Business and Development

Png Sharpens Teeth For A Bigger

Bite At The Copper Cake

Informal talks have begun which Lild lead to the renegotiation of the ich-debated mining agreement tween the Papua New Guinea wernment and Bougainville Copper Ihe government and company icers are sounding each other out the best way of approaching the )blem —but so far there have been formal round-table meetings, and se are not likely to occur until :h sides agree on the points that >uld be discussed. The PNG Govern nt has two directors on the BCL ird. The government wants a ater share of the Bougainville )per cake.

Hie matter of the agreement con jed to be discussed in the PNG use of Assembly’s April meeting 1 it was also debated by the jgainville Constituent Assembly in y. n the House of Assembly the mber for Bougainville, Father m Momis, said he did not believe t. a tough tax system would ;hten away foreign investors. Even r ery stiff excess profits tax would >w Bougainville Copper to earn m 20 to 30 per cent on its original sstment, “and this should be a big ugh profit for anyone”.

Ie said many foreign countries are v adopting much tougher tax itment of mining companies. PNG rich in natural resources and it Id attract companies to mine those mrces without having to fear htening away potential investors.

Ie added: “What we need now is mg leadership that is not afraid stand up to the multi-national ipanies and tell them that Papua v Guinea is prepared to defend its i interests. These companies need copper and timber and oil more i we need the companies.

Our leaders should not be afraid stand up for our own people’s its. I hope the coming renegotia of the Bougainville copper agree it will show us that we have this

kind of strong and dedicated leadership.”

In the Bougainville Constituent Assembly, councillors shook their heads when told by Dr Stephen Zorn, special adviser on mining matters to the PNG Chief Minister, Mr Michael Somare, that Bougainville Copper Ltd was making $1 million a day— sBoo,ooo from copper and $200,000 com gold, while the people who owned the ground site of the mine earned $150,000 a year.

Dr Zorn put a number of proposals about renegotiation of the BCL which he hoped the Constituent Assembly would pass on to the PNG Government as guidelines. These included a greater share of the profits for PNG, guarantees that the company would repair damage to the environment, safeguards against pollution should a copper smelter be set up, permission from the PNG Government if Bougainville Copper wanted to make further investments or borrow money in PNG, a priority for the PNG Government and PNG citizens in new share issues, and re-

examination of an agreement which allows CRA to set up four more mines near Panguna.

The Bougainville copper agreement (BCA) is legally binding on PNG, but there are a number of courses °P en to PNG t 0 secure a greater share of profits from the project. This is the view of a legal consultant at the Center for Strategic and Inter national Studies, Georgetown Umver sity, DC. The consultant was asked by the centre to study the agreement and g " e h a legal T“° n °" het £ e J 11 . could be rene B otiated and ln what circumstances.

A copy of the opinion has been sent to PIM by the centre, a non- Profit research organisation of the Georgetown University, which, for several years, has been studying the environment for investment in

developing countries, including PNG.

The consultant who prepared the opinion is a legal expert on mining l a w and mineral development, who has also been advising the UN on mining agreements, The legal consultant’s opinion said

the original agreement was approved in 1967 by a locally-elected pre dominantly indigenous House of Assembly. From a legal point of view the sovereign status or degree of political autonomy enjoyed by PNG appeared to be immaterial and irrele vant. The fact that PNG was admini stered by Australia did not alter the binding nature of the BCA in later years. Self-government did not, and would not, give PNG any legal rights to force the company to accept any revised terms. Legally, concessions survived when a territory passed from one state to another.

It was clear in the ordinance which gave effect to the BCA that there could be no unilateral alteration of the terms. Any unilateral alteration, even though backed by legislation, would be a breach of the BCA.

Despite all this, said the legal con sultant, there was nothing to stop PNG from renegotiating some or all of the terms, if there was a fundamental change in circumstances, such as unexpected or windfall pro fits. Parties to long-term concessions frequently renegotiated terms of agreements “in the light of unfolding events and equitable considerations”, and the practice was sufficiently established.

PNG might have the power, if not the legal right, to introduce unilateral changes in the BCA. The distinction was important because the company might not be able to take any effective remedy. However, if it did this, PNG would be vulnerable if it wished to attract large-scale foreign investment to develop mining resources. It might not wish to jeopardise its credit worthiness.

If there was an irresponsible or hostile attitude by PNG, there was little the company could do to restore its rights, in particular if measures introduced by PNG were not as extreme as outright expropriation.

The legal consultant said that as a practical measure the company might agree to renegotiate the contract terms, while preserving its rights should the situation about profits deteriorate in future.

If alterations were imposed unilaterally by PNG, the company would be free to invoke arbitration which the BCA provided. The onus would be on PNG to justify its action. For that reason the company would not totally reject proposals for a change on the purely formal ground of the BCA not recognising any principle of renegotiation; by the same token it would probably only agree to the minimum it felt it need concede in the absence of an express formula on the guiding ground rule for a change in allocation of benefits.