On 6 March 2018, Australia’s Minister for Foreign Affairs, the Honorable Julie Bishop MP, and His Excellency Mr Hermenegildo Pereira, the East Timor Minister in the Office of the Prime Minister for the Delimitation of Borders, signed a historic agreement on the delimitation of maritime boundaries in the Timor Sea. The agreement, known formally as the Treaty Between Australia and the Democratic Republic of Timor-Leste Establishing Their Maritime Boundaries in the Timor Sea, was signed in New York in the presence of the United Nations Secretary-General and the Chair of the Commission that conciliated the dispute between the two nations.
Background
Australia and Indonesia entered into an agreement in 1972 that delimited the continental shelves of Australia and Timor-Leste, with the final limits being separated by a gap that came to be known as the “Timor Gap”. On 20 May 2002, being the date of East Timorese independence, Australia and Timor-Leste entered into the “Timor Sea Treaty” (“TST”). The TST established a Joint Petroleum Development Area (“JPDA”) over the central part of the Zone of Cooperation. Under the terms of the TST, the issue of maritime boundary delimitation was set aside without prejudice to the States’ future rights to negotiate a permanent boundary, and Timor-Leste would receive 90% of the revenue from the exploitation of gas and oil deposits, while Australia would receive 10% of the revenue.
On 6 March 2003, the governments of Australia and Timor-Leste signed the Sunrise International Unitisation Agreement (“Sunrise IUA”), which unitised the fields that straddled the eastern side of the JPDA into the “Greater Sunrise” field. Sunrise IUA deemed 20.1% of the field to lie within the JPDA, meaning that, as Timor-Leste was to receive 90% of the revenue under the TST, it would receive 18.1% of the revenue from the Greater Sunrise field. Timor-Leste considered this arrangement to be unacceptable and refused to ratify the agreement.
In 2004, negotiations regarding the development of the Greater Sunrise field were resumed, culminating in the signing of the Treaty on Certain Maritime Arrangements in the Timor Sea (“CMATS”) on 12 January 2006. The terms of the CMATS included a “without prejudice” term, and a term that deferred each States’ maritime boundary delimitation claims for up to 50 years. Australia and Timor-Leste were to share the revenue from the development of the field equally, despite that around 80% of the field lies outside the JPDA and within Australia’s continental shelf.
However, in January 2017, the Australian government accepted a formal notice from the Timor-Leste government to terminate the CMATS. The government of Timor-Leste took the dispute to the Permanent Court of Arbitration, which ordered compulsory two-party arbitration. On 3 September 2017, the Court announced that an agreement on permanent maritime boundaries had been reached as a result of arbitration, although details remained confidential until the agreement was signed on 6 March 2018.
Legal Context
The key legal instrument governing the law of the sea is the United Nations Convention on the Law of the Sea (“UNCLOS”). Articles 56 and 57 of UNCLOS allow States to declare an Exclusive Economic Zone (“EEZ”) of up to 200 nautical miles (“nm”), in which the State has sovereign rights to explore, exploit, converse and manage natural resources in the seabed, subsoil and water column. Articles 76 and 77 entitle States to a continental shelf that extends to the outer edge of the continental margin, or to a distance of 200 nm from the territorial sea baseline, in which the State has sovereign rights to explore and exploit the seabed and subsoil.
In the case of States with opposite coasts less than 400 nm apart, it is necessary for the States to agree, or for an independent body to decide, on the delimitation of the States’ maritime boundaries. Article 74 of UNCLOS relevantly provides as follows:
- ‘The delimitation of the exclusive economic zone between States with opposite or adjacent coasts shall be effected by agreement on the basis of international law, as referred to in Article 38 of the State of the International Court of Justice, in order to achieve an equitable solution.
- If no agreement can be reached within a reasonable period of time, the States concerned shall resort to the procedures provided for in Part XV.
…
Article 83 of UNCLOS addresses the delimitation of the continental shelf and is in substantially the same wording as Article 74. Under Article 284 of Part XV, a State Party to a dispute regarding the application of the Convention is entitled to submit the dispute to conciliation by a Conciliation Commission in accordance with a procedure outlined in Annex V to the Convention.
Conciliation of Timor Sea Dispute
Timor-Leste activated the conciliation procedures in the Timor Sea dispute in April 2016. Being the first time that this dispute resolution procedure had been activated, there was some uncertainty as to the process, and Australia unsuccessfully challenged the competence of the Conciliation Commission. Following this, nearly 18 months of discussions facilitated by the Commission ensued, also involving the participation of four joint venturers with existing legal interests in the field. The final treaty provides for a permanent maritime boundary covering the entirety of the disputed area of the Timor Sea based on a median line between the opposite coasts, with two connecting eastern and western lateral lines that intersect with the continental shelf boundaries agreed upon in 1972.
Moving Forward
While the treaty is an encouraging step towards the exploitation of the gas and oil reserves in the Timor Sea, there are still a number of issues to be resolved before the development can proceed. Notably, under the new treaty, the division of the revenue depends upon the direction the pipeline runs. If the pipeline is directed towards Timor-Leste, Australia will receive 30% of the upstream revenue. If the pipeline is directed towards Australia, Australia will receive 20% of the upstream revenue. Given that a pipeline to Timor-Leste would open up important job and industrial opportunities, the Timor-Leste government is investing substantial political capital in bringing the pipeline to Timor-Leste. However, a pipeline to Australia presents the best option for developing the reserves as expeditiously as possible. In light of the comments of José Ramos Horta, former President and Prime Minister of East Timor, that the exploitation of the reserves is “an absolute necessity for the future wellbeing of this country”, there is substantial impetus for the government to accede to a pipeline to Australia, and pave the way for the long-awaited development of the Greater Sunrise.
Esther Pearson is Editor-in-Chief of the ILA Reporter.