The Timorese Government appealed the decision of the Supreme Court of Victoria, Australia, which claimed jurisdiction to prosecute an Australian company’s complaint against the Executive under an agreement to supply fuel and generators.
Background: The Jurisdiction Dispute
“The Government of Timor-Leste appealed the decision of the Victoria Supreme Court to grant Lighthouse Corporation Pty Ltd and Lighthouse Corporation IBC the right to hear their case against the Democratic Republic of Timor-Leste and its electricity department (EDTL) in Victoria,” said a statement on behalf of the Timorese Government sent to Lusa.
“Timor-Leste believes that the judge should have considered that the Australian State of Victoria was a clearly inappropriate forum for the dispute to be heard, given the relevance of Timorese law to determine the existence of a contract dispute in the case, and other factors that link the case to Timor-Leste,” the statement said.
In May, Judge Peter Almond of the Commercial Section of the Supreme Court of Victoria rejected the arguments of the Timorese Government, which questioned the jurisdiction of the court to hear Lighthouse’s complaint for alleged breach of a contract for the supply of fuel and generators in 2010.
Lighthouse wants the Timorese Government to pay damages of $328 million, plus interest and costs, on the grounds that Timor-Leste breached the contracts.
Legal Arguments
Lawyers for DL Piper, representing Timor-Leste, had argued that the Victoria Supreme Court did not have jurisdiction to hear the case because it was considered to involve “acts of state,” and therefore the court was an inappropriate forum for resolution of the dispute.
Judge Almond sided with Lighthouse’s lawyers, considering it a business transaction. He also rejected that Timor-Leste should be the venue to hear the dispute, noting there are “significant factors linking Victoria” — including the fact that the agreement explicitly states it is governed by the laws in force in the Australian state.
Prior ICSID Arbitration Attempt
The statement reiterated the position of the Government of Timor-Leste that no binding contract was signed with the Australian company. It noted that the Supreme Court decision “follows a failed attempt by Lighthouse in 2015 to have the dispute heard by the International Settlement of Investment Disputes (ICSID),” which “determined that it had no jurisdiction to hear the case.”
At the time, that court found it had no jurisdiction over the dispute, holding Lighthouse Corporation liable for the total costs of the arbitration process — including court costs — and ordering it to pay Timor-Leste more than $1.5 million (€1.3 million) in legal costs and expenses.
The statement noted that “even if the appeal is denied and the case continues in Victoria, the Government of Timor-Leste is confident in its legal position regarding the lack of a contract between the parties.”
The 2010 Contracts at Stake
At the centre of the dispute are three documents signed between October and November 2010 for the supply of fuel and generators to Timor-Leste. The key parties involved were:
| Party | Role |
|---|---|
| Xanana Gusmão | Prime Minister of Timor-Leste (signatory) |
| Carlos Oliveira | Zebra Fuels, Timor-Leste |
| Albert Jacobs | Lighthouse Corporation, Australia |
In 2010, Lighthouse submitted a proposal to supply approximately seven million litres of fuel per month for a minimum period of five years. Negotiations followed over subsequent months and included a letter of intent for an initial purchase of 7.5 million litres of fuel from Zebra Fuels.
However, Timor-Leste decided not to proceed with that initial proposal. A contract was instead signed with another Timorese company, Timor Oan lt (ETO), for fuel supply between 30 August 2010 and February 2011.
Renewed Negotiations and Generator Dispute
In October 2010, Lighthouse submitted a new proposal and, from that point, negotiations for a fuel supply agreement advanced relatively quickly. Xanana Gusmão wrote to the Australian company to confirm strong interest in the proposal for fuel and generator supply.
The agreements concluded between the parties, according to Lighthouse, provided for the delivery of a Letter of Credit by the Government — which was never honoured by the Timorese side.
At the beginning of 2011, two generators commissioned by Lighthouse from Cummins South Pacific were provided to Timor-Leste through Lighthouse, which billed them to the Government at more than 200% of their initial value. The Government ultimately paid for the generators directly to Cummins.
Source: Lusa