Canberra 14 June 1967
Papua and New Guinea—Bougainville Copper Agreement between Administration and Bougainville Copper Pty Ltd
The Agreement between the Administration and C.R.A.’s subsidiary, Bougainville Copper Pty. Ltd., has been signed and {was} introduced into the House of Assembly on 8th June. As part of the arrangements it was agreed that the Commonwealth provide the Company with a letter
2. The proposed letter was to contain assurances on foreign exchange and support in raising loan capital. C.R.A. had also sought some words indicating the Commonwealth’s favourable intentions towards success of the Agreement, whilst we wished to make clear that the Commonwealth does not accept any liability under the Agreement.
3. Cabinet decided, inter alia, that a best endeavours provision on foreign exchange be included in a letter of understanding; that the Commonwealth undertake to use its best endeavours to assist the Company in raising loan capital; and that satisfactory arrangements be made to ensure the Commonwealth has no liability to the Company upon ceasing to have authority over the executive and legislative acts of the Territory.
4. The attached letter has been cleared with Treasury, the First Assistant Crown Solicitor and C.R.A. It is considered to meet Cabinet’s decisions and also the point sought by C.R.A. The following are the agreed words proposed to be used in the Company’s reply—
‘My dear Minister,
I have your letter of …,1 and confirm that it contains a correct record of all the assurances agreed to be given by the Commonwealth to the Company. We confirm our understanding that the Commonwealth as distinct from the Administration has no legal responsibility under the Agreement.
Yours faithfully, F. F. Espie’.
5.
The attached letter is dated 6th June, 1967 to accord with the date of signing of the Agreement.
Recommendation
6. It is recommended that you sign the attached letter to Bougainville Copper Pty. Ltd.2
Attachment
In connection with the contemplated agreement between your Company and the Administration of the Territory of Papua and New Guinea relating to the mining of copper ore in areas covered by Prospecting Authorities Nos. I to 7 inclusive, certain understandings with the Commonwealth have been sought.
At the outset let me say that the Commonwealth views favourably the signing of the Agreement as an important step forward in the Territory’s economic development. It also views with satisfaction the steps taken to ensure that the approval of the House of Assembly and validating Territory legislation are essential elements to the Agreement’s operation. In these circumstances the Government would not look with favour upon any administrative action or decision being taken which would prejudice the continued operation of the Agreement.
I am afraid that it is not possible to give an unconditional guarantee that overseas currency will be provided to meet payments due to overseas lenders under the proposed borrowing arrangements.
It is the Government’s firm and long standing policy not to guarantee the provision of foreign exchange for the payment of interest and dividends on, and the repatriation of, investments in Australia or its Territories by overseas residents. I am sure you will understand that the Government could not, in all honesty, give unconditional guarantees regarding the availability of foreign exchange that would bind it and subsequent Governments regardless of all possible future circumstances.
At the same time, 1 wish to point out, that under present policy, approval for the provision of foreign exchange for the payment of current earnings on, and repatriation of, such investments is readily forthcoming, and that no change in that policy is contemplated. In fact, in the particular case of contractual liabilities of Australian or Territory residents undertaken with exchange control approval and calling for the making of payments in foreign currency, I cannot recall any occasion in the past where the provision of foreign currency for the full discharge of such obligations has been declined. Over the years Australia has established, in these matters, an international reputation of the highest order and you may be sure that nothing would be lightly done that would damage that reputation.
If the Administration takes up the offer of 20% equity capital the Commonwealth will, on request by the Company, use its best endeavours in assisting to raise overseas loan capital to establish the project. It is understood that such best endeavours would not involve any question of a Commonwealth guarantee.
It is, of course, the Commonwealth’s intention that the assurances given above do not extend beyond the period during which the Commonwealth has control over or relevant responsibility in relation to the Territory. As the Agreement is between your Company and the Administration the Commonwealth itself accepts no legal responsibility under it.
[NAA: A452, 1967/3211]
1 Ellipsis in the original.
2 Barnes approved the recommendation and Espie replied in the agreed terms on 16 June (NAA: A452, 1967/3211).