By Andrew Hobbs

A MOVE by the Papua New Guinean government to give one third ownership of Ok Tedi Mine Ltd (OTML) to the people of the Western Province has been put on hold by an arbitration decision.

The government announced in December 2014 that the people of Western Province were to be given one third ownership of OTML, with the remainder to be held by the government.

But it will be prevented from doing so by the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), which granted parts of an appeal launched by the PNG Sustainable Development Program (PNGSDP) in January.

The arbitration centres around the government’s move to assume complete control of the 63 per cent stake in the Ok Tedi mine held by PNGSDP in late 2013.

That stake was transferred to the group by former owner BHP in 2001, with the company’s stated intent for the PNGSDP to use profits from the mine to promote sustainable development and welfare within PNG and in the Western Province in particular.

The January decision centred around an application by PNGSDP’s to the tribunal for it to implement provisional measures against the PNG government.

Specifically, the PNGSDP requested that the Tribunal issue three orders to the PNG Government while the dispute continued.

First among these was that the government not take any further steps under Section Six of the Mining (Ok Tedi Mine Continuation) Act 2013, which gives it the power “to restructure PNGSDP and its operations in order to ensure that PNGSDP applies its funds for the exclusive benefit of the people of the Western Province.”

The second condition was that the PNG Government not harass, arrest or commence a criminal prosecution against PNGSDP employees or their associates in relation to their work for the group.

The third, that the government not take “any further steps that may aggravate the dispute, disturb the status quo… or otherwise impede the orderly resolution of the dispute in accordance with the ICSID Convention.”

ICSID did not grant the third order in its entirety, saying that the request was too broad in nature to implement – saying any legislative measure, regulatory decision or other action could be considered an alteration to the “status quo.”

However, in its ruling, the Tribunal made note of a letter sent to it by PNGSDP on 23 December citing news of the planned transfer of equity in OTLM to the people of the Western Province.

PNGSDP argued that this would profoundly disturb the status quo and would undermine the effectiveness of any future orders from the Tribunal.

The Tribunal agreed, saying in its decision that these developments were of “great concern”.

“Evidence submitted by both parties show that an urgent order is required.”

“The Respondent (PNG Government) has not provided any reasons that would justify the need to urgently dispose of OTML’s shares, nor has it explained the harm that the Respondent would suffer if the shares are not disposed of at this time,” the decision said.

“By contrast, the harm that is likely to result for the Claimant (PNGSDP) will be serious, and potentially irremediable.”

As a result, it ordered the PNG Government to “refrain from transferring or issuing (or completing the transfer or issue of) any OTML shares to any third party, or taking any steps that otherwise change the ownership of OTML.”

The Tribunal also ordered the PNG Government to refrain from taking any further steps to restructure PNGSDP under Section Six of the Mining (Ok Tedi Mine Continuation) Act 2013.

In particular, this referred to ensuring that no moves were made to change PNGSDP management.

In an announcement released by PNGSDP, group chairman Sir Mekere Morauta welcomed the decision.

“PNGSDP has been very concerned about the need to preserve the value of the company’s assets and former assets, its independence, its structure and its ability to continue or resume normal operations,” he said.

However, it was not all victory for the group, with the Tribunal refusing to grant the second provisional order, concerning the threat of harassment or arrest of PNGSDP officers, saying the group had failed to provide evidence that there was a need for it to do so.

“The Tribunal considers that requests for provisional measures should be denied where they are aimed at ‘prevent[ing] an action which [the Claimants] are not even sure is being planned,’ or where granting a provisional measure involves ‘a degree of speculation’ and where there is insufficient evidence before the tribunal that the risk would be likely to materialise,” the decision said.

PNGSDP is appealing before the ICSID for the return of the 63% OTML stake or, failing that, adequate financial restitution.

The case continues, as does a case before Singaporean courts concerning the removal of the PNGSDP board.

That case centres around whether moves to remove the board had affect under Singapore law, where the PNGSDP is based.