The Timor Sea Treaty between Australia and East Timor was signed on May 20, 2002. In announcing the conclusion of negotiations on May 17, the Minister for Foreign Affairs, Alexander Downer, had this to say:
This is the full text of the Timor Sea Treaty:
TIMOR SEA TREATY
BETWEEN
THE GOVERNMENT OF EAST TIMOR
AND
THE GOVERNMENT OF AUSTRALIA
(Dili, 20 May 2002)
TIMOR SEA TREATY
THE GOVERNMENT OF AUSTRALIA
and
THE GOVERNMENT OF EAST TIMOR
CONSCIOUS of the importance of promoting East Timor's economic development;
AWARE of the need to maintain security of investment for existing and
planned petroleum activities in an area of seabed between Australia and East
Timor;
RECOGNISING the benefits that will flow to both Australia and East Timor
by providing a continuing basis for petroleum activities in an area of seabed
between Australia and East Timor to proceed as planned;
EMPHASISING the importance of developing petroleum resources in a way
that minimizes damage to the natural environment, that is economically
sustainable, promotes further investment and contributes to the long-term
development of Australia and East Timor;
CONVINCED that the development of the resources in accordance with this
Treaty will provide a firm foundation for continuing and strengthening the
friendly relations between Australia and East Timor;
TAKING INTO ACCOUNT the United Nations Convention on the Law of the Sea
done at Montego Bay on 10 December 1982, which provides in Article 83 that the
delimitation of the continental shelf between States with opposite or adjacent
coasts shall be effected by agreement on the basis of international law in
order to achieve an equitable solution;
TAKING FURTHER INTO ACCOUNT, in the absence of delimitation, the further
obligation for States to make every effort, in a spirit of understanding and
co-operation, to enter into provisional arrangements of a practical nature
which do not prejudice a final determination of the seabed delimitation;
NOTING the desirability of Australia and East Timor entering into a
Treaty providing for the continued development of the petroleum resources in an
area of seabed between Australia and East Timor;
HAVE AGREED as follows:
Article 1: Definitions
For the purposes of this Treaty:
(a) "Treaty" means this Treaty, including Annexes A-G and any Annexes
subsequently agreed between Australia and East Timor.
(b) "contractor" means a corporation or corporations which enter into a
contract with the Designated Authority and which is registered as a contractor
under the Petroleum Mining Code".
(c) "criminal law" means any law in force in Australia and East Timor,
whether substantive or procedural, that makes provision for or in relation to
offences or for or in relation to the investigation or prosecution of offences
or the punishment of offenders, including the carrying out of a penalty imposed
by a court. For this purpose, "investigation" includes entry to an
installation or structure in the JPDA, the exercise of powers of search and
questioning and the apprehension of a suspected offender.
(d) "Designated Authority" means the Designated Authority established in
Article 6 of this Treaty.
(e) "fiscal scheme" means a royalty, a Production Sharing Contract, or other
scheme for determining Australia's and East Timor's share of petroleum or
revenue from petroleum activities and does not include taxes referred to in
Article 5 (b) of this Treaty.
(f) "initially processed" means processing of petroleum to a point where it is
ready for off-take from the production facility and may include such processes
as the removal of water, volatiles and other impurities.
(g) "Joint Commission" means the Australia-East Timor Joint Commission
established in Article 6 of this Treaty.
(h) "JPDA" means the Joint Petroleum Development Area established in Article 3
of this Treaty.
(i) "Ministerial Council" means the Australia-East Timor Ministerial Council
established in Article 6 of this Treaty.
(j) "petroleum" means:
i. any naturally occurring hydrocarbon, whether in a gaseous, liquid, or
solid state;
ii. any naturally occurring mixture of hydrocarbons, whether in a gaseous,
liquid or solid state; or
iii. any naturally occurring mixture of one or more hydrocarbons, whether
in a gaseous, liquid or solid state, as well as other substances produced
in association with such hydrocarbons;
and includes any petroleum as defined by sub-paragraphs (i), (ii) or (iii) that
has been returned to a natural reservoir.
(k) "petroleum activities" means all activities undertaken to produce
petroleum, authorised or contemplated under a contract, permit or licence, and
includes exploration, development, initial processing, production,
transportation and marketing, as well as the planning and preparation for such
activities.
(l) "Petroleum Mining Code" means the Code referred to in Article 7 of this
Treaty.
(m) "petroleum project" means petroleum activities taking place in a specified
area within the JPDA.
(n) "petroleum produced" means initially processed petroleum extracted from a
reservoir through petroleum activities.
(o) "Production Sharing Contract" means a contract between the Designated
Authority and a limited liability corporation or entity with limited liability
under which production from a specified area of the JPDA is shared between the
parties to the contract.
(p) "reservoir" means an accumulation of petroleum in a geological unit limited
by rock, water or other substances without pressure communication through
liquid or gas to another accumulation of petroleum.
(q) "taxation code" means the code referred to in Article 13 (b) of this
Treaty.
Article 2: Without prejudice
(a) This Treaty gives effect to international law as reflected in the United
Nations Convention on the Law of the Sea done at Montego Bay on 10 December
1982 which under Article 83 requires States with opposite or adjacent coasts to
make every effort to enter into provisional arrangements of a practical nature
pending agreement on the final delimitation of the continental shelf between
them in a manner consistent with international law. This Treaty is intended to
adhere to such obligation.
(b) Nothing contained in this Treaty and no acts taking place while this Treaty
is in force shall be interpreted as prejudicing or affecting Australia's or
East Timor's position on or rights relating to a seabed delimitation or their
respective seabed entitlements.
Article 3: Joint Petroleum Development Area
(a) The Joint Petroleum Development Area (JPDA) is established. It is the area
in the Timor Sea contained within the lines described in Annex A.
(b) Australia and East Timor shall jointly control, manage and facilitate
the exploration, development and exploitation of the petroleum resources of the
JPDA for the benefit of the peoples of Australia and East Timor.
(c) Petroleum activities conducted in the JPDA shall be carried out pursuant to
a contract between the Designated Authority and a limited liability corporation
or entity with limited liability specifically established for the sole purpose
of the contract. This provision shall also apply to the successors or assignees
of such corporations.
(d) Australia and East Timor shall make it an offence for any person to conduct
petroleum activities in the JPDA otherwise than in accordance with this
Treaty.
Article 4: Sharing of petroleum production
(a) Australia and East Timor shall have title to all petroleum produced in
the JPDA. Of the petroleum produced in the JPDA, ninety (90) percent shall
belong to East Timor and ten (10) percent shall belong to Australia.
(b) To the extent that fees referred to in Article 6(b)(vi) and other income
are inadequate to cover the expenditure of the Designated Authority in relation
to this Treaty, that expenditure shall be borne in the same proportion as set
out in paragraph (a).
Article 5: Fiscal arrangements and taxes
Fiscal arrangements and taxes shall be dealt with in the following manner:
(a) Unless a fiscal scheme is otherwise provided for in this Treaty:
i. Australia and East Timor shall make every possible effort to agree on
a joint fiscal scheme for each petroleum project in the JPDA.
ii. If Australia and East Timor fail to reach agreement on a joint fiscal
scheme referred to in sub-paragraph (i), they shall jointly appoint an independent
expert to recommend an appropriate joint fiscal scheme to apply to the petroleum
project concerned.
iii. If either Australia or East Timor does not agree to the joint fiscal
scheme recommended by the independent expert, Australia and East Timor may
each separately impose their own fiscal scheme on their proportion of the
production of the project as calculated in accordance with the formula contained
in Article 4 of this Treaty.
iv. If Australia and East Timor agree on a joint fiscal scheme pursuant
to this Article, neither Australia nor East Timor may during the life of the
project vary that scheme except by mutual agreement between Australia and
East Timor.
(b) Consistent with the formula contained in Article 4 of this Treaty,
Australia and East Timor may, in accordance with their respective laws and the
taxation code, impose taxes on their share of the revenue from petroleum
activities in the JPDA and relating to activities referred to in Article 13 of
this Treaty.
Article 6: Regulatory bodies
(a) A three-tiered joint administrative structure consisting of a Designated
Authority, a Joint Commission and a Ministerial Council is established.
(b) Designated Authority:
i. For the first three years after this Treaty enters into force, or for
a different period of time if agreed to jointly by Australia and East Timor,
the Joint Commission shall designate the Designated Authority.
ii. After the period specified in sub-paragraph (i), the Designated Authority
shall be the East Timor Government Ministry responsible for petroleum activities
or, if so decided by the Ministry, an East Timor statutory authority.
iii. For the period specified in sub-paragraph (i), the Designated Authority
has juridical personality and such legal capacities under the law of both
Australia and East Timor as are necessary for the exercise of its powers and
the performance of its functions. In particular, the Designated Authority
shall have the capacity to contract, to acquire and dispose of movable and
immovable property and to institute and be party to legal proceedings.
iv. The Designated Authority shall be responsible to the Joint Commission
and shall carry out the day-to-day regulation and management of petroleum
activities.
v. A non-exclusive listing of more detailed powers and functions of the Designated
Authority is set out in Annex C. The Annexes to this Treaty may identify other
additional detailed powers and functions of the Designated Authority. The
Designated Authority also has such other powers and functions as may be conferred
upon it by the Joint Commission.
vi. The Designated Authority shall be financed from fees collected under the
Petroleum Mining Code.
vii. For the period specified in sub-paragraph (i), the Designated Authority
shall be exempt from the following existing taxes:
(1) in East Timor, the income tax imposed under the law of East Timor;
(2) in Australia, the income tax imposed under the federal law of Australia;
as well as any identical or substantially similar taxes which are imposed
after the date of signature of this Treaty in addition to, or in place of,
the existing taxes.
viii. For the period specified in sub-paragraph (i), personnel of the Designated
Authority:
(1) shall be exempt from taxation of salaries, allowances and other emoluments
paid to them by the Designated Authority in connection with their service
with the Designated Authority other than taxation under the law of Australia
or East Timor in which they are deemed to be resident for taxation purposes;
and
(2) shall, at the time of first taking up the post with the Designated Authority
located in either Australia or East Timor in which they are not resident,
be exempt from customs duties and other such charges (except payments for
services) in respect of imports of furniture and other household and personal
effects in their ownership or possession or already ordered by them and
intended for their personal use or for their establishment; such goods shall
be imported within six months of an officer's first entry but in exceptional
circumstances an extension of time shall be granted by the Government of
Australia or the Government of East Timor; goods which have been acquired
or imported by officers and to which exemptions under this sub-paragraph
apply shall not be given away, sold, lent or hired out, or otherwise disposed
of except under conditions agreed in advance with the Government of Australia
or the Government of East Timor depending on in which country the officer
is located.
(c) Joint Commission:
i. The Joint Commission shall consist of commissioners appointed by Australia
and East Timor. There shall be one more commissioner appointed by East Timor
than by Australia. The Joint Commission shall establish policies and regulations
relating to petroleum activities in the JPDA and shall oversee the work of
the Designated Authority.
ii. A non-exclusive listing of more detailed powers and functions of the Joint
Commission is set out in Annex D. The Annexes to this Treaty may identify
other additional detailed powers and functions of the Joint Commission.
iii. Except as provided for in Article 8(c), the commissioners of either Australia
or East Timor may at any time refer a matter to the Ministerial Council for
resolution.
iv. The Joint Commission shall meet annually or as may be required. Its meetings
shall be chaired by a member nominated by Australia and East Timor on an alternate
basis.
(d) Ministerial Council:
i. The Ministerial Council shall consist of an equal number of Ministers
from Australia and East Timor. It shall consider any matter relating to the
operation of this Treaty that is referred to it by either Australia or East
Timor. It shall also consider any matter referred to in sub-paragraph (c)
(iii).
ii. In the event the Ministerial Council is unable to resolve a matter, either
Australia or East Timor may invoke the dispute resolution procedure set out
in Annex B.
iii. The Ministerial Council shall meet at the request of either Australia
or East Timor or at the request of the Joint Commission.
iv. Unless otherwise agreed between Australia and East Timor, meetings of
the Ministerial Council where at least one member representing Australia and
one member representing East Timor are physically present shall be held alternately
in Australia and East Timor. Its meetings shall be chaired by a representative
of Australia or East Timor on an alternate basis.
v. The Ministerial Council may, if it so chooses, permit members to participate
in a particular meeting, or all meetings, by telephone, closed-circuit television
or any other means of electronic communication, and a member who so participates
is to be regarded as being present at the meeting. A meeting may be held solely
by means of electronic communication.
(e) Commissioners of the Joint Commission and personnel of the Designated
Authority shall have no financial interest in any activity relating to
exploration for and exploitation of petroleum resources in the JPDA.
Article 7: Petroleum Mining Code
(a) Australia and East Timor shall negotiate an agreed Petroleum Mining Code
which shall govern the exploration, development and exploitation of petroleum
within the JPDA, as well as the export of petroleum from the JPDA.
(b) In the event Australia and East Timor are unable to conclude a Petroleum
Mining Code by the date of entry into force of this Treaty, the Joint
Commission shall in its inaugural meeting adopt an interim code to remain in
effect until a Petroleum Mining Code is adopted in accordance with paragraph
(a).
Article 8: Pipelines
(a) The construction and operation of a pipeline within the JPDA for the
purposes of exporting petroleum from the JPDA shall be subject to the approval
of the Joint Commission. Australia and East Timor shall consult on the terms
and conditions of pipelines exporting petroleum from the JPDA to the point of
landing.
(b) A pipeline landing in East Timor shall be under the jurisdiction of East
Timor. A pipeline landing in Australia shall be under the jurisdiction of
Australia.
(c) In the event a pipeline is constructed from the JPDA to the territory of
either Australia or East Timor, the country where the pipeline lands may not
object to or impede decisions of the Joint Commission regarding a pipeline to
the other country. Notwithstanding Article 6(c)(iii), the Ministerial Council
may not review or change any such decisions.
(d) Paragraph (c) shall not apply where the effect of constructing a pipeline
from the JPDA to the other country would cause the supply of gas to be withheld
from a limited liability corporation or limited liability entity which has
obtained consent under this Treaty to obtain gas from a project in the JPDA for
contracts to supply gas for a specified period of time.
(e) Neither Australia nor East Timor may object to, nor in any way impede, a
proposal to use floating gas to liquids processing and off-take in the JPDA on
a commercial basis where such proposal shall produce higher revenues to
Australia and East Timor from royalties and taxes earned from activities
conducted within the JPDA than would be earned if gas were transported by
pipeline.
(f) Paragraph (e) shall not apply where the effect of floating gas to liquids
processing and off-take in the JPDA would cause the supply of gas to be
withheld from a limited liability corporation or limited liability entity which
has obtained consent under this Treaty to obtain gas from the JPDA for
contracts to supply gas for a specified period of time.
(g) Petroleum from the JPDA and from fields which straddle the boundaries of
the JPDA shall at all times have priority of carriage along any pipeline
carrying petroleum from and within the JPDA.
(h) There shall be open access to pipelines for petroleum from the JPDA.
The open access arrangements shall be in accordance with good international
regulatory practice. If Australia has jurisdiction over the pipeline, it shall
consult with East Timor over access to the pipeline. If East Timor has
jurisdiction over the pipeline, it shall consult with Australia over access to
the pipeline.
Article 9: Unitisation
(a) Any reservoir of petroleum that extends across the boundary of the JPDA
shall be treated as a single entity for management and development purposes.
(b) Australia and East Timor shall work expeditiously and in good faith to
reach agreement on the manner in which the deposit will be most effectively
exploited and on the equitable sharing of the benefits arising from such
exploitation.
Article 10: Marine environment
(a) Australia and East Timor shall co-operate to protect the marine environment
of the JPDA so as to prevent and minimise pollution and other environmental
harm from petroleum activities. Special efforts shall be made to protect
marine animals including marine mammals, seabirds, fish and coral. Australia
and East Timor shall consult as to the best means to protect the marine
environment of the JPDA from the harmful consequences of petroleum activities.
(b) Where pollution of the marine environment occurring in the JPDA spreads
beyond the JPDA, Australia and East Timor shall co-operate in taking action to
prevent, mitigate and eliminate such pollution.
(c) The Designated Authority shall issue regulations to protect the marine
environment in the JPDA. It shall establish a contingency plan for combating
pollution from petroleum activities in the JPDA.
(d) Limited liability corporations or limited liability entities shall be
liable for damage or expenses incurred as a result of pollution of the marine
environment arising out of petroleum activities within the JPDA in accordance
with:
i. their contract, licence or permit or other form of authority issued pursuant
to this Treaty; and
ii. the law of the jurisdiction (Australia or East Timor) in which the claim
is brought.
Article 11: Employment
(a) Australia and East Timor shall:
i. take appropriate measures with due regard to occupational health and
safety requirements to ensure that preference is given in employment in the
JPDA to nationals or permanent residents of East Timor; and
ii. facilitate, as a matter of priority, training and employment opportunities
for East Timorese nationals and permanent residents.
(b) Australia shall expedite and facilitate processing of applications for
visas through its Diplomatic Mission in Dili by East Timorese nationals and
permanent residents employed by limited liability corporations or limited
liability entities in Australia associated with petroleum activities in the
JPDA.
Article 12: Health and safety for workers
The Designated Authority shall develop, and limited liability corporations or
limited liability entities shall apply, occupational health and safety
standards and procedures for persons employed on structures in the JPDA that
are no less effective than those standards and procedures that would apply to
persons employed on similar structures in Australia and East Timor. The
Designated Authority may adopt, consistent with this Article, standards and
procedures taking into account an existing system established under the law of
either Australia or East Timor.
Article 13: Application of taxation law
(a) For the purposes of taxation law related directly or indirectly to:
i. the exploration for or the exploitation of petroleum in the JPDA; or
ii. acts, matters, circumstances and things touching, concerning arising out
of or connected with such exploration and exploitation
the JPDA shall be deemed to be, and treated by, Australia and East Timor, as
part of that country.
(b) The taxation code to provide relief from double taxation relating to
petroleum activities is set out in Annex G.
(c) The taxation code contains its own dispute resolution mechanism. Article
23 of this Treaty shall not apply to disputes covered by that mechanism.
Article 14: Criminal jurisdiction
(a) A national or permanent resident of Australia or East Timor shall be
subject to the criminal law of that country in respect of acts or omissions
occurring in the JPDA connected with or arising out of exploration for and
exploitation of petroleum resources, provided that a permanent resident of
Australia or East Timor who is a national of the other country shall be subject
to the criminal law of the latter country.
(b) Subject to paragraph (d), a national of a third state, not being a
permanent resident of either Australia or East Timor, shall be subject to the
criminal law of both Australia and East Timor in respect of acts or omissions
occurring in the JPDA connected with or arising out of petroleum activities.
Such a person shall not be subject to criminal proceedings under the law of
either Australia or East Timor if he or she has already been tried and
discharged or acquitted by a competent tribunal or already undergone punishment
for the same act or omission under the law of the other country or where the
competent authorities of one country, in accordance with its law, have decided
in the public interest to refrain from prosecuting the person for that act or
omission.
(c) In cases referred to in paragraph (b), Australia and East Timor shall, as
and when necessary, consult each other to determine which criminal law is to be
applied, taking into account the nationality of the victim and the interests of
the country most affected by the alleged offence.
(d) The criminal law of the flag state shall apply in relation to acts or
omissions on board vessels including seismic or drill vessels in, or aircraft
in flight over, the JPDA.
(e) Australia and East Timor shall provide assistance to and co-operate with
each other, including through agreements or arrangements as appropriate, for
the purposes of enforcement of criminal law under this Article, including the
obtaining of evidence and information.
(f) Both Australia and East Timor recognise the interest of the other country
where a victim of an alleged offence is a national of that other country and
shall keep that other country informed, to the extent permitted by its law, of
action being taken with regard to the alleged offence.
(g) Australia and East Timor may make arrangements permitting officials of one
country to assist in the enforcement of the criminal law of the other country.
Where such assistance involves the detention of a person who under paragraph
(a) is subject to the jurisdiction of the other country that detention may only
continue until it is practicable to hand the person over to the relevant
officials of that other country.
Article 15: Customs, quarantine and migration
(a) Australia and East Timor may, subject to paragraphs (c), (e), (f) and (g),
apply customs, migration and quarantine laws to persons, equipment and goods
entering its territory from, or leaving its territory for, the JPDA. Australia
and East Timor may adopt arrangements to facilitate such entry and departure.
(b) Limited liability corporations or other limited liability entities shall
ensure, unless otherwise authorised by Australia or East Timor, that persons,
equipment and goods do not enter structures in the JPDA without first entering
Australia or East Timor, and that their employees and the employees of their
subcontractors are authorised by the Designated Authority to enter the JPDA.
(c) Either country may request consultations with the other country in relation
to the entry of particular persons, equipment and goods to structures in the
JPDA aimed at controlling the movement of such persons, equipment or goods.
(d) Nothing in this Article prejudices the right of either Australia or East
Timor to apply customs, migration and quarantine controls to persons, equipment
and goods entering the JPDA without the authority of either country. Australia
and East Timor may adopt arrangements to co-ordinate the exercise of such
rights.
(e) Goods and equipment entering the JPDA for purposes related to petroleum
activities shall not be subject to customs duties.
(f) Goods and equipment leaving or in transit through either Australia or East
Timor for the purpose of entering the JPDA for purposes related to petroleum
activities shall not be subject to customs duties.
(g) Goods and equipment leaving the JPDA for the purpose of being permanently
transferred to a part of either Australia or East Timor may be subject to
customs duties of that country.
Article 16: Hydrographic and seismic surveys
(a) Australia and East Timor shall have the right to carry out hydrographic
surveys to facilitate petroleum activities in the JPDA. Australia and East
Timor shall co-operate on:
i. the conduct of such surveys, including the provision of necessary on-shore
facilities; and
ii. exchanging hydrographic information relevant to petroleum activities in
the JPDA.
(b) For the purposes of this Treaty, Australia and East Timor shall co-operate
in facilitating the conduct of seismic surveys in the JPDA, including in the
provision of necessary on-shore facilities.
Article 17: Petroleum industry vessel - safety, operating standards
and crewing
Except as otherwise provided in this Treaty, vessels of the nationality of
Australia or East Timor engaged in petroleum activities in the JPDA shall be
subject to the law of their nationality in relation to safety and operating
standards and crewing regulations. Vessels with the nationality of other
countries shall apply the law of Australia or East Timor depending on whose
ports they operate, in relation to safety and operating standards, and crewing
regulations. Such vessels that enter the JPDA and do not operate out of either
Australia or East Timor under the law of both Australia or East Timor shall be
subject to the relevant international safety and operating standards.
Article 18: Surveillance
(a) For the purposes of this Treaty, Australia and East Timor shall have the
right to carry out surveillance activities in the JPDA.
(b) Australia and East Timor shall co-operate on and co-ordinate any
surveillance activities carried out in accordance with paragraph (a).
(c) Australia and East Timor shall exchange information derived from any
surveillance activities carried out in accordance with paragraph (a).
Article 19: Security measures
(a) Australia and East Timor shall exchange information on likely threats to,
or security incidents relating to, exploration for and exploitation of
petroleum resources in the JPDA.
(b) Australia and East Timor shall make arrangements for responding to security
incidents in the JPDA.
Article 20: Search and rescue
Australia and East Timor shall, at the request of the Designated Authority and
consistent with this Treaty, co-operate on and assist with search and rescue
operations in the JPDA taking into account generally accepted international
rules, regulations and procedures established through competent international
organisations.
Article 21: Air traffic services
Australia and East Timor shall, in consultation with the Designated Authority
or at its request, and consistent with this Treaty, co-operate in relation to
the operation of air services, the provision of air traffic services and air
accident investigations, within the JPDA, in accordance with national laws
applicable to flights to and within the JPDA, recognizing established
international rules, regulations and procedures where these have been adopted
by Australia and East Timor.
Article 22: Duration of the Treaty
This Treaty shall be in force until there is a permanent seabed delimitation
between Australia and East Timor or for thirty years from the date of its entry
into force, whichever is sooner. This Treaty may be renewed by agreement
between Australia and East Timor. Petroleum activities of limited liability
corporations or other limited liability entities entered into under the terms
of the Treaty shall continue even if the Treaty is no longer in force under
conditions equivalent to those in place under the Treaty.
Article 23: Settlement of Disputes
(a) With the exception of disputes falling within the scope of the taxation
code referred to in Article 13(b) of this Treaty and which shall be settled in
accordance with that code, any dispute concerning the interpretation or
application of this Treaty shall, as far as possible, be settled by
consultation or negotiation.
(b) Any dispute which is not settled in the manner set out in paragraph (a) and
any unresolved matter relating to the operation of this Treaty under Article
6(d)(ii) shall, at the request of either Australia or East Timor, be submitted
to an arbitral tribunal in accordance with the procedure set out in Annex B.
Article 24: Amendment
This Treaty may be amended at any time by written agreement between Australia
and East Timor.
Article 25: Entry into force
(a) This Treaty shall enter into force upon the day on which Australia and East
Timor have notified each other in writing that their respective requirements
for entry into force of this Treaty have been complied with.
(b) Upon entry into force, the Treaty will be taken to have effect and all of
its provisions will apply and be taken to have applied on and from the date of
signature.
IN WITNESS WHEREOF the undersigned, being duly authorised thereto by
their respective Governments, have signed this Treaty.
DONE at Dili, on this twentieth day of May, Two thousand and two in two
originals in the English language.
| For the Government of Australia |
For the Government of East Timor |
| John Howard (Prime Minister) |
Mari Alkatiri (Prime Minister) |
Annex A under Article 3 of this Treaty
Designation and Description of the JPDA
NOTE
Where for the purposes of the Treaty it is necessary to determine the position
on the surface of the Earth of a point, line or area, that position shall be
determined by reference to the Australian Geodetic Datum, that is to say, by
reference to a spheroid having its centre at the centre of the Earth and a
major (equatorial) radius of 6 378 160 metres and a flattening of 1/298.25 and
by reference to the position of the Johnston Geodetic Station in the Northern
Territory of Australia. That station shall be taken to be situated at Latitude
25o56'54.5515" South and at Longitude 133o12'30.0771"
East and to have a ground level of 571.2 metres above the spheroid referred to
above.
THE AREA
The area bounded by the line-
(a) commencing at the point of Latitude 9deg. 22' 53" South, Longitude 127deg.
48' 42" East;
(b) running thence south-westerly along the geodesic to the point of Latitude
10deg. 06' 40" South, Longitude 126deg. 00' 25" East;
(c) thence south-westerly along the geodesic to the point of Latitude 10deg.
28' 00" South, Longitude 126deg. 00' 00" East;
(d) thence south-easterly along the geodesic to the point of Latitude 11deg.
20' 08" South, Longitude 126deg. 31' 54" East;
(e) thence north-easterly along the geodesic to the point of Latitude 11deg.
19' 46" South, Longitude 126deg. 47' 04" East;
(f) thence north-easterly along the geodesic to the point of Latitude 11deg.
17' 36" South, Longitude 126deg. 57' 07" East;
(g) thence north-easterly along the geodesic to the point of Latitude 11deg.
17' 30" South, Longitude 126deg. 58' 13" East;
(h) thence north-easterly along the geodesic to the point of Latitude 11deg.
14' 24" South, Longitude 127deg. 31' 33" East;
(i) thence north-easterly along the geodesic to the point of Latitude 10deg.
55' 26" South, Longitude 127deg. 47' 04" East;
(j) thence north-easterly along the geodesic to the point of Latitude 10deg.
53' 42" South, Longitude 127deg. 48' 45" East;
(k) thence north-easterly along the geodesic to the point of Latitude 10deg.
43' 43" South, Longitude 127deg. 59' 16" East;
(l) thence north-easterly along the geodesic to the point of Latitude 10deg.
29' 17" South, Longitude 128deg. 12' 24" East;
(m) thence north-westerly along the geodesic to the point of Latitude 9deg. 29'
57" South, Longitude 127deg. 58' 47" East;
(n) thence north-westerly along the geodesic to the point of Latitude 9deg. 28'
00" South, Longitude 127deg. 56' 00" East; and
(o) thence north-westerly along the geodesic to the point of commencement.
Annex B under Article 23 of this Treaty
Dispute Resolution Procedure
(a) An arbitral tribunal to which a dispute is submitted pursuant to Article 23
(b), shall consist of three persons appointed as follows:
i. Australia and East Timor shall each appoint one arbitrator;
ii. the arbitrators appointed by Australia and East Timor shall, within sixty
(60) days of the appointment of the second of them, by agreement, select a
third arbitrator who shall be a citizen, or permanent resident of a third
country which has diplomatic relations with both Australia and East Timor;
iii. Australia and East Timor shall, within sixty (60) days of the selection of
the third arbitrator, approve the selection of that arbitrator who shall act as
Chairman of the Tribunal.
(b) Arbitration proceedings shall be instituted upon notice being given through
the diplomatic channel by the country instituting such proceedings to the other
country. Such notice shall contain a statement setting forth in summary form
the grounds of the claim, the nature of the relief sought, and the name of the
arbitrator appointed by the country instituting such proceedings. Within sixty
(60) days after the giving of such notice the respondent country shall notify
the country instituting proceedings of the name of the arbitrator appointed by
the respondent country.
(c) If, within the time limits provided for in sub-paragraphs (a) (ii) and
(iii) and paragraph (b) of this Annex, the required appointment has not been
made or the required approval has not been given, Australia or East Timor may
request the President of the International Court of Justice to make the
necessary appointment. If the President is a citizen or permanent resident of
Australia or East Timor or is otherwise unable to act, the Vice-President shall
be invited to make the appointment. If the Vice-President is a citizen, or
permanent resident of Australia or East Timor or is otherwise unable to act,
the Member of the International Court of Justice next in seniority who is not a
citizen or permanent resident of Australia or East Timor shall be invited to
make the appointment.
(d) In case any arbitrator appointed as provided for in this Annex shall resign
or become unable to act, a successor arbitrator shall be appointed in the same
manner as prescribed for the appointment of the original arbitrator and the
successor shall have all the powers and duties of the original arbitrator.
(e) The Arbitral Tribunal shall convene at such time and place as shall be
fixed by the Chairman of the Tribunal. Thereafter, the Arbitral Tribunal shall
determine where and when it shall sit.
(f) The Arbitral Tribunal shall decide all questions relating to its competence
and shall, subject to any agreement between Australia and East Timor, determine
its own procedure.
(g) Before the Arbitral Tribunal makes a decision, it may at any stage of the
proceedings propose to Australia and East Timor that the dispute be settled
amicably. The Arbitral Tribunal shall reach its award by majority vote taking
into account the provisions of this Treaty and relevant international law.
(h) Australia and East Timor shall each bear the costs of its appointed
arbitrator and its own costs in preparing and presenting cases. The cost of
the Chairman of the Tribunal and the expenses associated with the conduct of
the arbitration shall be borne in equal parts by Australia and East Timor.
(i) The Arbitral Tribunal shall afford to Australia and East Timor a fair
hearing. It may render an award on the default of either Australia or East
Timor. In any case, the Arbitral Tribunal shall render its award within six
(6) months from the date it is convened by the Chairman of the Tribunal. Any
award shall be rendered in writing and shall state its legal basis. A signed
counterpart of the award shall be transmitted to Australia and East Timor.
(j) An award shall be final and binding on Australia and East Timor.
Annex C under Article 6(b)(v) of this Treaty
Powers and Functions of the Designated Authority
The powers and functions of the Designated Authority shall include:
(a) day-to-day management and regulation of petroleum activities in accordance
with this Treaty and any instruments made or entered into under this Treaty,
including directions given by the Joint Commission;
(b) preparation of annual estimates of income and expenditure of the Designated
Authority for submission to the Joint Commission. Any expenditure shall only
be made in accordance with estimates approved by the Joint Commission or
otherwise in accordance with regulations and procedures approved by the Joint
Commission;
(c) preparation of annual reports for submission to the Joint Commission;
(d) requesting assistance from the appropriate Australian and East Timor
authorities consistent with this Treaty
i. for search and rescue operations in the JPDA;
ii. in the event of a terrorist threat to the vessels and structures engaged
in petroleum operations in the JPDA ; and
iii. for air traffic services in the JPDA;
(e) requesting assistance with pollution prevention measures, equipment and
procedures from the appropriate Australian and East Timor authorities or other
bodies or persons;
(f) establishment of safety zones and restricted zones, consistent with
international law, to ensure the safety of navigation and petroleum
operations;
(g) controlling movements into, within and out of the JPDA of vessels,
aircraft, structures and other equipment employed in exploration for and
exploitation of petroleum resources in a manner consistent with international
law; and, subject to Article 15, authorising the entry of employees of
contractors and their subcontractors and other persons into the JPDA;
(h) issuing regulations and giving directions under this Treaty on all matters
related to the supervision and control of petroleum activities including on
health, safety, environmental protection and assessments and work practices,
pursuant to the Petroleum Mining Code; and
(i) such other powers and functions as may be identified in other Annexes to
this Treaty or as may be conferred on it by the Joint Commission.
Annex D under Article 6(c)(ii) of this Treaty
Powers and Functions of the Joint Commission
1. The powers and functions of the Joint Commission shall include:
(a) giving directions to the Designated Authority on the discharge of its
powers and functions;
(b) conferring additional powers and functions on the Designated Authority;
(c) adopting an interim Petroleum Mining Code pursuant to Article 7(b) of the
Treaty, if necessary;
(d) approving financial estimates of income and expenditure of the Designated
Authority;
(e) approving rules, regulations and procedures for the effective functioning
of the Designated Authority;
(f) designating the Designated Authority for the period referred to in Article
6(b)(i);
(g) at the request of a member of the Joint Commission inspecting and auditing
the Designated Authority's books and accounts or arranging for such an audit
and inspection;
(h) approving the result of inspections and audits of contractors' books and
accounts conducted by the Joint Commission;
(i) considering and adopting the annual report of the Designated Authority;
(j) of its own volition or on recommendation by the Designated Authority, in a
manner not inconsistent with the objectives of this Treaty amending the
Petroleum Mining Code to facilitate petroleum activities in the JPDA;
2. The Joint Commission shall exercise its powers and functions for the benefit
of the peoples of Australia and East Timor having regard to good oilfield,
processing, transport and environmental practice.
Annex E under Article 9(b) of this Treaty
Unitisation of Greater Sunrise
(a) Australia and East Timor agree to unitise the Sunrise and Troubadour
deposits (collectively known as `Greater Sunrise') on the basis that 20.1% of
Greater Sunrise lies within the JPDA. Production from Greater Sunrise shall be
distributed on the basis that 20.1% is attributed to the JPDA and 79.9% is
attributed to Australia.
(b) Either Australia or East Timor may request a review of the production
sharing formula. Following such a review, the production sharing formula may
be altered by agreement between Australia and East Timor.
(c) The unitisation agreement referred to in paragraph (a) shall be without
prejudice to a permanent delimitation of the seabed between Australia and East
Timor.
(d) In the event of a permanent delimitation of the seabed, Australia and East
Timor shall reconsider the terms of the unitisation agreement referred to in
paragraph (a). Any new agreement shall preserve the terms of any production
sharing contract, licence or permit which is based on the agreement in
paragraph (a).
Annex F under Article 5(a) of this Treaty
Fiscal Scheme for Certain Petroleum Deposits
Contracts shall be offered to those corporations holding, immediately before
entry into force of the Treaty, contracts numbered 91-12, 91-13, 95-19, and
96-20 in the same terms as those contracts, modified to take into account the
administrative structure under this Treaty, or as otherwise agreed by Australia
and East Timor.
Annex G under Article 13 (b) of this Treaty
Taxation Code for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion in Respect of Activities Connected with the Joint
Petroleum Development Area
Article 1
General definitions
1. In this Taxation Code, unless the context otherwise requires:
(a) the term "Australian tax" means tax imposed by Australia, other than
any penalty or interest, being tax to which this Taxation Code applies;
(b) the term "company" means any body corporate or any entity which is treated
as a company or body corporate for tax purposes;
(c) the term "competent authority" means, in the case of Australia, the Commissioner
of Taxation or an authorised representative of the Commissioner and, in the
case of East Timor, the Minister for Finance or an authorised representative
of the Minister;
(d) the term "East Timor tax" means tax imposed by East Timor, other than
any penalty or interest, being tax to which this Taxation Code applies;
(e) the term "framework percentage" means, in the case of Australia, ten (10)
percent and, in the case of East Timor, ninety (90) percent;
(f) the term "law of a Contracting State" means the law from time to time
in force in that Contracting State relating to the taxes to which this Taxation
Code applies;
(g) the term "person" includes an individual, a company and any other body
of persons;
(h) the term "reduction percentage" means, in the case of Australia, ninety
(90) percent and, in the case of East Timor, ten (10) percent;
(i) the terms "tax" or "taxation" mean Australian tax or East Timor tax, as
the context requires; and
(j) the term "year" means, in Australia, any year of income and, in East Timor,
any tax year.
2. In the application of this Taxation Code at any time by a Contracting State
any term not defined in this Taxation Code or elsewhere in the Treaty shall,
unless the context otherwise requires, have the meaning which it has at that
time under the law of that Contracting State for the purposes of the taxes to
which this Taxation Code applies, any meaning under the applicable tax law of
that State prevailing over a meaning given to the term under other law of that
State.
Article 2
Personal scope
The provisions of this Taxation Code shall apply to persons who are residents
of one or both of the Contracting States as well as in respect of persons who
are not residents of either of the Contracting States, but only for taxation
purposes related directly or indirectly to:
(a) the exploration for or the exploitation of petroleum in the JPDA; or
(b) acts, matters, circumstances and things touching, concerning, arising
out of or connected with any such exploration or exploitation.
Article 3
Resident
1. For the purposes of this Taxation Code, resident of a Contracting State
means:
(a) in the case of Australia, a person who is liable to tax in Australia by
reason of being a resident of Australia under the tax law of Australia;
and
(b) in the case of East Timor, a person who is liable to tax in East Timor by
reason of being a resident of East Timor under the tax law of East Timor,
but does not include any person who is liable to tax in that Contracting State
in respect only of income from sources in that Contracting State.
2. Where by reason of the provisions of paragraph 1 of this Article, an
individual is a resident of both Contracting States, then the status of the
person shall be determined as follows:
(a) the person shall be deemed to be a resident solely of the Contracting
State in which a permanent home is available to the person;
(b) if a permanent home is available to the person in both Contracting States,
or in neither of them, the person shall be deemed to be a resident solely
of the Contracting State in which the person has an habitual abode;
(c) if the person has an habitual abode in both Contracting States, or if
the person does not have an habitual abode in either of them, the person shall
be deemed to be a resident solely of the Contracting State with which the
person's personal and economic relations are the closer. For the purposes
of this subparagraph, an individual's nationality or citizenship of one of
the Contracting States shall be a factor in determining the degree of the
individual's personal and economic relations with that Contracting State;
(d) if it cannot be determined with which Contracting State the person's
personal and economic relations are the closer, the competent authorities
of the Contracting States shall consult with a view to settling the question
by mutual agreement.
3. Where by reason of the provisions of paragraph 1 of this Article, a person
other than an individual is a resident of both Contracting States, then it
shall be deemed to be a resident solely of the Contracting State in which its
place of effective management is situated.
Article 4
Taxes covered
1. The existing taxes to which this Taxation Code shall apply are:
(a) in Australia:
(i) the income tax, but excluding the petroleum resource rent tax;
(ii) the fringe benefits tax;
(iii) the goods and services tax; and
(iv) the superannuation guarantee charge,
imposed under the federal law of Australia;
(b) in East Timor:
(i) the income tax, including either the tax on profits after income tax
or the additional profits tax, as applicable to a specified petroleum project
or part of a project;
(ii) the value added tax and sales tax on luxury goods ("value added tax");
and
(iii) the sales tax,
imposed under the law of East Timor.
2. The provisions of this Taxation Code shall also apply to any identical or
substantially similar taxes which are imposed after the date of signature of
this Treaty in addition to, or in place of, the existing taxes. The competent
authorities of the Contracting States shall notify each other of any relevant
changes which have been made in their respective taxation law as soon as
possible after such changes.
3. A Contracting State shall not impose a tax not covered by the provisions of
the Taxation Code in respect of or applicable to:
(a) the exploration for or exploitation of petroleum in the JPDA; or
(b) any petroleum exploration or exploitation related activity carried on
in the JPDA,
unless the other Contracting State consents to the imposition of that tax.
4. Nothing in paragraph 3 of this Article shall be taken to prevent a
Contracting State from imposing, in accordance with its law, penalty or
interest charges relating to the taxes covered by this Taxation Code.
Article 5
Business profits
1. For the purposes of the taxation law of each Contracting State, the business
profits or losses of a person, other than an individual, derived from, or
incurred in, the JPDA in a year shall be reduced by the reduction
percentage.
2. (a) Business profits or losses derived from the JPDA in a year by an
individual who is a resident of a Contracting State may be taxed in both
Contracting States as reduced by the reduction percentage.
(b) Notwithstanding subparagraph 2(a), the Contracting State of which the
individual is a resident may tax those profits or recognise those losses
without such reduction. In such a case, that Contracting State shall provide a
tax offset against the tax payable on those profits by the individual in that
State for the tax paid in the other Contracting State.
3. Business profits derived from the JPDA in a year by an individual who is not
a resident of either Contracting State may be taxed in both Contracting States
but subject to a rebate entitlement against the tax payable in each Contracting
State of the reduction percentage of the gross tax payable on those profits in
that Contracting State.
4. Business losses, incurred in the JPDA in a year by an individual who is not
a resident of either Contracting State, that are eligible under the law of a
Contracting State to be carried forward for deduction against future income
shall, for the purposes of that law, be reduced by the reduction percentage.
5. Where losses are brought forward from prior years as a deduction, those
losses may not also be taken into account when calculating the business profits
or business losses for the year in which they are brought forward as a
deduction.
6. Where profits include items of income which are dealt with separately in
other Articles of this Taxation Code or where losses are dealt with separately
in other Articles of this Taxation Code, then the provisions of those Articles
shall not be affected by the provisions of this Article.
7. In establishing whether business profits are derived from the JPDA for the
purposes of this Article, regard is to be had to internationally accepted
principles on the source of business profits, particularly taking into
consideration the extent to which activities in the JPDA, or assets located in
the JPDA, rather than elsewhere, contributed to those business profits. In
applying such internationally accepted principles special regard shall be had
to the location of:
(a) any activities or functions contributing to the business profits;
(b) any assets relevant to the derivation of the business profits; and
(c) any business and financial risks assumed by an entity and which relate
to the business profits.
8. For the purposes of paragraph 7, particular account should be had to the
terms of any relevant unitisation agreement to the extent to which they do not
conflict with the internationally accepted principles referred to in that
paragraph.
9. In determining whether business losses are incurred in the JPDA, regard is
to be had to internationally accepted principles as to where business losses
are incurred, with a view to an approach consistent with paragraphs 7 and 8 of
this Article.
10. Where particular business profits are derived wholly or principally from
the JPDA, or particular business losses are incurred wholly or principally in
the JPDA, then such profits or losses shall be treated as fully derived from or
fully incurred in, as the case may be, the JPDA. In other cases, the relevant
proportion should be attributed to the JPDA. In the application of this
paragraph the Contracting States shall seek a consistent approach, including as
between the treatment of profits and losses, and should consult if necessary to
this end.
11. For the purposes of this Taxation Code, the East Timor additional
profits tax shall be regarded as a tax on business profits.
Article 6
Shipping and air transport
1. Profits from all shipping and air transport, where the transport of the
relevant goods or persons commences at a place in the JPDA to any other place,
whether inside or outside the JPDA, shall in their entirety be regarded as
business profits derived from the JPDA.
2. Profits from all shipping and air transport internal to the JPDA, shall in
their entirety be regarded as business profits derived from the JPDA.
3. Profits from all shipping and air transport, where the transport of the
relevant goods or persons commences outside the JPDA, and ends in the JPDA,
shall not be regarded as derived from the JPDA.
Article 7
Petroleum Valuation
The value of petroleum shall for all purposes under the taxation law of both
Contracting States be the value as determined in accordance with
internationally accepted arm's length principles having due regard to functions
performed, assets used and risks assumed.
Article 8
Dividends
1. Dividends paid or credited by a company which is a resident of a Contracting
State wholly or mainly out of profits, income or gains derived from sources in
the JPDA, and which are beneficially owned by a resident of the other
Contracting State, may be taxed in that other Contracting State. However, such
dividends may also be taxed in the first-mentioned Contracting State and
according to the law of that State, but the tax so charged shall not exceed
fifteen (15) per cent of the gross amount of the dividends.
2. Dividends paid or credited by a company which is a resident of a Contracting
State wholly or mainly out of profits, income or gains derived from sources in
the JPDA, and which are beneficially owned by a resident of that Contracting
State, shall be taxable only in that State.
3. Dividends paid or credited by a company which is a resident of a Contracting
State wholly or mainly out of profits, income or gains derived from sources in
the JPDA, and which are beneficially owned by a person who is not a resident of
either Contracting State, may be taxed in both Contracting States but the
taxable amount of any such dividends shall be an amount equivalent to the
framework percentage of the amount that would be the taxable amount but for
this paragraph.
4. The term "dividends" as used in this Article means income from shares or
other rights participating in profits and not relating to debt claims, as well
as other income which is subjected to the same taxation treatment as income
from shares by the law of the Contracting State of which the company making the
distribution is a resident.
5. Notwithstanding any other provisions of this Taxation Code, where a company
which is a resident of a Contracting State derives profits, income or gains
from the JPDA, such profits, income or gains may be subject in the other
Contracting State to a tax on profits after income tax in accordance with its
law, but such tax shall not exceed fifteen (15) per cent of the gross amount of
such profits, income or gains after deducting from those profits, income or
gains the income tax imposed on them in that other State. Such tax shall be
imposed upon the amount equivalent to the framework percentage of the amount
that would be taxed but for this paragraph.
6. For the purposes of this Article, "derived from" has the same meaning as
expressed in Article 5.
Article 9
Interest
1. Interest paid or credited by a contractor, being interest to which a
resident of a Contracting State is beneficially entitled, may be taxed in that
Contracting State.
2. Such interest may also be taxed in the other Contracting State, but the tax
so charged shall not exceed ten (10) per cent of the gross amount of the
interest.
3. Interest paid or credited by a contractor, being interest to which a person
who is not a resident of either Contracting State is beneficially entitled, may
be taxed in both Contracting States but the taxable amount of any such interest
shall be an amount equivalent to the framework percentage of the amount that
would be the taxable amount but for this paragraph.
4. The term "interest" in this Taxation Code, includes interest from bonds or
debentures, whether or not secured by mortgage and whether or not carrying a
right to participate in profits, interest from any form of indebtedness and all
other income assimilated to income from money lent by law, relating to tax, of
the Contracting State in which the income arises.
Article 10
Royalties
1. Royalties paid or credited by a contractor, being royalties to which a
resident of a Contracting State is beneficially entitled, may be taxed in that
Contracting State.
2. Such royalties may also be taxed in the other Contracting State, but the tax
so charged shall not exceed ten (10) per cent of the gross amount of the
royalties.
3. Royalties paid or credited by a contractor, being royalties to which a
person who is not a resident of either Contracting State is beneficially
entitled, may be taxed in both Contracting States but the taxable amount of any
such royalties shall be an amount equivalent to the framework percentage of the
amount that would be the taxable amount but for this paragraph.
4. The term "royalties" in this Article means payments or credits, whether
periodical or not, and however described or computed, to the extent to which
they are made as consideration for:
(a) the use of, or the right to use, any copyright, patent, design or model,
plan, secret formula or process, trademark or other like property or right;
(b) the use of, or the right to use, any industrial, commercial or scientific
equipment;
(c) the supply of scientific, technical, industrial or commercial knowledge
or information;
(d) the supply of any assistance that is ancillary and subsidiary to, and
is furnished as a means of enabling the application or enjoyment of, any such
property or right as is mentioned in subparagraph (a), any such equipment
as is mentioned in subparagraph (b) or any such knowledge or information
as is mentioned in subparagraph (c); or
(e) total or partial forbearance in respect of the use or supply of any property
or right referred to in this paragraph.
Article 11
Alienation of property
1. Where a gain or loss of a capital nature accrues to or is incurred by a
person, other than an individual who is a resident of a Contracting State, from
the alienation of property situated in the JPDA or of shares or comparable
interests in a company, the assets of which consist (directly or indirectly,
including for example through a chain of companies), wholly or principally of
property situated in the JPDA, the amount of gain or loss shall, for the
purposes of the law of a Contracting State, be an amount equivalent to the
framework percentage of the amount that would be the gain or loss but for this
paragraph.
2. When a gain or loss of a capital nature accrues to or is incurred by an
individual who is a resident of a Contracting State, from the alienation of
property situated in the JPDA or of shares or comparable interests in a
company, the assets of which consist (directly or indirectly, including for
example through a chain of companies), wholly or mainly of property situated in
the JPDA, the amount of the gain or loss may, for the purposes of the law of a
Contracting State, be an amount equivalent to the reduction percentage of the
amount that would be the gain or loss but for this paragraph.
3. Notwithstanding paragraph 2, the Contracting State of which the individual
is a resident may tax that gain or recognise that loss of a capital nature
without such reduction. In such a case, that Contracting State shall provide a
tax offset against the tax payable on that gain by the individual in that other
Contracting State.
Article 12
Independent personal services
1. Income derived by an individual who is a resident of a Contracting State in
respect of professional services, or other independent activities of a similar
character, performed in the JPDA may be taxed in both Contracting States as
reduced by the reduction percentage.
2. Notwithstanding paragraph (1), the Contracting State of which the individual
is a resident may tax such income without such reduction. In such a case, that
Contracting State shall provide a tax offset against the tax payable on that
income by the individual in that State for the tax paid in the other
Contracting State.
3. Income derived by an individual who is not a resident of either Contracting
State in respect of professional services, or other independent activities of a
similar character, performed in the JPDA may be taxed in both Contracting
States but subject to a rebate entitlement against the tax payable in each
Contracting State of the reduction percentage of the gross tax payable in that
Contracting State on income referred to in this paragraph.
Article 13
Dependent personal services
1. Salaries, wages and other similar remuneration derived by an individual who
is a resident of a Contracting State in respect of employment exercised in the
JPDA may be taxed in both Contracting States as reduced by the reduction
percentage.
2. Notwithstanding paragraph (1), the Contracting State in which the individual
is a resident may tax such remuneration without such reduction. In such a
case, that State shall provide a tax offset against the tax payable on such
remuneration by the individual in that Contracting State for the tax paid in
the other Contracting State.
3. Remuneration derived by an individual who is not a resident of either
Contracting State in respect of employment exercised in the JPDA may be taxed
in both Contracting States but subject to a rebate entitlement against the tax
payable in each Contracting State of the reduction percentage of the gross tax
payable in that Contracting State on the income referred to in this
paragraph.
Article 14
Other income
1. Items of income of a resident of a Contracting State other than an
individual, derived from sources in the JPDA and not dealt with in the
foregoing Articles of this Taxation Code, shall be reduced by the reduction
percentage.
2. Items of income of a resident individual of a Contacting State derived from
sources in the JPDA and not dealt with in the foregoing Articles of this
Taxation Code, may be taxed in both Contracting States as reduced by the
reduction percentage.
3. Notwithstanding paragraph (2), the Contracting State in which the individual
is a resident may tax such items of income without such reduction. In such a
case, that State shall provide a tax offset against the tax payable on those
items of income by the individual in that State for the tax paid in the other
Contracting State.
4. Items of income of a person who is not a resident of either Contracting
State, derived from sources in the JPDA and not dealt with in the foregoing
Articles of this Taxation Code may be taxed in both Contracting States but
subject to a rebate entitlement against the tax payable in each Contracting
State of the reduction percentage of the gross tax payable in that Contracting
State on the income referred to in this paragraph.
5. For the purposes of this Article, "derived from" has the same meaning as
expressed in Article 5.
Article 15
Fringe benefits
For the purposes of the taxation law of Australia, the amount of Australian
fringe benefits tax payable in relation to fringe benefits provided to
employees in a year, in respect of employment exercised in the JPDA, shall
be:
(a) in the case of such employees who are residents of Australia, the fringe
benefits tax may be applied without reduction;
(b) in respect of employees who are residents of East Timor, the fringe benefits
tax shall not be applied; and
(c) in respect of employees who are not residents of either Contracting State,
the amount payable shall be reduced by the reduction percentage.
Article 16
Superannuation guarantee charge
The superannuation guarantee charge imposed by Australia in respect of
employment exercised in the JPDA in a year may be applied only in so far as it
relates to employees who are residents of Australia, in which case it may be
applied without reduction.
Article 17
Miscellaneous
In any case where income, profits or gains are not derived from the JPDA as
that term is used in Article 5, for the purposes of this Code, neither
Contracting State shall tax those income, profits or gains on a basis, in
effect, of their source in the JPDA.
Article 18
Indirect taxes
Goods introduced into the JPDA, whether or not from a Contracting State, and
services provided to a person in the JPDA, may, at or following introduction,
be taxed in both Contracting States in accordance with applicable Australian
goods and services tax law or the East Timor value added tax or sales tax law
as the case may be, but the taxable amount in relation to such goods and
services shall be an amount equivalent to the framework percentage of the
amount that would be the taxable amount but for this paragraph.
Article 19
Avoidance of double taxation
1. In the case of Australia, subject to the provisions of the law of Australia
from time to time in force which relate to the allowance of a credit against
Australian tax of tax paid in a country outside Australia (which shall not
affect the general principle of this Article), East Timor tax paid under the
law of East Timor and in accordance with this Taxation Code, whether directly
or by deduction, in respect of income derived by a person who is a resident of
Australia of the following types:
(a) dividends paid wholly or mainly out of profits, income or gains as referred
to in paragraph 1 of Article 8;
(b) interest paid by a contractor as referred to in paragraph 2 of Article
9;
(c) royalties paid by a contractor as referred to in paragraph 2 of Article
10; or
(d) profits, income or gains after income tax as referred to in paragraph
5 of Article 8,
shall be allowed as a credit against Australian tax payable in respect of
that income.
2. In the case of East Timor, subject to the provisions of the law of East
Timor from time to time in force which relate to the allowance of a credit
against East Timor tax of tax paid in a country outside East Timor (which shall
not affect the general principle of this Article), Australian tax paid under
the law of Australia and in accordance with this Taxation Code, whether
directly or by deduction, in respect of income derived by a person who is a
resident of East Timor of the following types:
(a) dividends paid wholly or mainly out of profits, income or gains as referred
to in paragraph 1 of Article 8;
(b) interest paid by a contractor as referred to in paragraph 2 of Article
9;
(c) royalties paid by a contractor as referred to in paragraph 2 of Article
10; or
(d) profits, income or gains after income tax as referred to in paragraph
5 of Article 8,
shall be allowed as a credit against East Timor tax payable in respect of that
income.
3. The dividends, interest or royalties taxed by a Contracting State in
accordance with the provisions of this Taxation Code and referred to in this
Article shall for the purposes of determining a foreign tax credit entitlement
under the law of the other Contracting State, be deemed to be income derived
from sources in the first-mentioned Contracting State.
Article 20
Mutual agreement procedure
1. Where a person considers that the actions of the competent authority of one
or both of the Contracting States result or will result for the person in
taxation not in accordance with the provisions of this Taxation Code, the
person may, irrespective of the remedies provided by the domestic law of the
Contracting States, present a case to the competent authority of the
Contracting State of which the person is a resident, or to either competent
authority in the case of persons who are not residents of either Contracting
State. The case must be presented within thirty-six (36) months from the first
notification of the action resulting in taxation not in accordance with the
provisions of the Taxation Code.
2. The competent authority shall endeavour, if the claim appears to it to be
justified and if it is not itself able to arrive at a satisfactory solution, to
resolve the case by agreement with the competent authority of the other
Contracting State, with a view to the avoidance of taxation which is not in
accordance with the provisions of this Taxation Code. Any agreement reached
shall be implemented notwithstanding any time limits in the domestic law of the
Contracting States.
3. In considering whether the actions of a Contracting State are or are not in
accordance with the provisions of this Taxation Code for the purposes of this
Article, particular regard is to be had to the objects and purposes of this
Taxation Code, including especially that of the avoidance of double
taxation.
4. The competent authorities of the Contracting States shall jointly endeavour
to resolve any difficulties or doubts arising as to the interpretation or
application of this Taxation Code. The competent authorities of the
Contracting States may meet from time to time or otherwise communicate for the
purposes of discussing the operation and application of this Taxation Code.
They may also consult together in relation to juridical or economic double
taxation in cases not specifically provided for in this Taxation Code.
5. For the purposes of paragraph 3 of Article XXII (Consultation) of the
General Agreement on Trade in Services, the Contracting States agree that,
notwithstanding that paragraph, any dispute between them as to whether a
measure falls within the scope of this Taxation Code may be brought before the
Council for Trade in Services, as provided by that paragraph, only with the
consent of both Contracting States. Any doubt as to the interpretation of this
paragraph shall be resolved under paragraph 4 of this Article or, failing
agreement under that procedure, pursuant to any other procedure agreed to by
both Contracting States.
Article 21
Exchange of information
1. The competent authorities of the Contracting States shall exchange such
information as is necessary for carrying out the provisions of this Taxation
Code or of the domestic law of the Contracting States concerning taxes covered
by this Taxation Code, insofar as the taxation thereunder is not contrary to
this Taxation Code, in particular for the prevention of avoidance or evasion of
such taxes. Any information received by the competent authority of a
Contracting State shall be treated as secret in the same manner as information
obtained under the domestic law of that Contracting State and shall be
disclosed only to persons or authorities (including courts and administrative
bodies) involved in the assessment or collection of, the enforcement or
prosecution in respect of, or the determination of appeals in relation to, the
taxes covered by this Taxation Code and shall be used only for such purposes.
Such persons or authorities may disclose the information in public courts or
tribunal proceedings or in judicial or tribunal decisions relating to taxes
covered by this Taxation Code.
2. In no case shall the provisions of paragraph 1 of this Article be construed
so as to impose on the competent authority of a Contracting State the
obligation:
(a) to carry out administrative measures at variance with the law or the
administrative practice of that or of the other Contracting State;
(b) to supply information which is not obtainable under the law or in the
normal course of the administration of that or of the other Contracting State;
or
(c) to supply information which would disclose any trade, business, industrial,
commercial or professional secret or trade process, or to supply information
the disclosure of which would be contrary to public policy.
Article 22
Interaction with other taxation arrangements
Nothing in this Taxation Code is intended to limit the operation of a taxation
arrangement concluded by either Contracting State with a third country or
territory unless so provided for in such treaty.
Article 23
Transitional provisions
1. Business losses incurred in the JPDA by a person in a year previous to the
year in which this Taxation Code enters into force and business losses
apportionable in accordance with paragraph 2 to that part of the year prior to
the date that this Taxation Code enters into domestic law effect, may, for the
purposes of the taxation law of a Contracting State and in accordance with the
provisions of that law, be carried forward for deduction against income which
is subject to the provisions of this Taxation Code, in accordance with the
provisions of this Taxation Code.
2. In the year in which this Taxation Code enters into force the Contracting
States shall only apply the framework percentage or reduction percentage to
that proportion of income, losses and other items addressed by this Taxation
Code which corresponds to that portion of the period from the date of entry
into domestic law effect to the end of the year.
Article 24
Review mechanism
At the request of either of the Contracting States, the Contracting States
shall review the terms and operations of this Taxation Code with a view to
amending the Taxation Code, if considered necessary.
Article 25
Entry into force
This Taxation Code shall enter into force at the same time as the Treaty to
which it forms part.
I am delighted to announce that yesterday we successfully concluded the negotiations over the Timor Sea Treaty. This Treaty and related documents will open the way for major oil and gas developments in the Timor Sea between Australia and a newly independent East Timor.