for broader development: a means of generating employment, both directly and indirectly, training Timor-Leste nationals, transferring technology, etc.125 Processing of Greater Sunrise resources in Timor-Leste would be a significant development opportunity,126 and Timor-Leste is pressing for this. The present discussion will, therefore, focus on Timor-Leste’s regulatory control over the development of Greater Sunrise.

There are three possible development concepts for Greater Sunrise: processing on a floating facility, transport via pipeline to Darwin for processing at the facility being constructed to process Bayu-Undan gas, or transport via pipeline to Timor-Leste for processing. There is widespread agreement that the Timor-Leste option is technically feasible (the most significant impediment being the depth of a Timor Trench, which a pipeline would have to cross). The question is a commercial one. Woodside commissioned a study on a pipeline to, and processing plant in, Timor-Leste, which allegedly “conclusively demonstrates” that this option is “not viable”, as it “involves greater capital cost, a longer schedule and has significantly higher technical risk.”127 However, the Timorese leadership has yet to be satisfied that the Timor-Leste development option is not commercially viable.128

It is unclear whether the settlement will address how Greater Sunrise is to be developed, or whether this will be left to negotiation with the joint venture partners. In fact, it is also unclear what Timor-Leste’s position is in this regard.129 Originally, it was reported that Timor-Leste wanted the development concept directly addressed by the settlement, which Australia refused on the grounds that this was a purely commercial issue.130 More recently, Timor-Leste was reported to be seeking only assurances that Australia “would not stand in the way of a pipeline to East Timor, if the Sunrise owners chose to take it there, and that it would not provide subsidies for the Darwin option.”131 The latest reporting is that Timor-Leste has “dropped” these demands.132

Any assurances from Australia in relation to the Greater Sunrise development concept should be treated with great skepticism. The Northern Territory has gone to significant lengths to ensure that Greater Sunrise gas is developed in Darwin. When the Greater Sunrise joint venture announced in 2001 that development on a floating facility was the preferred development option, having concluded that processing in Darwin was not commercially viable, the Northern Territory government pressured them to review this conclusion,133 and undertook extensive political lobbying.134 Processing in Darwin is now the option preferred by the joint venture. As discussed above, the Northern Territory lobbied the Commonwealth Government to resolve the Timor Sea dispute in order to enable the project to go ahead. It seems unlikely that the Commonwealth Government would now make any commitment that might prejudice the Northern Territory’s prospects, and it is clear that the Northern Territory is prepared to provide, or is at least seeking, fiscal incentives.135 Moreover, it is doubtful whether any commitment by the Commonwealth Government could be enforced against the Northern Territory is a matter of Australian law. To the extent that Timor-Leste wishes the settlement to speak to the development concept for Greater Sunrise, it is unlikely to get a material concession.

That said, under the IUA, Timor-Leste already has significant regulatory control over the development of Greater Sunrise. Greater Sunrise can only be exploited in accordance with a development plan that is approved by both the competent Australian authority and the competent authority under the Timor Sea Treaty.136 The Timor Sea Treaty sets up a three-tiered joint administrative structure. The day-to-day regulation and management of petroleum activities are carried out by the Designated Authority (the “DA”).137 The DA is “responsible to” the Joint Commission,138 an oversight body with responsibility for policy and other broad issues.139 Above the Joint Commission is the Ministerial Council, which is essentially a dispute resolution body.140 Timor-Leste now controls the DA in practice, and the DA will legally become the Timor-Leste Government body charged with petroleum activities in 2006.141 Timor-Leste also dominates the Joint Commission, which currently consists of two commissioners appointed by Timor-Leste and one appointed by Australia.142 Although Australia is equally represented on the Ministerial Council, the Timor Sea Treaty appears to preclude review by the Ministerial Council of a decision on a pipeline to Timor-Leste from Greater Sunrise.143 Consequently, except as constrained by the obligation to approve a development plan that meets certain conditions (including commercial viability),144 Timor-Leste retains a legal veto over the manner in which Greater Sunrise is developed.

How does this compare with the control over the development concept for Greater Sunrise that Timor-Leste might have under international law?

Jurisdiction over the entirety of Greater Sunrise under a favorable boundary would allow Timor-Leste an unfettered veto over the manner in which Greater Sunrise is developed. It should be noted, though, that this would only allow Timor-Leste to block development, rather than force development on its terms. Indeed, Woodside has intimated that it would not go ahead with the Greater Sunrise development ahead of development of other holdings if required to process the gas in Timor-Leste.

As discussed in Part IV.B.1), however, a boundary giving Timor-Leste 100% of Greater Sunrise is by no means guaranteed. The more likely result would be a boundary giving Timor-Leste more, but not all, of Greater Sunrise. Under this scenario (or, for that matter, under an expanded Timor Sea Treaty covering the entirety of Greater Sunrise, the settlement initially proposed by Timor-Leste), Timor-Leste would likely not have any greater legal control over the development of Greater Sunrise than under the proposed settlement. One might argue that Timor-Leste’s clout in the regulatory back-and-forth with Woodside over the Greater Sunrise development plan would be greater if Timor-Leste were allocated a greater share under the IUA, or in some other joint development scenario. In fact, however, both Timor-Leste and the DA have maximized use of their regulatory powers, requiring the Greater Sunrise joint venture fully to explore the possibility of processing in Timor-Leste. Its jurisdiction to do so has not been disputed.

Again, international law does not clearly mandate a specific maritime boundary; there is a spectrum of possibilities. What emerges from the present discussion is that the settlement affords a degree of regulatory control consistent with a boundary within this spectrum, and not even on the lower end of it.

C. Judicial alternatives

The discussion in Part IV.B illustrates that, if Timor-Leste were to reject the settlement terms and hold out for a delimitation of boundaries on the basis of international law, it would not be guaranteed a better result. Beyond this, however, it is important to factor into the analysis of the settlement the fact that Australia has successfully prevented Timor-Leste from seeking such delimitation from an international dispute resolution body. Although Timor-Leste may have other judicial avenues, the extent to which these would materially advance its cause is limited.

International courts only have jurisdiction to hear a case where the parties involved consent to that jurisdiction. In March 2002, less than two months before Timor-Leste’s independence, Australia withdrew its consent to the jurisdiction of any international dispute resolution body over the delimitation of maritime entitlements.145 Although somewhat transparently aimed at a potential claim by Timor-Leste, these declarations are well within Australia’s right, and there does not appear to be any appetite to reverse them, even among Australia’s opposition Labor party.146 Timor-Leste cannot, therefore, ask a court to set a maritime boundary that will bind Australia.

Timor-Leste is not, though, entirely without international judicial recourse in relation to the Timor Sea dispute. The following briefly canvasses two judicial avenues, a more thorough review of which is beyond the scope of this paper.

In becoming a party to UNCLOS,147 Australia gave wide-ranging consent to the jurisdiction of various bodies – the International Court of Justice (the “ICJ”), the International Tribunal for the Law of the Sea (“ITLOS”) and various types of arbitral panel – to settle maritime disputes.148 UNCLOS permits states to carve out only limited matters from the jurisdiction of these bodies. While Australia is able to avoid judicial delimitation of maritime boundaries,149 it cannot avoid adjudication of a claim that it is violating the rights of another state – for instance, a claim by Timor-Leste that Australia is violating its EEZ and continental shelf rights.150

As discussed above,151 there is a strong argument that Australia is violating Timor-Leste’s EEZ and continental shelf rights in unilaterally authorizing petroleum activities. Based on this argument, if Timor-Leste were to become a party to UNCLOS, it could request an order from the appropriate dispute resolution body under UNCLOS to block Australia’s unilateral licensing of petroleum activities, or require that any revenues derived from such activities be placed in escrow.152 That said, in addition to the legal hurdles to this argument discussed above,153 as a practical matter, a successful claim would advance Timor-Leste’s cause only as much as it would create an incentive for Australia to negotiate. Although Timor-Leste might succeed in blocking exploitation under Australian license, this would not provide a basis for Timor-Leste to license petroleum activities. In order to benefit from the disputed resources, Timor-Leste would still have to negotiate a boundary or other arrangement with Australia, albeit with Australia in less of a position to argue against Timor-Leste jurisdiction outside the JPDA.

Timor-Leste can also pursue companies operating under unilateral Australian license (i.e. without license from Timor-Leste) in areas of the Timor Sea claimed by Timor-Leste under its own domestic law. Under the Timor-Leste Petroleum Act, restitution and reparation can be sought for unauthorized activities as far back as 28 November 1975.154 Indeed, Timor-Leste has indicated its intention to pursue companies domestically for unauthorized activities.155 In itself, however, domestic prosecution is unlikely to be a satisfactory remedy to Timor-Leste. Judgements under Timor-Leste law, rendered by Timor-Leste courts, would have to be enforced in jurisdictions in which the companies have assets, which presents a significant hurdle to relief. Further, as with the UNCLOS claim against Australia, successful litigation would not settle the dispute over rights to future exploitation.

Conclusion

Unfortunately, what Timorese public comment exists is critical of the settlement for failing to resolve the issue of maritime boundaries.156 Timor-Leste’s charismatic president, independence hero Xanana Gusmão, who has unparalleled moral authority as well as a constitutional ability to block the settlement,157 appears to have reservations about the settlement for these same reasons: “I will give this issue to the government, because it is the government dealing with this. But as president, I should say that in the constitution I have to be the guarantee of our sovereignty.”158 The suggestion is that the settlement involves forfeiting Timorese sovereignty. It recalls the analogy, made by the President in mid-2004 and taken up by activists, between Australia’s stance in the Timor Sea dispute (notably, its unilateral licensing of petroleum exploitation) and the Indonesian occupation.159

Although this rhetoric effectively drew attention to the injustice of the Australian position, both suggestions are inaccurate. True, the settlement does as little as possible to recognize Timor-Leste rights outside the JPDA, thereby accommodating Australian assertions about rights acquired from Indonesia that are legally unfounded, to say nothing of morally repugnant. However, the Timor Sea dispute is not about sovereignty, but rather about less extensive bundles of sovereign rights.160 Further, Timor-Leste has only potential sovereign rights in the Timor Sea; the dispute arises by virtue of conflicting entitlements at international law. Therefore, it is incorrect to suggest that the settlement might be unconstitutional for alienating sovereignty,161 and the analogy to the Indonesian occupation is inappropriate.

The settlement is the best resolution to the Timor Sea dispute realistically available to Timor-Leste. Australia has successfully blocked Timor-Leste from seeking a judicial determination of a boundary, and other judicial avenues available to Timor-Leste would advance its cause little. Even if Timor-Leste were able to sue for a maritime boundary set according to international law, it would not necessarily end up better off than with the proposed settlement. International law does not clearly mandate a specific maritime boundary in the Timor Sea; there is a spectrum of possibilities. The settlement affords not only revenues, but also a degree of control over the manner of development of disputed resources, consistent with a boundary within this spectrum. As such, the settlement is one that should be accepted by the people of Timor-Leste, and approved by the Timor-Leste National Parliament and President.

Endnotes

  1. Peter Nicholson, The Australian, 23 March 2004.

  2. General Assembly resolution 3485 (XXX), “Question of Timor”, 12 December 1975, adopted by 72 votes to 10, with 43 abstentions; ; S/RES/384 (1975), adopted unanimously by the Security Council at its 1869th meeting on 22 December 1975; S/RES/389 (1976), adopted by 12 votes (2 abstaining and 1 non-voting) by the Security Council at its 1914th meeting on 22 April 1976; General Assembly Resolution 31/53, 1 December 1976, adopted by 68 votes to 20, with 49 abstentions; General Assembly Resolution 32/34, 28 November 1977, adopted by 67 votes to 26, with 47 abstentions; General Assembly Resolution 33/39, 13 December 1978, adopted by 59 votes to 31, with 44 abstentions; General Assembly Resolution 34/40, 21 November 1979, adopted by 62 votes to 31, with 45 abstentions 45; General Assembly Resolution 35/27, 11 November 1980; General Assembly Resolution 36/50, 24 November 1981; General Assembly Resolution 37/30, 23 November 1982.

  3. The Agreement between the Republic of Indonesia and the Portuguese Republic on the question of East Timor, signed 5 May 1999, the Agreement regarding the modalities for the popular consultation of the East Timorese through a direct ballot, between the Government of Indonesia, the United Nations and the Government of Portugal, signed 5 May 1999 and the East Timor popular consultation agreement, between the Government of Indonesia, the United Nations and the Government of Portugal, signed 5 May 1999, being Annexes I to III, respectively, to UN Doc. S/1999/513, “Question of East Timor – Report of the Secretary-General”, 5 May 1999.

  4. S/RES/1264 (1999), adopted by the Security Council at its 4045th meeting on 15 September 1999.

  5. People’s Consultative Assembly (Majelis Permusyawaratan Rakyat), Decision of 19 October 1999.

  6. S/RES/1272 (1999), adopted by the Security Council at its 4057th meeting on 25 October 1999.

  7. Oxfam Community Aid Abroad, “Two years on … What future for an independent East Timor?”, (Victoria: Oxfam Community Aid Abroad, 2004) [hereinafter “2004 Oxfam Report”] at 6.

  8. World Bank, International Development Association Country Assistance Strategy for the Democratic Republic of Timor-Leste for the Period FY06-FY08: Creating the Conditions for Sustainable Growth and Poverty Reduction, Report No. 32700-TP, 18 August 2005 at ¶ 37.

  9. 2004 Oxfam Report, supra note 7 at 9.

  10. See discussion below at text accompanying notes 116 to 119.

  11. See e.g. UNTAET Public Information Office, “UN Mission in East Timor opens talks with Australia on marine resources”, 9 October 2000; UNTAET Public Information Office, “East Timor ‘flexible’ in talks over Timor Sea dispute, UN mission says”, 12 April 2001.

  12. Treaty between Australia and the Republic of Indonesia on the Zone of Cooperation in an Area between the Indonesian Province of East Timor and Northern Australia, signed 11 December 1989, (purportedly) entered into force 9 February 1991, Australian Treaty Series 1991 No 9. The treaty also created the Joint Authority, through which Australia and Indonesia would jointly administer resource development in the zones.
    In 1979, Australia entered into negotiations with Indonesia about rights in the Timor Sea, and in so doing, became the only nation ever to grant de jure recognition to Indonesia’s occupation. Having failed to agree on a boundary, Australia and Indonesia eventually set the question aside in favor of negotiating an interim arrangement that would allow for exploitation of petroleum resources.

  13. K. Polglaze, “Timor Gap Treaty in Doubt”, The Canberra Times, 30 November 1999 (quoting Marí Alkatiri).

  14. Entered into force 2 April 2003. In fact, the arrangement had been assured significantly earlier. On 5 July 2001, representatives of the Timorese leadership (Marí Alkatiri) and UNTAET (Peter Galbraith), and Australia (Alexander Downer) signed an MOU to the effect that the Timor Sea Arrangement “is suitable for adoption as an agreement between Australia and East Timor upon East Timor’s independence”. UNTAET Public Information Office, “East Timor: Timor Sea accord initialed; Ms. Fréchette completes 4-day visit”, 5 July 2001. See also UNTAET Public Information Office, “Timor Sea arrangement, negotiated by UN, approved by East Timor cabinet”, 3 July 2001. With a few changes, the Timor Sea Arrangement became the Timor Sea Treaty.

  15. Timor Sea Treaty, supra note 14 at Article 22. It is without prejudice to Australia and Timor-Leste’s respective positions on maritime boundaries. Timor Sea Treaty, Article 2.

  16. Timor Sea Treaty, Ibid. at Article 4.

  17. See e.g. Ministry of Planning and Finance, The Democratic Republic of Timor-Leste Combined sources budget 2005-06, Draft Budget/Background Paper For Discussion at the Timor-Leste Development Partners’ Meeting 25-26 April 2005.

  18. J. Ramos-Horta, “‘Resource curse’ holds no fears for newest petro-economy”, The Australian, 16 August 2004. All figures used are in United States dollars.

  19. Oxfam, “Two years on”, supra note 9 at 2.

  20. Timor Sea Office, “Media Release: Australia is undermining ‘Greater Sunrise’ development”, 22 March 2004; “Welcome Statement by Prime Minister Alkatiri”, Timor-Leste – Australia Maritime Boundary Negotiations, 19-22 April 2004, Hotel Timor, Dili, Timor-Leste; “Nation Building in Timor-Leste”, Keynote Presentation by Timor-Leste Prime Minister Dr. Marí Alkatiri, South-East Asia-Australia Offshore Conference (SEAAOC), Darwin, 7-9 June 2004 [hereinafter “Alkatiri Address to SEAAOC, 2004”]; Timor Sea Office, “Statement on oil and gas development in Timor-Leste”, 29 August 2004.

  21. Done at Montego Bay, Jamaica, 10 December 1982, entered into force 16 November 1994. Timor-Leste has yet to become a party to UNCLOS. However, statements by Timor-Leste officials indicate that Timor-Leste feels bound by its provisions. Further, the provisions of UNCLOS setting out rights to resource exploitation are understood to set out customary international law, and therefore bind even states that are not members of UNCLOS.

  22. UNCLOS, Ibid. at Article 57.

  23. UNCLOS, Ibid. at Article 56(1)(a).

  24. UNCLOS, Ibid. at Article 76.

  25. UNCLOS, Ibid. at section 77(1). Rights over the continental shelf originated in the 1945 proclamation of U.S. President Truman (Proclamation No. 2667, “Policy of the United States with Respect to the Natural Resources of the Subsoil and Sea Bed of the Continental Shelf”, 28 September 1945, 10 Fed. Reg. 12 at 303). Continental shelf rights were agreed in the 1958 Convention on the Continental Shelf (adopted 29 April 1958, 499 U.N.T.S. 311), which remains in force between its states parties who have not yet become parties to UNCLOS (UNCLOS, Ibid. at Article 311.)

  26. 26 Timor-Leste Law No. 7/2002, Fronteiras Maritimas do Territorio da Republica Democratica de Timor-Leste, effective as of 20 May 2002, Articles 8 & 9. This law was enacted pursuant to the Article 4(2) of the Timor-Leste Constitution.

  27. Proclamation of 26 July 1994, under section 10B Seas and Submerged Lands Act 1973 and section 4 of the Acts Interpretation Act 1901.

  28. Statement by Australian Minister of Foreign Affairs, 30 October 1970. See generally Case concerning East Timor (Portugal v. Australia), International Court of Justice, Counter-Memorial of the Government of Australia, 1 June 1992 at ¶¶ 382-383, and Rejoinder of the Government of Australia, 1 July 1993 at ¶¶ 277-279.

  29. Timor-Leste has protested petroleum activity under unilateral Australian license, and sought that Australia either exercise restraint pending delimitation of boundaries or take other interim measures, in an area extending only to the median line.

  30. In June 2004, Timor-Leste announced a bidding round for offshore seismic and geophysical data acquisition rights in the Timor Sea north of the JPDA. (Alkatiri Address to SEAAOC, 2004, supra note 20; Timor Sea Office, “Media Release: Timor-Leste Prime Minister Opens Nation for Petroleum Development”, 7 June 2004.) In September 2004, rights were awarded to a BGP-GGS consortium. (Timor Sea Office, “Timor-Leste Prime Minister Welcomes First Successful Seismic Tender”, 7 September 2004.) A bidding round for exploration rights was launched in September 2005 in Singapore, where Prime Minister Alkatiri stated: “The proposed contract areas are distinct from the area of overlapping claims which has been the subject of ongoing talks between Timor-Leste and the Government of Australia since April last year.” (“Keynote address by Prime Minister Mari Alkatiri, Timor-Leste 2005/2006 Inaugural Acreage Release”, Singapore, 2 September 2005.) Timor-Leste has announced its intention to award exploration rights in mid-2005. (C. Soares, “Roadshow Presentation: Process and Timeline – Timor-Leste”, September 2005.) There is no evidence that Australia has protested this activity in any manner at any stage.

  31. UNCLOS, supra note 21 at Articles 74 & 83.

  32. Agreement between the Government of the Commonwealth of Australia and the Government of the Republic of Indonesia establishing certain sea-bed boundaries in the area of the Timor and Arafura seas, supplementary to the Agreement of 18 May 1971, signed 9 October 1972, entered into force 8 November 1973 at Articles 1 & 2. The Agreement between the Government of the Commonwealth of Australia and the Government of the Republic of Indonesia establishing certain sea-bed boundaries in the area of the Timor and Arafura seas, supplementary to the Agreement of 18 May 1971 1972 Line obviously did not cover the area of the Timor Sea between Australia and (then) Portuguese Timor. Rather, it left a gap, which came to be known as the “Timor Gap”.

  33. Treaty between the Government of Australia and the Government of the Republic of Indonesia establishing an exclusive economic zone boundary and certain seabed boundaries, signed 14 March 1997. Articles 2 and 6 set the EEZ boundary between Australia and Indonesia at the median line. Article 7 then provides that in areas where EEZ ad continental shelf jurisdiction overlap – i.e. north of the median line but south of the 1972 Line – Australia exercises EEZ rights in relation to the seabed and Indonesia exercises EEZ rights in relation to the water column.

  34. UNCLOS, supra note 21 at Articles 74(1) & 83(1). Customary law also requires that an “equitable solution” be the aim of any delimitation of continental shelf or EEZ rights. Maritime Delimitation in the Area between Greenland and Jan Mayen (Denmark v Norway), [1993] ICJ Rep 38 at ¶48.

  35. See e.g. Jan Mayen case, supra note 34 at ¶¶ 49-51, in which the ICJ canvasses relevant decisions of international courts and arbitral panels, and concludes that “it is in accord with precedents to begin with the median line as a provisional line and then to ask whether ‘special circumstances’ require any adjustment or shifting of that line.” See also Maritime Delimitation and Territorial Questions between Qatar and Bahrain (Qatar v Bahrain) (Merits), Judgment of 16 March 2001 at ¶ 230; Permanent Court of Arbitration, Award of the Arbitral Tribunal in the Second Stage of the Proceedings – Maritime Delimitation (Eritrea v. Yemen), Award of 17 December 1999 at ¶ 131; Land and Maritime Boundary Between Cameroon and Nigeria (Cameroon v. Niveria; Equatorial Guinea intervening), Judgment of 10 October 2002 (Merits) at ¶ 288.

  36. See e.g. Case Concerning the Continental Shelf (Lybian Arab Jamahiriya v Malta), [1985] ICJ Rep. 13 at ¶¶ 74-78.

  37. See e.g. Case Concerning the Continental Shelf (Tunisia v Lybian Arab Jamahiriya) (Merits), [1982] ICJ Rep. 18 at ¶ 79; Qatar v Bahrain, supra note 35 at ¶ 219.

  38. Timor Sea Office, Briefing for the Diplomatic Community: “East Timor – Australia Maritime Boundary Negotiations”, 27 April 2004 [hereinafter “TSO, April 2004 Briefing”]; José Teixeira, Secretary of State for Investment, Tourism and Resources, Briefing for La’o Hamutuk: “Informasaun ba La’o Hamutuk: Timor-Leste – Australia Negosiu Fronteira Maritimu”, 4 June 2004 [hereinafter “Teixeira, June 2004 Briefing”].

  39. Supra note 28.

  40. See e.g. Triggs (2000), supra note 44 at 118.

  41. Australia does accept the median line for the water column portion of EEZ rights. Its position, though, is that the frontal boundary for the sea bed portion of EEZ rights and the continental shelf should not necessarily coincide with the water column boundary.

  42. As discussed above, UNCLOS recognizes a default continental shelf entitlement of 200 nm, as well as rights in a 200 nm EEZ. In both regards, UNCLOS was an innovation over the pre-existing regime. In 1985, the ICJ confirmed that UNCLOS meant that geological or geophysical factors (such as the Timor Trough) have no relevance to a boundary delimitation where states are less than 400 nm apart. (Libya/Malta case, supra note 36 at ¶¶ 39-40.) See generally J.I. Charney, “International Maritime Boundary for the Continental Shelf: The Relevance of Natural Prolongation”, in N. Ando et al., eds., Liber Amicorum Judge Shigeru Oda (The Hague: Kluwer Law, 2002) 1011 at 1029.

  43. Letter from Bill Paterson, First Assistant Secretary, South and South-East Asia Division, Department of Foreign Affairs and Trade to Andrew Hewett, Executive Director, Oxfam Community Aid Abroad, dated 4 June 2004 [hereinafter “June 2004 Australian response to Oxfam report”] at 2.

  44. See e.g. V. Lowe, C. Carleton & C. Ward, “In the Matter of East Timor’s Maritime Boundaries”, Opinion prepared for Petrotimor Companhia de Petroleos, S.A.R.L., 11 April 2002 [hereinafter “Lowe, Carleton & Ward Opinion”] at ¶ 39; N.S. Marques Antunes, “Spatial Allocation of Continental Shelf Rights in the Timor Sea: Reflections on Maritime Delimitation and Joint Development”, (2003) The Centre for Energy, Petroleum and Mineral Law and Policy, Volume 13 Internet Journal Article 13 at 26-28.
    But see G. Triggs, “Legal and Commercial Risks of Investment in the Timor Gap”, (2000) 1 Melbourne J. Int’l L. 98 at 117-124. Note, though, that Professor Triggs adds a gloss on this conclusion in favor of Timor-Leste in a subsequent publication. (Triggs & Bialek (2002), supra note 48 at 355.)

  45. Supra note 38.

  46. 1972 Seabed Agreement, supra note 32 at Article 3.

  47. Supra note 38.

  48. Lowe, Carleton & Ward Opinion, supra note 44 at ¶¶ 38-42. See also Antunes, “Spatial Allocation of Continental Shelf Rights in the Timor Sea”, supra note 44 at 29-31, in which arguments similar to those made by Timor-Leste are advanced, without suggesting where a boundary should lie.
    It has been pointed out that the effect of small islands was discounted in the manner suggested by Timor-Leste in the 1969 continental shelf delimitation between Malaysia and Indonesia. (G. Triggs & D. Bialek, “The New Timor Sea Treaty and Interim Arrangements for Joint Development of Petroleum Resources of the Timor Gap”, (2002) 3 Melb. J. Int’l L. 322 at 346-47, citing Agreement between the Government of the Republic of Indonesia and the Government of Malaysia Relating to the Delimitation of the Continental Shelves between the Two Countries, opened for signature 27 October 1969, 9 ILM 1173 (1970), entered into force 7 November 1969.) However, the authors conclude that Indonesian support for Timor-Leste’s position is “unlikely”. (Ibid. at 347.)

  49. See e.g. “June 2004 Australian response to Oxfam report”, supra note 27 at 2.

  50. TSO, April 2004 Briefing, supra note 38; Teixeira, June 2004 Briefing, Ibid.; Alkatiri Address to SEAAOC, 2004, supra note 20; R. Callick, “Border quarrel takes shine off Sunrise”, Australian Financial Review, 30 July 2004; “East Timor suggests mediation for sea border dispute”, ABC Radio, 21 July 2004 (quoting Bill Patterson, Australian Department of Foreign Affairs and Trade); “E Timor ‘holding out’ for better boundary deal”, ABC Darwin, 19 July 2004 (quoting Australian Prime Minister Howard); N. Wilson, “Bedeviled in the Timor Sea”, The Australian, 29 May 2004.

  51. Although opinions differ in relation to where the lateral boundaries should lie, as further discussed below, the assumption is that these remain to be negotiated. See e.g. Lowe, Carleton & Ward Opinion, supra note 44 at ¶¶ 37-42; V. Prescott, “East Timor’s Potential Maritime Boundaries”, in Centre for Maritime Policy, Report No 8 (2000) 79 at 91; Triggs & Bialek (2002), supra note 48 at 339, 341-343 & 347.

  52. Supra note 20.

  53. Ibid.

  54. Agreement between the Government of Australia and the Government of the Democratic Republic of Timor-Leste relating to the Unitization of the Sunrise and Troubadour fields, signed 6 March 2003, not yet entered into force.

  55. The Greater Sunrise Unitisation Agreement Implementation Bill 2004 and the Customs Tariff Amendment (Greater Sunrise) Bill 2004.

  56. IUA, supra note 54 at Article 27.

  57. IUA, Ibid. at Preamble.

  58. In April 2003, Permit NT/P65 was awarded in an area adjacent to the Sunrise field. (The Hon Joe Hockey, MP (Minister 2001-2004), “Media Release: Major Boost to Quest for New Petroleum Resources”, 30 July 2003.) In March 2004 lots NT04-1 (adjacent to the Greater Sunrise field) and AC04-1 (to the West of the JPDA) were offered for auction. The Australian documentation relating to these releases noted that they related to areas claimed by Timor-Leste, and that Timor-Leste had protested the releases, but that these claims are not accepted by Australia. (Exploration Section, Offshore Resources Branch, Resources Division, Department of Industry, Tourism and Resources, Commonwealth of Australia, Guidance Notes for Applicants – 2004 Release of Offshore Petroleum Exploration Areas (2004) at 25.)

  59. Statements of John Hartwell, Head, Resources Division, Department of Industry, Tourism and Resources, Joint Standing Committee on Treaties, Reference: Treaties tabled in May and June 2003, Committee Hansard, 23 JUNE 2003 at 72; Ian Macfarlane, Minister for Industry, Tourism and Resources, Greater Sunrise Unitisation Agreement Implementation Bill 2004 Explanatory Memorandum; Senator Ian Campbell, Minister for Local Government, Territories and Roads, Western Australia, Second Reading Speeches, Senate Hansard, 10 March 2004.

  60. Timor Sea Office, “Media Release: Australia is undermining ‘Greater Sunrise’ development”, 22 March 2004; Timor Sea Office, “Media Release: Timor-Leste protests unlawful exploitation of its resources”, 30 March 2004.

  61. Timor Sea Office, “Press Statement: Maritime Boundary Talks between Timor-Leste and Australia”, 13 November 2003; “Welcome Statement by Prime Minister Alkatiri”, Timor-Leste – Australia Maritime Boundary Negotiations, 19-22 April 2004, Hotel Timor, Dili; “NT urges more generous offer over gas field royalties”, ABC News Online, 7 June 2004; S. Powell, “Bedeviled in the Timor Sea”, The Weekend Australian, 29 May 2004.

  62. J. Perlez, “U.S. Chief Pushes Oil Giant’s Moves Beyond Australia”, New York Times, 11 August 2004; G. Daley, “Australian Industry Minister Says Oil Prices May Curb Growth”, Bloomberg, 25 August 2004 (quoting Ian Macfarlane, Australian Minister for Industry, Tourism and Resources); V. Brooks, “Interview: Canberra Wants More Realistic Timor Sea Terms”, Dow Jones Newswires, 11 November 2004 (also quoting Ian Macfarlane); A. Macdonald-Smith, “Woodside’s Browse LNG Project May Cost Too Much (Update2)”, Bloomberg, 21 November 2004.

  63. According to the Woodside web site, for instance, Gary Gray joined Woodside in 2001 as Principal Strategic Adviser after long political career as National Secretary of the Australian Labor Party.

  64. For example, the Australian government blocked the 2001 attempt by part-owner Shell to assume majority control of the company on national interest grounds. (Peter Costello, Treasurer of the Commonwealth of Australia, “Press Release: Foreign Investment Proposal – Shell Australia Investments Limited’s (Shell) Acquisition Of Woodside Petroleum Limited (Woodside)”, 23 April 2001.)

  65. D. Shanahan, “Latham, Downer toy with Timor’s future”, The Australian, 30 July 2004; “Editorial: Timor talks now all at sea”, The Australian, 29 July 2004.

  66. Letter from Clare Martin, Northern Territory Chief Minister, to Julie Bishop, MP, Chairperson, Joint Standing Committee on Treaties, dated 19 June 2003, being Submission No. 15 to the Joint Standing Committee on Treaties, Reference: IUA.
    The Northern Territory submissions in relation to the Timor Sea Treaty also stressed this point, and more specifically related to provisions affecting the development concept for Greater Sunrise (notably, Article 8(e)). See e.g. Letter from Clare Martin, Northern Territory Chief Minister, to Julie Bishop, MP, Chairperson, Joint Standing Committee on Treaties, dated 11 August 2002, being Submission No. 48 to the Joint Standing Committee on Treaties, Reference: Timor Sea treaties.

  67. Clare Martin, Northern Territory Chief Minister, “Address to the Institute of NT Economic Development”, Northern Territory, Australia, 8 August 2002 at 2. Such representations were made in the context of comparing the benefit from developing Greater Sunrise gas in Darwin with the (lack of) benefit from development on a floating facility.
    Representation had also been made that developing Bayu-Undan and Greater Sunrise gas in Darwin would increase Australian revenue by $10 billion (discounted at 6%) and create 11,900 jobs. (Testimony of Andrew Joseph Andrejewskis, Director, Petroleum Developments, Office of Territory Development, Department of the Chief Minister, Northern Territory Government to JSCOT Public Hearing, 3 October 2002, Darwin Australia, Official Committee Hansard – Joint Standing Committee on Treaties, Reference: Timor Sea treaties at 72. See also Testimony of Bruce Peter Fadelli, AM, President, Northern Territory Chamber of Commerce to JSCOT Public Hearing, 3 October 2002, Darwin Australia, Official Committee Hansard – Joint Standing Committee on Treaties, Reference: Timor Sea treaties at 65-66.)

  68. The Timor Sea dispute is on the agenda of such Australian NGOs as Oxfam Community Aid Abroad and the Uniting Church. The Melbourne-based Timor Sea Justice Campaign was created at the start of maritime boundary negotiations “to bring about a just and prompt resolution to the Timor Sea dispute”. The Australian Section of the International Commission of Jurists issued a statement during the April 2004 negotiations, decrying the Australian position, and in particular, Australia’s refusal of neutral third party adjudication. (Australian Section, International Commission of Jurists, “News Release: Timor Gap Dispute”, 22 April 2004.)

  69. In a March 2004 letter to Prime Minister Howard, 53 members of the Congress of the United States “urged” Australia “to move seriously and expeditiously in negotiations”, and “to heed Prime Minister Mari Alkatiri’s call to conclude negotiations within three to five years”. It expressed a hope that the Australia and Timor-Leste “will agree to a legal process for an impartial resolution if the boundary dispute cannot be settled by negotiation,” and a strong hope that any revenue from disputed areas on East Timor’s side of the median line but outside the [JPDA] be held in escrow until a permanent boundary is established.” (East Timor Action Network, Press Release: “Congress Urges Expeditious Talks on Permanent Maritime Boundary for East Timor; Calls on Australia to Create Trust Fund for Disputed Revenue”, 4 March 2004.)
    In September 2004, shortly before talks about a “creative solution” were to begin, thirty-seven members of the European Parliament sent petitions calling for a “just and speedy accord to give Timor resources it is entitled to in order to ensure its development” to Australian Prime Minister John Howard and deputies in the Canberra Senate. (“East Timor: Ahead of oil talks, MEPs urge Canberra to respect Dili’s rights”, Lusa, 14 September 2004.)
    The question of maritime boundaries in the Timor Sea was repeatedly raised at Security Council during consideration of the United Nations presence in Timor-Leste. (See e.g. Security Council, “Speakers in Security Council voice broad support for extension of UN mission in Timor-Leste”, Press Release SC/8088, 10 May 2004; Security Council, “Report of the Secretary-General on the United Nations Mission of Support in East Timor”, U.N. Doc. S/2004/333 at ¶7.1.) It was also raised less formally – for example, by German Foreign Minister Joshka Fischer during his February 2005 visit to Canberra. (“German ministerial visit highlights environmental issues”, ABC News Online, 7 February 2005).

  70. D.Shanahan & N. Wilson, “Latham ‘threat’ to East Timor”, The Australian, 28 July 2004 (quoting Foreign Minister Downer and Mark Latham, Australian Opposition Leader); “Latham throws oil on troubled Timor talks”, The Australian, 28 July 2004; D. Shanahan, “Latham, Downer toy with Timor’s future”, The Australian, 30 July 2004; “Timor dispute threatens gas project”, ABC Radio, 28 July 2004 (quoting Philip Ruddock, Australian Attorney-General and Joel Fitzgibbon, the Australian Labor Party’s mining and energy spokesman).

  71. N. Wilson & P. Walters, “More gas cash for E Timor”, NEWS.com.au, 12 August 2004 (quoting Foreign Ministers Ramos-Horta and Downer); M. Forbes & B. Nicholson, “Deal struck over Timor Sea oil”, The Age, 12 August 2004; “Reaching out across the Timor Gap”, The Age, 13 August 2004.

  72. T. Allard, “Downer offers Timorese a new deal”, SMH, 12 August 2004 (quoting Foreign Ministers Ramos-Horta and Downer); M. Forbes & B. Nicholson, “Deal struck over Timor Sea oil”, Ibid. (quoting José Teixeira, Timor-Leste Secretary of State for Investment, Tourism and Environment); “E Timor confident on Sea rights”, AFP, 29 August 2004 (quoting Timor-Leste Prime Minister Alkatiri).

  73. R. Callick, “Australia blames East Timor for gas talks failure”, Australian Financial Review, 29 October 2004 (quoting Doug Chester, Australian Department of Foreign Affairs and Trade Deputy Secretary and leader of Australia’s negotiating team); Kyne, 11 November 2004, supra note 75 (quoting Ian Macfarlane, Australian Minister for Industry, Tourism and Resources).

  74. Timor Sea Office, “Statement on oil and gas development in Timor-Leste”, 29 August 2004.

  75. M. Alkatiri, “All East Timor seeks is a fair go”, The Age, 3 November 2004; P. Kyne, “Interview: E Timor PM In No Hurry For Sunrise Gas Deal”, Dow Jones Newswires, 11 November 2004 (quoting Timor-Leste Prime Minister Alkatiri).

  76. T. Allard, “Talks on Timor Gap reserves collapse”, Sydney Morning Herald, 28 October 2004 (quoting Timor-Leste Prime Minister Alkatiri and an unnamed Australian official); “East Timor Accuses Australia on Proposals”, Associated Press, 27 October 2004 (quoting Timor-Leste Prime Minister Alkatiri).

  77. J. Ramos-Horta, “The shape of a fair deal for East Timor”, The Age, 30 May 2005.

  78. Foreign Minister Ramos-Horta’s article stated that the period during which claims would be deferred would be 50 years. (Ibid.) More recent reports state that the period would correspond with the life of the Greater Sunrise field, or 40 years. (“Hopes for Timor Sea deal by year’s end”, ABC News Online, 9 November 2005; N. Wilson, “East Timor wants Sunrise on island”, The Australian, 26 October 2005.)

  79. D. Shanahan & N. Wilson, “Gas deal sealed with extra $8bn”, The Australian, 7 July 2005 (quoting Australian Prime Minister John Howard); “Cabinet to consider East Timor gas deal”, Sydney Morning Herald, 30 May 2005 (quoting Australian Foreign Minister Downer).

  80. “Gas deal campaign ‘not helping Timor’”, The Age online, 21 July 2005; “Timor Sea deal expected by August”, AAP, 6 July 2005 (quoting Timor-Leste Foreign Minister Ramos-Horta).

  81. Veronica Brooks, “Australia, E Timor Still Ironing Out Rev Pact”, Dow Jones Newswires, 18 May 2005; H.T. Lee, “Are Timor talks a Downer?”, Crikey Daily, 16 May 2005.

  82. Ministry of Foreign Affairs and Cooperation, “Press Release: Foreign Minister denies reports in The Australian of President Xanana’s “threat to veto” agreement with Australia”, 28 July 2005; N. Wilson, “Gusmao to veto gas deal”, The Australian, 22 July 2005; B. Jinks, “East Timor Not Ready to Handle Oil, Gas Revenue, Gusmao Says”, Bloomberg, 16 June 2005; “East Timor president interviewed on three years of independence”, Asia Intelligence Wire, 19 May 2005.

  83. Articles 95(3)(f) and 85(a), respectively, of Timor-Leste’s Constitution, require approval of a treaty by the Timor-Leste National Parliament and President for its ratification.

  84. N. Wilson, “Bedeviled in the Timor Sea”, The Australian, 29 May 2004. See also T. Mapes & P. Barta, “For East Timor, Energy Riches Lie Just Out of Reach”, Wall Street Journal, 10 June 2004.

  85. P. Kyne, “Interview: E Timor PM In No Hurry For Sunrise Gas Deal”, Dow Jones Newswires, 11 November 2004 (quoting Ian Macfarlane, Australian Minister for Industry, Tourism and Resources); “Transcript of Alexander Downer’s Doorstop, Timor Sea”, 1 December 2004.

  86. “Transcript of Alexander Downer’s Doorstop, Timor Sea”, 1 December 2004; “Downer rebuffs Ramos Horta over gas talks”, ABC Radio, 21 July 2004 (quoting Australian Foreign Minister Downer).

  87. Alkatiri Address to SEAAOC, 2004, supra note 20; “Play Fair In Oil Talks, E Timor’s 1st Lady Tells Australian Govt”, Asia Pulse, 2 August 2004 (quoting Kirsty Sword Gusmão, Timor-Leste First Lady); “Don’t make us beg, East Timor first lady urges Australia”, AFP, 2 August 2004.

  88. Timor Sea Office, “Press Statement: Maritime Boundary Talks between Timor-Leste and Australia”, 13 November 2003.

  89. Minister for Foreign Affairs, “Media Release: Timor Sea Talks to Resume”, 20 April 2005. N. Wilson, “Dawn at hand for sharing Sunrise”, The Australian, July 25, 2005; R. Callick, “Australia blames East Timor for gas talks failure”, Australian Financial Review, 29 October 2004 (quoting Doug Chester, Australian Department of Foreign Affairs and Trade Deputy Secretary and leader of Australia’s negotiating team).

  90. “Timor dispute threatens gas project”, ABC Radio, 28 July 2004 (quoting Clare Martin, Northern Territory Chief Minister); J. Lamb, “All eyes on the Timor Sea”, Green Left Weekly, 30 June 2004; “NT urges more generous offer over gas field royalties”, ABC News Online, 7 June 2004.

  91. Indeed, it will be important for Timor-Leste to ensure the agreement safeguards its interests if the Greater Sunrise development does not go forward.

  92. T. Mapes & P. Barta, “For East Timor, Energy Riches Lie Just Out of Reach”, Wall Street Journal, 10 June 2004; M. Richardson, “More Than a Matter of Boundaries”, South China Morning Post, 18 June 2004.
    It bears mention that the position of the opposition Labor party on this point is aligned with the government. L. Taylor, “ALP willing to negotiate on East Timor oil and gas”, Australian Financial Review, 24 July 2004 (quoting Joel Fitzgibbon, Australian Labor Party mining and energy spokesman)

  93. Supra note 32.

  94. Vienna Convention on the Law of Treaties, entered into force 27 January 1980, 1155 U.N.T.S. 331 at Recitals & Article 26.

  95. Triggs & Bialek (2002), supra note 48 at 351-352, arguing that the principle of intertemporal law, according to which “‘a juridical fact must be appreciated in the light of the law contemporary with it, and not of the law in force at the time when the dispute in regard to it arises or falls to be settled’”, “preserves the legal validity of the 1972 Seabed Agreement”.

  96. Antunes, supra note 98 at 361-362.

  97. R.J. King, “The Timor Gap, Wonosobo and the Fate of Portuguese Timor”, (2002) Journal of the Royal Australian Historical Society 88:1 [hereinafter “King, “The Timor Gap””] at 5, citing “Boundary threat to seabed leases”, The Sydney Morning Herald, 21 December 1978.

  98. The 1972 Seabed Agreement was negotiated and eventually signed in the aftermath of the North Sea cases, in which the ICJ had made pronouncements suggesting a greater relevance to the principle of natural prolongation than it was eventually given. (North Sea Continental Shelf Cases (FRG v Denmark; FRG v Netherlands) (Merits), 1969 ICJ Rep.) It is argued that the position of the 1972 boundary is testament to Indonesia’s acceptance of the Australian “two-shelf” theory. N.S. Marques Antunes, Towards the Conceptualisation of Maritime Delimitation (Leiden: Martinus Nijhoff, 2003) [hereinafter Antunes (2003)] at 355.

  99. According to Indonesia’s Foreign Minister, Hassan Wirajuda, Indonesia accepted Australia’s continental shelf claims not only because it was politically weak, but also in return for Australia’s support for the concept of archipelagic states at the UN law of the sea conference. R. Callick, “Tiny Timor treads warily among giants”, Australian Financial Review, 31 May 2004 (quoting Timor-Leste Foreign Minister Ramos-Horta). It is also argued that Indonesia felt pressure, at the time, to “add substance” to its bilateral relations with Australia, and specifically to reciprocate such Australian gestures as the proportional increase in foreign aid to Indonesia, the start of defense cooperation and preparations for Indonesia to benefit from trade preferences. King, “The Timor Gap”, supra note 97 at 5.

  100. Nor can Australia rely on its having exercised exclusive jurisdiction in areas for a long period of time, as it seeks to. Presumably, Australia seeks to rely on the principle of prescription, by which a state may acquire sovereignty over land territory by virtue of occupying territory claimed by another state, which other state does not protest the occupation, and exercising rights of sovereignty for a long period of time.
    However, this principle can have no application to continental shelf rights. Continental shelf rights are inherent, and “do not depend on occupation, effective or notional”. (UNCLOS, Article 77(3). See also North Sea cases, supra note 98 at ¶19.) Therefore, they “cannot be lost through neglect”. D.M. Ong, “Joint Development of Common Offshore Oil and Gas Deposits: ‘Mere’ State Practice or Customary International Law?”, (1999) 93 A.J.I.L. 771 at 775.
    Further, Australian exploitation of areas to the east and west of the JPDA were consistently protested – by Portugal, by UNTAET and by the Timorese leadership (before and after independence).

  101. 1972 Seabed Agreement, supra note 32 at Article 3.

  102. Vienna Convention, supra note 94 at Article 34.

  103. King, “The Timor Gap”, supra note 97 at 6.

  104. Ibid. at 6.

  105. In order not to disrupt commercial activity in the Timor Sea that would provide essential revenues to Timor-Leste in the short and medium term, UNTAET and the Timorese leadership, and Australia, agreed to continue the practical arrangements of the Timor Gap Treaty until the end of UNTAET. This was accomplished by the 10 February 2000 Exchange of Notes, which had effect from 25 October 1999 (Exchange of Notes Constituting an Agreement between the Government of Australia and the United Nations Transitional Administration in East Timor (UNTAET) concerning the Continued Operation of the Treaty between Australia and the Republic of Indonesia on the Zone of Cooperation in an Area between the Indonesian Province of East Timor and Northern Australia of 11 December 1989, 10 February 2000, [2000] ATS No 9). The UN stressed at the time that this was a new legal instrument: it was “not a case of succession” and did not “retroactively legitimize, or give any legitimacy to the conclusion of”, the Timor Gap Treaty. UNTAET Public Information Office, “Press briefing by Hansjoerg Strohmeyer, Principal Legal Adviser to the SRSG Sergio Vieira de Mello, on Timor Gap Treaty”, 19 January 2000.

  106. Minister for Foreign Affairs & Minister for Industry, Science and Resources, “Joint Media Release: Timor Gap Agreement Reached with UNTAET”, 10 February 2000; Timor Gap Treaty (Transitional Arrangements) Act 2000, Second Reading Speech by Ian Campbell (Made in House of Representatives on 17 February 2000 and Senate on 13 March 2000.

  107. Triggs (2000), supra note 44 at 115.

  108. Timor Gap Treaty, supra note 12 at Article 2(3)-(4).

  109. Timor Gap Treaty, Ibid. at Article 8.

  110. Ramos-Horta, “The shape of a fair deal for East Timor”, supra, note 77.

  111. It has been argued, including in relation to the Timor Sea Treaty, that “without prejudice” clauses may be insufficient to prevent a boundary from “crystallizing” as a consequence of a pattern of activity. See e.g. Lowe, Carleton & Ward Opinion, supra note 44 at ¶¶ 47-49; Antunes, “Spatial Allocation of Continental Shelf Rights in the Timor Sea”, supra note 44 at 35; Triggs & Bialek (2002), supra note 48 at 334-336.

  112. In this regard, it is notable that Timor-Leste is now deriving significant revenues from exploration activity in areas of the Timor Sea north of the JPDA.

  113. Lowe, Carleton & Ward Opinion, supra note 44.

  114. Antunes (2003), supra note 98 at 400-401.

  115. Antunes, “Spatial Allocation of Continental Shelf Rights in the Timor Sea”, supra note 44 at 39.

  116. UNCLOS, supra note 21 at Articles 77(2) & 81; [CSC], Article 2(2); North Sea cases, supra note 98 at ¶19.

  117. North Sea cases, supra note 98 at ¶20. See generally Ong (1999), supra note 100 at 774-775.

  118. UNCLOS, supra note 21 at Articles 74(3) & 83(3). According to Churchill and Lowe’s The law of the sea, the leading treatise on the law of the sea: “This suggests that neither party should take any action in the area subject to delimitation, such as engaging in exploratory drilling for oil or gas, which might be regarded as prejudicial by the other party.” R.R. Churchill & A.V. Lowe, The law of the sea, 3rd ed. (Manchester: Manchester University Press, 1999).
    Indeed, the Bluefin Tuna case, Australia argued, based on the duty to cooperate set out in UNCLOS Articles 64 & 116-199, that Japan’s unilateral exploitation of bluefin tuna was illegal. It prevailed on this point before the International Tribunal for the Law of the Sea (“ITLOS”), from whom it had sought provisional measures pending the decision in the case of the arbitral panel. (Southern Bluefin Tuna Cases (New Zealand v. Japan; Australia v. Japan),Requests for provisional measures, ITLOS Case Nos. 3 and 4, Order of 27 August 1999.) The arbitral panel eventually declined jurisdiction to hear the case on other grounds.

  119. UNCLOS, supra note 21 at Article 300. A paper co-authored by Gillian Triggs, Co-Director of the Institute for Comparative and International Law at the Faculty of Law of the University of Melbourne and Dean Bialek, now a member of Australia’s maritime boundary delegation, argues: “International law imposes a good faith requirement for Australia to seek to discuss a proposal to explore an area subject to conflicting or overlapping sovereignty claims.” (Triggs & Bialek (2002), supra note 48 at 349.)

  120. This would include ongoing production from the Laminaria-Corallina field, as well as any new production in disputed areas – for instance, Woodside’s website indicates drilling in 2005 aimed at discovering new reserves in the vicinity of Laminaria-Corallina.
    It might also address exploration activity. In the view of certain authors, the obligation of restraint does not extend to exploration activity, as mere exploration for petroleum “does not necessarily create a risk of irreparable prejudice” to Timor-Leste’s interests. (Triggs & Bialek (2002), supra note 48 at 349.)

  121. Supra note 20.

  122. Australia successfully deflected Portugal’s challenge to the Timor Gap Treaty before the ICJ on these grounds. Case Concerning East Timor (Portugal v Australia) (Merits), 1995 ICJ Rep. 90.

  123. Victor Prescott, Professor-Emeritus at Wollongong University, Australia and an authority in the field of international maritime law, argues: “It is hard to see what arguments might be used to justify a divergence from the line of equidistance. There are no islands located so as to cause a major divergence of the boundary in favour of any State at the expense of a neighbour.” (Prescott, supra note 51 at 90. See also Ibid. at 104-105.) Prescott notes, however, that the eastern perimeter of the Zone of Co-operation under the Timor Gap Treaty (and therefore also the eastern perimeter of the JPDA) is not a line of equidistance, as it does not take into account Ilheu de Jaco, an island off the east coast of Timor-Leste’s . An equidistance line would intersect the 1972 Boundary roughly 2 nm east of the JPDA intersection. (Ibid. at 89-90.) This would place significantly more of the Greater Sunrise field within Timor-Leste jurisdiction.
    Similarly, a paper by Gillian Triggs, Co-Director of the Institute for Comparative and International Law at the Faculty of Law of the University of Melbourne, and Dean Bialek, now a member of Australia’s maritime boundary delegation (then a Lecturer and PhD candidate at the Faculty of Law of The University of Melbourne) argues, in relation to the western lateral boundary, that “there appears little justification for the adoption of a perpendicular line” as opposed to the line of equidistance. (Triggs & Bialek (2002), supra note 48 at 351.) In relation to the eastern lateral, they do not articulate a view, although they are highly skeptical of arguments in favor of movement away from the equidistance line. They agree that international law discounts the effect of islands to take into account such factors such as relative size, location etc. However, they suggest that these factors “may … be of lesser significance” because Indonesia is an archipelagic state. They then go on to discuss the position Indonesia would likely take, without coming to a conclusion on what international law would mandate. (Ibid. at 343-347.)

  124. H. Burmeister, “The Zone of Cooperation between Australia and Indonesia: A Preliminary Outline with Particular Reference to Applicable Law”, in Hazel Fox (ed.), Joint Development of Offshore Oil and Gas (London: British Institute of International and Comparative Law, 1990) 128 at 129-130.

  125. See e.g. “Keynote address by Prime Minister Mari Alkatiri, Timor-Leste 2005/2006 Inaugural Acreage Release”, Singapore, 2 September 2005. See also Alkatiri Address to SEAAOC, 2004, supra note 20; P. Kyne, “Interview: E Timor PM In No Hurry For Sunrise Gas Deal”, Dow Jones Newswires, 11 November 2004 (quoting Timor-Leste Prime Minister Alkatiri).

  126. World Bank, Country Assistance Strategy for FY06-08, supra note 8 at ¶ 27.

  127. See article on the Woodside Web site. See also N. Wilson, “Dawn at hand for sharing Sunrise”, The Australian, July 25, 2005.

  128. “Timor PM open to processing Sunrise Gas in Australia”, Reuters, 18 June 2005 (quoting Timor-Leste Prime Minister Alkatiri); “Timor Sea deal expected by August”, AAP, 6 July 2005 (quoting Timor-Leste Foreign Minister Ramos-Horta).

  129. Timor-Leste Foreign Minister, José Ramos-Horta, has referred to the issue as one that needs to be resolved with Woodside. (J. Ramos-Horta, “The shape of a fair deal for East Timor”, The Age, 30 May 2005. See also R. Callick, “East Timor gas deal may be on backburner”, The Financial Review, 3 June 2005 (quoting Timor-Leste Foreign Minister Ramos-Horta).) He is also quoted as referring to the issue as one that could jeopardize agreement. (“East Timor says Woodside ‘arrogant’ over gas field”, Reuters, 2 June 2005.)

  130. M. Alkatiri, “All East Timor seeks is a fair go”, The Age, 3 November 2004; C. Banham, “Blackmail claims over Timor Sea”, Sydney Morning Herald, 30 November, 2004; M. Forbes, “Crucial Timor Sea oil talks collapse”, The Age, 28 October 2004; R. Callick, “Australia blames East Timor for gas talks failure”, Australian Financial Review, 29 October 2004; T. Allard, “Talks on Timor Gap reserves collapse”, Sydney Morning Herald, 28 October 2004.

  131. R. Callick, “East Timor PM sees Sunrise”, The Financial Review, 20 June 2005 (quoting Timor-Leste Prime Minister Alkatiri). See also N. Wilson, “Dawn at hand for sharing Sunrise”, The Australian, July 25, 2005.

  132. “Hopes for Timor Sea deal by year’s end”, supra note 78. See also N. Wilson, “East Timor wants Sunrise on island”, The Australian, 26 October 2005 (quoting Timor-Leste Foreign Minister Ramos-Horta).

  133. See e.g. “Open letter to the shareholders of Woodside Petroleum”, from Clare Martin, Chief Minister of the Northern Territory et al., not dated (2002)

  134. See e.g. Integrated Development of Timor Sea Gas: The National Interest Case, A Submission by The Northern Territory Government to The Commonwealth Government, February 2002. Lobbying outlined in Clare Martin, Northern Territory Chief Minister, “Address to the Institute of NT Economic Development”, Northern Territory, Australia, 8 August 2002.
    Other documents relating to the Northern Territory’s campaign to have Greater Sunrise gas piped to Darwin can be found here.

  135. Integrated Development of Timor Sea Gas, supra note 134 at 4 & 9.

  136. IUA, supra note 54 at Section 12(1).

  137. Timor Sea Treaty, supra note 14 at Article 6(b)(iv).

  138. Timor Sea Treaty, Ibid. at Article 6(b)(iv).

  139. The powers and functions of the Joint Commission are set out at Article 6(c) and Annex D of the Timor Sea Treaty. Generally speaking, the Joint Commission “shall establish policies and regulations relating to petroleum activities in the JPDA and shall oversee the work of the Designated Authority (Timor Sea Treaty, Article 6(c)(i)).

  140. Timor Sea Treaty, supra note 14 at Article 6(d).

  141. Timor Sea Treaty, Ibid. at Article 6(b)(i) & (ii).

  142. The treaty requires that there be “one more commissioner appointed by East Timor than by Australia” (Timor Sea Treaty, Ibid. at Article 6(c)(i)).

  143. Timor Sea Treaty, Ibid. at Article 8(c).

  144. Section 12(3) of the IUA, supra note 54, requires the DA to approve a development plan where:
    (a) the project is commercially viable;
    (b) the contractor or licensee possesses the competence and resources needed to exploit the reservoir to the best commercial advantage;
    (c) the contractor or lic
    ensee is seeking to exploit the reservoir to the best commercial advantage consistent with good oilfield practice;
    (d) the contractor or licensee could reasonably be expected to carry out the exploitation of the reservoir during the specified period;
    (e) the contractor or licensee has entered into contracts for the sale of gas from the project which are consistent with arm’s length transactions.

  145. Declaration under Article 36, ¶ 5 of the Statute of the ICJ, 21 March 2002; Declaration of 21 March 2002 under articles 287 and 298 of the United Nations Convention on the Law of the Sea.

  146. “ALP fail to support Timor’s right to arbitration to establish fair maritime boundaries”, greens.org.au, 9 December 2004; J. Lamb, “All eyes on the Timor Sea”, Green Left Weekly, 30 June 2004.

  147. Australia signed UNCLOS on 10 December 1982, and deposited its instrument of ratification on 5 October 1994.

  148. See generally UNCLOS, supra note 21 at Part XV.

  149. UNCLOS, supra note 21 at Article 298(1)(a).

  150. UNCLOS, Ibid., Part XV, Section 3.

  151. Text accompanying notes 116 to 119.

  152. This would include ongoing production from the Laminaria-Corallina field, as well as any new production in disputed areas – for instance, Woodside’s website indicates drilling in 2005 aimed at discovering new reserves in the vicinity of Laminaria-Corallina.
    It might also address exploration activity. In the view of certain authors, the obligation of restraint does not extend to exploration activity, as mere exploration for petroleum “does not necessarily create a risk of irreparable prejudice” to Timor-Leste’s interests. (Triggs & Bialek (2002), supra note 48 at 349.)

  153. Text accompanying note 122.

  154. Lei das Actividades Petrolíferas, approved 29 July 2005 at Articles 16 & 45.

  155. Timor Sea Office, “Media Release: Timor-Leste protests unlawful exploitation of its resources”, 30 March 2004.

  156. See e.g. East Timor National NGO Forum, “Media Release: Timor-Leste Civil Society Demands Fair Boundary”, 29 September 2004.

  157. The Timor-Leste Constitution requires the President’s approval of a treaty for its ratification. (Supra note 83.)

  158. “East Timor president interviewed on three years of independence”, Radio Australia, 19 May 2005.
    Article 4(3) of the Timor-Leste Constitution provides: “The State shall not alienate any part of the East Timorese territory or the rights of sovereignty over the land”.
    On a separate occasion, the President stated: “It’s fundamental for me as president to guarantee the sovereignty, to guarantee the state, and the fundamental problem is the demarcation”. (B. Jinks, “East Timor Not Ready to Handle Oil, Gas Revenue, Gusmao Says”, Bloomberg, 16 June 2005.)

  159. “East Timor: Gusmão compares Canberra oil dispute to independence struggle”, AAP, 25 April 2004 (quoting Timor-Leste President Gusmão); D. Fickling, “Timorese fury at ‘immoral oil grab’”, The Guardian, 19 April 2004 (quoting João Sarmento, of the Timor-Leste NGO, Movement Against the Occupation of the Timor Sea).

  160. UNCLOS does not grant sovereignty in the EEZ and over the continental shelf, but rather specific rights, some of which are referred to as “sovereign rights”. Regarding the conceptual distinction between “sovereignty” and “sovereign rights”, see generally Ong (1999), supra note 100 at 777.

  161. Article 4(3) of the Timor-Leste Constitution clearly prohibits only the alienation of “territory” or “rights of sovereignty over the land”. To extrapolate this prohibition to sovereign rights in maritime zones would render the Constitution inconsistent with international law, which clearly requires that states delimit overlapping entitlements. (UNCLOS, supra note 21 at Articles 74 & 83.) Further, it would result in an absurdity. Article 4(2) of the Constitution provides: “The extent and limits of territorial waters and the exclusive economic zone, and the rights of East Timor to the adjacent seabed and continental shelf shall be laid down in the law.” An interpretation of Article 4(3) prohibiting alienation of sovereign rights in maritime zones could be circumvented by amending legislation.
    The stricter interpretation of the Constitution could be circumvented by amending the claims in the MZA.