In 2002, Geoff Gallop’s Labor government in Western Australia entered into a state agreement with Mineralogy, Clive Palmer’s company, for the development of the Balmoral South iron ore mine in the Pilbara. Generally speaking, a state agreement is a statutory contract agreed between a company and the state containing the terms that form the basis of a mining project. It prescribes, amongst other things, the rights and obligations of the parties, the process for approval and the process to resolve disputes. In WA, they are common.
After hours last Tuesday, the WA Attorney General, John Quigley, sought to suspend standing orders to introduce a bill to the state parliament. A bill which he had known about for months, Cabinet had known about for 30 minutes, and the opposition had no notice of prior to it being introduced.
The bill sought to change the Mineralogy state agreement to extinguish certain rights of Mineralogy relating to an ongoing dispute with successive WA governments. The bill provided, in relation to the dispute, that:
- two arbitral awards (a judgment in a private arbitration) that had been awarded by a private arbitrator in Mineralogy’s favour (against WA) are deemed to be invalid;
- the government is absolved of any liability (including criminal liability in relation to certain matters);
- Palmer must indemnify the government in relation to any loss and damage arising from the litigation and arbitration to date;
- Mineralogy/Palmer cannot sue WA over this legislation for any reason;
- There is no avenue of appeal or review; and
- The rules of natural justice and provisions for freedom of information do not apply.
The Attorney General told us that Palmer was planning proceedings against the State for $30 billion, that the bill would protect WA from Palmer’s so-called rapacious conduct and that the bill needed to be passed immediately to prevent any risk of the state being required to pay Mineralogy if the claim continued through to judgment. The Premier told us that Palmer was trying to take our money and if that happened the government would be required to close schools, police stations and hospitals.
If you think this sounds a lot like yelling ‘fire’ because someone has lit a cigarette, you’d be right.
It’s populism at its most putrid.
We now know Mineralogy commenced, and won, two arbitrations in its dispute with the state based on alleged breaches of the state agreement by the Barnett Liberal government. We also know that Mineralogy has threatened additional court proceedings. However, instead of dealing with the substance and consequences of this dispute, the government has thrown its toys out of the cot and has unilaterally sought to change the state agreement to deny Mineralogy its contractual rights. Remember, these are rights the government agreed to give Mineralogy under the state agreement back in 2002.
The fact is, this is a commercial dispute. The only thing unusual is the size of the claim. Mind you, $30 billion is a number paraded around by the government to terrify West Australians; it is not a number, so far as I understand, that originated with Palmer. And even so — it is still only a claim. For a damages claim to be successful, Palmer must first establish the state is liable on each cause of action and then the quantum of damages is assessed. I’ve seen plenty of burgeoning damages claims and most of them are reduced to mere lambs once all the relevant questions are asked and a judge runs a ruler over them.
In any event, the size of the claim is as irrelevant as is the identity of the person bringing it. Justice is meant to be blind. Despite this, the Government has used a very effective but disingenuous narrative to convince an already hypersensitive population into believing that this gross abuse of government power is in the interests of Western Australians. The irony is that nothing could be further from the truth. By extinguishing Mineralogy’s rights, and putting a shot through the heart of government accountability, government transparency, judicial oversight, natural justice and freedom of information, the Government is trampling upon fundamental and immutable principles of our parliamentary democracy. The Government is catapulting its own self-serving interests outside of reach of the Courts in an attempt to escape its own alleged wrongdoing.
In his speech in the legislative assembly, Quigley said that the bill didn’t create sovereign risk because no other company has sought to challenge the Minister’s decision or take the state to arbitration and that the change only applies very narrowly to this dispute and not to the broader Mineralogy state agreement. Actually, the bill is the archetypal definition of sovereign risk. Any unilateral change to a contract with a private party by a government on the wrong end of a commercial dispute smacks of wrangling with an African backwater despot. It might be a narrow change, but it sets a precedent: challenge this government, and if you get the upper hand, it will pull the rug out from underneath you. Given Mineralogy is the first company to challenge a state agreement, means we now have 100% strike rate of the Government moving to expropriate the rights of a private company who exercises the dispute resolution provisions prescribed in a state agreement. Regardless of the rhetoric, this will make prospective investors think twice before committing big money to projects in WA.
The Bill also provided for the non-application of freedom of information provisions and rules of natural justice. Freedom of information provisions permit a level of government transparency for the public and journalists and the rules of natural justice to ensure procedural fairness for private citizens in their interaction with state institutions. Ultimately, both protect citizens from government overreach and abuse of power. Despite this, Mr McGowan claimed Mr Palmer was trying to bankrupt WA and that these strong measures were being taken for the right reasons. Mineralogy may have the better side of this dispute, but it is still a private entity with the right to protect its commercial interests and to expect fair judicial process. Similarly, by the very severe nature of this law there should be an emphasis on government transparency not an excision of it.
Regardless how you tart this up, a state government extinguishing certain legal rights of a private entity, after having reached agreement with that entity to grant them those rights, is terrifyingly totalitarian.
And what of the other players in this political soap opera?
Well, the unofficial PR arm of the WA government — otherwise known as the West Australian newspaper — spent the week pumping out the most puerile front pages known to modern journalism: it turned a conversation about fundamental rights into a series of caricatures and crass headlines. And instead of shining a light on the government’s conduct and asking the hard questions, it has, save for the odd exception, been perfectly obedient.
And the opposition?
Well, you’d be forgiven for thinking there wasn’t one.
At least Liberal Democrats MLC Aaron Stonehouse, together with the Liberals, Shooters and Fishers and One Nation, moved to have the bill referred to a committee in the upper house for review and amendment, because, you know, IT’S THE HOUSE OF REVIEW. This resulted in criticism from Labor MP Rita Saffioti who alleged the Liberal Party sided with Palmer and voted to shut down debate on the Bill. Evidently, the nuances of the parliamentary process are not Saffioti’s strong suite, nor is an appreciation for irony given the ALP’s sledgehammer approach of trying to ram this legislation through both houses without notice or interrogation.
Despite the abovementioned protestations in the Upper House, the bill was waved through without review and into law courtesy of the increasingly irrelevant and politically clueless Nationals who voted with the ALP and the Greens. Nationals leader, Mia Davies said, via Twitter, that ‘we have to take what Premier & AG say on face–value. We must trust that they have chosen the best course of action’. Well, if that isn’t appeasement with the hope of being eaten last then I don’t know what is. And if the Nationals are happy to trust and take the government on face value, then their upper house members should pack their bags because they are evidently oblivious as to what their job entails. Look at it this way, if the federal government legislated to extinguish its liabilities in relation to the live export class action judgment, methinks Davies would have squealed. The dots of that analogy are not hard to join.
Following the Liberal Party’s failed attempt to send the bill for review, the WA opposition leader, Liza Harvey, tweeted that ‘I want to assure all West Australians that we support this legislation to stop Clive Palmer’s legal challenge’. Ladies and gents, I present you ‘gutless’ in a single tweet. Instead of standing up for the fundamental rights of individuals and private enterprise, the Libs have capitulated to this abuse of power in the desperate hope they can avoid a public backlash and keep their jobs come the March election.
And as we head towards that election, the Essential Poll shows the WA Government has continued to outshine other state governments in terms of approval, particularly in support of the hard border. It’s amazing what rank politics mainlined with fear will do to an otherwise easy-going population. In addition, McGowan has soundly hammered the Liberals over their early support for a softer border which has resulted in a gold medal winning backflip in favour of the harder border. This panicked grasp for the popular position only serves to make the Liberals look all the more spineless. It’s disappointing but unsurprising that no one has yet to grasp that ‘popular’ doesn’t necessarily mean ‘proper’.
But I digress…
On Thursday night, the Bill passed and it was ushered off, under the cover of darkness, to Governor Kim Beazley for immediate rubber stamping. And so, on Thursday, government transparency, accountability, natural justice and private rights all became optional extras. Our political class has totally vacated the field of courage, integrity and competence.
And as Clive becomes the canary, the rest of us watch on, wondering which of us is next.
Caroline Di Russo is a lawyer, businesswomen and unrepentant nerd.
Got something to add? Join the discussion and comment below.