Among Clive Palmer’s gifts to Australia — which include, arguably, the Morrison government — is a lot of interesting law.
Palmer’s constitutional challenge to Western Australia’s border closure is significant enough, but it’s dwarfed by the wow factor of the law he recently provoked the WA Parliament into passing.
Just before midnight last Thursday the WA governor signed off on an emergency bill designed to block a damages claim from the mining magnate. It had been a race with Palmer’s lawyers, and the WA government believed it had won. But the issue is far from over.
Palmer is now claiming the law is unconstitutional, and he’ll no doubt be asking the High Court to agree. After all, there’s supposedly $30 billion on the line…
What is this all about?
The story starts in 2002, when the government of then-premier Geoff Gallop created the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act.
This act gave legal force to a “state agreement” made between the government and Palmer’s company Mineralogy, under which WA promised to help Palmer exploit his iron ore mining tenements in the Pilbara. Such agreements had become standard in the state as a means of encouraging the big mining companies to come in and dig deep into WA’s incalculable mineral wealth.
The agreement was extraordinary in its generosity. The basic scheme was that Palmer would come up with proposals for mining projects on the land (including transport, ports and shipping), and the minister was obliged to either approve these proposals or give his approval subject to conditions which had to be “reasonable”.
Critically, if he took the second course Palmer could then invoke his right to have the minister’s conditions reconsidered in a compulsory arbitration. The arbitrator’s decision on their reasonableness would be binding. (Arbitration is a dispute resolution process conducted privately, outside the court system. It’s supposed to be simpler, faster and cheaper than litigation, but it removes many of the options parties would have if they went to court.)
In 2012 and 2014, then-premier Colin Barnett refused to approve proposals put up by Palmer for his Balmoral South tenements, and an arbitration commenced with former High Court judge Michael McHugh as arbitrator.
That proceeded in secret, but McHugh has reportedly made decisions in Palmer’s favour. My guess is that he’s determined that Barnett’s refusals were unreasonable and that approval should have been given back in 2014.
Palmer claims he would have been operational and earning revenue by 2016. The next step would be to determine how much WA owes Palmer for its breach of the agreement. The $30 billion number comes from WA’s attorney-general, stated in parliament as part of his pitch for the extraordinary law last week. Palmer says it didn’t come from him.
Palmer’s latest movements
On Tuesday, Palmer went to the Supreme Court of Queensland, registering the arbitration “awards” made by McHugh, so as to give them the force of law and protection of the courts.
Palmer then approached the Federal Court, seeking to pre-empt the WA government’s attempt to kill his case altogether. That didn’t go anywhere, because the WA bill is now law.
The new law amends the original 2002 act, with a pile of provisions expressly overriding much of its content and legal effect.
The central elements of the law are that it says that Palmer’s Balmoral South proposals have no legal effect (that is, they’re dead); and the arbitration is “terminated”. Any awards made by McHugh in 2014 and 2019 are declared to have no effect. Even the arbitration agreement is deemed to be invalid.
Everything else in the amending law (there’s a lot of it) is consequential. The drafters have tried to cover off every possible angle. All legal remedies are explicitly cancelled, the state and everyone in government is immunised from liability. Even freedom of information rights are extinguished.
Palmer has focused on one particularly exotic aspect of the law: its grant of immunity to everyone on the government side from criminal liability. Fairly enough, he’s asking what’s being hidden. Probably nothing really criminal, but it does underline how bizarre the situation is.
Who’s in the right here?
It is not unusual for a government to make laws extinguishing contractual or other rights. Parliament is the supreme law-making body, and its power is essentially unlimited. It can validly do things which have unfair or arbitrary consequences.
State governments are also not bound by the constitution’s restriction on the Commonwealth government that forces it to pay “just terms” when it compulsorily acquires private property. WA has just done that to Palmer, but it’s not legally obliged to compensate him at all.
As to what constitutional rule Palmer thinks WA has breached, it’s not immediately obvious to me. The rule of law does not include, as a fundamental principle, protection of personal spoils. A government can use its legislative power to get itself out of a bad bargain. That’s what is happening here. I don’t think his move in the Queensland court will help; it has no jurisdiction in WA.
Nevertheless, it’s a bad precedent. The real evil was the 2002 state agreement, under which WA gave away its sovereign power and obligation to protect the interests of its people, essentially selling them off to a mining magnate for the promise of royalties.
I think what WA has done will work, in that it will survive challenge and kill off Palmer’s claims. But, in doing so, it will vindicate what he is saying: that, in terms of sovereign risk, WA is an unsafe place to do business.
It may be distasteful to hear those words from a man like Palmer, but that’s the legacy of WA’s tradition of getting into bed with such people. It is paying the price of its own greed.
I disagree Michael; it’s a very good precedent.
Parliaments have to exercise their sovereignty every now then, otherwise the whole principle of sovereign risk and Parliamentary democracy are lost. Why is that so? Because without this fundamental right of parliaments to not be bound or constrained by previous parliaments, or indeed contracts or agreements entered into by the Executive or even public servants, their ability or powers to implement the wishes of the people are constrained. In effect it gives the Executive or public servants the power to impose constraints on parliament like a constitution, but without all the necessary process of affecting a Constitutional amendment. Some international treaties also run foul of this principle, for example, the way the Trans Pacific Partnership purports to give corporates the right to sue Governments for regulating them. It’s good to see a parliament in Australia finally stand up against bully boy corporations; hopefully more will follow the WA legislatures’ lead.
I agree, Mark…and yes there should be more such laws passed.
Particularly like to see your example of the TPP, and all those other useless ‘Free’ Trade agreements, be cut down to size so they don’t disadvantage our country as they currently do.
Great explanation Michael…funny how few of the MSM outfits wanted to let us ordinary citizens know what this was all about???
I purposefully didn’t mention ‘free trade’ because I’m generally supportive of free trade, but many of these agreements are NOT just about free trade, but about corporate interests (mostly foreign) being free from government (ie democratic) regulation. You just have to look at Big Tobacco and the fuss they made about plain packaging. While Australia ‘won’ the case, other smaller countries have been threatened and bullied to not introduce similar regulation. Often the ‘agreements’ purport to require governments to have ‘evidence’ to justify regulations, thereby getting rid of the right for rules justified on the precautionary principle. How ridiculous that a government should have to prove a product is unsafe, rather than the company prove it is safe!
And are they really ‘free trade’ agreements when they run to 1500 pages long?
This is the first place I have read exactly what this stoush is about. Thanks.
How about giving immunity to everyone except the people responsible for the original act?
Agree with Mark Dunstone. Sovereign risk is a good thing, putting investors on a par with ordinary citizens, and allowing crony capitalist deals to be scrapped. If Palmer had been paid, the WA government would have been forced to break promises to ordinary citizens in order to fulfil an incredibly dubious deal with Palmer.
Presumably, a consequence will be that future deals of this kind will be harder to make. That’s good.
Sovereign Risk? One word for the NSW government NuCoal!
Always a good read Michael.
“Sovereign risk”and bad precedents aside, if it were anyone but Clive I might care about the WA government’s actions.
But it isn’t so I don’t.