Infrastructure charges reform: An update on changes and commencement

The provisions of the Sustainable Planning (Infrastructure Charges) and Other Legislation Amendment Act 2014 (Qld) (Amendment Act) which amended the Sustainable Planning Act 2009 (Qld) (SPA) and the South-East Queensland (Distribution and Retail Restructuring) Act 2009 (SEQ Water Act) commenced on 4 July 2014 implementing amendments to the infrastructure charging provisions in the SPA and the SEQ Water Act.

The Amendment Act is a part of the Queensland Government’s long-term reforms to the Sustainable Planning (Infrastructure Charges) and Other Legislation Amendment Bill 2014 (Qld) (Bill).

The Amendment Act contains various amendments to the Bill. The key amendments include the following:

• Where a refund applies for an infrastructure offset, the infrastructure charges notice must state when the refund will be given. An applicant’s appeal rights are also extended to the timing for giving the refund.
• Making it clear that cross crediting is mandatory. For example, an infrastructure offset which accrues for the delivery of road infrastructure can be claimed against the whole infrastructure charge (not just the portion of the infrastructure charge which a local government allocates to road infrastructure).
• Requiring a charges resolution or a board decision to include criteria for deciding a conversion application which must be consistent with parameters under a guideline made by the Minister and prescribed by regulation.

A full article about the Amendment Act has been prepared by John Ware, Partner, Brisbane and Matthew Soden-Taylor, Senior Associate, Brisbane, and can be read here.

Women in Resources Victoria Event – Panel discussion examining the competitiveness of the Australian resources industry

On 17 July 2014, Women in Resources Victoria held a panel discussion examining the competitiveness of the Australian resources industry.  The event was very well attended and topical in light of recent industry and media discussion of the current challenges facing the resources industry and the Government’s focus on the regulatory environment.

The panel discussion was chaired by Mr Michael Catchpole, Chief Executive of The AusIMM and featured the following eminent speakers (listed in order of speaking): Kate Vidgen, Executive Director at Macquarie Capital, Brooke Miller, CFO of BP and Karen Stoffels, General Manager Finance at MMG.  Each speaker examined the topic from a different perspective.

1. Key factors affecting resource investment choices in Australia against overseas locations (Kate Vidgen, Macquarie Capital) - Ms Vidgen spoke about the key factors affecting resource investment choices in Australia against overseas locations.  Ms Vidgen observed that there is currently ‘a wall’ of new capital seeking investment in the resources sector and therefore the challenge for Australia was to capitalise on its competitive advantages.  In considering the attractiveness of Australia as a location for investment, Ms Vidgen examined a number of commonly cited perceptions (i.e. increased sovereign risk, lack of cost competitiveness and lack of infrastructure) and critically assessed the extent to which they were in fact grounded in reality. In short, Ms Vidgen concluded that many of these common perceptions were not accurate and opportunities existed for Australia to further leverage its competitive strengths, particularly in the area of innovation.
   
2. The Three C's of Competitiveness: Cost, Capability and Curiosity (Brooke Miller, BP) - Ms Miller also observed that there is currently an enormous opportunity in the market provided the right resources and conditions can be brought to bear.  In relation to the creation of the right conditions, Ms Miller identified the following three factors:
• Creation of a ‘cost culture’ – this is not about focusing on always being the cheapest; instead, it requires an intelligent and strategic examination of the nature of the costs being incurred (aided by good tracking and a constant awareness of changes in the environment) and the extent to which they are linked to a company’s value proposition. However, equally, in the resources industry a focus on safety is essential.
• Increased capabilities – in particular, the advent of new technology and ‘big data’ which is now driving analytics will continue to change the way business is done and provide opportunities for innovation.
• Curiosity – Ms Miller observed that in comparison with other countries, Australia has a real competitive advantage in terms of being prepared to challenge the status quo which often results in innovation.
  
3. Choosing the right skills base and diversity mix within the work force to maximise productivity (Karen Stoffels, MMG) - Ms Stoffels discussed the challenges of creating a collaborative and productive work environment in circumstances where team members are from diverse backgrounds.  Ms Stoffels identified a number of strategies that she has successfully used in the past to bridge cross-cultural issues when managing a team located in a different country including: establishing a common purpose or goal by face-to-face meetings and agreeing on a long-term strategy up-front, adopting an inclusive approach that allows all team members to feel that they have had an opportunity to contribute, and identifying a ‘trusted adviser’ with local knowledge who is able to explain the unique differences of doing business in a particular country.  

Following the debate, Mr Catchpole moderated a question and answer session from the audience that prompted further interesting discussion of a variety of issues including the likely impact of the current Government’s new policies and how best to institutionalise a culture of innovation.

For further information, please contact Jennifer Galatas, Senior Associate, Melbourne, or your usual Herbert Smith Freehills contact.

English High Court judgment in ongoing Zambian dispute

On 15 July 2014, the High Court in London handed down a further judgment in the ongoing dispute between Konkola Copper Mines (KCM) and U&M Mining Zambia Ltd (U&M).

KCM owns a number of mines on the Zambian copper belt.  It is a Zambian company majority owned by Vendanta Resources Plc, which is listed on the London Stock Exchange.  The remaining stake in KCM is held by a company which is in turn majority owned by the Government of the Republic of Zambia.

The Government also holds a Golden Share.  U&M, which is a Zambian subsidiary of a Brazilian mining conglomerate, was contracted from around 2007 to operate one of KCM's mines.  From 2012, a number of disputes arose between the parties in relation to their various contractual arrangements, including in relation to invoices allegedly unpaid by KCM.

In common with other disputes between locally incorporated mining companies with parents in the UK or elsewhere, action has been taken in more than one jurisdiction.  The parties' disputes were referred to arbitration at the London Court of International Arbitration and there have been related court proceedings in Zambia, Brazil and London.

It appears from the English High Court judgments that there are currently several outstanding arbitral awards against KCM, totalling in excess of USD56 million, but that KCM is resisting enforcement of the first award in Zambia and brought proceedings in the English court seeking to challenge the second award on various grounds.  

It was the dismissal of KCM's challenge to that second award that was the subject of the latest English High Court judgment.  In another decision some two weeks prior, KCM had been directed to pay security for U&M's costs of defending that challenge. Of interest was the Court's reasoning that KCM, which was found itself to have insufficient liquid funds to pay U&M's costs and no assets in the jurisdiction, could not rely on the significant financial strength of its LSE listed parent to defeat the application as there were no undertakings in place from that parent company.

This is an engaging though apparently bitterly fought dispute and we will await any further developments with interest.

This article was written by Joanne Keillor, Senior Associate, London.  For further information please contact Joanne Keillor or your usual Herbert Smith Freehills contact.

Japan-Australia Economic Partnership Agreement signed, text released

On Wednesday, 9 July, Japanese Prime Minister, Shinzo Abe, and Australian Prime Minister, Tony Abbott, signed the Japan-Australia Economic Partnership Agreement (JAEPA).

Following domestic approval processes in Australia and Japan, the JAEPA will come into force and 99.7% of Australia’s exports of resource, energy and manufacturing products will benefit from duty-free enter into Japan. All of Australia’s current resources, energy and manufactured goods exports with benefit from duty-free entry into Japan on full implementation of the JAEPA.

The JAEPA does not include investor-state dispute settlement (ISDS) provisions, offering cross-border investors protection against political risks such as expropriation of investment assets or profits and discrimination between cross-border investors and national investors.

The original article was prepared by Leon Chung, Partner, and Kate Lindeman, Solicitor, Sydney, and can be read here.

ICSID claim filed against Indonesian Government

On 1 July, PT Newmont Nusa Tenggara and its majority Dutch shareholder Nusa Tenggara Partnership BV, announced that they have filed international investment arbitration proceedings against the Indonesian Government to seek relief from export restrictions that have halted production at the Batu Hijau mine and are said to have inflicted hardship and economic loss on PT Newmont Nusa Tenggara’s employees, contractors, and other stakeholders.

The claimants allege that the government’s imposition of new export conditions, a new export duty and a ban on the export of copper concentrate breach PT Newmont Nusa Tenggara’s Contract of Work with the Indonesian Government, and the bilateral investment treaty between Indonesia and the Netherlands. The claimants have indicated that they will seek interim injunctive relief, so that work at the mine can resume.

This claim follows an announcement earlier this year that Indonesia intended to cancel all of its 67 bilateral investment treaties, and draw up new treaties. The bilateral investment treaty between Indonesia and the Netherlands was among the first to be cancelled, with effect from July 2015 (though a sunset clause in the treaty means it will continue to apply for a period after that).

For further information, please contact Jay Leary, Partner, Brisbane, or your usual Herbert Smith Freehills contact.

Baosteel and Aurizon in control of Aquila Resources

On Thursday, 3 July, Aurizon announced that Baosteel Resources Australia and Aurizon Operations (the Bidders) entered into a Takeover Implementation Agreement (TIA) with Aquila Resources (Aquila) to facilitate the change in control and management of Aquila to the Bidders.

Tony Poli (chairman and largest shareholder of Aquila) has agreed to sell his 28.9% stake in Aquila (a condition of the TIA), increasing the Bidders’ stake to 69.3%.  Mineral Resources also agreed to sell its $12.8% stake after failing to secure a merger deal with Aquila.

Under the TIA, Tony Poli and two directors of Aquila, Gordon Galt and Denise Goldsworthy, will resign from the Aquila board on or before 11 July and four of the Bidders’ nominees will be appointed.

The remaining 30% of Aquila shareholders have until 25 July to accept the $1.4b ($3.40 per share) bid.

Read the announcement and TIA here.

For further information, please contact Jay Leary, Partner, Brisbane, or your usual Herbert Smith Freehills contact.

Clive Palmer and Al Gore team up in a remarkable day for carbon in Australia

Yesterday was a remarkable day here for carbon-related issues.

Clive Palmer has substantially changed position. He won’t support Direct Action - he says that it ‘is a waste of money’. Nor will he support the abolition of various key existing carbon-related statutory agencies or the Renewable Energy Target. What he now advocates is the implementation of an emissions trading scheme (ETS), but one which will be ‘zero-rated’ until Australia’s major trading partners (5  named countries including the US and China) have ‘equivalent’ schemes. He says that he will ‘move amendments’ to the Government’s Bills to do these things. He announced all of this to journalists gathered in the Great Hall of Parliament in the company of no less than Al Gore, both of whom left without taking or answering any questions. There will be plenty of them today.
 
It appears that he is now advocating a variation on what Rudd announced in July 2013 – an early move to the ‘flexible’ phase of carbon pricing, only a ‘zero-rated’ one. Milne of the Greens has picked up on this saying that she and her party will support moving to the market-based ‘flexible’ phase of carbon pricing under the Clean Energy Act in FY2014-2015 rather than FY2015-2016 as currently proposed.        

Labor has said this morning, through shadow environment Minister Mark Butler, that Labor went to the last election promising to get rid of the fixed carbon price and to move straight to the emissions trading scheme, and that it therefore has no trouble with the repeal of the fixed price but that it does have a problem with the repeal of a meaningful ETS.

Recently, Xenophon and others have made noises that the issues raised by the Government’s Bills are too complex and important to be decided in haste in the first weeks of a new Senate. Palmer’s actions yesterday will add weight to these calls.

Palmer’s position, if maintained, means that it’s likely that the Government’s Bills will be defeated in the Senate, a prospect which was unimaginable until yesterday.

Meanwhile, the Clean Energy Act remains in force unamended.

Stay tuned!

This article was written by John Taberner, Consultant, and Michael Voros, Special Counsel.

For further information, please contact John Taberner, Michael Voros, or your usual Herbert Smith Freehills contact.