N11104

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 58 OF 2021 (IECMS)

BETWEEN:
RT HON. SIR JULIUS CHAN, MP IN HIS CAPACITY AS PROVINCIAL GOVERNOR AND CHAIRMAN, NEW IRELAND PROVINCIAL EXECUTIVE COUNCIL
First Plaintiff

AND:
PROVINCIAL EXECUTIVE COUNCIL OF THE NEW IRELAND PROVINCIAL GOVERNMENT
Second Plaintiff

AND:
NEW IRELAND PROVINCIAL GOVERNMENT
Third Plaintiff

AND:
HON. JAMES MARAPE, MP IN HIS CAPACITY AS PRIME MINISTER AND CHAIRMAN OF THE NATIONAL EXECUTIVE COUNCIL
First Defendant

AND:
NATIONAL EXECUTIVE COUNCIL
Second Defendant

AND:
MINERAL RESOURCES AUTHORITY
Third Defendant

AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fourth Defendant

AND:
LIHIR GOLD LIMITED
Fifth Defendant

Waigani: Coates, J
2024:12th July

CONTRACT – Memorandum of Agreement – Government Entities – Departure from Agreement – Arbitration Clause not Invoked – Application to Court for Declarations as to Illegal Decisions and Breach – Mediation Ordered - One party against mediation – Application to Stay Mediation Order – Application to order  Arbitration – One set of parties initially wanted mediation to Continue – Change of submission - Practicality

Cases Cited:
Delta Construction Pty Limited v Administration of the Territory of Papua New Guinea [1965-66] PNGLR 381
Lovangai Equities Limited v Club 21 (2009) SC1001
Niugini Civil and Petroleum Ltd v West New Britain Development Corporation Limited (2005) N2909.
Niugini Civil Petroleum Ltd v West New Britain Development Corporation Ltd (2005) N2909
Paul Palimbo Pora v Larry Hull and Dean Hull (2009) N3729

Counsel:
Mr P. Mawa, for Plaintiffs
Mr T. Injia, for the First and Second Defendants
Mr L. Baida, for the Third Defendant
Mr J. Bakaman, for the Fourth Defendant
Ms G. Tamade, for the Fifth Defendant

RULING
12th July 2024

1.	COATES J: On 2 May 2007 a document headed Revised Memorandum of Agreement was executed between three levels of government and the Lihir Mining Area Landowners Association.

2.    The government bodies involved are the Independent State of Papua New Guinea, the New Ireland Provincial Government and the Nimamar Rural Local Level Government.

3.    The agreement addressed multiple issues associated with the gold mining development in the Lihir district and beneficial outcomes for the local population including a royalties payment scheme.

4.	   Clauses 6 and 23 address royalty distribution.

5.   The clauses direct the National Government to ensure the payments of royalties.

6.    In summary, the clauses set out that the National Government will ensure 20 percent will be paid to the land owners in cash, 30 percent will be paid to the Nimamar Rural Local Level Government with stated amounts for community development projects and long term growth investments, and 50 percent to the Provincial Government with stated amounts for infrastructure in  the Namatanai District and  the Kavieng District, and 10 percent paid for general administration.

7.	   Two important sections of the agreement addressed disputes.

8.     Clause 42 is headed Resolution of Disputes and states - where a dispute arises between the parties as to the interpretation or implementation of this agreement, a meeting shall be held within 14 days of the request made by a party, with a view to resolve same.

9.     Clause 43 is headed Arbitration and states - where a dispute referred to in clause 42 is not resolved within 60 days after the request for a meeting, the parties may submit the dispute to a single arbitrator agreed to by the parties for resolution of disputes in accordance with the provisions of the Arbitration Act (chapter 46).

10.     On 24 February 2021 the National Government, through the National Executive Council, determined to depart from the arrangement under clause 6 to redistribute monies directly to the Namatanai and Kavieng districts, bypassing the New Ireland Provincial Government.

11.      On 15 April 2021 the plaintiffs in this matter, the Provincial Governor Sir Julius Chan, the Provincial Executive Council of the New Ireland Provincial Government and the New Ireland Provincial Government filed an Originating Summons seeking declarations that decisions taken to depart from the Memorandum of Agreement were invalid or illegal and sought orders to return decision-making to the status quo established under the Memorandum. 

12.     Interim orders were also sought in support of the claims.

13.    On 30 April 2024, in case managing the matter, orders were made for mediation and the substantive matter was stayed.

14.    Some steps have been taken towards the mediation.

15.     On 14 May 2024 the first and second defendants filed a Notice of Motion seeking to stay the mediation orders and refer the matter to arbitration under the Arbitration Act, as anticipated in the Memorandum of Agreement.

16.    An alternative set of mediation orders were also set out but in hearing this matter they were not relied upon.

17.     On 25 June 2024 the plaintiffs filed a Notice of Motion but did not press the matter at the hearing on Wednesday 10 July 2024.

18.    Counsel for the first and second defendants, Mr T. Injia, took the court to decisions addressing written agreements and contracts containing an arbitration clause which were deemed to be submission by the parties to arbitration when a dispute arose (see Lovangai Equities Limited v Club 21 (2009) SC1001 at paragraph 11, Paul Palimbo Pora v Larry Hull and Dean Hull (2009) N3729 and Niugini Civil and Petroleum Ltd v West New Britain Development Corporation Limited (2005) N2909).
19.    He also addressed section 2 of Arbitration Act which states that an arbitration clause is irrevocable and has the effect of a court order unless leave otherwise is given by the court.

20.   He also addressed the issue of a stay of a proceeding once it is established that a dispute falls within an arbitration clause and relied on Delta Construction Pty Limited v Administration of the Territory of Papua New Guinea (1965-66) PNGLR 381 at p 393, where Ollerenshaw J stated that there was a tendency by the courts to stay an action unless cause was shown to the contrary.

21.   The applicability of these cases was not challenged and both sides accepted that the dispute resolution and arbitration clauses in the memorandum were not mandatory methods of resolving any dispute.

22.   In fact counsel for the plaintiffs, Mr P Mawa, said the essence of the plaintiffs claim was that the defendants should have invoked clause 42, called a meeting of interested parties and if a dispute arose then invoked clause 43 to go to arbitration.

23.   He submitted that because the defendants and particularly the second defendant, the National Executive Council, had gone completely outside the ambit of the scheme and made a decision contrary to the dispute resolution process stated in the memorandum,  the only viable option for his clients was to institute legal proceedings to determine the validity of the National Executive Council decision.

24.   Putting those issues to the side for one moment, an issue I raised with the parties was the utility of going to a mediation when the first, second and fourth defendants were very clear in stating their intention that they would not settle this matter by way of mediation. 

25.   Mediation is a developing and important method of settling legal disputes, but its efficacy depends on an amount of self-discipline of the parties involved to make it successful. It wastes precious resources when the court is told that at least one side is refusing to partake in the process and while orders of the court can be enforced in a legal setting, such become ineffective when people have a choice as to how they will act and mediation gives them that choice.

26.   While there are directions to the effect that parties are to use their best endeavours to come to a settlement, trying to determine that somebody has not used their best endeavours could be an almost impossible task.

27.    As well, Mr. Injia submitted that the first defendant Mr. Marape as Prime Minister and chairman of the National Executive Council is not in a position to mediate a decision which he has taken part in at government level.

28.     That is my interpretation of a submission made on behalf of the first and second defendants.

29.     Mr Injia submitted that his clients wanted a binding decision and arbitration could supply that.

30.    Added to the unwillingness of the defendants, but for the fifth defendant Lihir Gold Limited which remained neutral, Mr. Mawa for the plaintiffs also changed course from insisting that the mediation go ahead to a position in which it was made clear that the plaintiffs would prefer a legal decision rather than a mediation event.

31.     By this application the defendants also seek a stay of the mediation order and stays, because they interfere with a legal process underway, should not be granted easily.

32.     I was referred to the decision of Canning J in Niugini Civil Petroleum Ltd v West New Britain Development Corporation Ltd (2005) N2909 and the considerations listed which will assist in determining whether to stay a matter.

33.    Applying those relevant considerations, while there are arguments being put forward by the plaintiffs as to not now wanting to go to arbitration, I am satisfied that the original intention of the parties was to arbitrate any dispute and have a binding determination.

34.     I am satisfied that the defendants have not delayed in their defence of the proceedings and I am satisfied that the stay application has been bought within a reasonable time after the mediation order was made.

35.   I am satisfied that the arbitration clause in the Memorandum of Agreement is not mandatory, yet it still expressed an intention of the parties as to dispute resolution.

36.    I am also satisfied that the defendants have not waived their right under the Memorandum of Agreement to arbitration. I come to that conclusion because I accept the submission that the decision to depart from the royalty payment scheme triggered the dispute only when the decision was made. 

37.    In the circumstances presented in this matter, clause 42 is based upon a dispute after a decision, not a dispute because a decision to change the royalty payment scheme may be made.

38.    But most persuasively I am of the view that once a party makes a statement to a court that they do not want to attend a mediation on the basis that the circumstances would not allow that party to conclude the matter, as has been stated here, a discretion ought to be exercised to assist the quickest form of resolution.

39.   Further, it became apparent towards the end of submissions for the plaintiffs that the plaintiffs did not really want a mediation either and wanted the court to determine the matter.

40.    The result is that the court has no evidence that either party will attend the mediation with an intention to resolve the dispute.

41.    It is on that basis that I will stay the mediation order and order the parties to organise and attend an arbitration of the dispute.

42.   I need to address section 22 of the Arbitration Act (Chapter 46) which states that the court is not empowered to order any proceedings to which the state is a party to be tried by an arbitrator without the consent of the head of state.

43.   That submission was made towards the end of the hearing – and seemed to be some type of lifeline for the plaintiffs to avoid an arbitration order being made.

44.   The State of Papua New Guinea in this matter is a party to the Memorandum of Agreement with several other parties. As a party the State agreed to clauses 42 and 43 and the Memorandum appears to be a contract or a legally binding document or instrument and one in which the State and its servants impliedly abandoned any right to be claimed under section 22 of the Arbitration Act.

45.    They had that power and it is not an illegal act to contract away this particular right that the State had.

46.  In making the above orders I am aware that only the parties to the Memorandum will have standing and that others who have a general interest in the royalties scheme may be excluded from the arbitration, although the order sought by the applicant appears to include others. I will make that order, but cannot bind the arbitrator.

47.     Because both plaintiffs and defendants now both reject mediation, the matter could have been settled by agreement and so I do not intend making any costs order, other than the parties bear their own costs.

48.    Finally, given the nature of the submissions  I would say that this decision may cause further applications to abandon the arbitration in favour of a trial of the matter, but the intention of the parties is clear as stated in the Memorandum, and unless there are very good grounds, such an application may well be seen to be simply a delaying tactic and one not worthy of the positions of the parties.

ORDER
1.	Pursuant to Section 2 and Section 4 (1) and (2) of the Arbitration Act (Chapter 46) this proceeding and the mediation orders made on 30 April 2024 be permanently stayed and parties to this proceeding and any other party(s) whose interest is affected by the Memorandum of Agreement (Revised) relating to the Lihir Gold Mining Project between the State and the New Ireland Provincial Government and the Nimamar Rural Local Level Government and the Lihir Mining Area Landowners Association Incorporated made on 2 May 2007 (the MOA) be referred to arbitration in accordance with Clause 43 of the MOA by a single international or domestic arbitrator approved by Alternative Dispute Resolution (ADR) Services of the National Court of Justice.

2.	Each party to bear their own costs.

3.	This matter returns on Thursday 3 October 2024, at 9:30 am. 

Judgement accordingly 
________________________________________________________________
Mawa Lawyers:		Lawyers for Plaintiffs
Ashurst Lawyers:		Lawyers for First and Second Defendants
Nelson lawyers:		Lawyers for Third Defendant
Solicitor General:		Lawyers for the Fourth Defendant
In-House Lawyer:		Lawyers for the Fifth Defendant