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Clive Palmer dispute versus WA gives lessons for international arbitrators
Mining tycoon Clive Palmer’s newest legal battle – in which he is threatening to use a treaty with New Zealand to sue Australia for $45 billion in damages in response to proposed West Australian legislation – highlights particular professional issues and opportunities for those in the international arbitration space, according to a partner in a global firm.
Jerome Doraisamy
In conversation with Lawyers Weekly, Clifford Chance international arbitration group partner Dr Sam Luttrell said Mr Palmer’s threat to bring an international claim against Australia as part of his ongoing dispute with a Chinese mining company shows that businesses in the region are becoming increasingly aware of how investor-state dispute settlement clauses in treaties can be used to oppose certain types of legislative measures.
“Toothless treaties present a major problem for investors in countries where the rule of law is weak and the default forum – the local courts – cannot be relied on to dispense justice in disputes between foreign investors and the government.”
Mr Palmer’s claim, Dr Luttrell explained, appears to be that if the WA Parliament passes a law that removes the requirement for consent from the Palmer-controlled Mineralogy company to prospective expansion of the Chinese-operated Sino Iron project, on land it leases to Sino, an unlawful expropriation will occur.
Assuming the consent requirement originates from a contract between Mineralogy and CITIC – the Chinese company that owns Sino Iron – then this would primarily be a claim for expropriation of contractual rights, he said. And while it is possible to expropriate a contractual right, such claims face certain challenges under international law.
“But even before Mineralogy will get to confront these substantive challenges, it will first have to get to an international forum so it can make its claims.
According to public reports, Mineralogy has brought its claim under the Australia-New Zealand Closer Economic Relations Trade Agreement, known as ANZCERTA, which is an economic treaty that does not expressly give investors a right to refer investment disputes with their host state to international arbitration,” he outlined.
“Instead, ANZCERTA has a Protocol on Investment that allows the government of New Zealand to request consultations with the government of Australia if New Zealand considers the investment protection provisions of the protocol are not being adhered to by Australia.”
The consultation process is essentially a negotiation between representatives of the two governments, he continued, while noting it does not involve any third-party decision maker or any binding outcome, without the agreement of the parties.
“Given that Mineralogy is controlled by an Australian person and apparently only incorporated a New Zealand holding company late last year, it should not be assumed that the government of New Zealand would seek ANZCERTA consultations on behalf of Mineralogy in this case,” he said.
“Obviously, it is a major step for a government to seek consultations with another government under a trade treaty and the New Zealand government will carefully weigh the national interest before it does so in this case.”
New Zealand may also rely on the ‘Denial of Benefits’ clause of the Protocol, he added, and decline to make any request on behalf of Mineralogy.
“New Zealand could raise the timing of Mineralogy’s corporate restructuring relative to the dispute with the WA government. It is well settled that an investor cannot restructure to place itself under an investment protection treaty once a dispute with its host state has arisen or is reasonably foreseeable,” he said.
“If New Zealand declines to request consultations on behalf of Mineralogy, the company will have to bring its claim in the Australian courts and challenge the legislation at the domestic level.”
This matter may have legal ramifications in WA, and perhaps Australia more broadly, if the legislation is passed and Mineralogy then challenges it in the Australian courts.
“It will be significant in legal and diplomatic terms if New Zealand does decide to request consultations with Australia on behalf of Mineralogy under ANZCERTA,” Dr Luttrell concluded.
“But this is not the likely scenario and, if the consultation procedure is not initiated by New Zealand, this matter it is unlikely to have major legal implications at the international level.”
Jerome Doraisamy
Jerome Doraisamy is the editor of Lawyers Weekly and HR Leader. He has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. In June 2024, he also assumed the editorship of HR Leader. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of the Minds Count Foundation.
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