Also - AP: Court says it has no jurisdiction in Timor oil compensation case

Sydney Morning Herald

Timor oil hearing ruled out by court

By Sarah Crichton February 4 2003

The Federal Court has ruled it cannot hear a US oil company's multi-billion dollar compensation claim against the Commonwealth for loss of rights to vast oil and gas reserves in the Timor Sea.

In its decision handed down yesterday, the full bench ruled the issue could require interference in Australia's international relations and foreign policy and so the court did not have the power to act.

The majority of the full bench, Chief Justice Michael Black and Justice Donald Hill, were persuaded by a 1906 precedent, known in legal circles by its case name, the "Potter" principle - that domestic Australian courts will not enforce rights granted by a foreign sovereign.

PetroTimor, a subsidiary of Denver-based public oil and gas company Oceanic Exploration, was granted an exploration concession for 50,000 square kilometres of the Timor Sea between Australia and East Timor in March 1974.

It had sought legal recognition of the concession, which others argued effectively became null and void as a result of Indonesia's 1975 invasion of East Timor.

The company's concession area formed much of the area covered by the 1989 Timor Gap Treaty between Australia and Indonesia.

Australia and East Timor have since reached an agreement on a new treaty, which is still subject to ratification by Australia.

PetroTimor was outraged when, rather than being given any validation of its concession, it was invited along with several other companies by the joint Indonesian-Australian authorities to bid for exploration permits for the Timor Sea after the treaty was finalised.

The company refused to bid, arguing it already held a claim to much of the "Zone A" area and hoped to proceed with separate plans to develop the Bayu Undan gasfields by building a pipeline to gas processing facilities in East Timor.

In their ruling Justices Black and Hill said: "We are of the view that ... the court would simply have no jurisdiction to adjudicate on the application of the law of Portugal in granting to the applicants (PetroTimor) the concessions to which they claim to be entitled."

PetroTimor sought more than $2 billion from the Australian Government but after dismissing the claim, the court ordered the company to pay legal costs.

Ron Nathans, litigation partner at Deacons which represented PetroTimor in the court case, said last night an appeal to the High Court was possible.

"We think the High Court would be interested in revisiting this principle in light of contemporary law."

While he had not been able to receive instructions from PetroTimor US representatives in the time available, Mr Nathans believed it was "more likely than not" he would be instructed to lodge a special leave application for an appeal.

------------- AP

Court says it has no jurisdiction in Timor oil compensation case Mon Feb 3, 4:12 AM ET

SYDNEY, Australia - An Australian court ruled Monday that it had no jurisdiction in a U.S. company's multimillion dollar compensation claim from Canberra over rights to oil and gas reserves under the sea between Australia and East Timor (news - web sites).

Australia secured rights to the rich resource field by signing the Timor Gap Treaty with Indonesia in 1989 and is now on the verge of signing a new deal with East Timor to carve up oil and gas revenues from the region.

But Petrotimor, a Portuguese-registered company owned by Denver, Colorado-based Oceanic Exploration, also staked a claim, arguing it held pre-existing exploration rights under Portugal's colonial rule of the area.

Projected annual revenues from just one of the gas fields in the area, the Bayu-Undan project, start at US$70 million in 2004, peaking at US$300 million in 2013 and continuing until 2020.

Petrotimor claimed more than 2 billion Australian dollars (US$1.2 billion) from the Australian government and other companies which now hold exploration rights, including Phillips Petroleum, now known as ConocoPhillips.

The full bench of the Federal Court sitting in Sydney dismissed the claim and ordered Petrotimor to pay legal costs.

In a written judgment, the court accepted Australia's argument that it had no authority to rule in such an international dispute.

"We are of the view that ... the court would simply have no jurisdiction to adjudicate on the application of the law of Portugal in granting to the applicants (Petrotimor) the concessions to which they claim to be entitled," the judgment said.

Petrotimor lawyer Ron Nathans later said he was awaiting further instruction from his clients in the United States, but he expected the case would go to Australia's final court of appeal, the High Court.

"I expect more likely than not that Petrotimor and Oceanic Exploration will appeal the decision," Nathans said.

There was no immediate comment from the Australian government.

The American group claims it had access to most of the Timor Gap reserves through a concession granted in 1974 before Portugal pulled out of the colony.

The deal was suspended after months of civil unrest and the invasion of the province by Indonesia in December 1975.

In written submissions to the court, Australia argued that the court had no authority over "foreign affairs and, particularly in the present context, involving the territorial boundaries of Australia's claim to the continental shelf between Australia and East Timor."

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