TIMOR LESTE PETROLEUM

Contents

Part 1—Preliminary 2

1 Short title...........................................................................................2

2 Commencement .................................................................................2

3 Object of the Act ...............................................................................3

4 Ministerial Council, Joint Commission and Designated

Authority authorised to exercise rights of Australia ..........................3

5 Definitions .........................................................................................3

Part 2—General provisions 5

6 Prospecting for petroleum .................................................................5

7 Petroleum activities ...........................................................................5

8 Powers of inspectors..........................................................................5

9 Jurisdiction of State and Territory courts...........................................6

10 Northern Territory laws to be applied................................................7

Part 3—Tax provisions 8

Division 1—Tax provisions 8

11 Definitions .........................................................................................8

12 Australian tax—Treaty and taxation code have the force of

law.....................................................................................................8

13 Medicare levy and Medicare levy surcharge to be treated as

income tax .........................................................................................8

14 Incorporation of Australian tax laws .................................................9

15 Calculation of gross tax payable for the purposes of rebate

calculations under the taxation code..................................................9

Division 2—Application and other provisions 11

16 Definitions .......................................................................................11

17 Application of taxation codes in relation to business profits

and business losses ..........................................................................11

18 Application of taxation codes in relation to dividends etc. ..............12

19 Application of new taxation code in relation to individual

residents of East Timor....................................................................13

20 Amendment of assessments for 2001-2002 year of income ............13

Part 4—Transitional provisions 14

21 Definitions .......................................................................................14

22 Retrospective effect of authorities and production sharing

contracts ..........................................................................................14

23 Interim Petroleum Mining Code......................................................14

24 Actions taken under former Petroleum Mining Code ......................15

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 ii

Part 5—Regulations 16

25 Regulations......................................................................................16

Schedule 1—Timor Sea Treaty 17

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 1

Petroleum (Timor Sea Treaty) Act 2003

No. 9, 2003

Part 1 Preliminary

Section 1

2 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

An Act to give effect to the Timor Sea Treaty, and

for related purposes

[Assented to 2 April 2003]

The Parliament of Australia enacts:

Part 1—Preliminary

1 Short title

This Act may be cited as the Petroleum (Timor Sea Treaty) Act

2003.

2 Commencement

(1) Each provision of this Act specified in column 1 of the table

commences, or is taken to have commenced, on the day or at the

time specified in column 2 of the table.

Commencement information

Column 1 Column 2 Column 3

Provision(s) Commencement Date/Details

1. Sections 1 and

2 and anything in

this Act not

elsewhere covered

by this table

The day on which this Act receives the

Royal Assent

2 April 2003

2. Sections 3 to 5 20 May 2002 20 May 2002

3. Sections 6 and

7

The day on which this Act receives the

Royal Assent

2 April 2003

4. Subsection

8(1)

20 May 2002 20 May 2002

5. Subsection

8(2)

The day on which this Act receives the

Royal Assent

2 April 2003

Preliminary Part 1

Section 3

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 3

Commencement information

Column 1 Column 2 Column 3

Provision(s) Commencement Date/Details

6. Sections 9 to

25

20 May 2002 20 May 2002

7. Schedule 1 20 May 2002 20 May 2002

Note: This table relates only to the provisions of this Act as originally

passed by the Parliament and assented to. It will not be expanded to

deal with provisions inserted in this Act after assent.

(2) Column 3 of the table is for additional information that is not part

of this Act. This information may be included in any published

version of this Act.

3 Object of the Act

The object of this Act is to enable Australia to fulfil its obligations

under the Treaty.

4 Ministerial Council, Joint Commission and Designated Authority

authorised to exercise rights of Australia

The Ministerial Council, the Joint Commission and the Designated

Authority exercise the rights and responsibilities of Australia, in

relation to the exploration, development and exploitation of the

petroleum resources of the JPDA, in accordance with the Treaty.

5 Definitions

(1) In this Act, unless the contrary intention appears:

JPDA means the Joint Petroleum Development Area established in

Article 3 of the Treaty.

Petroleum Mining Code means the Code referred to in Article 7 of

the Treaty (including the interim code referred to in paragraph 7(b)

of the Treaty).

Treaty:

Part 1 Preliminary

Section 5

4 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

(a) means the Timor Sea Treaty between Australia and East

Timor done on 20 May 2002, being the Treaty the text of

which is set out in Schedule 1; and

(b) includes that Treaty as amended from time to time.

(2) Unless the contrary intention appears, a word or an expression that

is defined in the Treaty has, when used in this Act, the same

meaning as in the Treaty.

General provisions Part 2

Section 6

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 5

Part 2—General provisions

6 Prospecting for petroleum

A person commits an offence if the person:

(a) prospects for petroleum in the JPDA; and

(b) does so without the approval of the Designated Authority.

Maximum penalty: Imprisonment for 5 years.

7 Petroleum activities

(1) A person commits an offence if the person:

(a) undertakes activities to produce petroleum in or from the

JPDA; and

(b) does so otherwise than:

(i) in accordance with a production sharing contract; or

(ii) with the approval of the Designated Authority.

Maximum penalty: Imprisonment for 5 years.

(2) In subsection (1):

activities to produce petroleum includes exploration, development,

initial processing, production, transportation, marketing, as well as

planning and preparation for such activities.

8 Powers of inspectors

(1) An inspector appointed under the Petroleum Mining Code may, for

the purpose of ascertaining whether:

(a) the Petroleum Mining Code; or

(b) regulations and directions that have effect under the

Petroleum Mining Code; or

(c) contract terms and conditions applying to petroleum

activities in the JPDA;

Part 2 General provisions

Section 9

6 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

have been complied with, at all reasonable times and on production

of a certificate of appointment as an inspector:

(d) enter or board any structure, vessel or aircraft that is in the

JPDA and is being used for petroleum activities; and

(e) inspect and test any equipment being used or proposed to be

used for petroleum activities in the JPDA; and

(f) enter or board any structure, vessel, aircraft or building in

which the inspector has reason to believe that there are any

documents relating to petroleum activities in the JPDA, and

inspect, take extracts from and make copies of any of those

documents.

(2) A person commits an offence if the person:

(a) is in charge of any structure, vessel, aircraft or building

referred to in subsection (1); and

(b) does not, at the request of an inspector, provide the inspector

with all reasonable facilities and assistance for the effective

exercise of powers under this section.

Maximum penalty: 50 penalty units.

9 Jurisdiction of State and Territory courts

(1) Subject to this section, the courts of each State and Territory are

invested with federal jurisdiction in civil matters:

(a) relating to an act or omission done in the JPDA; and

(b) involving damage suffered or expenses incurred by:

(i) Australia, a State or a Territory; or

(ii) a person who is a national, or permanent resident, of

Australia.

(2) The jurisdiction with which courts are invested by subsection (1) is

invested within the limits, other than limits having effect by

reference to localities, of their respective jurisdictions (whether

those limits are as to subject-matter or otherwise).

(3) This section does not limit the jurisdiction of the courts of a State

or Territory arising otherwise than under this section.

General provisions Part 2

Section 10

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 7

10 Northern Territory laws to be applied

(1) Subject to this section, in exercising jurisdiction conferred by

section 9, a court is to apply the laws, whether written or unwritten,

in force in the Northern Territory.

(2) The laws referred to in subsection (1) do not include laws that are:

(a) substantive criminal laws; or

(b) laws of criminal investigation, procedure and evidence;

within the meaning of Schedule 1 to the Crimes at Sea Act 2000,

but nothing in this section detracts from the operation of that Act.

(3) A law is taken to be in force in the Northern Territory even if it

applies only in part of the Northern Territory.

(4) This section does not require a court to apply a law that is

inconsistent with a law of the Commonwealth (including this Act).

(5) This section does not limit the operation that any law has apart

from this section.

(6) The regulations may provide that a law, or specified provisions of a

law, referred to in subsection (1) are not to be applied for the

purposes of that subsection, or are to be so applied with specified

modifications.

Part 3 Tax provisions

Division 1 Tax provisions

Section 11

8 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

Part 3—Tax provisions

Division 1—Tax provisions

11 Definitions

In this Division:

Australian tax means:

(a) tax imposed by the Fringe Benefits Tax Act 1986; or

(b) income tax imposed as such by any Act; or

(c) a charge imposed by the Superannuation Guarantee Charge

Act 1992.

Medicare levy means the Medicare levy imposed by the Medicare

Levy Act 1986.

Medicare levy surcharge means the Medicare levy surcharge

imposed by the A New Tax System (Medicare Levy Surcharge—

Fringe Benefits) Act 1999.

12 Australian tax—Treaty and taxation code have the force of law

Subject to this Part, the provisions of the Treaty and of the taxation

code, so far as those provisions affect Australian tax, have the

force of law according to their tenor.

13 Medicare levy and Medicare levy surcharge to be treated as

income tax

For the purposes of this Part, Medicare levy and Medicare levy

surcharge are taken to be income tax and to be imposed as such

and, unless the contrary intention appears, references to income tax

are to be construed accordingly.

Tax provisions Part 3

Tax provisions Division 1

Section 14

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 9

14 Incorporation of Australian tax laws

(1) Subject to subsection (2), the following Acts are incorporated and

are to be read as one with this Part:

(a) the Fringe Benefits Tax Assessment Act 1986;

(b) the Income Tax Assessment Act 1936;

(c) the Income Tax Assessment Act 1997;

(d) the Superannuation Guarantee (Administration) Act 1992.

(2) The provisions of this Part have effect in spite of anything

inconsistent with those provisions contained in any of the

following Acts:

(a) the Fringe Benefits Tax Assessment Act 1986 (other than

section 67 of that Act);

(b) the Income Tax Assessment Act 1936 (other than Part IVA of

that Act);

(c) the Income Tax Assessment Act 1997;

(d) the Superannuation Guarantee (Administration) Act 1992

(other than section 30 of that Act);

(e) an Act imposing Australian tax.

15 Calculation of gross tax payable for the purposes of rebate

calculations under the taxation code

(1) This section applies where, under Article 5, 12, 13 or 14 of the

taxation code, a taxpayer is entitled to a rebate against income tax

of 90% of the gross tax payable in Australia on particular profits,

or particular income, derived by the taxpayer in a year of income.

(2) In determining that rebate, the gross tax payable in Australia on

those profits or that income is calculated using the formula:

Notional Australian tax

Taxable income

Rebatable amoun× t

where:

notional Australian tax means the amount of income tax that

would be assessed under the Income Tax Assessment Act 1936 and

Part 3 Tax provisions

Division 1 Tax provisions

Section 15

10 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

the Income Tax Assessment Act 1997 in respect of the taxpayer’s

taxable income of the year of income if the taxpayer was not

entitled to any rebate of income tax or credit against the taxpayer’s

liability for income tax.

rebatable amount means so much of the taxpayer’s taxable income

of the year of income as is attributable to those profits or to that

income, as the case may be.

taxable income means the number of whole dollars in the

taxpayer’s taxable income of the year of income.

(3) A reference in this section to income tax is a reference to income

tax imposed as such by any Act.

Tax provisions Part 3

Application and other provisions Division 2

Section 16

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 11

Division 2—Application and other provisions

16 Definitions

(1) In this Division:

new taxation code has the same meaning as taxation code has in

the Treaty.

old taxation code has the same meaning as Taxation Code had in

the Petroleum (Timor Gap Zone of Cooperation) Act 1990

immediately before 20 May 2002.

year of income has the same meaning as in the Income Tax

Assessment Act 1936.

(2) If an expression used in subsection 17(2) or 18(1) is also used in

the old taxation code, the expression has the same meaning as in

the old taxation code.

(3) If an expression used in subsection 17(3) or 18(2) is also used in

the new taxation code, the expression has the same meaning as in

the new taxation code.

17 Application of taxation codes in relation to business profits and

business losses

Calculating business profits and business losses

(1) For the purposes of this section, business profits derived, and

business losses incurred, in the following periods are to be

calculated separately:

(a) the period (the first period):

(i) starting at the beginning of the 2001-2002 year of

income; and

(ii) ending on 19 May 2002; and

(b) the period (the second period):

(i) starting on 20 May 2002; and

Part 3 Tax provisions

Division 2 Application and other provisions

Section 18

12 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

(ii) ending at the end of the 2001-2002 year of income.

Continued application of old taxation code

(2) Despite the repeal of the Petroleum (Timor Gap Zone of

Cooperation) Act 1990, the old taxation code continues to apply in

relation to business profits derived, and business losses incurred, in

the first period.

Application of new taxation code

(3) Subject to section 19, the new taxation code applies in relation to

business profits derived, and business losses incurred:

(a) in the second period; and

(b) in all years of income that begin after the 2001-2002 year of

income ends.

Note: Section 19 deals with the application of the new taxation code in

relation to individual residents of East Timor.

18 Application of taxation codes in relation to dividends etc.

Continued application of old taxation code

(1) Despite the repeal of the Petroleum (Timor Gap Zone of

Cooperation) Act 1990, the old taxation code continues to apply in

relation to:

(a) dividends paid; and

(b) interest paid; and

(c) royalties paid; and

(d) gains of a capital nature accrued; and

(e) losses of a capital nature incurred; and

(f) income in respect of professional services, or other

independent activities of a similar character, derived; and

(g) salaries, wages and other similar remuneration derived; and

(h) other income (but not including business profits) derived;

before 20 May 2002.

Tax provisions Part 3

Application and other provisions Division 2

Section 19

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 13

Application of new taxation code

(2) Subject to section 19, the new taxation code applies in relation to:

(a) dividends paid or credited; and

(b) interest paid or credited; and

(c) royalties paid or credited; and

(d) gains of a capital nature accrued; and

(e) losses of a capital nature incurred; and

(f) income in respect of professional services, or other

independent activities of a similar character, derived; and

(g) salaries, wages and other similar remuneration derived; and

(h) other income (but not including business profits) derived;

on or after 20 May 2002.

Note: Section 19 deals with the application of the new taxation code in

relation to individual residents of East Timor.

19 Application of new taxation code in relation to individual

residents of East Timor

The new taxation code applies only in relation to the 2003-2004

year of income, and all later years of income, for a person if the

person is:

(a) an individual; and

(b) a resident of East Timor.

20 Amendment of assessments for 2001-2002 year of income

Section 170 of the Income Tax Assessment Act 1936 does not

prevent the amendment of an assessment made for the 2001-2002

year of income for the purposes of giving effect to this Part.

Part 4 Transitional provisions

Section 21

14 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

Part 4—Transitional provisions

21 Definitions

In this Part:

former Petroleum Mining Code has the same meaning as

Petroleum Mining Code had in the Petroleum (Timor Gap Zone of

Cooperation) Act 1990 immediately before 20 May 2002.

Joint Authority has the same meaning as it had in the Petroleum

(Timor Gap Zone of Cooperation) Act 1990 immediately before

20 May 2002.

new Petroleum Mining Code means the Petroleum Mining Code

referred to in Article 7 of the Treaty (including the interim code

referred to in paragraph 7(b) of the Treaty).

22 Retrospective effect of authorities and production sharing

contracts

If the Designated Authority determines that:

(a) an approval the Designated Authority grants to a person to

prospect for petroleum, or to undertake petroleum activities,

in the JPDA; or

(b) a production sharing contract the Designated Authority enters

into with a person;

is to be taken to have had effect on and from 20 May 2002, the

approval or contract is taken, for the purposes of this Act, to have

had effect on and from that day.

23 Interim Petroleum Mining Code

If the Joint Commission:

(a) adopts an interim code under paragraph 7(b) of the Treaty;

and

Transitional provisions Part 4

Section 24

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 15

(b) determines that the interim code is to be taken to have had

effect on and from 20 May 2002;

the interim code is taken, for the purposes of this Act, to have had

effect on and from that day.

24 Actions taken under former Petroleum Mining Code

(1) Anything that the Joint Authority purported to do on or after

20 May 2002 for the purposes of the former Petroleum Mining

Code is taken, for the purposes of this Act, to have been done by

the Designated Authority for the purposes of the new Petroleum

Mining Code.

(2) Without limiting subsection (1), any regulations or directions the

Joint Authority purported to issue on or after 20 May 2002 under

the former Petroleum Mining Code are taken, for the purposes of

this Act, to have been issued by the Designated Authority under the

new Petroleum Mining Code.

(3) Anything that an inspector appointed under the former Petroleum

Mining Code purported to do on or after 20 May 2002 for the

purposes of the former Petroleum Mining Code is taken, for the

purposes of this Act, to have been done by an inspector appointed

under the new Petroleum Mining Code for the purposes of the new

Petroleum Mining Code.

Part 5 Regulations

Section 25

16 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

Part 5—Regulations

25 Regulations

(1) The Governor-General may make regulations prescribing all

matters necessary or convenient to be prescribed for carrying out or

giving effect to this Act.

(2) The regulations may prescribe penalties not exceeding a fine of 10

penalty units for offences against regulations made for the

purposes of Part 3.

Timor Sea Treaty Schedule 1

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 17

Schedule 1—Timor Sea Treaty

Note: This is the copy of the Treaty referred to in the definition of Treaty in subsection 5(1) of

this Act.

TIMOR SEA TREATY

THE GOVERNMENT OF AUSTRALIA

and

THE GOVERNMENT OF EAST TIMOR

CONSCIOUS of the importance of promoting East Timor’s economic

development;

AWARE of the need to maintain security of investment for existing and

planned petroleum activities in an area of seabed between Australia and East

Timor;

RECOGNISING the benefits that will flow to both Australia and East Timor

by providing a continuing basis for petroleum activities in an area of seabed

between Australia and East Timor to proceed as planned;

EMPHASISING the importance of developing petroleum resources in a way

that minimizes damage to the natural environment, that is economically

sustainable, promotes further investment and contributes to the long-term

development of Australia and East Timor;

CONVINCED that the development of the resources in accordance with this

Treaty will provide a firm foundation for continuing and strengthening the

friendly relations between Australia and East Timor;

TAKING INTO ACCOUNT the United Nations Convention on the Law of the

Sea done at Montego Bay on 10 December 1982, which provides in Article 83

that the delimitation of the continental shelf between States with opposite or

adjacent coasts shall be effected by agreement on the basis of international law

in order to achieve an equitable solution;

TAKING FURTHER INTO ACCOUNT, in the absence of delimitation, the

further obligation for States to make every effort, in a spirit of understanding

Schedule 1 Timor Sea Treaty

18 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

and co-operation, to enter into provisional arrangements of a practical nature

which do not prejudice a final determination of the seabed delimitation;

NOTING the desirability of Australia and East Timor entering into a Treaty

providing for the continued development of the petroleum resources in an area

of seabed between Australia and East Timor;

HAVE AGREED as follows:

Article 1: Definitions

For the purposes of this Treaty:

(a) “Treaty” means this Treaty, including Annexes A-G and any Annexes

subsequently agreed between Australia and East Timor.

(b) “contractor” means a corporation or corporations which enter into a

contract with the Designated Authority and which is registered as a contractor

under the Petroleum Mining Code”.

(c) “criminal law” means any law in force in Australia and East Timor,

whether substantive or procedural, that makes provision for or in relation to

offences or for or in relation to the investigation or prosecution of offences or

the punishment of offenders, including the carrying out of a penalty imposed by

a court. For this purpose, “investigation” includes entry to an installation or

structure in the JPDA, the exercise of powers of search and questioning and the

apprehension of a suspected offender.

(d) “Designated Authority” means the Designated Authority established in

Article 6 of this Treaty.

(e) “fiscal scheme” means a royalty, a Production Sharing Contract, or

other scheme for determining Australia’s and East Timor’s share of petroleum

or revenue from petroleum activities and does not include taxes referred to in

Article 5 (b) of this Treaty.

(f) “initially processed” means processing of petroleum to a point where it

is ready for off-take from the production facility and may include such

processes as the removal of water, volatiles and other impurities.

Timor Sea Treaty Schedule 1

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 19

(g) “Joint Commission” means the Australia-East Timor Joint Commission

established in Article 6 of this Treaty.

(h) “JPDA” means the Joint Petroleum Development Area established in

Article 3 of this Treaty.

(i) “Ministerial Council” means the Australia-East Timor Ministerial

Council established in Article 6 of this Treaty.

(j) “petroleum” means:

i. any naturally occurring hydrocarbon, whether in a gaseous,

liquid, or solid state;

ii. any naturally occurring mixture of hydrocarbons, whether in a

gaseous, liquid or solid state; or

iii. any naturally occurring mixture of one or more hydrocarbons,

whether in a gaseous, liquid or solid state, as well as other

substances produced in association with such hydrocarbons;

and includes any petroleum as defined by sub-paragraphs (i), (ii) or (iii) that has

been returned to a natural reservoir.

(k) “petroleum activities” means all activities undertaken to produce

petroleum, authorised or contemplated under a contract, permit or licence, and

includes exploration, development, initial processing, production, transportation

and marketing, as well as the planning and preparation for such activities.

(l) “Petroleum Mining Code” means the Code referred to in Article 7 of

this Treaty.

(m) “petroleum project” means petroleum activities taking place in a

specified area within the JPDA.

(n) “petroleum produced” means initially processed petroleum extracted

from a reservoir through petroleum activities.

(o) “Production Sharing Contract” means a contract between the

Designated Authority and a limited liability corporation or entity with limited

Schedule 1 Timor Sea Treaty

20 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

liability under which production from a specified area of the JPDA is shared

between the parties to the contract.

(p) “reservoir” means an accumulation of petroleum in a geological unit

limited by rock, water or other substances without pressure communication

through liquid or gas to another accumulation of petroleum.

(q) “taxation code” means the code referred to in Article 13 (b) of this

Treaty.

Article 2: Without prejudice

(a) This Treaty gives effect to international law as reflected in the United

Nations Convention on the Law of the Sea done at Montego Bay on

10 December 1982 which under Article 83 requires States with opposite or

adjacent coasts to make every effort to enter into provisional arrangements of a

practical nature pending agreement on the final delimitation of the continental

shelf between them in a manner consistent with international law. This Treaty is

intended to adhere to such obligation.

(b) Nothing contained in this Treaty and no acts taking place while this

Treaty is in force shall be interpreted as prejudicing or affecting Australia’s or

East Timor’s position on or rights relating to a seabed delimitation or their

respective seabed entitlements.

Article 3: Joint Petroleum Development Area

(a) The Joint Petroleum Development Area (JPDA) is established. It is the

area in the Timor Sea contained within the lines described in Annex A.

(b) Australia and East Timor shall jointly control, manage and facilitate the

exploration, development and exploitation of the petroleum resources of the

JPDA for the benefit of the peoples of Australia and East Timor.

(c) Petroleum activities conducted in the JPDA shall be carried out

pursuant to a contract between the Designated Authority and a limited liability

corporation or entity with limited liability specifically established for the sole

purpose of the contract. This provision shall also apply to the successors or

assignees of such corporations.

Timor Sea Treaty Schedule 1

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 21

(d) Australia and East Timor shall make it an offence for any person to

conduct petroleum activities in the JPDA otherwise than in accordance with this

Treaty.

Article 4: Sharing of petroleum production

(a) Australia and East Timor shall have title to all petroleum produced in

the JPDA. Of the petroleum produced in the JPDA, ninety (90) percent shall

belong to East Timor and ten (10) percent shall belong to Australia.

(b) To the extent that fees referred to in Article 6(b)(vi) and other income

are inadequate to cover the expenditure of the Designated Authority in relation

to this Treaty, that expenditure shall be borne in the same proportion as set out

in paragraph (a).

Article 5: Fiscal arrangements and taxes

Fiscal arrangements and taxes shall be dealt with in the following manner:

(a) Unless a fiscal scheme is otherwise provided for in this Treaty:

i. Australia and East Timor shall make every possible effort to

agree on a joint fiscal scheme for each petroleum project in the

JPDA.

ii. If Australia and East Timor fail to reach agreement on a joint

fiscal scheme referred to in sub-paragraph (i), they shall jointly

appoint an independent expert to recommend an appropriate

joint fiscal scheme to apply to the petroleum project concerned.

iii. If either Australia or East Timor does not agree to the joint

fiscal scheme recommended by the independent expert,

Australia and East Timor may each separately impose their own

fiscal scheme on their proportion of the production of the

project as calculated in accordance with the formula contained

in Article 4 of this Treaty.

Schedule 1 Timor Sea Treaty

22 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

iv. If Australia and East Timor agree on a joint fiscal scheme

pursuant to this Article, neither Australia nor East Timor may

during the life of the project vary that scheme except by mutual

agreement between Australia and East Timor.

(b) Consistent with the formula contained in Article 4 of this Treaty,

Australia and East Timor may, in accordance with their respective laws and the

taxation code, impose taxes on their share of the revenue from petroleum

activities in the JPDA and relating to activities referred to in Article 13 of this

Treaty.

Article 6: Regulatory bodies

(a) A three-tiered joint administrative structure consisting of a Designated

Authority, a Joint Commission and a Ministerial Council is established.

(b) Designated Authority:

i. For the first three years after this Treaty enters into force, or for

a different period of time if agreed to jointly by Australia and

East Timor, the Joint Commission shall designate the

Designated Authority.

ii. After the period specified in sub-paragraph (i), the Designated

Authority shall be the East Timor Government Ministry

responsible for petroleum activities or, if so decided by the

Ministry, an East Timor statutory authority.

iii. For the period specified in sub-paragraph (i), the Designated

Authority has juridical personality and such legal capacities

under the law of both Australia and East Timor as are necessary

for the exercise of its powers and the performance of its

functions. In particular, the Designated Authority shall have the

capacity to contract, to acquire and dispose of movable and

immovable property and to institute and be party to legal

proceedings.

iv. The Designated Authority shall be responsible to the Joint

Commission and shall carry out the day-to-day regulation and

management of petroleum activities.

Timor Sea Treaty Schedule 1

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 23

v. A non-exclusive listing of more detailed powers and functions

of the Designated Authority is set out in Annex C. The Annexes

to this Treaty may identify other additional detailed powers and

functions of the Designated Authority. The Designated

Authority also has such other powers and functions as may be

conferred upon it by the Joint Commission.

vi. The Designated Authority shall be financed from fees collected

under the Petroleum Mining Code.

vii. For the period specified in sub-paragraph (i), the Designated

Authority shall be exempt from the following existing taxes:

(1) in East Timor, the income tax imposed under the law of

East Timor;

(2) in Australia, the income tax imposed under the federal

law of Australia;

as well as any identical or substantially similar taxes which are

imposed after the date of signature of this Treaty in addition to,

or in place of, the existing taxes.

viii. For the period specified in sub-paragraph (i), personnel of the

Designated Authority:

(1) shall be exempt from taxation of salaries, allowances

and other emoluments paid to them by the Designated

Authority in connection with their service with the

Designated Authority other than taxation under the law

of Australia or East Timor in which they are deemed to

be resident for taxation purposes; and

(2) shall, at the time of first taking up the post with the

Designated Authority located in either Australia or East

Timor in which they are not resident, be exempt from

customs duties and other such charges (except

payments for services) in respect of imports of furniture

and other household and personal effects in their

ownership or possession or already ordered by them

Schedule 1 Timor Sea Treaty

24 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

and intended for their personal use or for their

establishment; such goods shall be imported within six

months of an officer’s first entry but in exceptional

circumstances an extension of time shall be granted by

the Government of Australia or the Government of East

Timor; goods which have been acquired or imported by

officers and to which exemptions under this

sub-paragraph apply shall not be given away, sold, lent

or hired out, or otherwise disposed of except under

conditions agreed in advance with the Government of

Australia or the Government of East Timor depending

on in which country the officer is located.

(c) Joint Commission:

i. The Joint Commission shall consist of commissioners

appointed by Australia and East Timor. There shall be one

more commissioner appointed by East Timor than by Australia.

The Joint Commission shall establish policies and regulations

relating to petroleum activities in the JPDA and shall oversee

the work of the Designated Authority.

ii. A non-exclusive listing of more detailed powers and functions

of the Joint Commission is set out in Annex D. The Annexes to

this Treaty may identify other additional detailed powers and

functions of the Joint Commission.

iii. Except as provided for in Article 8(c), the commissioners of

either Australia or East Timor may at any time refer a matter to

the Ministerial Council for resolution.

iv. The Joint Commission shall meet annually or as may be

required. Its meetings shall be chaired by a member nominated

by Australia and East Timor on an alternate basis.

(d) Ministerial Council:

i. The Ministerial Council shall consist of an equal number of

Ministers from Australia and East Timor. It shall consider any

matter relating to the operation of this Treaty that is referred to

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Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 25

it by either Australia or East Timor. It shall also consider any

matter referred to in sub-paragraph (c) (iii).

ii. In the event the Ministerial Council is unable to resolve a

matter, either Australia or East Timor may invoke the dispute

resolution procedure set out in Annex B.

iii. The Ministerial Council shall meet at the request of either

Australia or East Timor or at the request of the Joint

Commission.

iv. Unless otherwise agreed between Australia and East Timor,

meetings of the Ministerial Council where at least one member

representing Australia and one member representing East

Timor are physically present shall be held alternately in

Australia and East Timor. Its meetings shall be chaired by a

representative of Australia or East Timor on an alternate basis.

v. The Ministerial Council may, if it so chooses, permit members

to participate in a particular meeting, or all meetings, by

telephone, closed-circuit television or any other means of

electronic communication, and a member who so participates is

to be regarded as being present at the meeting. A meeting may

be held solely by means of electronic communication.

(e) Commissioners of the Joint Commission and personnel of the

Designated Authority shall have no financial interest in any activity relating to

exploration for and exploitation of petroleum resources in the JPDA.

Article 7: Petroleum Mining Code

(a) Australia and East Timor shall negotiate an agreed Petroleum Mining

Code which shall govern the exploration, development and exploitation of

petroleum within the JPDA, as well as the export of petroleum from the JPDA.

(b) In the event Australia and East Timor are unable to conclude a

Petroleum Mining Code by the date of entry into force of this Treaty, the Joint

Commission shall in its inaugural meeting adopt an interim code to remain in

effect until a Petroleum Mining Code is adopted in accordance with

paragraph (a).

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26 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

Article 8: Pipelines

(a) The construction and operation of a pipeline within the JPDA for the

purposes of exporting petroleum from the JPDA shall be subject to the approval

of the Joint Commission. Australia and East Timor shall consult on the terms

and conditions of pipelines exporting petroleum from the JPDA to the point of

landing.

(b) A pipeline landing in East Timor shall be under the jurisdiction of East

Timor. A pipeline landing in Australia shall be under the jurisdiction of

Australia.

(c) In the event a pipeline is constructed from the JPDA to the territory of

either Australia or East Timor, the country where the pipeline lands may not

object to or impede decisions of the Joint Commission regarding a pipeline to

the other country. Notwithstanding Article 6(c)(iii), the Ministerial Council may

not review or change any such decisions.

(d) Paragraph (c) shall not apply where the effect of constructing a pipeline

from the JPDA to the other country would cause the supply of gas to be

withheld from a limited liability corporation or limited liability entity which has

obtained consent under this Treaty to obtain gas from a project in the JPDA for

contracts to supply gas for a specified period of time.

(e) Neither Australia nor East Timor may object to, nor in any way impede,

a proposal to use floating gas to liquids processing and off-take in the JPDA on

a commercial basis where such proposal shall produce higher revenues to

Australia and East Timor from royalties and taxes earned from activities

conducted within the JPDA than would be earned if gas were transported by

pipeline.

(f) Paragraph (e) shall not apply where the effect of floating gas to liquids

processing and off-take in the JPDA would cause the supply of gas to be

withheld from a limited liability corporation or limited liability entity which has

obtained consent under this Treaty to obtain gas from the JPDA for contracts to

supply gas for a specified period of time.

Timor Sea Treaty Schedule 1

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 27

(g) Petroleum from the JPDA and from fields which straddle the

boundaries of the JPDA shall at all times have priority of carriage along any

pipeline carrying petroleum from and within the JPDA.

(h) There shall be open access to pipelines for petroleum from the JPDA.

The open access arrangements shall be in accordance with good international

regulatory practice. If Australia has jurisdiction over the pipeline, it shall

consult with East Timor over access to the pipeline. If East Timor has

jurisdiction over the pipeline, it shall consult with Australia over access to the

pipeline.

Article 9: Unitisation

(a) Any reservoir of petroleum that extends across the boundary of the

JPDA shall be treated as a single entity for management and development

purposes.

(b) Australia and East Timor shall work expeditiously and in good faith to

reach agreement on the manner in which the deposit will be most effectively

exploited and on the equitable sharing of the benefits arising from such

exploitation.

Article 10: Marine environment

(a) Australia and East Timor shall co-operate to protect the marine

environment of the JPDA so as to prevent and minimise pollution and other

environmental harm from petroleum activities. Special efforts shall be made to

protect marine animals including marine mammals, seabirds, fish and coral.

Australia and East Timor shall consult as to the best means to protect the marine

environment of the JPDA from the harmful consequences of petroleum

activities.

(b) Where pollution of the marine environment occurring in the JPDA

spreads beyond the JPDA, Australia and East Timor shall co-operate in taking

action to prevent, mitigate and eliminate such pollution.

(c) The Designated Authority shall issue regulations to protect the marine

environment in the JPDA. It shall establish a contingency plan for combating

pollution from petroleum activities in the JPDA.

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28 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

(d) Limited liability corporations or limited liability entities shall be liable

for damage or expenses incurred as a result of pollution of the marine

environment arising out of petroleum activities within the JPDA in accordance

with:

i. their contract, licence or permit or other form of authority

issued pursuant to this Treaty; and

ii. the law of the jurisdiction (Australia or East Timor) in which

the claim is brought.

Article 11: Employment

(a) Australia and East Timor shall:

i. take appropriate measures with due regard to occupational

health and safety requirements to ensure that preference is

given in employment in the JPDA to nationals or permanent

residents of East Timor; and

ii. facilitate, as a matter of priority, training and employment

opportunities for East Timorese nationals and permanent

residents.

(b) Australia shall expedite and facilitate processing of applications for

visas through its Diplomatic Mission in Dili by East Timorese nationals and

permanent residents employed by limited liability corporations or limited

liability entities in Australia associated with petroleum activities in the JPDA.

Article 12: Health and safety for workers

The Designated Authority shall develop, and limited liability corporations or

limited liability entities shall apply, occupational health and safety standards

and procedures for persons employed on structures in the JPDA that are no less

effective than those standards and procedures that would apply to persons

employed on similar structures in Australia and East Timor. The Designated

Authority may adopt, consistent with this Article, standards and procedures

Timor Sea Treaty Schedule 1

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 29

taking into account an existing system established under the law of either

Australia or East Timor.

Article 13: Application of taxation law

(a) For the purposes of taxation law related directly or indirectly to:

i. the exploration for or the exploitation of petroleum in the

JPDA; or

ii. acts, matters, circumstances and things touching, concerning

arising out of or connected with such exploration and

exploitation

the JPDA shall be deemed to be, and treated by, Australia and East Timor, as

part of that country.

(b) The taxation code to provide relief from double taxation relating to

petroleum activities is set out in Annex G.

(c) The taxation code contains its own dispute resolution mechanism.

Article 23 of this Treaty shall not apply to disputes covered by that mechanism.

Article 14: Criminal jurisdiction

(a) A national or permanent resident of Australia or East Timor shall be

subject to the criminal law of that country in respect of acts or omissions

occurring in the JPDA connected with or arising out of exploration for and

exploitation of petroleum resources, provided that a permanent resident of

Australia or East Timor who is a national of the other country shall be subject to

the criminal law of the latter country.

(b) Subject to paragraph (d), a national of a third state, not being a

permanent resident of either Australia or East Timor, shall be subject to the

criminal law of both Australia and East Timor in respect of acts or omissions

occurring in the JPDA connected with or arising out of petroleum activities.

Such a person shall not be subject to criminal proceedings under the law of

either Australia or East Timor if he or she has already been tried and discharged

or acquitted by a competent tribunal or already undergone punishment for the

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30 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

same act or omission under the law of the other country or where the competent

authorities of one country, in accordance with its law, have decided in the

public interest to refrain from prosecuting the person for that act or omission.

(c) In cases referred to in paragraph (b), Australia and East Timor shall, as

and when necessary, consult each other to determine which criminal law is to be

applied, taking into account the nationality of the victim and the interests of the

country most affected by the alleged offence.

(d) The criminal law of the flag state shall apply in relation to acts or

omissions on board vessels including seismic or drill vessels in, or aircraft in

flight over, the JPDA.

(e) Australia and East Timor shall provide assistance to and co-operate

with each other, including through agreements or arrangements as appropriate,

for the purposes of enforcement of criminal law under this Article, including the

obtaining of evidence and information.

(f) Both Australia and East Timor recognise the interest of the other

country where a victim of an alleged offence is a national of that other country

and shall keep that other country informed, to the extent permitted by its law, of

action being taken with regard to the alleged offence.

(g) Australia and East Timor may make arrangements permitting officials

of one country to assist in the enforcement of the criminal law of the other

country. Where such assistance involves the detention of a person who under

paragraph (a) is subject to the jurisdiction of the other country that detention

may only continue until it is practicable to hand the person over to the relevant

officials of that other country.

Article 15: Customs, quarantine and migration

(a) Australia and East Timor may, subject to paragraphs (c), (e), (f) and (g),

apply customs, migration and quarantine laws to persons, equipment and goods

entering its territory from, or leaving its territory for, the JPDA. Australia and

East Timor may adopt arrangements to facilitate such entry and departure.

(b) Limited liability corporations or other limited liability entities shall

ensure, unless otherwise authorised by Australia or East Timor, that persons,

equipment and goods do not enter structures in the JPDA without first entering

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Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 31

Australia or East Timor, and that their employees and the employees of their

subcontractors are authorised by the Designated Authority to enter the JPDA.

(c) Either country may request consultations with the other country in

relation to the entry of particular persons, equipment and goods to structures in

the JPDA aimed at controlling the movement of such persons, equipment or

goods.

(d) Nothing in this Article prejudices the right of either Australia or East

Timor to apply customs, migration and quarantine controls to persons,

equipment and goods entering the JPDA without the authority of either country.

Australia and East Timor may adopt arrangements to co-ordinate the exercise of

such rights.

(e) Goods and equipment entering the JPDA for purposes related to

petroleum activities shall not be subject to customs duties.

(f) Goods and equipment leaving or in transit through either Australia or

East Timor for the purpose of entering the JPDA for purposes related to

petroleum activities shall not be subject to customs duties.

(g) Goods and equipment leaving the JPDA for the purpose of being

permanently transferred to a part of either Australia or East Timor may be

subject to customs duties of that country.

Article 16: Hydrographic and seismic surveys

(a) Australia and East Timor shall have the right to carry out hydrographic

surveys to facilitate petroleum activities in the JPDA. Australia and East Timor

shall co-operate on:

i. the conduct of such surveys, including the provision of

necessary on-shore facilities; and

ii. exchanging hydrographic information relevant to petroleum

activities in the JPDA.

(b) For the purposes of this Treaty, Australia and East Timor shall

co-operate in facilitating the conduct of seismic surveys in the JPDA, including

in the provision of necessary on-shore facilities.

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32 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

Article 17: Petroleum industry vessel—safety, operating standards and crewing

Except as otherwise provided in this Treaty, vessels of the nationality of

Australia or East Timor engaged in petroleum activities in the JPDA shall be

subject to the law of their nationality in relation to safety and operating

standards and crewing regulations. Vessels with the nationality of other

countries shall apply the law of Australia or East Timor depending on whose

ports they operate, in relation to safety and operating standards, and crewing

regulations. Such vessels that enter the JPDA and do not operate out of either

Australia or East Timor under the law of both Australia or East Timor shall be

subject to the relevant international safety and operating standards.

Article 18: Surveillance

(a) For the purposes of this Treaty, Australia and East Timor shall have the

right to carry out surveillance activities in the JPDA.

(b) Australia and East Timor shall co-operate on and co-ordinate any

surveillance activities carried out in accordance with paragraph (a).

(c) Australia and East Timor shall exchange information derived from any

surveillance activities carried out in accordance with paragraph (a).

Article 19: Security measures

(a) Australia and East Timor shall exchange information on likely threats

to, or security incidents relating to, exploration for and exploitation of

petroleum resources in the JPDA.

(b) Australia and East Timor shall make arrangements for responding to

security incidents in the JPDA.

Article 20: Search and rescue

Australia and East Timor shall, at the request of the Designated Authority and

consistent with this Treaty, co-operate on and assist with search and rescue

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Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 33

operations in the JPDA taking into account generally accepted international

rules, regulations and procedures established through competent international

organisations.

Article 21: Air traffic services

Australia and East Timor shall, in consultation with the Designated Authority or

at its request, and consistent with this Treaty, co-operate in relation to the

operation of air services, the provision of air traffic services and air accident

investigations, within the JPDA, in accordance with national laws applicable to

flights to and within the JPDA, recognizing established international rules,

regulations and procedures where these have been adopted by Australia and

East Timor.

Article 22: Duration of the Treaty

This Treaty shall be in force until there is a permanent seabed delimitation

between Australia and East Timor or for thirty years from the date of its entry

into force, whichever is sooner. This Treaty may be renewed by agreement

between Australia and East Timor. Petroleum activities of limited liability

corporations or other limited liability entities entered into under the terms of the

Treaty shall continue even if the Treaty is no longer in force under conditions

equivalent to those in place under the Treaty.

Article 23: Settlement of Disputes

(a) With the exception of disputes falling within the scope of the taxation

code referred to in Article 13(b) of this Treaty and which shall be settled in

accordance with that code, any dispute concerning the interpretation or

application of this Treaty shall, as far as possible, be settled by consultation or

negotiation.

(b) Any dispute which is not settled in the manner set out in paragraph (a)

and any unresolved matter relating to the operation of this Treaty under Article

6(d)(ii) shall, at the request of either Australia or East Timor, be submitted to an

arbitral tribunal in accordance with the procedure set out in Annex B.

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34 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

Article 24: Amendment

This Treaty may be amended at any time by written agreement between

Australia and East Timor.

Article 25: Entry into force

(a) This Treaty shall enter into force upon the day on which Australia and

East Timor have notified each other in writing that their respective requirements

for entry into force of this Treaty have been complied with.

(b) Upon entry into force, the Treaty will be taken to have effect and all of

its provisions will apply and be taken to have applied on and from the date of

signature.

IN WITNESS WHEREOF the undersigned, being duly authorised thereto by

their respective Governments, have signed this Treaty.

DONE at Dili, on this twentieth day of May, Two thousand and two in two

originals in the English language.

For the Government of Australia

For the Government of East Timor

John Howard (Prime Minister)

[Signature omitted]

Mari Alkatiri (Prime Minister)

[Signature omitted]

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Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 35

Annex A under Article 3 of this Treaty

Designation and Description of the JPDA

NOTE

Where for the purposes of the Treaty it is necessary to determine the position on

the surface of the Earth of a point, line or area, that position shall be determined

by reference to the Australian Geodetic Datum, that is to say, by reference to a

spheroid having its centre at the centre of the Earth and a major (equatorial)

radius of 6 378 160 metres and a flattening of 1/298.25 and by reference to the

position of the Johnston Geodetic Station in the Northern Territory of Australia.

That station shall be taken to be situated at Latitude 25o56’54.5515” South and

at Longitude 133o12’30.0771” East and to have a ground level of 571.2 metres

above the spheroid referred to above.

THE AREA

The area bounded by the line-

(a) commencing at the point of Latitude 9deg. 22’ 53” South, Longitude

127deg. 48’ 42” East;

(b) running thence south-westerly along the geodesic to the point of Latitude

10deg. 06’ 40” South, Longitude 126deg. 00’ 25” East;

(c) thence south-westerly along the geodesic to the point of Latitude 10deg. 28’

00” South, Longitude 126deg. 00’ 00” East;

(d) thence south-easterly along the geodesic to the point of Latitude 11deg. 20’

08” South, Longitude 126deg. 31’ 54” East;

(e) thence north-easterly along the geodesic to the point of Latitude 11deg. 19’

46” South, Longitude 126deg. 47’ 04” East;

(f) thence north-easterly along the geodesic to the point of Latitude 11deg. 17’

36” South, Longitude 126deg. 57’ 07” East;

(g) thence north-easterly along the geodesic to the point of Latitude 11deg. 17’

30” South, Longitude 126deg. 58’ 13” East;

(h) thence north-easterly along the geodesic to the point of Latitude 11deg. 14’

24” South, Longitude 127deg. 31’ 33” East;

(i) thence north-easterly along the geodesic to the point of Latitude 10deg. 55’

26” South, Longitude 127deg. 47’ 04” East;

Schedule 1 Timor Sea Treaty

36 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

(j) thence north-easterly along the geodesic to the point of Latitude 10deg. 53’

42” South, Longitude 127deg. 48’ 45” East;

(k) thence north-easterly along the geodesic to the point of Latitude 10deg. 43’

43” South, Longitude 127deg. 59’ 16” East;

(l) thence north-easterly along the geodesic to the point of Latitude 10deg. 29’

17” South, Longitude 128deg. 12’ 24” East;

(m) thence north-westerly along the geodesic to the point of Latitude 9deg. 29’

57” South, Longitude 127deg. 58’ 47” East;

(n) thence north-westerly along the geodesic to the point of Latitude 9deg. 28’

00” South, Longitude 127deg. 56’ 00” East; and

(o) thence north-westerly along the geodesic to the point of commencement.

Timor Sea Treaty Schedule 1

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 37

Annex B under Article 23 of this Treaty

Dispute Resolution Procedure

(a) An arbitral tribunal to which a dispute is submitted pursuant to Article

23 (b), shall consist of three persons appointed as follows:

i. Australia and East Timor shall each appoint one arbitrator;

ii. the arbitrators appointed by Australia and East Timor shall,

within sixty (60) days of the appointment of the second of

them, by agreement, select a third arbitrator who shall be a

citizen, or permanent resident of a third country which has

diplomatic relations with both Australia and East Timor;

iii. Australia and East Timor shall, within sixty (60) days of the

selection of the third arbitrator, approve the selection of that

arbitrator who shall act as Chairman of the Tribunal.

(b) Arbitration proceedings shall be instituted upon notice being given

through the diplomatic channel by the country instituting such proceedings to

the other country. Such notice shall contain a statement setting forth in

summary form the grounds of the claim, the nature of the relief sought, and the

name of the arbitrator appointed by the country instituting such proceedings.

Within sixty (60) days after the giving of such notice the respondent country

shall notify the country instituting proceedings of the name of the arbitrator

appointed by the respondent country.

(c) If, within the time limits provided for in sub-paragraphs (a) (ii) and (iii)

and paragraph (b) of this Annex, the required appointment has not been made or

the required approval has not been given, Australia or East Timor may request

the President of the International Court of Justice to make the necessary

appointment. If the President is a citizen or permanent resident of Australia or

East Timor or is otherwise unable to act, the Vice-President shall be invited to

make the appointment. If the Vice-President is a citizen, or permanent resident

of Australia or East Timor or is otherwise unable to act, the Member of the

International Court of Justice next in seniority who is not a citizen or permanent

resident of Australia or East Timor shall be invited to make the appointment.

(d) In case any arbitrator appointed as provided for in this Annex shall

resign or become unable to act, a successor arbitrator shall be appointed in the

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38 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

same manner as prescribed for the appointment of the original arbitrator and the

successor shall have all the powers and duties of the original arbitrator.

(e) The Arbitral Tribunal shall convene at such time and place as shall be

fixed by the Chairman of the Tribunal. Thereafter, the Arbitral Tribunal shall

determine where and when it shall sit.

(f) The Arbitral Tribunal shall decide all questions relating to its

competence and shall, subject to any agreement between Australia and East

Timor, determine its own procedure.

(g) Before the Arbitral Tribunal makes a decision, it may at any stage of the

proceedings propose to Australia and East Timor that the dispute be settled

amicably. The Arbitral Tribunal shall reach its award by majority vote taking

into account the provisions of this Treaty and relevant international law.

(h) Australia and East Timor shall each bear the costs of its appointed

arbitrator and its own costs in preparing and presenting cases. The cost of the

Chairman of the Tribunal and the expenses associated with the conduct of the

arbitration shall be borne in equal parts by Australia and East Timor.

(i) The Arbitral Tribunal shall afford to Australia and East Timor a fair

hearing. It may render an award on the default of either Australia or East Timor.

In any case, the Arbitral Tribunal shall render its award within six (6) months

from the date it is convened by the Chairman of the Tribunal. Any award shall

be rendered in writing and shall state its legal basis. A signed counterpart of the

award shall be transmitted to Australia and East Timor.

(j) An award shall be final and binding on Australia and East Timor.

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Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 39

Annex C under Article 6(b)(v) of this Treaty

Powers and Functions of the Designated Authority

The powers and functions of the Designated Authority shall include:

(a) day-to-day management and regulation of petroleum activities in

accordance with this Treaty and any instruments made or entered into under this

Treaty, including directions given by the Joint Commission;

(b) preparation of annual estimates of income and expenditure of the

Designated Authority for submission to the Joint Commission. Any expenditure

shall only be made in accordance with estimates approved by the Joint

Commission or otherwise in accordance with regulations and procedures

approved by the Joint Commission;

(c) preparation of annual reports for submission to the Joint Commission;

(d) requesting assistance from the appropriate Australian and East Timor

authorities consistent with this Treaty

i. for search and rescue operations in the JPDA;

ii. in the event of a terrorist threat to the vessels and structures

engaged in petroleum operations in the JPDA; and

iii. for air traffic services in the JPDA;

(e) requesting assistance with pollution prevention measures, equipment

and procedures from the appropriate Australian and East Timor authorities or

other bodies or persons;

(f) establishment of safety zones and restricted zones, consistent with

international law, to ensure the safety of navigation and petroleum operations;

(g) controlling movements into, within and out of the JPDA of vessels,

aircraft, structures and other equipment employed in exploration for and

exploitation of petroleum resources in a manner consistent with international

law; and, subject to Article 15, authorising the entry of employees of contractors

and their subcontractors and other persons into the JPDA;

(h) issuing regulations and giving directions under this Treaty on all

matters related to the supervision and control of petroleum activities including

Schedule 1 Timor Sea Treaty

40 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

on health, safety, environmental protection and assessments and work practices,

pursuant to the Petroleum Mining Code; and

(i) such other powers and functions as may be identified in other Annexes

to this Treaty or as may be conferred on it by the Joint Commission.

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Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 41

Annex D under Article 6(c)(ii) of this Treaty

Powers and Functions of the Joint Commission

1. The powers and functions of the Joint Commission shall include:

(a) giving directions to the Designated Authority on the discharge of its

powers and functions;

(b) conferring additional powers and functions on the Designated

Authority;

(c) adopting an interim Petroleum Mining Code pursuant to Article 7(b) of

the Treaty, if necessary;

(d) approving financial estimates of income and expenditure of the

Designated Authority;

(e) approving rules, regulations and procedures for the effective

functioning of the Designated Authority;

(f) designating the Designated Authority for the period referred to in

Article 6(b)(i);

(g) at the request of a member of the Joint Commission inspecting and

auditing the Designated Authority’s books and accounts or arranging for such

an audit and inspection;

(h) approving the result of inspections and audits of contractors’ books and

accounts conducted by the Joint Commission;

(i) considering and adopting the annual report of the Designated Authority;

(j) of its own volition or on recommendation by the Designated Authority,

in a manner not inconsistent with the objectives of this Treaty amending the

Petroleum Mining Code to facilitate petroleum activities in the JPDA;

2. The Joint Commission shall exercise its powers and functions for the

benefit of the peoples of Australia and East Timor having regard to good

oilfield, processing, transport and environmental practice.

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42 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

Annex E under Article 9(b) of this Treaty

Unitisation of Greater Sunrise

(a) Australia and East Timor agree to unitise the Sunrise and Troubadour

deposits (collectively known as ‘Greater Sunrise’) on the basis that 20.1% of

Greater Sunrise lies within the JPDA. Production from Greater Sunrise shall be

distributed on the basis that 20.1% is attributed to the JPDA and 79.9% is

attributed to Australia.

(b) Either Australia or East Timor may request a review of the production

sharing formula. Following such a review, the production sharing formula may

be altered by agreement between Australia and East Timor.

(c) The unitisation agreement referred to in paragraph (a) shall be without

prejudice to a permanent delimitation of the seabed between Australia and East

Timor.

(d) In the event of a permanent delimitation of the seabed, Australia and

East Timor shall reconsider the terms of the unitisation agreement referred to in

paragraph (a). Any new agreement shall preserve the terms of any production

sharing contract, licence or permit which is based on the agreement in

paragraph (a).

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Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 43

Annex F under Article 5(a) of this Treaty

Fiscal Scheme for Certain Petroleum Deposits

Contracts shall be offered to those corporations holding, immediately before

entry into force of the Treaty, contracts numbered 91-12, 91-13, 95-19, and

96-20 in the same terms as those contracts, modified to take into account the

administrative structure under this Treaty, or as otherwise agreed by Australia

and East Timor.

Schedule 1 Timor Sea Treaty

44 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

Annex G under Article 13 (b) of this Treaty

Taxation Code for the Avoidance of Double Taxation and the Prevention of

Fiscal Evasion in Respect of Activities Connected with the Joint Petroleum

Development Area

Article 1

General definitions

1. In this Taxation Code, unless the context otherwise requires:

(a) the term “Australian tax” means tax imposed by Australia,

other than any penalty or interest, being tax to which this

Taxation Code applies;

(b) the term “company” means any body corporate or any entity

which is treated as a company or body corporate for tax

purposes;

(c) the term “competent authority” means, in the case of Australia,

the Commissioner of Taxation or an authorised representative

of the Commissioner and, in the case of East Timor, the

Minister for Finance or an authorised representative of the

Minister;

(d) the term “East Timor tax” means tax imposed by East Timor,

other than any penalty or interest, being tax to which this

Taxation Code applies;

(e) the term “framework percentage” means, in the case of

Australia, ten (10) percent and, in the case of East Timor,

ninety (90) percent;

(f) the term “law of a Contracting State” means the law from time

to time in force in that Contracting State relating to the taxes to

which this Taxation Code applies;

(g) the term “person” includes an individual, a company and any

other body of persons;

Timor Sea Treaty Schedule 1

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 45

(h) the term “reduction percentage” means, in the case of Australia,

ninety (90) percent and, in the case of East Timor, ten (10)

percent;

(i) the terms “tax” or “taxation” mean Australian tax or East Timor

tax, as the context requires; and

(j) the term “year” means, in Australia, any year of income and, in

East Timor, any tax year.

2. In the application of this Taxation Code at any time by a Contracting

State any term not defined in this Taxation Code or elsewhere in the Treaty

shall, unless the context otherwise requires, have the meaning which it has at

that time under the law of that Contracting State for the purposes of the taxes to

which this Taxation Code applies, any meaning under the applicable tax law of

that State prevailing over a meaning given to the term under other law of that

State.

Article 2

Personal scope

The provisions of this Taxation Code shall apply to persons who are

residents of one or both of the Contracting States as well as in respect of

persons who are not residents of either of the Contracting States, but only for

taxation purposes related directly or indirectly to:

(a) the exploration for or the exploitation of petroleum in the

JPDA; or

(b) acts, matters, circumstances and things touching, concerning,

arising out of or connected with any such exploration or

exploitation.

Article 3

Resident

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46 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

1. For the purposes of this Taxation Code, resident of a Contracting State

means:

(a) in the case of Australia, a person who is liable to tax in

Australia by reason of being a resident of Australia under the

tax law of Australia; and

(b) in the case of East Timor, a person who is liable to tax in East

Timor by reason of being a resident of East Timor under the tax

law of East Timor,

but does not include any person who is liable to tax in that Contracting State in

respect only of income from sources in that Contracting State.

2. Where by reason of the provisions of paragraph 1 of this Article, an

individual is a resident of both Contracting States, then the status of the person

shall be determined as follows:

(a) the person shall be deemed to be a resident solely of the

Contracting State in which a permanent home is available to the

person;

(b) if a permanent home is available to the person in both

Contracting States, or in neither of them, the person shall be

deemed to be a resident solely of the Contracting State in which

the person has an habitual abode;

(c) if the person has an habitual abode in both Contracting States,

or if the person does not have an habitual abode in either of

them, the person shall be deemed to be a resident solely of the

Contracting State with which the person’s personal and

economic relations are the closer. For the purposes of this

subparagraph, an individual’s nationality or citizenship of one

of the Contracting States shall be a factor in determining the

degree of the individual’s personal and economic relations with

that Contracting State;

(d) if it cannot be determined with which Contracting State the

person’s personal and economic relations are the closer, the

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Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 47

competent authorities of the Contracting States shall consult

with a view to settling the question by mutual agreement.

3. Where by reason of the provisions of paragraph 1 of this Article, a person

other than an individual is a resident of both Contracting States, then it shall be

deemed to be a resident solely of the Contracting State in which its place of

effective management is situated.

Article 4

Taxes covered

1. The existing taxes to which this Taxation Code shall apply are:

(a) in Australia:

(i) the income tax, but excluding the petroleum resource rent tax;

(ii) the fringe benefits tax;

(iii) the goods and services tax; and

(iv) the superannuation guarantee charge,

imposed under the federal law of Australia;

(b) in East Timor:

(i) the income tax, including either the tax on profits after income

tax or the additional profits tax, as applicable to a specified

petroleum project or part of a project;

(ii) the value added tax and sales tax on luxury goods (“value

added tax”); and

(iii) the sales tax,

imposed under the law of East Timor.

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48 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

2. The provisions of this Taxation Code shall also apply to any identical or

substantially similar taxes which are imposed after the date of signature of this

Treaty in addition to, or in place of, the existing taxes. The competent

authorities of the Contracting States shall notify each other of any relevant

changes which have been made in their respective taxation law as soon as

possible after such changes.

3. A Contracting State shall not impose a tax not covered by the

provisions of the Taxation Code in respect of or applicable to:

(a) the exploration for or exploitation of petroleum in the JPDA; or

(b) any petroleum exploration or exploitation related activity

carried on in the JPDA,

unless the other Contracting State consents to the imposition of that tax.

4. Nothing in paragraph 3 of this Article shall be taken to prevent a

Contracting State from imposing, in accordance with its law, penalty or interest

charges relating to the taxes covered by this Taxation Code.

Article 5

Business profits

1. For the purposes of the taxation law of each Contracting State, the

business profits or losses of a person, other than an individual, derived from, or

incurred in, the JPDA in a year shall be reduced by the reduction percentage.

2. (a) Business profits or losses derived from the JPDA in a year by an

individual who is a resident of a Contracting State may be taxed in

both Contracting States as reduced by the reduction percentage.

(b) Notwithstanding subparagraph 2(a), the Contracting State of which

the individual is a resident may tax those profits or recognise those

losses without such reduction. In such a case, that Contracting State

shall provide a tax offset against the tax payable on those profits by

the individual in that State for the tax paid in the other Contracting

State.

Timor Sea Treaty Schedule 1

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 49

3. Business profits derived from the JPDA in a year by an individual who is

not a resident of either Contracting State may be taxed in both Contracting

States but subject to a rebate entitlement against the tax payable in each

Contracting State of the reduction percentage of the gross tax payable on those

profits in that Contracting State.

4. Business losses, incurred in the JPDA in a year by an individual who is

not a resident of either Contracting State, that are eligible under the law of a

Contracting State to be carried forward for deduction against future income

shall, for the purposes of that law, be reduced by the reduction percentage.

5. Where losses are brought forward from prior years as a deduction, those

losses may not also be taken into account when calculating the business profits

or business losses for the year in which they are brought forward as a deduction.

6. Where profits include items of income which are dealt with separately

in other Articles of this Taxation Code or where losses are dealt with separately

in other Articles of this Taxation Code, then the provisions of those Articles

shall not be affected by the provisions of this Article.

7. In establishing whether business profits are derived from the JPDA for

the purposes of this Article, regard is to be had to internationally accepted

principles on the source of business profits, particularly taking into

consideration the extent to which activities in the JPDA, or assets located in the

JPDA, rather than elsewhere, contributed to those business profits. In applying

such internationally accepted principles special regard shall be had to the

location of:

(a) any activities or functions contributing to the business profits;

(b) any assets relevant to the derivation of the business profits; and

(c) any business and financial risks assumed by an entity and which

relate to the business profits.

8. For the purposes of paragraph 7, particular account should be had to the

terms of any relevant unitisation agreement to the extent to which they do not

conflict with the internationally accepted principles referred to in that

paragraph.

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50 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

9. In determining whether business losses are incurred in the JPDA, regard

is to be had to internationally accepted principles as to where business losses are

incurred, with a view to an approach consistent with paragraphs 7 and 8 of this

Article.

10. Where particular business profits are derived wholly or principally from

the JPDA, or particular business losses are incurred wholly or principally in the

JPDA, then such profits or losses shall be treated as fully derived from or fully

incurred in, as the case may be, the JPDA. In other cases, the relevant

proportion should be attributed to the JPDA. In the application of this paragraph

the Contracting States shall seek a consistent approach, including as between

the treatment of profits and losses, and should consult if necessary to this end.

11. For the purposes of this Taxation Code, the East Timor additional

profits tax shall be regarded as a tax on business profits.

Article 6

Shipping and air transport

1. Profits from all shipping and air transport, where the transport of the

relevant goods or persons commences at a place in the JPDA to any other place,

whether inside or outside the JPDA, shall in their entirety be regarded as

business profits derived from the JPDA.

2. Profits from all shipping and air transport internal to the JPDA, shall in

their entirety be regarded as business profits derived from the JPDA.

3. Profits from all shipping and air transport, where the transport of the

relevant goods or persons commences outside the JPDA, and ends in the JPDA,

shall not be regarded as derived from the JPDA.

Article 7

Petroleum Valuation

The value of petroleum shall for all purposes under the taxation law of

both Contracting States be the value as determined in accordance with

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Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 51

internationally accepted arm’s length principles having due regard to functions

performed, assets used and risks assumed.

Article 8

Dividends

1. Dividends paid or credited by a company which is a resident of a

Contracting State wholly or mainly out of profits, income or gains derived from

sources in the JPDA, and which are beneficially owned by a resident of the

other Contracting State, may be taxed in that other Contracting State. However,

such dividends may also be taxed in the first-mentioned Contracting State and

according to the law of that State, but the tax so charged shall not exceed fifteen

(15) per cent of the gross amount of the dividends.

2. Dividends paid or credited by a company which is a resident of a

Contracting State wholly or mainly out of profits, income or gains derived from

sources in the JPDA, and which are beneficially owned by a resident of that

Contracting State, shall be taxable only in that State.

3. Dividends paid or credited by a company which is a resident of a

Contracting State wholly or mainly out of profits, income or gains derived from

sources in the JPDA, and which are beneficially owned by a person who is not a

resident of either Contracting State, may be taxed in both Contracting States but

the taxable amount of any such dividends shall be an amount equivalent to the

framework percentage of the amount that would be the taxable amount but for

this paragraph.

4. The term “dividends” as used in this Article means income from shares

or other rights participating in profits and not relating to debt claims, as well as

other income which is subjected to the same taxation treatment as income from

shares by the law of the Contracting State of which the company making the

distribution is a resident.

5. Notwithstanding any other provisions of this Taxation Code, where a

company which is a resident of a Contracting State derives profits, income or

gains from the JPDA, such profits, income or gains may be subject in the other

Contracting State to a tax on profits after income tax in accordance with its law,

but such tax shall not exceed fifteen (15) per cent of the gross amount of such

profits, income or gains after deducting from those profits, income or gains the

Schedule 1 Timor Sea Treaty

52 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

income tax imposed on them in that other State. Such tax shall be imposed upon

the amount equivalent to the framework percentage of the amount that would be

taxed but for this paragraph.

6. For the purposes of this Article, “derived from” has the same meaning

as expressed in Article 5.

Article 9

Interest

1. Interest paid or credited by a contractor, being interest to which a

resident of a Contracting State is beneficially entitled, may be taxed in that

Contracting State.

2. Such interest may also be taxed in the other Contracting State, but the

tax so charged shall not exceed ten (10) per cent of the gross amount of the

interest.

3. Interest paid or credited by a contractor, being interest to which a

person who is not a resident of either Contracting State is beneficially entitled,

may be taxed in both Contracting States but the taxable amount of any such

interest shall be an amount equivalent to the framework percentage of the

amount that would be the taxable amount but for this paragraph.

4. The term “interest” in this Taxation Code, includes interest from bonds

or debentures, whether or not secured by mortgage and whether or not carrying

a right to participate in profits, interest from any form of indebtedness and all

other income assimilated to income from money lent by law, relating to tax, of

the Contracting State in which the income arises.

Article 10

Royalties

1. Royalties paid or credited by a contractor, being royalties to which a

resident of a Contracting State is beneficially entitled, may be taxed in that

Contracting State.

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Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 53

2. Such royalties may also be taxed in the other Contracting State, but the

tax so charged shall not exceed ten (10) per cent of the gross amount of the

royalties.

3. Royalties paid or credited by a contractor, being royalties to which a

person who is not a resident of either Contracting State is beneficially entitled,

may be taxed in both Contracting States but the taxable amount of any such

royalties shall be an amount equivalent to the framework percentage of the

amount that would be the taxable amount but for this paragraph.

4. The term “royalties” in this Article means payments or credits, whether

periodical or not, and however described or computed, to the extent to which

they are made as consideration for:

(a) the use of, or the right to use, any copyright, patent, design or

model, plan, secret formula or process, trademark or other like

property or right;

(b) the use of, or the right to use, any industrial, commercial or

scientific equipment;

(c) the supply of scientific, technical, industrial or commercial

knowledge or information;

(d) the supply of any assistance that is ancillary and subsidiary to,

and is furnished as a means of enabling the application or

enjoyment of, any such property or right as is mentioned in

subparagraph (a), any such equipment as is mentioned in

subparagraph (b) or any such knowledge or information as is

mentioned in subparagraph (c); or

(e) total or partial forbearance in respect of the use or supply of any

property or right referred to in this paragraph.

Article 11

Alienation of property

1. Where a gain or loss of a capital nature accrues to or is incurred by a

person, other than an individual who is a resident of a Contracting State, from

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54 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

the alienation of property situated in the JPDA or of shares or comparable

interests in a company, the assets of which consist (directly or indirectly,

including for example through a chain of companies), wholly or principally of

property situated in the JPDA, the amount of gain or loss shall, for the purposes

of the law of a Contracting State, be an amount equivalent to the framework

percentage of the amount that would be the gain or loss but for this paragraph.

2. When a gain or loss of a capital nature accrues to or is incurred by an

individual who is a resident of a Contracting State, from the alienation of

property situated in the JPDA or of shares or comparable interests in a

company, the assets of which consist (directly or indirectly, including for

example through a chain of companies), wholly or mainly of property situated

in the JPDA, the amount of the gain or loss may, for the purposes of the law of

a Contracting State, be an amount equivalent to the reduction percentage of the

amount that would be the gain or loss but for this paragraph.

3. Notwithstanding paragraph 2, the Contracting State of which the

individual is a resident may tax that gain or recognise that loss of a capital

nature without such reduction. In such a case, that Contracting State shall

provide a tax offset against the tax payable on that gain by the individual in that

other Contracting State.

Article 12

Independent personal services

1. Income derived by an individual who is a resident of a Contracting

State in respect of professional services, or other independent activities of a

similar character, performed in the JPDA may be taxed in both Contracting

States as reduced by the reduction percentage.

2. Notwithstanding paragraph (1), the Contracting State of which the

individual is a resident may tax such income without such reduction. In such a

case, that Contracting State shall provide a tax offset against the tax payable on

that income by the individual in that State for the tax paid in the other

Contracting State.

3. Income derived by an individual who is not a resident of either

Contracting State in respect of professional services, or other independent

activities of a similar character, performed in the JPDA may be taxed in both

Timor Sea Treaty Schedule 1

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 55

Contracting States but subject to a rebate entitlement against the tax payable in

each Contracting State of the reduction percentage of the gross tax payable in

that Contracting State on income referred to in this paragraph.

Article 13

Dependent personal services

1. Salaries, wages and other similar remuneration derived by an individual

who is a resident of a Contracting State in respect of employment exercised in

the JPDA may be taxed in both Contracting States as reduced by the reduction

percentage.

2. Notwithstanding paragraph (1), the Contracting State in which the

individual is a resident may tax such remuneration without such reduction. In

such a case, that State shall provide a tax offset against the tax payable on such

remuneration by the individual in that Contracting State for the tax paid in the

other Contracting State.

3. Remuneration derived by an individual who is not a resident of either

Contracting State in respect of employment exercised in the JPDA may be taxed

in both Contracting States but subject to a rebate entitlement against the tax

payable in each Contracting State of the reduction percentage of the gross tax

payable in that Contracting State on the income referred to in this paragraph.

Article 14

Other income

1. Items of income of a resident of a Contracting State other than an

individual, derived from sources in the JPDA and not dealt with in the

foregoing Articles of this Taxation Code, shall be reduced by the reduction

percentage.

2. Items of income of a resident individual of a Contacting State derived

from sources in the JPDA and not dealt with in the foregoing Articles of this

Taxation Code, may be taxed in both Contracting States as reduced by the

reduction percentage.

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56 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

3. Notwithstanding paragraph (2), the Contracting State in which the

individual is a resident may tax such items of income without such reduction. In

such a case, that State shall provide a tax offset against the tax payable on those

items of income by the individual in that State for the tax paid in the other

Contracting State.

4. Items of income of a person who is not a resident of either Contracting

State, derived from sources in the JPDA and not dealt with in the foregoing

Articles of this Taxation Code may be taxed in both Contracting States but

subject to a rebate entitlement against the tax payable in each Contracting State

of the reduction percentage of the gross tax payable in that Contracting State on

the income referred to in this paragraph.

5. For the purposes of this Article, “derived from” has the same meaning

as expressed in Article 5.

Article 15

Fringe benefits

For the purposes of the taxation law of Australia, the amount of

Australian fringe benefits tax payable in relation to fringe benefits provided to

employees in a year, in respect of employment exercised in the JPDA, shall be:

(a) in the case of such employees who are residents of Australia,

the fringe benefits tax may be applied without reduction;

(b) in respect of employees who are residents of East Timor, the

fringe benefits tax shall not be applied; and

(c) in respect of employees who are not residents of either

Contracting State, the amount payable shall be reduced by the

reduction percentage.

Article 16

Superannuation guarantee charge

Timor Sea Treaty Schedule 1

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 57

The superannuation guarantee charge imposed by Australia in respect of

employment exercised in the JPDA in a year may be applied only in so far as it

relates to employees who are residents of Australia, in which case it may be

applied without reduction.

Article 17

Miscellaneous

In any case where income, profits or gains are not derived from the JPDA

as that term is used in Article 5, for the purposes of this Code, neither

Contracting State shall tax those income, profits or gains on a basis, in effect, of

their source in the JPDA.

Article 18

Indirect taxes

Goods introduced into the JPDA, whether or not from a Contracting

State, and services provided to a person in the JPDA, may, at or following

introduction, be taxed in both Contracting States in accordance with applicable

Australian goods and services tax law or the East Timor value added tax or sales

tax law as the case may be, but the taxable amount in relation to such goods and

services shall be an amount equivalent to the framework percentage of the

amount that would be the taxable amount but for this paragraph.

Article 19

Avoidance of double taxation

1. In the case of Australia, subject to the provisions of the law of Australia

from time to time in force which relate to the allowance of a credit against

Australian tax of tax paid in a country outside Australia (which shall not affect

the general principle of this Article), East Timor tax paid under the law of East

Timor and in accordance with this Taxation Code, whether directly or by

deduction, in respect of income derived by a person who is a resident of

Australia of the following types:

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58 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

(a) dividends paid wholly or mainly out of profits, income or gains

as referred to in paragraph 1 of Article 8;

(b) interest paid by a contractor as referred to in paragraph 2 of

Article 9;

(c) royalties paid by a contractor as referred to in paragraph 2 of

Article 10; or

(d) profits, income or gains after income tax as referred to in

paragraph 5 of Article 8,

shall be allowed as a credit against Australian tax payable in respect of that

income.

2. In the case of East Timor, subject to the provisions of the law of East

Timor from time to time in force which relate to the allowance of a credit

against East Timor tax of tax paid in a country outside East Timor (which shall

not affect the general principle of this Article), Australian tax paid under the law

of Australia and in accordance with this Taxation Code, whether directly or by

deduction, in respect of income derived by a person who is a resident of East

Timor of the following types:

(a) dividends paid wholly or mainly out of profits, income or gains

as referred to in paragraph 1 of Article 8;

(b) interest paid by a contractor as referred to in paragraph 2 of

Article 9;

(c) royalties paid by a contractor as referred to in paragraph 2 of

Article 10; or

(d) profits, income or gains after income tax as referred to in

paragraph 5 of Article 8,

shall be allowed as a credit against East Timor tax payable in respect of that

income.

3. The dividends, interest or royalties taxed by a Contracting State in

accordance with the provisions of this Taxation Code and referred to in this

Article shall for the purposes of determining a foreign tax credit entitlement

Timor Sea Treaty Schedule 1

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 59

under the law of the other Contracting State, be deemed to be income derived

from sources in the first-mentioned Contracting State.

Article 20

Mutual agreement procedure

1. Where a person considers that the actions of the competent authority of

one or both of the Contracting States result or will result for the person in

taxation not in accordance with the provisions of this Taxation Code, the person

may, irrespective of the remedies provided by the domestic law of the

Contracting States, present a case to the competent authority of the Contracting

State of which the person is a resident, or to either competent authority in the

case of persons who are not residents of either Contracting State. The case must

be presented within thirty-six (36) months from the first notification of the

action resulting in taxation not in accordance with the provisions of the

Taxation Code.

2. The competent authority shall endeavour, if the claim appears to it to be

justified and if it is not itself able to arrive at a satisfactory solution, to resolve

the case by agreement with the competent authority of the other Contracting

State, with a view to the avoidance of taxation which is not in accordance with

the provisions of this Taxation Code. Any agreement reached shall be

implemented notwithstanding any time limits in the domestic law of the

Contracting States.

3. In considering whether the actions of a Contracting State are or are not

in accordance with the provisions of this Taxation Code for the purposes of this

Article, particular regard is to be had to the objects and purposes of this

Taxation Code, including especially that of the avoidance of double taxation.

4. The competent authorities of the Contracting States shall jointly

endeavour to resolve any difficulties or doubts arising as to the interpretation or

application of this Taxation Code. The competent authorities of the Contracting

States may meet from time to time or otherwise communicate for the purposes

of discussing the operation and application of this Taxation Code. They may

also consult together in relation to juridical or economic double taxation in

cases not specifically provided for in this Taxation Code.

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60 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

5. For the purposes of paragraph 3 of Article XXII (Consultation) of the

General Agreement on Trade in Services, the Contracting States agree that,

notwithstanding that paragraph, any dispute between them as to whether a

measure falls within the scope of this Taxation Code may be brought before the

Council for Trade in Services, as provided by that paragraph, only with the

consent of both Contracting States. Any doubt as to the interpretation of this

paragraph shall be resolved under paragraph 4 of this Article or, failing

agreement under that procedure, pursuant to any other procedure agreed to by

both Contracting States.

Article 21

Exchange of information

1. The competent authorities of the Contracting States shall exchange such

information as is necessary for carrying out the provisions of this Taxation

Code or of the domestic law of the Contracting States concerning taxes covered

by this Taxation Code, insofar as the taxation thereunder is not contrary to this

Taxation Code, in particular for the prevention of avoidance or evasion of such

taxes. Any information received by the competent authority of a Contracting

State shall be treated as secret in the same manner as information obtained

under the domestic law of that Contracting State and shall be disclosed only to

persons or authorities (including courts and administrative bodies) involved in

the assessment or collection of, the enforcement or prosecution in respect of, or

the determination of appeals in relation to, the taxes covered by this Taxation

Code and shall be used only for such purposes. Such persons or authorities may

disclose the information in public courts or tribunal proceedings or in judicial or

tribunal decisions relating to taxes covered by this Taxation Code.

2. In no case shall the provisions of paragraph 1 of this Article be

construed so as to impose on the competent authority of a Contracting State the

obligation:

(a) to carry out administrative measures at variance with the law or

the administrative practice of that or of the other Contracting

State;

(b) to supply information which is not obtainable under the law or

in the normal course of the administration of that or of the other

Contracting State; or

Timor Sea Treaty Schedule 1

Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003 61

(c) to supply information which would disclose any trade, business,

industrial, commercial or professional secret or trade process,

or to supply information the disclosure of which would be

contrary to public policy.

Article 22

Interaction with other taxation arrangements

Nothing in this Taxation Code is intended to limit the operation of a

taxation arrangement concluded by either Contracting State with a third country

or territory unless so provided for in such treaty.

Article 23

Transitional provisions

1. Business losses incurred in the JPDA by a person in a year previous to

the year in which this Taxation Code enters into force and business losses

apportionable in accordance with paragraph 2 to that part of the year prior to the

date that this Taxation Code enters into domestic law effect, may, for the

purposes of the taxation law of a Contracting State and in accordance with the

provisions of that law, be carried forward for deduction against income which is

subject to the provisions of this Taxation Code, in accordance with the

provisions of this Taxation Code.

2. In the year in which this Taxation Code enters into force the

Contracting States shall only apply the framework percentage or reduction

percentage to that proportion of income, losses and other items addressed by

this Taxation Code which corresponds to that portion of the period from the

date of entry into domestic law effect to the end of the year.

Article 24

Review mechanism

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62 Petroleum (Timor Sea Treaty) Act 2003 No. 9, 2003

At the request of either of the Contracting States, the Contracting States

shall review the terms and operations of this Taxation Code with a view to

amending the Taxation Code, if considered necessary.

Article 25

Entry into force

This Taxation Code shall enter into force at the same time as the Treaty

to which it forms part.

Minister’s second reading speech made in—

House of Representatives on 5 March 2003

Senate on 6 March 2003]

(19/03)