3 December 2012

Mining reforms introduced into QLD parliament


The Queensland Government has introduced legislation to give effect to the introduction of competitive tendering for coal, petroleum and gas areas, and the development of the Aurukun bauxite resource on Cape York.

The Queensland government announced on 9 October 2012 that a new competitive cash bidding process would apply to companies seeking the right to explore on highly prospective coal, petroleum and gas resources tenements. This new legislation amends the Mineral Resources Act 1989 (Qld) to allow for this to occur.

Minister for Natural Resources and Mines Andrew Cripps said “this new process of allocating exploration rights will deliver a consistent approach across the resources sector and ensure all Queenslanders benefit from the timely development of the state’s most resource-rich areas.”

The changes will be significant for coal and petroleum proponents – coal miners will no longer be able to rely on the first in first served process that has governed the grants of permits thus far. The change, whilst resulting in increased revenues for government, will make it more difficult for smaller miners to compete with the deeper pockets and greater balance sheets of the larger miners.

The new legislation also allows for expressions of interest in Queensland’s lucrative bauxite leases in far north Queensland. In relation to this issue, the Minister said that “given the vast area of the Aurukun bauxite resource it is possible that following the tender process the State may select more than one proponent to develop different parts of the resource area.”

29 November 2012

Mining blog recap for 2012


2012 saw the merger between Herbert Smith and Freehills, creating one of the world’s most experienced energy and resources firms. As it draws to a close, we pause to reflect on some of the key developments in the mining industry.

This year we saw several regulatory and legislative changes take place in the mining sector:
  • New South Wales, Queensland, Northern Territory, Australian Capital Territory, South Australia, Tasmania and the Commonwealth all took steps to ensure the harmonisation of safety laws via the Model Work Health and Safety Act was introduced by January 1.
  • In August, Victoria declared a ban on approvals to undertake hydraulic fracturing (fraccing) as part of onshore gas exploration, and the issue of new exploration licences for coal seam gas (CSG). While Queensland took a significant step in reducing red tape by passing the Mines Legislation (Streamlining) Amendment Act 2012.
  • The new Indonesian Mining Law enabled foreign investors to hold business permits for the first time, although foreign investors are now required to divest ownership in companies on an incremental scale after 5 years of production (up to 51%).
  • The Commonwealth Government released, for comment, the exposure draft of the Native Title Amendment Bill 2012, which proposes substantive amendments to the Native Title Act 1993 (Cth).
In March, we reported that M&A transactions in the mining and energy sectors were buoyant, accounting for almost half of all deals in the preceding 6 months. Despite significant nervousness and negative opinions surrounding the market in recent months, Chris Richardson of Deloitte Access Economics suggested that the glass is still ‘half full’ for the resources sector at the Annual National AMPLA Conference.
In September, Queensland called for EOI in its lucrative bauxite leases, while also announcing an increase in coal royalties of up to 50 per cent per tonne. In October, Western Australia granted approval for Toro Energy to proceed with the State’s first uranium mine to be developed.
The year also saw a raft of inquiries and debates:
  • Coal seam gas (CSG) was on the agenda on the east coast. Victoria released a report entitled ‘Inquiry into Greenfields mineral exploration and project development in Victoria’, in a move to understand how better to develop and regulate Victoria’s CSG potential, while New South Wales tabled an inquiry into the environmental, economic and social impacts of mining CSG.
  • In October, the Productivity Commission announced a 12 month inquiry into the non-financial barriers to mineral and energy resource exploration to determine if there is unnecessary regulatory burden.
With still a month or two to go in 2012, be sure to keep an eye on our blog for further updates.

15 November 2012

Right to negotiate and other native title reform

Native Title Act reform

On 20 September 2012, the Commonwealth Government released, for comment, the exposure draft of the Native Title Amendment Bill 2012 (Bill). The Bill proposes substantive amendments to the Native Title Act 1993 (Cth) (NTA) and, if passed, may have a direct impact on proponents establishing or operating mining, energy and infrastructure projects in Australia.

The key amendments relate to:

  • Right to Negotiate: the amendments codify what constitutes ‘good faith’ negotiations and extend the minimum negotiation period from 6 to 8 months; 
  • Historical Extinguishment: the amendments include provisions to enable the historical extinguishment of native title in national parks and nature reserves to be disregarded in certain circumstances; and
  • ILUAs: clarifying and changing some aspects of the processes for the authorisation, registration and amendment of indigenous land use agreements (ILUAs).

A summary of these proposed reforms and implications can be found by following this link to Herbert Smith Freehills website.


1 November 2012

The Australian Resources Economy – the glass is still “half full”


This morning saw the 36th Annual National AMPLA Conference in Brisbane officially kick off with key note address from Chris Richardson of Deloitte Access Economics, providing an overall insight into the complexities of the Australian resources supply/demand economy and external influencing factors, as well as a general overview as to the significance of the resources sector to the Australian Economy.

While there has been some significant nervousness and negative opinions surrounding the market of late, the address provided a timely reminder to the industry that while a cautious approach is perhaps warranted, Australia still remains in a relatively positive position (particularly as against the US/European economies) with further growth opportunities still to come.

The key takeaway points on the market for the industry were:
  • Australia is still going well, but unlikely to see the same growth from recent times as China demand slows, but we should retain “a glass half full” attitude;
  •  Workforce demand vs. workers, interest rates, high aussie dollar and excess gas in the US are all having effect on the Australian resources demand;
  •  The future maybe more about stability - changes to a more democratic system in China may also temporarily slow demand from China; and
  • Growth in India (which is typically 15yrs behind China) will increase demand from Australia but may be unlikely to be as great as in China.

29 October 2012

Productivity Commission announces inquiry into mineral and energy resource exploration


The Productivity Commission (Commission) has announced a 12 month inquiry into the non financial barriers to mineral and energy resource exploration. The inquiry was established on the recommendation of the Policy Transition Group, which noted that ‘a range of approvals are required before exploration can begin, including land access, native title, indigenous and non-indigenous heritage, environmental, conservation estate and planning and infrastructure approvals.’

The review will investigate areas of duplication across different levels of government and examine exploration approvals and processes to assess their effectiveness and efficiency. The Commission will determine if there is evidence of unnecessary regulatory burden, examine complexity and time frames of government approvals and examine costs of non-financial barriers (including regulatory and related costs).

The review excludes taxation and fiscal policy across all levels of government, the government’s response to the review of the Environment Protection and Biodiversity Conservation Act 1999 (Cth), and indigenous land rights regimes.

Initial submissions are due by the end of March 2013, with a final report to government by the end of September 2013. 

25 October 2012

Another phase of the Streamlining Act rolled out


The latest phase in the slow roll out of the Mines Legislation (Streamlining) Amendment Act 2012, which was passed by State Parliament in August 2012, began last week, though it is not known when the remainder of the legislation will commence.

However given the extent of modification to the existing tenure administration regime, particularly in relation to post-grant dealing registrations, it is likely that we will not see the full system operating for quite some months.

Substantive parts of the tenure administration amendments that commenced last week under this new phase, include key changes, such as:

  • the Minister can now approve mining leases and 1923 petroleum leases  
  • new exploration permit relinquishment requirements (40% by end of year 3, 50% of remaining area by end of year 5)
  • new ability to withdraw objections on mining claims and mining leases
  • Minister’s new ability to issue “notice to progress” applications, and any failure to comply will allow the Minister to reject applications

Uranium ban overturned, but production is years away



The Queensland Government has announced that it will assemble a three member committee to oversee the reintroduction of uranium mining in Queensland.

Despite Australia boasting 31% of the world’s total minable uranium, uranium mining has been banned or contrary to government policy for the better part of 30 years in most states. In Queensland, uranium mining has not occurred since the closure of the Mary Kathleen uranium mine in 1982.

The Queensland Government has never prohibited exploration for uranium, nor has it banned uranium mining by legislation, it has simply made it clear that no mining leases for uranium would be granted as a matter of government policy. Some exploration for uranium deposits has continued in Queensland, with known uranium deposits valued between A$10 billion and A$18 billion. Valhalla, owned by Palladin Energy located 40 km north-west of Mt Isa is the largest known deposit, with significant deposits also located at the Westmoreland (Laramide Resources), Ben Lomund (Mega Uranium) and Maureen (Mega Uranium) deposits.

The relaxation of the federal government’s ‘no new mines’ policy, coupled with the announcement of uranium sales to India, led the Queensland government to move towards the reintroduction of uranium mining. Despite the possibility of A$900 million in royalties, the myriad international, federal and state environmental regulations mean that it could take at least four years for a mine to be developed in Queensland.

16 October 2012

State approves Western Australia’s first uranium mine


Western Australian Environment Minister Bill Marmion has granted approval for Toro Energy to proceed with the State’s first uranium mine to be developed, four years after the Liberal government lifted a ban imposed by Labor. The project is based at the Centipede and Lake Way deposits near Wiluna in the State’s Mid-West, processing approximately 820 tonnes of uranium oxide concentrate per year. The capital cost expected to be about $280 million.

In May, the Environmental Protection Authority recommended the Minister approve the project, subject to strict conditions. Mr Marmion said the environment will be sufficiently monitored in the event that the project obtains Commonwealth approval, with stringent dust management and rehabilitation measures in place to protect stygofauna and groundwater-dependent vegetation.

Environmental groups have criticised the decision, claiming that the uranium industry is fading and the announcement was only made to fast track the Barnett Government’s political agenda.

The Commonwealth is expected to make its decision by the end of 2012. The company hopes to have the mine operating by 2014, with the first uranium sales in 2014-2015.

The decision will likely assist other similar uranium mine projects being developed in W.A.

Herbert Smith Freehills assists the development of many of Western Australia’s significant mining projects and will continue to monitor the development of the uranium industry in WA.

19 September 2012

Queensland government calls for EOI in it’s lucrative bauxite leases


The Queensland government has called for expressions of interest in its lucrative bauxite leases in far north Queensland, but with a twist, the private sector must come up with initiatives to financially benefit Cape York indigenous communities. Initiatives could include traditional owners being given direct equity in the project, a cash payment or jobs and business opportunities on the mine.

Pechiney of France originally held the leases offered by the government, but these were removed from them in 2004. The tender for the Aurukun leases was later won by Chinese group Chalco, which agreed to the condition that it establish an alumina refinery at Abbot Point. The refinery was not economically viable, however, and the Queensland government again took the leases back.

With much of the same profitability issues that hampered Chalco’s refinery development in 2010 still in existence (weak macro economic conditions, low metal prices and a strong Australian dollar), it is unsurprising that the new Queensland government has decided to offer the leases without the requirement that the bauxite be refined in Queensland.

Premier Campbell Newman stated that “the Bligh Government ran a strategy whereby it would lease the bauxite to a company under the condition it established a refinery or expanded refinery capacity. Their strategy of leasing the bauxite under the conditions of establishing a refinery simply will not work.”

Despite the fact that Aurukun’s bauxite ore is not as high quality as Rio Tinto’s Weipa or that at the South of Embley project, there is still expected to be significant interest in the leases. Mr Newman further stated that

“… over the coming months we will now go to the market and seek fresh expressions of interest and by April next year we expect to shortlist bidders to participate in a tender process for the right to develop the resource.”

A decision is expected by the end of 2013.

17 September 2012

Coal industry uproar over State budget’s increase in mining royalties


The LNP Government’s first State budget has caused a stir in the Queensland coal industry after last week announcing an increase in mining royalties of up to 50 per cent per tonne, to commence 1 October this year.

In an attempt to stabilise State debt levels, the government expects to raise $1.6 billion over four years by increasing the coal royalty from 10 per cent, to 12.5 per cent for coal prices above $100 per tonne and 15 per cent for coal prices above $150 per tonne.

Queensland Treasurer, Tim Nicholls, said the government is obliged to deliver extra money to fund mining infrastructure projects, such as RG Tanner, Abbot Point and Connors River Dam. He said that the State did not receive extra money in the Federal Government’s budget this year for the infrastructure. Mr Nicholls addressed the Mineral Resources Rent Tax (MRRT) and claimed “Queenslanders should receive the benefits of the resources they own, not the Commonwealth. As the value of State royalties paid is netted off against MRRT liabilities, the incidence of taxation ought not to increase”.

However, the MRRT presupposes that Queensland miners will face significant MRRT liabilities. It was designed during the peak of the resources boom to capture super profits. Queensland Resource Council’s Michael Roche dismissed the notion that coal companies will be able to offset the new State royalties against the MRRT obligations. He said, “it’s hard work to find a coal mine in Queensland making a profit, let alone a super profit”.

The coal industry has argued the increased coal royalty is another governmental tool, along with the MRRT and carbon tax, that is squeezing them from both sides, with coal prices slashed and their costs continuing to rise. The problem that coal producers face will be if there is a marginal difference between the spot price of coal that is over $100 and the cost of production.

According to Wilson HTM analyst, Andrew Pedler, the spot price of hard coking coal is around $US155 a tonne as opposed to about $US150 cost of production in Queensland. Mr Pedler said the notion of increased royalties does not take into account increasing costs; “it just takes notice of the top line”.

XStrata Coal claimed that a significant portion of the coal industry was unprofitable at current prices and that “there is a risk that the increase in royalties could result in production cutbacks in marginal operations.” He predicted that as a consequence, estimates regarding the amount of additional royalty revenue may be optimistic.

Yancoal took on a different attitude. Managing Director, Murray Bailey, acknowledged that the royalty change was concerning but said that the exchange rate was having a bigger impact on profits.

The government guaranteed that coal royalties in Queensland will not be increased for a ten-year period. However, this promise is seemingly flawed; constitutionally, it is not enforceable since a parliament cannot bind the next to not change the law.

This post is written by Freehills Mining Lead Partner Jay Leary

13 September 2012

NSW Strategic Regional Land Use Package unveiled


What’s new?

The NSW Government has today released the long awaited final Strategic Regional Land Use package (SRLU Package). The SRLU Package contains a suite of new plans, policies and codes aimed at reducing land use conflicts between agricultural land use and mining and coal seam gas (CSG) projects. The SRLU Package provides the NSW mining and CSG industry with some much needed certainty as to how the mining and CSG industry will be regulated going forward.

So what is the SRLU Package? 

The Strategic Regional Land Use package consists of:

  1. the Strategic Regional Land Use Plan - New England North West;
  2. the Strategic Regional Land Use Plan - Upper Hunter;
  3. the Aquifer Interference Policy; and
  4. two CSG specific codes of practice:
  • the Code of Practice for Coal Seam Gas - Well Integrity; and
  • the Code of Practice for Coal Seam Gas - Fracture Stimulation Activities.

For further information follows this link to Freehills latest NSW Environment and Planning update.

10 September 2012

A strange thing happened at Africa Downunder


A strange thing happened at the annual Africa Downunder conference in Perth last week, and it had nothing to do with the record attendance of more than 2,500 delegates from Australian and overseas mining companies, service providers, financiers and governments.

It was the vastly different, almost conflicting, messages coming out of senior Australian government ministers who spoke at the conference.In one corner, was Australia’s current Foreign Affairs minister Bob Carr. In the other, was former Prime Minister and subsequent Foreign Minister, Kevin Rudd. Both seasoned political campaigners well equipped to speak of the importance of Africa to the hundreds of delegates that crammed into the Riverside Ballroom.

Carr had clearly studied his briefing notes as he lauded the role that Africa has and will play in Australia’s economic and social development, challenging the conventional wisdom that we were all living witnesses to the ‘Asian century’. In Carr’s words, “what we’ve seen since 2000, could well be an African century”. Heads nodded in agreement, media bulletins were issued. Job done.

Rudd, however, appeared far less interested in talking about Africa, focusing almost his entire speech on the continued rise of China whilst launching the release of the “Fuelling the Dragon” report by the ASPI and the Brenthurst Foundation.

In contrast to Carr, Rudd began his speech declaring that “the core question confronting treasuries and finance ministries around the world at present is what is the near, medium and long term prospects for the Chinese economy.” There was less head nodding, more head scratching. Little mention was made of Africa. In fact, in the entire 20 minute speech Rudd mentioned Africa on fewer than four occasions.

One might readily conclude that Rudd’s last minute call-up in place of the ill Resources minister, Martin Ferguson, meant that a ‘revert to type’ presentation was inevitable for the former Prime Minister. Whatever the reasons, the contrast in the political messages from two of Australia’s most senior government ministers at Australia’s largest mining conference, was striking. But were they conflicting?

One conclusion that is easily drawn from the presentations and discussions with participants during the three day conference, is that they are not conflicting messages – that Africa probably needs China more than it needs Australia, but that China needs Australian expertise, resources and know-how to unlock its growing need for natural resources.

During a conference breakfast, hosted by BDO, Herbert Smith Partner, Michael Walter, joined other panellists to discuss and field questions from the audience on the impact that China’s growing need for “rocks and crops” is having on Australian mining companies’ business plans for Africa, and how we can work effectively with China in our collaborative African mining pursuits.

According to Michael, the huge amount of interest in Africa, and relationships with China, was much in evidence in a great turnout for the breakfast briefing and some thoughtful and searching questioning.
 
Austrade also hosted a luncheon which saw Senior Trade Commissioner for Sub-Saharan Africa, John Madew, speak about the importance of our government’s role in assisting Africa with the three “A”s – access, advice and advocacy. In his speech, CEO of Fortescue Metals, Andrew Forrest, urged Australian mining companies to replicate the high environment standards that they display in their Australian operations across their African operations. He also highlighted the importance of Australian mining companies investing in corporate social responsibility programs that make a sustainable difference to the lives of the African communities in which they operate.

With the impending merger of Freehills with international law firm Herbert Smith due to launch on 1 October, the conference was a great networking opportunity for the respective Freehills and Herbert Smith mining teams and a tremendous success generally.

Herbert Smith Freehills will provide clients with an impressive global mining practice boasting over 30 years of experience advising across the entire continent of Africa in both French and English. With offices strategically placed in Perth, Singapore, Shanghai, Beijing, Paris, New York and London, and an office to be opened on the ground in Guinea, Herbert Smith Freehills’ mining clients will benefit from seamless service all the way from the office in Australia, China or Europe, to the minesite in Africa.

31 August 2012

Streamlining Act receives assent!


Further to our recent blog, 10 August, the Queensland Government has taken a significant step towards its commitment to cut red tape for the resources sector by passing the Mines Legislation (Streamlining) Amendment Act 2012 (Qld) (Streamlining Act). The Streamlining Act received assent on 29 August 2012, however the sections that will substantially amend Queensland resources legislation have not yet commenced. The Streamlining Act aims to clarify the legislative framework relating to the compulsory acquisition of land in regards to resource interests, and implement part of the Government’s Streamlining Approvals Project.

The amending provisions that have already commenced aim to clarify the relationship between the compulsory acquisition of land and resource interests. A resumption notice for the taking of land does not extinguish interests (resource interests) under the Mineral Resources Act 1989 (Qld), Petroleum and Gas (Production and Safety) Act 2004 (Qld), Petroleum Act 1923 (Qld), Greenhouse Gas Storage Act 2009 (Qld) and Geothermal Energy Act 2010 (Qld) unless stated in the resumption notice. A resumption notice may provide for the extinguishment of a resource interest only to the extent that the interest is incompatible with the purpose for which the land was taken. If a resource interest is compulsorily acquired, no compensation is payable for the value of that resource.

Other provisions of the Streamlining Act which have commenced provide for the transportation and treatment of coal seam gas water, and other minor amendments. It is not yet known when the remaining provisions of the Streamlining Act will come into force.

28 August 2012

Victoria declares ban on fraccing


The Victorian Government has declared bans on:

  • approvals to undertake hydraulic fracturing or “fraccing” as part of onshore gas exploration; and
  • the issue of new exploration licences for coal seam gas (CSG).
This move follows the ban on fraccing by the New South Wales Government, which has been in place since July 2011.

The measures taken by the Victorian Government do not affect exploration activity approved under current CSG exploration licences that do not involve fraccing, such as surveying and drilling for core samples.

It appears that the bans are a response by the Victorian Government to the pressure exerted by regional community groups, as described in our blog entry of 13 June 2012.

According to the Victorian Government, the bans will remain in place until a national harmonised framework for CSG has been developed. The work program to deliver this framework was announced in December 2011 by Energy and Resources Ministers from across Australia, and results of that work are expected in December this year.

The Minerals Council of Australia has said the Victorian Government’s measures in relation to CSG are ‘profoundly disappointing’. In particular, it states that the decision to rely on the development of a national framework for CSG is ‘concerning’ as the framework may be delayed for years, meaning that Victoria would miss the opportunity to develop an industry that could generate jobs and significant revenue for the state.

Similarly, the Australian Petroleum Production & Exploration Association (APPEA) has said that the Victorian Government’s decision to put the bans in place ‘sends the wrong message to investors and will see the state fall further behind Australia’s rapidly growing resource-rich states’.

There is currently no CSG production in Victoria, and exploration for CSG is in an embryonic stage. Fraccing does not currently occur in Victoria.

10 August 2012

Are you prepared for the new Streamlining Bill?


Companies operating in the Queensland energy and resources sector should prepare themselves for the commencement of these new laws and seek specific advice on the effect of these changes.

On 2 August 2012 the Queensland Parliament introduced the Mines Legislation (Streamlining) Amendment Bill 2012 (Qld) (Streamlining Bill) in an effort to cut red tape and streamline regulatory approval processes in the energy and resources sector.

The Streamlining Bill includes amendments to five pieces of Queensland resource legislation and aims to clarify the legislative framework relating to compulsory acquisition, tenure administration and approvals, health and safety and the emerging CSG/LNG industry.

For further information follow the link below

http://www.freehills.com.au/8355.aspx

10 July 2012

AFP gives insight on Australian anti-bribery laws


In a climate of aggressive enforcement of foreign bribery, both in Australia and overseas, many companies are questioning the precise scope and application of foreign bribery laws and what kinds of actions they should be taking to minimise their risk of exposure. In a joint panel discussion held at Freehills’ Sydney offices on 15 June 2012 and co-hosted by Deloitte, AFP Assistant Commissioner Ramzi Jabbour provided a rare insight into the AFP’s approach to the enforcement of Australia’s foreign bribery laws.

In particular, the AFP Assistant Commissioner provided guidance on how the AFP assesses payments for hospitality, gifts and charitable donations, or payments which may fall within the facilitation payments defence. He highlighted the AFP’s interest in working with industries such as the resources industry to raise awareness and encourage self-reporting.


While many Australian companies are well aware of corruption risks, they may struggle with the precise scope and application of Australia’s foreign bribery laws as well as overseas laws that may now apply to Australian companies, for example, in the US and the UK. Of particular concern are the scope of the facilitation payments defence and the grey areas of corporate hospitality, travel, charitable donations and gifts.


In total the AFP has conducted 29 bribery investigations to date. The Assistant Commissioner commented that the AFP has not targeted particular industries. It is keen to work with industry groups to raise awareness, particularly those industries at higher risk because of the nature of the industry, or the regions in which they operate. One example is the resources industry. The AFP is currently in the process of preparing a ‘fact sheet’ to assist companies to identify and navigate the risks.


Matters to date have generally come from whistleblowers or self-reporting by companies. The AFP sees self-reporting as important but has no power to negotiate outcomes with companies that self-report. 


While each matter will turn on its own facts, key considerations for the AFP when assessing hospitality, travel payments or charitable donations, or facilitation payments are whether these are:

  • reasonable in the circumstances
  • for a business purpose, and
  • clearly documented. 

Transparency will be key. The AFP does not have a specific threshold value when assessing payments, and the cumulative value will be relevant. What may be reasonable on one occasion may become questionable if it is occurring on a regular basis. Payments for close personal protection in dangerous regions may also be legitimate but again should be fully documented.

A key takeaway from the panel was that awareness is critical. Companies need to be aware of how they may be exposed to risks because of the culture and environment in which they operate, the contracts they have in place and the business partners they are working with. Implementing appropriate policies and procedures, continually monitoring risks and clearly documenting payments will stand companies in good stead.

This post is written by Freehills Partner Caroline Cox.

Freehills would like to thank AFP Assistant Commissioner Ramzi Jabbour and Frank O’Toole, Partner Deloitte for participating in the panel discussion. 

9 July 2012

Merger creates one of the world’s most experienced energy and resources firms


International law firms Herbert Smith and Freehills confirmed today that their partnerships have voted overwhelmingly in favour of merging to create a new firm, Herbert Smith Freehills. The firm will focus on providing an integrated service to clients across its 20 offices. This will be a full equity merger, with a single profit pool from day one. Launch of the firm is targeted for 1 October 2012.

http://www.freehills.com.au/8214.aspx

15 June 2012

New Queensland Government with new (and refreshing) change to mining related infrastructure



Although it is still early days, the Queensland Government has displayed a radically different and refreshing approach to mining infrastructure to that of the previous Labor government.

The previous government’s approach was light handed. It left planning of ports to GOCs, and believed that coordination was best achieved by the forces of competition and commercial resolution.

While in theory the previous government’s approach has merit, in practice it meant that infrastructure delivery was delayed while miners hedged their bets by applying for capacity at every planned port. This is turn lead to delays in QR Network’s ability to determine what coal systems needed expansion.

In a relatively short period the Queensland Government has made significant changes to key mining infrastructure projects. The most significant of these changes is the re-setting of development at Abbot Point T4-T9. The government seems to have taken a view that the planned MCF was not feasible (economically or environmentally) and that 6 terminals was overkill. Both of these views were correct.

The government’s changes to T4-T9 signals a radically different approach to mining infrastructure generally. In particular, that the government will be very hands on and will act decisively with a view to bringing on development. That new approach should be applauded.

The government do however face a number of challenges:

  • Understanding a very complicated coal chain, including:
    • unlocking capacity through coordination; and
    • developing an efficient process for development of rail expansions (where SUFA will be crucial);
  • Developing a new model for development of Abbot Point T4-T9;
  • Water transportation issues.

This post is written by Freehills Mining Lead Partner Jay Leary.

13 June 2012

CSG: The state of play in Victoria


In recent weeks, the approach to coal seam gas (CSG) mining in Victoria has been explored and debated both in the Victorian Parliament and out in the farming lands of the State.

Recent Developments

In moves to understand how better to develop and regulate Victoria’s CSG potential the Victorian Parliament’s Economic Development and Infrastructure Committee released a report entitled ‘Inquiry into greenfields mineral exploration and project development in Victoria’ (Report) on 22 May. The Victorian Government also recently became a signatory to the National Partnership Agreement on Coal Seam Gas and Large Coal Mining Development (Partnership Agreement) with the Commonwealth, Queensland, New South Wales and South Australia.

The Report recommends the Victorian Government establish an appropriate process to enable open consultation with stakeholders, including local communities, for issues regarding future coal seam gas exploration and development.

If adopted, increased communication between different stakeholders may lead to more balanced and informed views. The risk, however, is that increased communication may not be sufficient to stymie the conjecture and angst surrounding unconventional gas extraction, with the result being that any potential mutual benefit for farmers and miners is buried beneath the noise.

The Partnership Agreement advocates a strengthening of the science underpinning the regulation of these industries by establishing the Independent Expert Scientific Committee on CSG and Large Coal Mining (IESC). The IESC aims to address public concerns about the actual and potential impacts of CSG and coal mining activities on water resources by increasing public access to information as the IESC will make public its advice and findings from any research it oversees.

Community Murmurs

Community groups in Toongabbie, Forrest, Colac and Wonthaggi are all calling for a ban on CSG and at minimum, a full scale public inquiry.

The concerns of the community groups campaigning against CSG are echoed by Mark Wakeham, Campaign Director at Environment Victoria (EV). In his presentation to the Committee, Mark raised a number of concerns, in particular the imbalances between:

  • the assumption that exploration will be beneficial for the State and the continued environmental unknowns; and 
  • the levels of strategic assessment of conflicting land uses, namely mining and agriculture.

In support for those community groups calling for a ban on CSG, EV has recommended a moratorium on CSG, as adopted by the NSW Government until:

  • quantified measures indicate CSG operations actually operate at a lower emission level than coal fired energy generation; and 
  • the full environmental impact of hydraulic fracturing is known. 

The Environment Protection Authority (EPA) has already identified a number of environmental impacts associated with coal seam gas extraction, including impacts on groundwater and also wastewater generation. It has been argued that the EPA could take a more active role in the exploration process to aid conservation. Of course this would add to the already increasing costs and pressures on mining companies.

What happens next

There is currently no CSG production in Victoria, or any applications to begin CSG production in the State. However ExxonMobil recently showed appetite to investigate CSG potential in Victoria when it entered into a farm-in agreement with Ignite Energy Resources to evaluate the scope for commercial production of CSG in the Gippsland Basin. It remains to be seen how the impacts of the Report, the Partnership Agreement and campaigning by the growing number of community groups will play out.

8 May 2012

NSW inquiry plugs CSG

Last week the NSW Upper House tabled its inquiry into the environmental, economic and social impacts of mining coal seam gas (CSG), highlighting that this pipeline of regulation for CSG will be a prevalent issue.

As with any future regulation law makers must consider the trade off between clearing the fog of uncertainty vis-à-vis stifling future energy supply.

The expansion of CSG is filtering down the east coast, as energy sources are no longer limited to desolate rural land.

While making 35 recommendations, the report resinates a level of uncertainty surrounding the potential impacts of the CSG industry.

The main recommendations include:

  • a moratorium on production licences but not on exploration as more data needs to be gathered to assess potential impacts;
  • a tightening of the Draft Code of Practice for CSG Exploration so that the suggested measures around water testing and monitoring are compulsory rather than optional;
  • a ban on open storage of produced water; 
  • continuation of the current ban on fraccing until more is known about the side effects of the controversial process;
  • development of a model to ensure that CSG companies are held responsible for covering the full costs of remediating any environmental impacts;
  • review of the Petroleum (Onshore) Act 1991 to rectify any imbalance between landholders and mining companies over land access;
  • amendments to  the Petroleum (Onshore) Act 1991 to require a licence holder to enter into an access agreement with a landholder for CSG production; and 
  • establishment of a position for a Petroleum Ombudsman.

It is not just gas supply that is at risk, the delay connected to any moratorium is in the fore front of CSG investors. Following the release of the report share prices of companies with NSW CSG exposure closed down.

Not only is CSG coming under increased scrutiny in NSW, in Victoria another shire has sought to ban the controversial practise.

Ultimately the recommendations are a step in the right direction, unfortunately the risk of closing the pipe on CSG remains.

For a full copy of the tabled inquiry click here.

24 April 2012

Contractor Safety Management – a recent victory for common sense

Sunday night’s Beaconsfield biopic, whilst entertaining viewing, provides a reminder to the mining industry of just how important safety management is – and what’s at stake.

However there is some recent good news in decisions such as Kirwin v The Pilbara Infrastructure Pty Ltd which gives mining operators comfort in relation to the practical application of safety laws to contracting arrangements.

Following Cyclone George’s destruction of a railway camp in the East Pilbara in 2009 and resulting fatalities, the Western Australian Supreme Court considered the resulting safety prosecution against The Pilbara Infrastructure Pty Ltd (Pilbara Infrastructure).

The key issue was whether or not Pilbara Infrastructure had done everything reasonably practicable to ensure the railway camp dongas had been properly constructed and were a safe refuge in the event of a cyclone. It had engaged a contractor (NT Link) to build the camp, and had utilised another contractor (Spotless) to project manage.

The Supreme Court rejected an argument by the regulator that Pilbara Infrastructure had not done all that was reasonably practicable. The regulator had argued that that it should have engaged the services of an appropriately qualified engineer specifically to ensure that the dongas were built to relevant wind specifications (ie. engage a further expert to review the work of NT Link), but this was rejected. 

The Pilbara Infrastructure had procured apparently well qualified experts to design and identify the specifications for the dongas, and found that whilst Pilbara Infrastructure could not contract out of or delegate its duties, it could perform those duties by ensuring that an appropriately experienced and qualified contractor was retained to deal with matters beyond its knowledge and ability.

This victory for common sense is also supported by the recent High Court decision in Baiada Poultry Pty Ltd v The Queen which confirms that absolute reliance on an expert contractor may be capable of discharging a principal’s duty, and the mere fact that the principal has the power to take a certain step does not make it reasonably practicable to have done so.

30 March 2012

Mauritius paves the way for Australian route into Africa

We have previously blogged about Africa’s importance to Australian mining , and the vast amount of resources work going on in the region – but how can you get your foot in the door?

On Monday night we attempted to answer this when our Perth office hosted 50 guests from the mining, legal and accountancy sectors to talk about African investment and why Mauritius could be your gateway into Africa. The seminar included informative and thought-provoking presentations from the Mauritian Board of Investment, Intercontinental Trust Ltd, Stock Exchange of Mauritius, and HSBC Bank (Mauritius) Ltd, each highlighting the opportunities in this region.

Freehills partner, Justin Little, set the scene with an overview of Australian mining companies’ increasing investment in resource-rich African projects and the legal and commercial challenges that these companies face, including: a lack of infrastructure, skills shortage, reporting and compliance issues, political and social instability, the threat of the nationalisation of the mining industry, changes in fiscal regimes and obtaining financing.  Justin’s overall message was “opportunity knocks for those investors who are prepared to tackle and surmount the challenges that mining in Africa poses” but “the potential for elephant-sized discoveries comes with elephant-sized risks”.

Against the backdrop of these challenges, Managing Director of the Mauritian Board of Investment, Ken Poonoosamy, spoke about the attractive business environment that Mauritius – “the star and key of the Indian Ocean” – has to offer and how its economic, political, legal and fiscal regimes create a competitive platform for Australian companies wishing to invest in Africa.

White sandy beaches and pristine azure blue waters aside, why use Mauritius as an international hub for investing into Africa as opposed to another country or investing directly into Africa?  Why would you not, was the resounding answer from CEO of Intercontinental Trust, Ben Lim, who gave insight into the many perceived benefits of using Mauritius, such as its bilateral investment treaties and fourteen double taxation agreements with Africa, its membership of the African Union and regional economic blocs (such as COMESA and SADC), low income and corporation taxes, lack of capital gains tax and relative ease and efficiency of establishing corporate vehicles.  Ben contrasted this with the arguably less attractive option of investing directly into Africa which comes with the burden of high withholding taxes, capital gains tax, high investment risks and no preferential access.

If that was not enough for the audience to start booking their flights, Chief Executive of the Stock Exchange of Mauritius, Sunil Benimadhu, threw into the bargain the possibility for Australian investors to list their companies on Mauritius’s very own Stock Exchange – one which, according to Sunil, offers a cost competitive and stream-lined listing process, while accommodating dual-listing, and trading in various currencies including USD, GBP and the Euro.

Despite the building momentum behind Australian mining companies investing into Africa, the start-up costs of their projects are significant and, so, financing is often the end game for investors.  Participants were therefore pleased to hear from Managing Director of HSBC Mauritius, James Boucher, that the Mauritian banking system has grown over the years to become part of a sophisticated international banking system – one which is becoming increasingly tailored to its foreign mining clients and which covers the full box and dice of business solutions and services, ranging from acquisition, project, export and trade finance, foreign exchange and treasury services to cash management.

We would like to thank our presenters Ken, Ben, Sunil and James for sharing their knowledge and insight into what Mauritius has to offer as a gateway into Africa.

28 March 2012

A global contract law? What is in store for Australia?

Some utopian visions of the world foresee that, in a globalising economy, we will be ruled by a ‘global law’ – a law that is not connected to any particular nation state. But the concept of a universal law, applying across nation states, regardless of the nationality of market participants is in fact very old. It is found in the medieval concept of the lex mercatoria – the law merchant – which applied to all merchants in the vibrant medieval international economy. Now, in response to the internationalisation of markets, we are seeing a resurgence of that vision, especially by nations such as Australia which stand outside any of the major trading blocs and seek to be relevant.

The Australian Government has recently released a discussion paper, Improving Australia’s Law and Justice Framework: A discussion paper to explore the scope for reforming Australian contract law: Discussion Paper. Such reforms are said to be necessary in light of the lack of uniformity of contract law across Australian jurisdictions, the lack of clarity as to the applicable law in particular contract disputes and international developments in contract law. The discussion paper is a broad-ranging one and covers many issues including the possible codification and ‘harmonisation’ of contract law.

Of particular interest and importance are the aspects of the paper relating to Australia’s contract law in the context of international commerce. The paper notes that a key potential obstacle to greater economic integration with Australia’s main trading partners are the differences between their systems of contract law and Australia’s and acknowledges the potential benefits in Australia being an early adopter of the developing “international law of commerce”. The paper makes reference to a number of important international approaches to contract law including the United Nations Convention on Contracts for the International Sale of Goods (Vienna Convention) and the UNIDROIT Principles of International Commercial Contracts. Each of these have been attempts at codifying parts of the law merchant. They are important sources of restatement of the fundamental rules that apply to any international transaction.

The challenge for Australia is how it best integrates its economy into the international world economy, especially in this ‘Asian Century’. The discussion paper on the reform of Australian contract law should be seen in the context of two other projects already underway or about to proceed. The first is the Prime Minister’s forthcoming White Paper on Australia in the Asian Century: Australia in the Asia Century. The second is the possible project to be approved in April by the Standing Council on Law and Justice (previously known as the Standing Committee of Attorneys-General) on the private international law aspects of commerce: Standing Council on Law and Justice.

All three projects sharpen our focus on the international dimensions of our economy and legal system.

This is an exciting time for those concerned about the international dimensions of commerce – these projects bring many opportunities for reform but also great risks. As the projects proceed we will bring you insights into the issues and thinking that stand behind them.

This post is written by Freehills Partner Don Robertson.

23 March 2012

Foreign mining investors to be stripped of majority ownership

Foreign mining investors will be required to divest majority ownership in companies holding mining business permits under a new Presidential Regulation issued recently.

On February 21 this year, the Indonesian Government implemented a forced divestment framework to capture and ultimately control mining projects.  This new regulation, Government Regulation No.24, deals with a number of issues including the procedures for the extension of Contracts of Work and Coal Contracts of Work but the provisions that are getting most attention are those requiring an increased compulsory divestment of ownership to Indonesian Participants.

The new Indonesian Mining Law enable foreign investors to hold mining business permits for the first time.  But here’s the kicker – foreign investment companies that hold licences for a producing mine of 5 year maturity are required to divest 20% of the mine to Indonesian Participants, and after ten years the shareholding percentage held by Indonesian Participants must be not less than 51% (it goes up incrementally from 5 years).  There is also stipulation on which Indonesian Participants have priority.  Shares must be offered to the Central Government and if it is not interested, then to the Provincial Government or Regional Governments; State owned and regional owned enterprises; and finally to national private business entities that are 100% owned by domestic investors.

Shares offered to State and regional owned enterprises or  to national private business entities must be offered by way of auction, but it is not yet clear how this process will work. Others areas of concern are that the regulations are yet to provide any details on the pricing of offers made to the a Government.

There are of course a number of technicalities around what happens to existing Contracts of Work and Coal Contracts of Work including how and whether they can be extended – but what is clear is that companies operating in this area need to familiarise themselves with these laws, and quickly as they are already in effect!

6 March 2012

Mining M&A continues to surge

by Simon Reed, Partner, Perth

Looking back at the public M&A activity in the last 6 months, the mining and energy sectors clearly stand out accounting for almost half of all deals.

But what does this all mean? What do numbers and stats really tell us?

Well, they tell us that even though total deal numbers are slightly down on previous years (57 public M&A deals announced, compared to 75 deals in the same period in FY2011), energy and resources is still dominant. They tell us that there’s been significant activity at the upper end of the market, where in the mining sector 35% of transactions exceeded $500 million in value (this is even higher in the energy sector – which includes coal plays – where 60% of the deals announced related to targets of $500 million or more in value). Some notable deals were the bids for Anvil Mining and Sundance Resources as well as the proposed merger of Aston Resources and Whitehaven Coal.

They tell us that Western Australia continues to play a key role in the public M&A activity, with the majority of targeted companies having projects either in Western Australia or Africa. Of the 17 resources deals announced in the first half of FY2012, 53% had primary assets located in Western Australia. 35% of those targets had assets located in Africa – a trend we expect to see grow.

They also show us a couple of interesting trends that have emerged in how mining M&A is being executed: the strong preference in the resources sector is to undertake friendly deals with target board support. 70% of resources deals have been launched with target board support – contrast this to the energy sector, where the vast majority of transactions have been initiated as hostile deals.

Finally, against a backdrop of stronger preferences for cash consideration in public M&A generally, the resources sector continues to show an appetite for scrip consideration, with resources deals being launched with an equal preference for scrip or cash.

23 February 2012

Anti-bribery and the mining push into developing countries

2011 was an active year for law enforcers on the foreign bribery and corruption front.

Australian business found itself in a new era – where law enforcers around the world have been pursuing bribery and corruption issues with renewed vigour and increased cross-jurisdictional co-operation. If they weren’t before, Boards are now asking their managements teams whether their companies are doing enough to manage bribery risk and how it is being dealt with in commercial arrangements ranging from ongoing contractual arrangements to one-off acquisitions. 2011 also marked the commencement of the UK Bribery Act – with a number of far reaching consequences, including that many payments that in the past may not have been bribery will now certainly constitute bribery under the UK law. The end of 2011 also flagged that some payments, which in the past would not have been bribery under Australian law, soon may be.

Any Australian business that operates in countries where demands for small payments to lubricate regulatory and other public processes is common are now faced with a risk to the business, its employees and its directors, and a dilemma in how they deal with business transactions in these countries going forward. The dilemma is underscored by mind boggling penalties for getting it wrong.

Toward the end of 2011, the Attorney General’s Department released a Public Consultation Paper inviting comment on the Government’s review of Australian anti-bribery legislation, with particular focus on the treatment of facilitation payments under Australian law.

Presently, if a charge is brought in relation to a payment made to a foreign public official that would otherwise be classified as a bribe under Australian law, it will be a complete defence if the payment was a ‘facilitation payment’.

To be a facilitation payment, the value of the payment must be minor, it must have been paid for the dominant purpose of securing or expediting a routine government function which itself is of a minor nature, and as soon as practicable after the payment a record (which satisfies particular legal requirements) must be made – the most difficult of these being that the payor must effectively obtain a receipt from the foreign official.

In March 1999, the Howard Government amended the Commonwealth Criminal Code to include the offence of bribing a foreign public official. In relation to the facilitation payments, the Government said: “Small payments are something left for local officials to stamp out and it is not appropriate or practical for foreign governments to be concerning themselves with expensive international prosecutions. This approach reflects what is provided for in the Convention and is similar to legislation in the USA and Canada.” [Senate Hansard, 10 March 1999]

For the next 12 years not much happened under Australian anti-bribery laws. That was until the charges laid on 1 July 2011 in the Securency matter. Prior to then, Australian law makers and enforcers had been subject to polite but consistent criticism about a lack of action. In around October 2012 the UN Working Group on Bribery in International Transactions is due to release its ‘phase 3’ report on Australian bribery laws. In broad terms the report will comment on the degree to which Australian laws have been enforced since their introduction. It is likely that Australia will be in for further criticism about a lack of action.

It is against that background that the Federal Government’s ‘assessment of Australia’s anti-bribery laws’ can be better understood. That it will focus on a defence which has never been (and never had to be) invoked is curious.  It can’t be that the prospect of potential defendants invoking the defence has scared off prosecutors. After-all, the recording keeping hurdles imposed in an Australian context mean that the defence will rarely be satisfied. Further, a similar defence is available in USA, and that country is by far the most active, and successful, in enforcing its bribery legislation. The defence is rarely raised by defendants in USA prosecutions for foreign bribery. More likely, the impetus for the Federal Government’s assessment is the renewed emphasis on bribery of foreign officials brought about by the commencement of the UK Bribery Act, and anticipated criticism in the form of the UN’s phase 3 report.

Just how this fits with the Federal Government’s encouragement of Australian business to move into new offshore markets, particularly Africa, is unclear. The World Bank estimates that half of the 10 fast growing economies over the next 5 years will be in Africa. Presently, Australian business reportedly has 665 projects in 42 African countries, with 220 of these being commenced in the passed 20 Months. Meanwhile, in October 2011 Foreign Minister Kevin Rudd launched a $30 million initiative to foster mining development in Africa. This can be contrasted with a public survey of conducted by Transparency International in 2010 – 2011 of more than 6,000 people across the Democratic Republic of Congo, Malawi, Mozambique, South Africa, Zambia and Zimbabwe, the results of which included that 62% of those surveyed considered that corruption had increased in their countries, and 56% actually admitted to having paid a bribe to one of 9 service providers (ie government services) in the previous 12 months. Alarmingly, the police were considered the most corrupt institution in each of the countries.

Regardless, Australian business finds itself in this new era. In the context of the Public Consultation Paper released last 2011, Australian business should now consider that, to the extent the facilitation payments defence ever had any life under Australian laws, it will soon be dead. In response to the UK Bribery Act and these latest developments, many of Freehills’ clients are updating their Codes of Conduct to explicitly outlaw such payments by their employees and others. Any Australian business operating in countries where demands for such payments are common, including fast emerging African economies, should certainly act to prohibit the making of such payments. Business impacts of refusing such demands will also need to be anticipated and planned for. To do otherwise risks the employee, the business and its directors committing criminal offences punishable in Australia (irrespective of where the facilitation payment is made).

16 February 2012

Industrial unrest: coming to a mine-site near you!

Since the Federal Government's Fair Work Act came into effect in 2009, the mining industry has seen a steady increase in industrial activity. This is hardly surprising as the new legislation gives significant new rights to unions and compels mining companies to bargain with unions in most circumstances.

While much of the mining industry has relied on industrial agreements made under the old legislation, 2012 will see many of these agreements nearing their expiry date and a new round of industrial bargaining commence. Most of the major mining houses will be negotiating agreements with unions in 2012 under this new legislation. For this reason, mining companies will need to be well advanced in their planning and implementation of forward industrial strategies.

An example of the challenges of the new bargaining regime is the BMA negotiations which have been ongoing in the Bowen basin coal fields for more than 12 months. These negotiations will continue in to 2012 with a likely coordinated campaign of industrial action across all of the companies coal mines. 

In addition to the increase in industrial bargaining throughout the mining industry, 2011 saw the announcement of a large number of new mining projects across all tiers of the sector. These developments are likely to exacerbate the labour shortages already being seen in the boom mining states of Western Australia and Queensland. Initial resourcing strategies have led to an increase in the number of employees commuting from other states and territories and an increase in the use of foreign labour. 

Foreign labour will continue to be a contentious issue, with mining unions recently staging protests in Perth in relation to the use of foreign labour by major resources companies operating in Western Australia. The government’s new Enterprise Migration Agreement scheme will be available to larger players in the industry, however these agreements will require detailed consultation with relevant unions at an early stage in the planning process. The current consultation protocols include a requirement for project owners to provide manning plans and other detailed commercial information to unions as part of this initial consultation process. This, combined with the powers provided to industrial organisations under the Fair Work Act, will further feed the strength of mining unions in Australia during 2012.

Finally, the Federal Government has appointed a committee to review the operation of the Fair Work Act. The terms of the review have caused some concern among employers, including those in the mining industry. This review may lead to changes to the legislation—it will be important to monitor those changes and plan for their implementation.

14 February 2012

CEO Michelmore on dancing with the Dragon

Andrew Michelmore, CEO of Minmetals Resources Limited (MMR), treated those who attended Tuesday night’s AMPLA Twilight Seminar at Freehills to a thought-provoking presentation.

MMR is not your everyday company. Its management team is based in Melbourne, it is listed on the Hong Kong Stock Exchange and its major shareholder is the state-owned China Minmetals Corporation. MMR is a rare example of China investing in Australia’s human capital and it has strived to achieve a strong ‘east-west’ partnership that can stand the test of time.

Throughout his presentation, Michelmore spoke in detail about MMR’s explorations and operations, its journey since acquiring Minerals and Metals Group (MMG) at the end of 2010 and its ambitious strategies moving forward into 2012. However, it was Michelmore’s thoughts about Australia’s future relationship with China that really captivated his audience.

According to Michelmore, the centre of economic gravity is shifting from the West back to the East. Interestingly, he noted that apart from the 19th and 20th centuries, the Asian region has led the global economy since the beginning of the Common Era. Michelmore stated that he believes China is going to achieve huge economic growth in the coming years, but went on to emphasise that Australia has what China needs to help them grow. For that reason, a strong partnership with China is mutually beneficial and could be lucrative for Australia.

Michelmore’s message is simple. We can’t fight China. We need to work with Chinese companies, on equal terms, in what must be a win-win scenario for both parties. This is what MMR has tried to achieve and it appears to have reaped the benefits.

Significantly, Michelmore believes that it is important to fight the incorrect perception that Chinese companies collude with each other. He affirmed that, in reality, the exact opposite is true. Chinese companies fiercely compete with each other, in contrast to the collusion believed to be characteristic of Japanese companies back in the 1960s and 1970s.

Ultimately, Australia needs foreign investment and China is a crucial strategic partner moving forward. MMR is one of the leaders in fostering this relationship and tries to use it to create a competitive advantage over its competitors.

Michelmore’s presentation was not limited to China. He explained some of the obstacles that confront his company in Laos, where unexploded bombs from the Vietnam War need to be cleared. He also stressed the importance of building trust and keeping one’s promises in Africa, a region where many companies fall into the trap of painting all countries with the same brush.

Michelmore is an industry leader. His insights on how to avoid cultural clashes are alarmingly simple. All that is required, he suggests, is the ability to “step into the other person’s shoes,” to understand that others see the world through different eyes and to embrace diversity genuinely and wholeheartedly. One couldn’t help but leave Michelmore’s presentation feeling that this mantra could equally apply to many other areas of life outside the corporate world.

Freehills would like to thank Andrew Michelmore for his insightful presentation.

9 January 2012

National harmonisation of safety laws gathers momentum

The New Year is here. The year of harmonised national safety laws. 

The harmonisation process is well underway with the goal of achieving balanced and nationally consistent safety laws becoming ever closer after five jurisdictions recently enacted the Model Work Health and Safety Act (Model Act). 

New South Wales, Queensland, Northern Territory, Australian Capital Territory and the Commonwealth have all taken the final steps to ensure the commencement of the Model Act from 1 January 2012. While South Australia and Tasmania will likely take similar steps either later this year or early in 2013 to enact bills before their parliaments, Victoria or Western Australia are yet to release any bill. It is still unclear whether they will adopt the Model Act. But we are closer than ever to harmonisation.

For the mining industry, the Model Act will place the primary duties under the regulations on mine operators, and will endeavour to strike the right balance between providing the requirements that are necessary to maximise work health and safety outcomes without being too prescriptive. 

The status of the Model Work Health and Safety Regulations is a little less certain. While the regulations have been have been finalised by Safe Work Australia, they are yet to be adopted in all of the five jurisdictions which have agreed to adopt the Model Act.

So 2012 has begun, and will be a year to watch the safety space – especially for those in mining industry where safety remains a high priority.

6 January 2012

The Big Freeze

A major part of risk management when operating across national boundaries involves a carefully constructed dispute resolution mechanism. Such mechanisms are intended to confine disputes to mutually agreed jurisdictions and procedures (usually international arbitration in an acceptably ‘safe’ country).

But how effective are such mechanisms? The reality is that parties to international contracts are at risk of foreign courts freezing their assets around the world, despite any dispute resolution clauses and despite there being no security over those assets.

Parties who fear that their counterparty might deal with its assets in a manner that would result in a judgment or arbitral award being wholly or partly unsatisfied may be able to approach courts other than the courts of the place where the dispute is being resolved to obtain orders freezing the counterparty’s assets in a jurisdiction where they may seek to enforce that judgment or award. These are known as ‘freezing orders’ or ‘Mareva orders’ (after the case in which they first came to prominence).

Freezing orders can have a major impact on businesses, their day-to-day operations, commercial negotiations and financing arrangements. They may be obtained even if:
  • there is no dispute about the venue and method of dispute resolution
  • the assets are located in a jurisdiction that is otherwise unconnected to the dispute; and
  • the moving party has given no security over those assets to the person with whom they are in dispute.
The Federal Court of Australia recently froze shares worth over AUD$700 million in an Australian publicly listed company in a case involving three parties, none of whom actually operated in Australia, but one who held a significant parcel of shares in an Australian listed company. One of the parties subject to the freeze was not even a party to the contract. See The Big Freeze: Exposure to asset preservation orders around the world.

Parties seeking certainty as to the courts that may make interim orders might provide in their contract that the parties submit to the exclusive jurisdiction of particular courts for the purposes of interim relief. But such clauses are untested in Australia, could cut both ways and may affect the conduct of any proceedings for final relief. Are your international contracts sufficiently insulated against the big freeze that might come your way?