Letter from HopgoodGanim Lawyers' Mr Michael Hunt to SMLOLA Chairman, Mr Philip Miriori in response to the ABG Submission titled Interpretation of Part 17
**************************************************************************************************************************
Mr Philip Miriori
Chairman
Special Mining Lease Osikaiyang Landowners Association Inc
Level 2, Karoona House, Panguna Town
Panguna District, Autonomous Region of Bougainville
Papua New Guinea
Dear Mr Miriori
“Interpreting Part 17 of the BMA 2015”
You have asked me to comment on the statement titled “Interpreting Part 17 of the BMA 2015” which was a submission lodged by the Hon Robin Wilson, Minister for Finance and Treasury to the Bougainville Parliament’s Parliamentary Committee on Legislation and was subsequently published on Facebook on 10 June 2019 (Wilson’s Statement).
The statement pretends to explain the Bougainville Mining (Amendment) Bill 2019 (Bill) in laymen's terms but in reality, it is a false and misleading manifesto riddled with errors.
Wilson’s Statement claims the opposition to the Bill is based on:
“preconceived misinterpretations, misconceptions, deliberate propaganda and/or pure ignorance”
Nothing could be further from the truth. In fact, the opposition comes from landowners who have received first class legal advice that their rights will be usurped if the Bill is enacted.
In contradicting Wilson’s Statement, this letter will demonstrate the “misinterpretations, misconceptions, deliberate propaganda and/or pure ignorance” which are contained within it.
PART A OF THE BILL
Wilson’s Statement refers to Part A of the Bill which relevantly provides:
Notwithstanding anyotherprovisioninthisAct, to the extent that there are any inconsistencies between Part 1 to Part 16 of this Act and Schedule 1 to this Act; and Part 17 of thisAct; then Part 17 of this Act shall prevail.
Wilson’s Statement states correctly that “Notwithstanding” means “in spite of” but it then incorrectly asserts that “Notwithstanding” conveys the “sense of equality of provisions - it does not necessarily imply that one provision is overlapping or contradictory”.
Of course, that is nonsense. “Notwithstanding” doesn't convey equality. “Notwithstanding” necessitates that one provision over-rules another. The only way Part A can be interpreted is that it doesn't matter what else is specified in the preceding 16 Parts of the Bougainville Mining Act 2015 (BMA), Part 17 over-rules it.
There is no “equality of provisions”. All the provisions in Parts 1-16 of the BMA which protect the rights of landowners are over-ridden by the stroke of a pen in Part A of the Bill; a Bill which, amongst many other objectionable things, clearly states that all rights and interests granted to landowners under the BMA do not apply to the Special Bougainville Entity (SBE) nor to a Special Bougainville Exploration Licence or Mining Lease (SBELML).
Wilson’s Statement claims:
“it is not the intention of the BEC to supersede (set aside) Part 1 to Part 16. Therefore introducing Part 17 withtheword‘Notwithstanding’protectsPart1toPart16frombeing setaside.”
It then claims that:
“Part 17 does not override Part 1 to Part 16 of the BMA”.
These claims are nonsense. Part A clearly states that Part 17 prevails over anything in Part 1 to Part 16 which is inconsistent with it.
Wilson’s Statement claims that if:
“In the event that there are inconsistencies pertaining to benefits and entitlements accorded to landowners by law, then Part 17 prevails. This simply means that the landowners will receive more benefits and entitlements pursuant to Part 17.”
That is wrong too. It is not a question of “inconsistencies pertaining to benefits and entitlements”. Part 17 abolishes all benefits and entitlements conferred by the BMA. Instead of the landowners having all those legislatively entrenched rights, the Bill substitutes the prospect of negotiating an agreement with the Autonomous Bougainville Government (ABG)(which will then have control of the rights to the landowners’ minerals through the SBE). The negotiation will take place only after all the landowners’ existing rights have been abolished. The negotiation will be about an entitlement to receive preferential benefits “in one form or another” (iethere can be no certainty on the amount or the types of benefits). These “preferential benefits” will probably be determined only at the time mining is about to commence (ie many years down the track) at which stage the landowners will have no bargaining power. There are no interim payments to landowners under the Bill. The landowners will have to survive by themselves till the mine is about to start. There is no requirement that the ABG negotiate in good faith. So in the period between the issue of the SBELML and the negotations prior to mining, no doubt the landowners will have no access to their land and no access to their minerals and yet they will receive no benefits for being deprived of such access and they can’t be assured the ABG will negotiate in good faith to give them “preferential benefits”. This is bound to lead to open conflict, thus putting the Peace Agreement at risk.
SECTION 378(1), (2) and (3)(a)
Wilson’s Statement refers to section 378(1) empowering the BEC to issue an SBELML to a SBE. If that’s all section 378 does, it would be unobjectionable.
However the following issues render section 378 objectionable, unreasonable, unfair and unconstitutional:
1. Section 378(2) permits an SBELML to be issued over all the land in Bougainville other than land presently the subject of an exploration licence; in other words, it can be issued over approximately 95% of the land mass of Bougainville. This effectively confers a near monopoly on one company over exploration and mining on Bougainville.
Wilson’s Statement irrelevantly claims that “there is NO land available for reconnaissance, exploration or mining in Bougainville as those lands that are not covered by existing exploration licenses (or mining leases) are currently under the existing Moratorium”. Wilson’s Statement conveniently ignores that revoking the Moratorium is a simple process. The Bougainville Executive Council (BEC) can revoke it merely by asking for advice from the Bougainville Mining Advisory Council (BMAC) and giving the House of Representatives an opportunity to debate the merits of the proposed revocation.
2. The definition of an SBEallows a party other than the ABG or the landowners to own (initially) up to 40% of the shares in the SBE and there is no provision that allows the landowners to have any say in who holds the other 40%. There is also absolutely no guarantee that any shareholding in the mine developer will ever be conferred on the customary landowners who own the minerals. The provision could be satisfied without allocating any shares to a customary landowner. The Bill only requires that the ABG and the “resource owners” (at the date of issue of the SBELML) holds 60% of the SBE. This requirement would be satisfied by the ABG holding all of the 60% (the reason being that an SBELML over a significant area within the AROB would inevitably encroach on land other than customary land, in which case the ABG is a “resource owner” (as owner of the minerals) and so the ABG can declare it holds one or more of its shares in its capacity as a “resource owner”). Obviously, this is theABG’sintention because the presentation Mr Wilson was making to landowners actually showed that the Bougainville Advanced Holdings Trust and the (undefined) “People of Bougainville” would (indirectly through a holding company) hold the full 60% interest in the SBE, with no direct interest held by landowners. According to that presentation (slide 3), the beneficiaries of the Bougainville Advanced Holdings Trust will be the ABG, the (undefined) “resource owners” and the (undefined) “People of Bougainville”. So according to the presentation, to the extent (if at all) that one or more customary landowners are regarded by the ABG as resource owners, they may, in the ABG’s discretion, receive a share of the mine owner’s profits. However, the Trust being a discretionary trust, this cannot be assured. The ABG could distribute all the profits to itself in the exercise of its discretion. It should also be emphasised that any distribution to the “resource owners” would be unlawful because the only beneficiaries named in the Act authorising the Bougainville Advanced Holdings Trust are the ABG and the (undefined) “People of Bougainville”. The“resource owners” are not beneficiaries under the proposed Bougainville Advanced Holdings Trust Act 2019.
3. The SBEis not required to be legally constituted in such a way that the landowners may elect to acquire equity interests in it. Its ownership structure is stated simply as not less than 60%of the voting shares being held by the ABGandthe“resource owners”.Coupled with section 378(3)(b) stating that rights and interests under the BMA don’t apply to the SBE,the result is to deny application of BMA section 41 which requires an applicant for a mining lease to grant landowners a right to obtain a 5% equity ownership interest on a free, sustained, non-dilutable and non-contributing basis plus a right to obtain an additional 5% working equity ownership interest. Acting under the existing BMA the Panguna landowners have already negotiated a more attractive deal which delivers them a 10% free carried interest. However, the Bill to amend the BMA does not require the SBE to match that. It only provides for a negotiation entitling the landowner to receive “in one form or another”, benefits not less than the entitlements granted to landowners under the BMA, with the landowners having no negotiating power at the time such a negotiation occurs.
The definition uses (presumably deliberately) the vague term “resource owners” instead of the well recognised term “customary landowners” (presumably to deny the present rights of the customary landowners to a free 5% equity and a paid further 5% equity)and thus enabling the ABG to pick and choose who they consider “resource owners” (it could be the ABG as owner of minerals on all land other than customary land.
4. The Bill does not require that the shareholding entitlement of the ABG and the “resource owners” be maintained at not less than 60% once an SBELML has been issued.
In this regard, Wilson’s Statement claims that “By law, the ABG and resource owners will hold no less than 60% - implying explicitly that the 60% is non-dilutable and cannot be any less than 60% at any time or for any reason”.
Apart from the obvious nonsense of saying “implying explicitly” (something is either implied or explicit) what is said by Wilson’s Statement is not true.
Under the Bill it is only at the time of issue of the SBELML that the ABG and “resource owners” must hold not less than 60%. There is no “law” that requires this shareholding to be maintained. And quite obviously it can’t. No project can sustain a 60% free carried interest; 10% would be the maximum free carry the financial markets will accept. The ABG and “resource owners” will not be able to fund their share of a multi-billion dollar development. So what will inevitably happen is that the shareholding of the ABG and “resource owners” will be diluted dramatically and outsiders will control the company to which this Bill gives a near monopoly over exploration and mining on Bougainville, with no requirements for the partner/party who will secure control to have any relevant qualifications or to be fit and proper (as the BMA currently requires).
5. Relevant to the issue concerning most of the parties to this debate is the obvious grab for Panguna. Section 378(3)(a) states that where an existing exploration licence expires and is not renewed, the subject land becomes available for the SBE to apply for the issue of an SBELML over it. Assuming the PNG court dismisses the legal action taken by Bougainville Copper Ltd (BCL) against the ABG, the refusal of the extension of the term of EL01 will stand and the SBEwill then become entitled to tenure over the old Panguna mine area. Importantly, the Bill does not deal with or cure the current application by BCL for Judicial Review of the refusal and injunction over the grant of a new EL or ML over Panguna. The Caballus proposal underlying the need for the Bill requires an SBELML for Panguna to be able to raise the possible delivery of US$150m. Accordingly, the Bill does not deliver the outcome it is designed to achieve.
6. Panguna Mining Ltd (PML),a company in which the Panguna landowners have an indirect shareholding, has a pending exploration licence application for Panguna which is next in line for consideration. However section378(2) would enable the BEC to grant an SBELML to the SBE notwithstanding PML’s pending exploration licence application over Panguna and notwithstandingBMA section 241 under which the first application lodged must be considered first.
7. And most importantly, the confiscation of the landowners’ property and rights under section 378(3)(b) which is dealt with in detail next is objectionable, unreasonable, unfair and unconstitutional.
SECTION 378(3)(b)
This section provides that all fees, annual rent, royalties, levies and other rights and interests granted to landowners under the BMA do not apply to the SBEor its SBELML.
Wilson’s Statement acknowledges that:
“it may be deemed alarming that the landowners will not benefit from all fees, annual rent, royalties, levies and other rights and interests granted under Part 1 to Part16. However, the landowners will benefit better in two major categories: Preferential Benefits and Enhanced Entitlements.”
Under section 378(3)(b)(ii) the ABG (or its subsidiary) must provide benefits to the landowners that exceed the entitlements that the landowners would ordinarily have under the BMA. The meaning of “benefits” and “entitlements” in this context is unclear. Presumably this vague drafting is intended to mean that the BEC will determine if any landowners are affected and, if so, the ABG will pay them benefits by negotiating agreements with them. But this negotiation will not occur until long after the issue of the SBELML at a time when the ABG will control the landowners’ rights to the minerals (perhaps, but more likely unknown foreign investors will by then have taken control because the ABG’s shareholding will have been diluted and – which is inevitable), so the landowners will be negotiating from a position of no power. They have no rights at that point in time and, given that commencement of mining will not occur until after the ABG’s shareholding in the SBE has been diluted, the landowners will be negotiating with a government (or its subsidiary company) which itself will be under pressure from the foreign investors who have a near-monopoly on mining rights and who will want to minimise the benefits to the landowners. By way of contrast, I have been told that the free carry already offered to Panguna landowners under their current deal has a net cashflow of approximately US$1 billion. The ABG will never be in a position to compensate the landowners at this level (let alone an enhanced value) as at that point in time the ABG will be a minority shareholder in a mining company, and the ABG will have no rights to access any benefits derived by the mine.
Under the BMA in addition to owning the minerals on their land and the financial rewards resulting from that mineral ownership (such as royalties, equity ownership in a project, land rent and land access compensation) customary landowners have other extensive rights and interests in respect of mineral exploration and mining – principally the ability to deny access for exploration and the ability to deny the grant of a mining lease.
Realising that:
• section 378(1) empowers the BEC to issue an SBELML to the SBE without any consultation either with the landowners or the BMAC; and
• the process is simply an administrative act to issue a title as opposed to the BMA’s “grant” of the title connoting the absence of an assessment process leading to the issue of a SBELML,
it is clear that “benefits” and “entitlements” referred to in section 378(3)(b)(ii) are limited to financial rewards and are not intended to afford landowners their non-financial rights. An additional important component of their existing valuable non-financial rights is that their existence may serve to protect the landowners and people of Bougainville from a repeat of history which lead to a 10 year civil war.
It would be naïve to suppose that:
• the BEC could genuinely determine affected landowners, given the complexities involved;
• fair benefits could be negotiated between landowners and the ABG, given the shabby treatment of the landowners to date and the massive reduction in their negotiating power;
• the ABG could be expected to have the money to pay these benefits, given that the ABG has little money and none will be forthcoming until revenue flows from Panguna; and
• even if the ABG has the money, it would pay it to the landowners given, amongst other things, the ABG's competing demands for money.
So in summary, it cannot seriously be argued that after taking away from landowners all fees, annual rent, royalties, levies and other rights and interests granted to them under the BMA (legislation guaranteeing landowner rights), replacing them with a contractual obligation to pay “benefits” negotiated under duress that exceed their “entitlements” under the BMA restores the position of the landowners.
First, if that was the case, why include these provisions? If all the financial rewards and non-financial rights and interests are to remain, why make the change? If the Bill is not intended to deprive landowner of rights held under the BMA, section 378(3)(b) would be unnecessary.
Secondly, the benefits will be limited to financial rewards and will not extend to other rights and interests (such as the ability to deny access for exploration, the ability to deny the grant of a mining lease and the ability to acquire a free equity ownership interest in mining lease projects).
Thirdly, the “benefits” will no longer apply automatically by virtue of land ownership, as they now do. Instead they will be determined in the discretion of the BEC, so it is doubtful that the “benefits” will remain the same and doubtful that the same people will be entitled to them. The “benefits” under the Bill are not automatic – they must be negotiated.
Fourthly, the negotiations are not required to occur prior to and as a condition of the grant of the title – only prior to mining activities commencing. At that time the landowners will be faced with a granted mining lease, an approved feasibility study, an approved environmental study and an approved mine development. The landowners will have zero bargaining power.
Finally, it would be naïve to assume the ABG will have the money (and be willing to part with it) so as to pay the “benefits”.
Wilson’s Statement then makes some extraordinary statements, none of which are supported by the language of the Bill. Wilson’s Statement lists the preferential benefits as:
• Employment opportunities with preference given to landowners.
• Employee entitlements such as service-related benefits (commitment & loyalty), Enhanced redundancy pay(enhanced payment to old/women), Enhanced Maternity /Paternity pay, Health benefits, etc
• preferential awarding of general contracts based on capability and expertise of local landowner companies
• Engagelandownersactivelysoas to avoid making landowners mere spectators and/ or passive recipients of just monetary benefits
All of this is nonsense. None of this is contained in the Bill.
As to the entitlements which the Bill requires the landowners to negotiate with the ABG, Wilson’s Statement says:
“the ABG and the landowners will negotiate entitlements that exceed the 5% in free equity and exceed the 3.75% in royalties.”
There is nothing in the Bill to support this statement. Negotiations between the ABG and the landholders at a time when mining is about to commence can not be on a level playing field. There is a real question whether the ABG will negotiate with landowners in good faith, based on this draconian Bill and their refusal to even meet and discuss it with the customary landowners before it was presented to the Parliament.
Wilson’s Statement claims:
“The ABG and resource owners hold controlling interests in the Special Bougainville Entity and as such, are at liberty to negotiate entitlements over and above the current entitlements as stipulated in Part 1 to Part 16 of the BMA2015.”
That is misleading too. Whilst the respective shareholdings of the ABG and the “resource owners” in the SBE are not specified, the customary landowners are not guaranteed any shares in the SBE. The only beneficiaries named in the Act authorising the Bougainville Advanced Holdings Trust are the ABG and the (undefined) “People of Bougainville” – which as I have noted above conflicts with the presentation Mr Wilson made to landowners which showed the beneficiaries of the Bougainville Advanced Holdings Trust will be the ABG, the (undefined) “resource owners” and the (undefined) “People of Bougainville”. There will be no direct interest held by landowners unlike the existing provisions in the BMA entitling the landowners to a shareholding of up to 10%.
The Bill only requires that the ABG and the “resource owners” hold 60% of the shares at the time of grant of the SBELML. How can the landholders negotiate more favourable entitlements than their present rights under the BMA at the time when mining activities are to commence? At that stage the landowners have zero bargaining position with the ABG which will be anxious to please the then foreign controllers of the SBE, a monopoly title holder with the ultimate power.
SECTION 378(3)(c)
Wilson’s Statement says that the application process for an SBELMLby the SBE must follow “the ordinary processes pursuant to Part 1 to Part 16” which means that “the landowners veto powers are NOT removed” and “Warden's hearings will ensure that the landowners’ consent to allow Exploration or Mining in their land is not undermined or removed”.
Both of these statements are wrong.
The Bill abolishes all rights and interests granted to landowners under the BMA. Those rights include the landowners’ veto powers. The Bill requires the SBE to comply with the “ordinary application processes in relation to the grant” of an SBELML. Presumably what is meant by the “ordinary application processes in relation to the grant” in the context that only the SBE is obliged to observe them is that the SBE must do everything required of it to make an application.
Because it is only theSBE which is obliged under this section, none of the other persons and entities involved in the process of assessment of an application and grant of a tenement is obliged under this section. So there is no requirement for:
• The Minister to convene a Mineral Resources Forum
• The BMAC to assess the merits of the application
• The Mining Registrar to examine the application
• The Mining Registrar and other Departmental officers to give written reports to the BMAC.
• The Mining Registrar to advertise the application and give notice of it to the Council of Elders and the District Office
• The warden to convene a warden’s hearing
Also there is no ability for any interested person to object to the application.
THE CONCLUSION OF WILSON’S STATEMENT
Wilson’s Statement concludes that:
“the intention and purpose of the Bougainville Mining (Amendment) Bill 2019 is to give preferential benefits and enhance entitlements to the resource owners and the ABG. It does not in any way undermine Part 1 to Part 16 of the BMA 2015 which protects the resource owners' rights and outlines the normal processes pertaining applications for Exploration Licenses or Mining Leases.”
If that truly is the intention and purpose, the Bill fails to achieve it in any respect. What the Bill and its proponents fail to recognise is that the customary landowners own the minerals on and beneath their land by virtue of the BMA which gives effect to the principles of the Bougainville Peace Agreement and the Bougainville Constitution.
Further, not only do they own the minerals but under the BMA they are granted various rights which reinforce their mineral ownership and enable them to benefit from it and protect themselves from unwanted parties entering their lands.
The landowners’ rights underPart 1 to Part 16 of the BMA are abolished by the Bill. Their purported replacement is uncertain and unlikely to be achieved. The Bill is unreasonable, unfair and unconstitutional. The Bill effectively transfers all the rights of the landowners to the ABG (through the SBE) without offering any form of compensation at the time of stripping those rights from landowners and simply offers a vague promise of a right to negotiate in the future to get some financial benefit “in one form or another” – no guarantee of any ownership interest in the SBE, no matching of what they have already negotiated with their preferred developer which is materially in excess of the minimum the BMA provides for and, finally, no ability to have a say in who enters their lands or mines their minerals.
Wilson’s Statement is itself guilty of the same sin of which he accused the critics of the Bill: “misinterpretations, misconceptions, deliberate propaganda and/or pure ignorance”.
Yours truly
HopgoodGanim Lawyers
No comments:
Post a Comment