Subject: TSO: Maritime boundary dispute speech

Maritime boundary dispute between Timor-Leste and Australia speech for the Timor Sea Justice Campaign

Manuel de Lemos August-September 2004


Thank you for the opportunity given to me to speak about the maritime boundary dispute between Australia and Timor-Leste, our two countries. My name is Manuel de Lemos, I am an Assistant Coordinator and Finance Officer, Timor Sea Office, Office of the Timor-Leste Prime Minister and member of Timor-Leste maritime boundary team.

On 20th of May 2002, while we were celebrating our Restoration of our Independent Day, at the same time we signed the Timor Sea Treaty, an interim arrangement allowing for joint petroleum development by Timor-Leste and Australia in the Timor Sea pending a maritime boundary agreement between our two countries.

At the same time, on its first sitting, Timor-Leste’s parliament passed Timor-Leste’s Maritime Zone Act. Here came the question: Why was this act so important to Timor-Leste? Because it proclaimed Timor-Leste’s potential maritime entitlement under international law, and because we have no maritime boundaries with our neighbors, including Australia. So there is an overlap of maritime entitlements. And this overlap is the source of Timor-Leste’s dispute with Australia in the Timor Sea.

Just a note on the practical importance of resolving this dispute to my country:

I recently finished a three day public consultation meeting on a set of laws and model contracts that will make up Timor-Leste’s petroleum regime. This consultation will be followed by consultation meetings in Timor-Leste district centres over a two week period, and complemented by any written submissions received on the regime, including from industry.

What is before the Timor-Leste public and the petroleum industry is a revised regime for the offshore area jointly managed with the Australian Government, as well as a new regime for other Timor-Leste areas, both onshore and offshore, as set out in Timor-Leste’s Maritime Zones Act.

Once the new regime is in place, Timor-Leste hopes to begin exploration and development as soon as possible. As you know, however, much of Timor-Leste’s offshore areas are in dispute with Australia.

Now, I will give you some background on this dispute, as well as the potential for its resolution.

Background of the Timor Sea

In 1972, Australia and Indonesia negotiated continental shelf boundaries which permitted Australia to control its continental shelf well beyond the median line between the two countries, out to the edge of the continental shelf near the Timor Trough. The 1972 agreement left a gap on the boundary line between points A16 and A17, which became known as “Timor Gap”.

At that time, Timor-Leste was under the colonial control of Portugal which, after the 1972 agreement was signed, had no incentive in negotiating a continental shelf boundary with Australia. Linking points A16 and A17 was not an acceptable possibility.

At the time that Portugal left Timor-Leste, and Indonesia invaded, no agreement on a seabed boundary in the Timor Gap area existed. And no agreement on a seabed boundary was reached subsequently between Australia and Indonesia. However, they did finalise the Timor Gap Treaty. While not resolving the boundary issue, this agreement allowed nonetheless the exploration and exploitation of petroleum in the Timor Sea area.

Since the Indonesian occupation was illegal, the Timor Gap Treaty was equally illegal. This was recognized by the United Nations Transitional Administration in Timor-Leste, and eventually acknowledged by the parties to it. But since there was already petroleum activity going on under this treaty, and in order not to jeopardize that activity, Timor-Leste entered into a temporary agreement to allow the continuation of that activity in the form of the Timor Sea Treaty.

Neither the Timor Gap Treaty nor the Timor Sea Treaty cover all the area claimed by Timor-Leste, or that is disputed between Australia and Timor-Leste. I will go into the detail later.

Soon after we signed the Timor Sea Treaty and passed our Maritime Zones Act, Timor-Leste’s Prime Minister start to send diplomatic correspondence to Australia requesting talks on the delimitation on maritime boundary between this two nations. After a long wait for a reply from Australia, at the mid 2003, the Australian Prime Minister had agreed to hold maritime boundary talks between our two countries.

We had a preparatory talk with Australia on 12 November 2003 in Darwin. At that preparatory talk, Timor-Leste requested monthly meetings and Australia rejected that with the reason they don’t have enough resources to have monthly talks. At the end we had to agree to twice yearly talks and we set the month which is April 2004. (Two to tango.)

The maritime boundary talk on 19 to 22 April 2004

On the first formal round on maritime boundary talks, we presented our claim to Australia. What is Timor-Leste’s claim? What we are seeking is a single maritime boundary based on International Law as set out in the United Nation Convention on the Law of the Sea (UNCLOS) and customary international law.

All we are asking for in making this is what we are entitled to under international law nothing more.

As you know, Australia has a complicated maritime boundary agreement with Indonesia. The seabed boundary was agreed in 1972; and another agreement was signed in 1997 for the water column. 1972 Treaty with Indonesia is a seabed boundary Agreement but in 1997 they signed another Treaty with Indonesia which establishes a boundary for fisheries which is a median line. So on the one hand Australia has a continental shelf boundary, but at the same time they apply UNCLOS 1982 convention for the fisheries boundary.

In order to put forward our legal case, we have presented more than 50 examples of the bilateral agreements and around dozen of examples of decisions by International tribunals which support our case. Why we are seeking a single maritime boundary with Australia?

The single maritime boundary that we are seeking is based on what is stated in UNCLOS, Article 56 (1) (a) which refers to … and I quote … “sovereign rights for the purpose of … exploiting … natural resources of the waters superjacent to the seabed and of the seabed and its subsoil” … end quote.

Base on Article 57 of UNCLOS, the maximum potential EEZ entitlement of a state is 200 nautical miles (“NM”). Since the distance between Timor-Leste and Australia is less than 400NM, this creates an overlapping of entitlements which must be resolved by delimiting a boundary, which has to be an equitable solution, as described in Articles 74 and 83 of UNCLOS: “… delimitation … shall be effected … on the basis of international law … in order to achieve an EQUITABLE SOLUTION.”

So … What is equitable for Timor-Leste and Australia?

“Equitable” … here, has nothing to do with our being poor. We don’t claim this and have never claimed this.

What is “equitable” has to be determined by reference to international law, as applied to the circumstances of the Timor Sea.

Timor-Leste’s understanding of international , the definition of the equitable solution is to be achieved on the basis of an equidistance-line, modified as needed to accommodate any existing special circumstances. What this means is that, although an equidistance is not necessarily the final solution, it certainly is the starting point for any solution.

In Timor-Leste’s view, the application of the delimitation regime under international law would attribute to it an area that extends to the frontal equidistance-line, and that is wider both to the east and to the west of the lateral-limits of the JPDA. For whereas in relation to the frontal line there are no circumstances that would justify an adjustment, in respect to the laterals these circumstances are present. This is a position that has been endorsed by the leading international experts in this area of law, such as international law Professors Ian Brownlie and Vaughan Law.

The lateral boundaries are the issue for Timor-Leste. Why?

The value of known petroleum deposits in areas east and west of the JPDA that would come to Timor-Leste under a boundary set according to international law is approximately US $20 billion. This is twice the value of known petroleum deposits in the JPDA. Lateral boundaries set according to international law could triple our revenues.

You might appreciate that these boundaries are vitally important to a nation that runs on an national budget of just $100 million a year (and this does not account for the donor’s share, which will sooner or later end).

Leading experts such as the World Bank and Oxfam Community Aid Abroad have indicated that, under the current Timor Sea arrangements, Timor-Leste may be unviable.

While, as I said, Timor-Leste’s maritime boundary claim is not based on its needs, it is in the interest of both nations that Timor-Leste becomes a prosperous and independent nation. It is not in Australia’s interest to have another failed state on its doorstep.

What has been the Australian reaction to Timor-Leste’s claim?

At the April talks, Australia was not prepared to negotiate on lateral boundaries.

Australia’s claim to sole jurisdiction in areas east and west of the JPDA included in Timor-Leste’s proposal is a unilateral assertion of a right. The 1972 seabed Treaty was signed with Indonesia. Portugal was not a party to this Treaty.

And even when we are under the illegal occupation of Indonesia, this state never delimited boundaries with Australia.

Timor-Leste’s sovereign rights to this area, as a matter of law, have not been relinquished in any way. They cannot be (and could not have been) extinguished by the illegal invasion and occupation of Timor-Leste. Further, it would be repugnant for any country to receive a benefit from an illegal occupation that cost the lives of more than 200 thousand Timorese.

Under UNCLOS Articles 74 and 83, both Australia and Timor-Leste have an obligation to negotiate over their respective positions on boundaries in the Timor Sea. This includes frontal and lateral boundaries.

It is unfair for Australia to refuse to negotiate about the lateral boundaries, which are the KEY issue for Timor-Leste, but refuse international adjudication, while enjoying the benefits of the unilaterally exploitation of the petroleum in the Timor Sea.

Let me give a bit of detail on this last point.

International law, and UNCLOS in particular, sets out an obligation not to take unilateral action in respect of disputed resources.

Timor-Leste has requested that Australia do so. And we have been reasonable in this demand. We have not requested that Australia exercise restraint in all the Timor Sea. In diplomatic correspondence with Australia, restraint has been requested only in areas which Timor-Leste believes would come to it under a permanent maritime boundary set according to international law. We call these areas the “red zones”.

Australia’s unilateral exploitation in the disputed area has not only not ceased, in accordance with international law and our demands. It has increased since 20 May 2002.

They are unilaterally enjoying the benefits of the Laminaria, Corralina and Buffalo fields. Timor-Leste is not receiving even a cent of the exploitation of its own petroleum. Aside from enjoying the benefits of the unilateral exploitation of petroleum in the disputed area, at the same time they are issuing licences in the disputed area, including in areas abutting the Greater Sunrise field.

For Q&A: Licenses granted: License NT/P65 (formerly NT02-1) granted 22 September 2003 License NT/P68 (formerly NT03-3) granted 23 February 2004 Licenses advertised on 29 of March this year: AC04-1 located west of JPDA NT04-1 located east of JPDA, adjacent to Sunrise.

What is Timor-Leste’s next step in order to enforce our Maritime Zone Act?

On January 16 of this year, Timor-Leste sent a letter to the companies conducting petroleum activities in the so-called “red zones”.

We stated that: The activities are not authorised under Timor-Leste law. Failure to comply with relevant Timor-Leste laws will render company liable to civil and criminal prosecution. May already have incurred tax and other financial liabilities.

Our next step is: • Potential tax, administrative and/or criminal liability: Timor-Leste will prosecute petroleum activities not authorised by Timor-Leste to the full extent of the law. • Obtain judgments in Timor-Leste courts. • Enforcement judgments in all available jurisdictions. • No recognition of Australian licenses in areas coming to Timor-Leste on delimitation. • Timor-Leste reserves the right to grant petroleum licenses in the “red zones”.

But before we go through those avenue, we have proposed to Australia alternative interim measure which is : • Establish an escrow account for revenues from petroleum activities in the “red zones”; • Refrain from issuing or advertising new licenses in these areas.

Before I will finish with my speech and I think it won’t be completed without mention our view on the hot topic which is the International Unitization Agreement (IUA).

International Unitization Agreement (IUA)

The Timor-Leste Government signed the IUA in good faith.

We signed an agreement that, by its terms, is “without prejudice” to Timor-Leste’s maritime boundaries with Australia. In its preamble, the IUA acknowledges Timor-Leste’s maritime claims. It states: “Timor-Leste and Australia have, at the date of this agreement, made maritime claims, and not yet delimited their maritime boundaries, including in an area of the Timor Sea where Greater Sunrise lies. ”

What do these provisions mean? The answer lies in the 1969 Vienna Convention on the Law of Treaties.

Article 31 (1) of the Vienna Convention sets out a general rule of treaty interpretation at international law. I quote … “A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty….”

The ordinary meaning of the IUA is that all of Greater Sunrise is the subject of overlapping claims, and therefore cannot be under the sole jurisdiction of Australia. Timor Leste signed the IUA on this basis. Without Australia’s express acknowledgement of the existence of Timor-Leste’s claim, Timor-Leste would never have signed the IUA.

Article 31 (3) (c) of the Vienna Convention sets out another general rule of treaty interpretation: I quote … “There shall be taken into account, together with the context, any relevant rules of international law applicable in the relations between the parties.”

Where there are overlapping claims, a relevant rule of international law applicable to Timor-Leste and Australia is the obligation not to take unilateral action in respect of resources in areas of overlap.

So … Australia is already in breach of the IUA. How? · Australia’s assertion of exclusive jurisdiction over an area of the Timor Sea that includes part of Greater Sunrise contradicts the ordinary meaning of the IUA. · Further, Australia’s refusal to acknowledge Timor-Leste’s claims (and its refusal to negotiate on the laterals) contradicts the ordinary meaning of the IUA, and breaches it.

It is Timor-Leste’s position that Australia must honor the IUA if Timor-Leste is to ratify it. What does this involve? · The IUA will not be ratified by Timor-Leste until Australia abides by the relevant rules of international law applicable in the relations between the parties. · This requires Australia to: o commit to a satisfactory time frame for negotiations, o after which either party will be able to seek resolution of the maritime boundary dispute before a neutral international mechanism, should agreement not have been reached. o Further, Australia will have to: § cease unilateral activity in disputed areas in accordance with diplomatic correspondence from Timor-Leste, or § take adequate interim measures (e.g. placing revenues in escrow) to preserve Timor-Leste’s rights in these areas pending resolution of the dispute.

This gives you a sense of the dispute in the Timor Sea and the position of the government of Timor-Leste.

Possibilities for resolution of dispute

I am sure you are all very curious about some very recent developments.

As you probably know, on August 11, Australian Foreign Minister Alexander Downer met with our Foreign Minister, José Ramos-Horta, to discuss this dispute.

Following the meeting, Alexander Downer told journalists that he accepted Timor-Leste’s proposal to find a “creative solution” to the Timor Sea dispute.

Timor-Leste welcomes Australian Foreign Minister Downer’s willingness to resolve the Timor Sea maritime boundary dispute expeditiously, by looking at creative solutions.

Under current interim arrangements, Timor-Leste will earn approximately U.S.$4.4 billion, based on known reserves. As I mentioned earlier, under a permanent maritime boundary set according to international law, Timor-Leste would be entitled to triple those revenues.

Mr Downer’s comments at the August 11 press conference marked an important recognition of Timor-Leste’s claim to these revenues.

We are confident that a solution can be reached to the Timor Sea dispute that reflects Timor-Leste’s rights in the Timor Sea under international law.

We understand that the next round of negotiations will be intensive and serious, so that this dispute can be resolved fairly and equitably for the benefit of both nations. The September 20 talks in Canberra will tell us all just how serious the Howard Government about Timor Sea justice.

Thank you.

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