Rio Tinto in Court battle over Bougainville

Published by MAC on 2002-09-09

Rio Tinto and Ok Tedi back in the courts?

source: Australian Financial Review September 9 2002

Papua New Guinea's new Parliament has thrown open the prospect of BHP Billiton and Rio Tinto, being dragged back into the courts to face virtually uncapped accountability over adverse impacts of their massive, troubled copper mines in PNG.

The miners thought they had succeeded in ruling lines under their mines at Ok Tedi and Bougainville. However, late last week, during question time in the first session of PNG's new Parliament, where almost three-quarters of the MPs are newcomers, it became clear the companies' pain could be prolonged. This prospect also casts a deeper shadow over the future of PNG's resources sector, the country's dominant source of revenue.

Virtually all greenfields exploration has ceased and all the mines except Lihir will be closed within a decade, while the oil and gas sector depends heavily on the long-extended bid to sign up customers for the $6.5 billion gas pipeline to Brisbane. Bougainville mine, 54 per cent owned by Rio Tinto, closed 13 years ago as a civil war took hold that has only recently been resolved. BHP Billiton early this year withdrew from the Ok Tedi mine, of which it had owned 52 per cent. The mine is now operating profitably, controlled by a trust for the people of the area.

BHP Billiton wrote off its shareholding and lent the new company US$100 million ($183 million) interest free. Bob Danaya, the new governor of Western province that contains Ok Tedi, asked the Government to consider removing a clause in legislation passed by the previous Parliament in December granting BHP Billiton indemnity against future court actions. If the Government accedes to his request, it would lay BHP Billiton open to a fresh wave of legal claims. Two such suits are under way in Port Moresby and another in Melbourne, but the legislative indemnity added considerable firepower to BHP Billiton's defence.

Dr Danaya asked the Government whether the agreement would be reviewed because it had "caused great division and inequities among the Western province people". Prime Minister Michael Somare said he would consult the mining minister, Sam Akoitai, about the issue. Governor of Bougainville John Momis asked Sir Michael, also in Parliament, whether he sided with the Bougainvilleans seeking billions of dollars compensation via a Californian court from Rio Tinto for claimed environmental damage from the mine and for the effects of the civil war. Sir Michael said: "I was one of the signatories [supporting the action] when I was Leader of the Opposition. I said the court must be taken to the United States, not on our soil." While Opposition Leader, Sir Michael initiated legal action against the legislative indemnity covering BHP's withdrawal from Ok Tedi and won a partial victory in April.

A class action against BHP over Ok Tedi, launched in April 2000 by Melbourne law firm Slater and Gordon on behalf of a group of people living downstream from the mine is due to return to Melbourne's Supreme Court next year. The class action against Rio Tinto was launched in San Francisco two years ago by 20 Bougainvilleans seeking to have it "disgorge all profits earned from the mine" billions of dollars if interest is deemed accrued, compared with BHP's net loss from Ok Tedi. The action was conducted by leading US contingency law firm Hagens Berman, with assistance from Slater and Gordon. It was dismissed in April on condition that the case was instead able to be heard in PNG. But an appeal was recently lodged in the US, prompting the parliamentary question from Mr Momis, whose original claim in 1987 for 4 per cent of all Bougainville net revenue to go to the provincial government helped trigger the civil strife.

Jay Hair, secretary-general of the new International Council on Mining and Metals, of which BHP Billiton and Rio Tinto are two of 20 founding members, said in Melbourne in April that corporations were being held to ever-increasing levels of accountability across the board: "Anyone who thinks they can just walk away from that is living in a fool's paradise."