March 01, 1995

Article at Asian Business Review

World Court hears evidence on Timor Gap treaty


The eyes of the oil world turned to The Netherlands last month where Portugal began its legal bid in the World Court at The Hague to sink the Timor Gap oil exploration treaty between Australia and Indonesia. Wilson da Silva reports.

BY THE LEGAL theatrics before the World Court in The Hague last month, observers could be forgiven for mistaking that a war crimes trial was in progress.

Accusations of military aggression, massacres, human rights abuses, the carving up of spoils of territory illegally taken and even genocide were bandied before the 17 elderly men of the supreme United Nations Court.

In the box seat was Australia. In debate, an oil exploration treaty. Portugal’s challenge to the Timor Gap treaty between Australia and Indonesia has caused a few headaches for both countries’ governments.

Australia defended itself vigorously, performing some daredevil verbal acrobatics at The Hague, while Indonesia kept its head down and pretended the whole affair was of no matter.

Yet both nations know that an adverse decision could spell the death knell for the treaty and for more than A$200 million already spent by the 20 international oil companies now exploring the Timor Sea.

Although Australia is not accused of committing illegal acts, it may end up being castigated for its involvement with Indonesia.

The case against Australia is being brought by Portugal, the for met colonial ruler of East Timor until Indonesia’s invasion in 1975.

Portugal is challenging Australia’s right to conclude an agreement with Indonesia over the Timor Gap - a potentially rich oil prospect - given that the UN has not recognised the takeover of the Timor region by Indonesia.

The UN has, in two Security Council resolutions and eight General Assembly votes, deplored the invasion of East Timor by Indonesia, demanded Indonesia leave the territory and recognised Portugal as the legitimate administering power.

The Australian Minister for Foreign Affairs, Senator Gareth Evans knew allof this when he signed the Timor Gap Treaty with his Indonesian counterpart, Ali Alatas, on an aircraft flying over the Timor Sea in 1989.

It had been thought that the curly question of East Timor’s status was on the wane and would soon be forgotten.

Yet, less than two years after the two clinked champagne glasses before Indonesian cameras, Indonesian troops opened fire on a crowd of Timorese civilians in East Timor, killing around 200 people.

The grisly images of the massacre re-ignited the issue in the world’s press and prompted Portugal to launch its court challenge shortly after.

Indonesia does not recognise the World Court, but Australia does. Hence, by targeting Australia, Portugal is seeking to confirm its status over East Timor and use a favourable ruling as a circuit breaker to bring the issue into international prominence.

Australian companies have known about the rich oil potential of the Timor Gap since 1974, when initial exploration detected geological structures thought to harbour substantial oil reserves.

The Timor Gap Treaty divides the 61,000 square kilometres of sea between East Timor and Australia into three oil exploration zones - one Australian, one Indonesian and one shared.

More than 80 wells have been drilled in the Timor Gap and two large discoveries were made by Australia’s BHP last year. Oil companies plan to drill another three wells this year.

The two finds made so far are estimated to hold up to 150 million recoverable barrels of crude oil and are expected to go into commercial development in the next two years.

The hearings in The Hague last month challenging the treaty lasted three weeks and the court is expected to rule in June or July.

However, the World Court cannot directly enforce its decision, but it does notify its decisions to the UN Security Council which, armed with a ruling, can enforce the decision if it so chooses. Australian Government legal experts claim that it is unlikely to come to this.

Australia would be damaged enough in international circles by an adverse ruling without seeking to defy it.

“If there is an adverse judgement against Australia, then I just can’t imagine the Australian government ignoring it,” said Dr Tim McCormack, an international law expert at the University of Melbourne.

Dr McCormack added companies would be well within their rights to seek compensation from the Australian Government should the treaty be placed in doubt by the court.

“Given that the Government had implemented legislation under the treaty and given effect to the international legal obligations, rights and privileges that it entered into with Indonesia, then I think the responsibility would be on the [Australian] Government to do something about it,” he said.

Dick Wells, executive director of the Australian Petroleum Exploration Association, said the Timor Gap challenge is just another hazard of the business.

“Obviously the Australian and international companies that have gone in to explore in that area have done so in full knowledge of the status of the treaty,” Mr Wells said. “While there’s a lot of risks in the business, it’s just one additional risk.”

However, he conceded that some of the big corporate names of the oil world are noticeably absent from the Timor Gap register and that a few investment houses, concerned by the nebulous legal status of East Timor, have declined to finance projects in the Timor Gap.

Legal experts claim Portugal’s case appears well founded given that the UN still regards it as a ruling authority and that, under the UN charter, the Timorese have a right to self-determination which has never been tested.

Terry Gill, lecturer in international law at Utrecht University in The Netherlands, believes Portugal has a better than even chance, and noted similarities between the Timor Gap case and a 1971 ruling by the court on South Africa’s occupation of Namibia in defiance of Security Council resolutions.

The court then ruled that UN member states were obliged to refrain from action that would imply recognition of the legality of South Africa’s presence in Namibia.

“If you use that as an analogy, then other states would at least have a duty not to do anything that would legitimise Indonesia’s title to East Timor,” Mr Gill said.

Lawyer Miguel Galvão Teles, presenting Portugal’s case, has said that Australia has flouted the right of Timorese to self-determination by signing the agreement.

“Portugal wants oil in the Timor Gap to be conserved for the people of Timor when they are in an effective position to benefit from it,” Mr Teles said.

Australia has called Portugal’s case “cynically misdirected” and said there is no real dispute between the two countries.

“Portugal’s attitude is not only regrettable but has no basis in international law and is, in fact, misconceived to the extent that Portugal has no real dispute with Australia,” Senator Evans said.

“What we’re saying is that while we recognise Indonesian sovereignty now over East Timor, we also recognise a continuing right of the East Timorese people to self-determination, just as we in the past recognised that Portugal had sovereignty, but recognised internationally that the East Timorese again had the fight to self-determination.”

The difficulty for Australia, which is playing the innocent bystander in the dispute, is that the Timor Gap treaty is the only legal agreement anywhere in the world that effectively recognises Indonesia’s fight to rule East Timor.

The treaty is a detailed apportionment of East Timorese sea-bed territory between Australia and Indonesia which, given the Namibian example, could weaken Australia’s case.

This puts the ball back in Indonesia’s court, but the Suharto Government seems loth to make any move on the issue internationally which might call into question its rule in East Timor.

Talks between Indonesia and Portugal on the issue, chaired by the UN Secretary-General, Boutros-Boutros Ghali, has been convened five times over the past three years, with no ground given by either side.

At the latest round of talks in Geneva in January, the two countries agreed on a UN-organised conference between rival Timorese factions for and against integration with Jakarta, so long as the issue of sovereignty was not discussed. This is the very issue that may stall the Timor Gap Treaty and the resolution of the issue in general.

“We reject the proposition that East Timor is still under the jurisdiction of Portugal, as the so-called administering power,” Indonesian Foreign Minister Ali Alatas said.

“Our position is that East Timor is already part of Indonesia and, therefore, we have sovereignty over it and that sovereignty has been recognised by many countries.

“Australia has done nothing wrong in having an agreement with us on the Timor Gap. We think the Australian position is quite strong, so does Australia.”

However, Indonesia remains under international pressure over the issue.

While a ruling of the court is still months away, the oil industry is already thinking about how it might cover itself should Australia lose the case.

“If that treaty was to come through the path of the Security Council under scrutiny...I think the industry would have to have discussion with the government about protecting its interests,” said Dick Wells.

“We’ve certainly invested hundreds of millions of dollars already in that area, so companies would be looking to the government to negotiate a way through that.”