Papua New Guinea state fails to wrest control of US$1.4b stake
The government of Papua New Guinea (PNG) has lost its protracted battle in the Singapore High Court to wrest control of an entity with assets worth about US$1.4 billion that were spawned from a deal inked with the “largest mining company in the world”.
Justice Vinodh Coomaraswamy has ruled in favour of PNG Sustainable Development Program (PNGSDP) company, saying the state of PNG had failed to prove it had a deal with PNGSDP's co-founder BHP Minerals Holdings, for joint control to develop PNGSDP assets.
It also failed to prove that there was a charitable trust that allowed the state to intervene.
“I have found that neither the agreement nor the trust exists. The pleaded breaches of the agreement and the trust must correspondingly fail,” Justice Vinodh said in decision grounds last Tuesday.
The outcome means PNGSDP is free to carry out its objectives under the control of its independent board according to the 2001 contractual framework, without interference from the state.
Justice Vinodh, in his 149-page judgment, addressed each of the arguments made as he explained why the state had failed in its bid to wrest control of PNGSDP from its independent board.
“I acknowledge I found the state's narrative compelling and its logic attractive. But the essential problem... is that this narrative stands alone and is unsupported by the evidence,” he said.
The court examined each key plank of the state's case and found in addition that none of the state's witnesses pointed to the existence of a partly oral agreement, much less to the terms of that agreement.
The court found that in the context of a “sovereign nation” and “the largest mining company in the world”, it was likely that the parties would have entered into written contracts “definitively and exhaustively setting out the precise terms actually agreed, instead of exposing their minds to the vagaries of memory and ambiguity inherent in a partly oral agreement”.
The high-stakes court battle involved law heavyweights on both sides. Defending PNGSDP was a team led by Senior Counsel Philip Jeyaretnam from Dentons Rodyk & Davidson while WongPartnership's Senior Counsel Alvin Yeo led the team representing the PNG government.
PNGSDP was incorporated in Singapore in 2001 with two shareholders: the state of PNG and BHP Minerals Holdings and was meant to enable BHP to divest its shares in mining company Ok Tedi Mining to PNGSDP.
Both parties intended PNGSDP to hold BHP's shares in Ok Tedi Mining and apply the derived income to promote sustainable development in PNG.
BHP owned 52 per cent and the state 20 per cent of the mine, which was rich in gold and copper and highly profitable.
The judge noted there were several reasons PNGSDP was incorporated in Singapore and these include its robust corporate governance regime.
In 2012 and 2013, PNGSDP made material changes to its corporate governance framework which diluted the state's powers of control and oversight over the company.
The PNG government sued to reverse the changes.
It argued, among other things, that it would not have agreed to form PNGSDP if the company was free to cast off the state's rights of control and oversight.
PNGSDP countered that the structure of the parties' written agreement left no scope for such a critical aspect of PNGSDP's corporate governance framework to be left "entirely undocumented in that suite of contracts and to be the subject of an oral agreement".
It added that the common intention in PNGSDP's formation was to eventually make it a self-run and self-perpetuating organisation and the changes made in 2012 and 2013 were the next step in effecting the common intention.
Justice Vinodh said the dispute is “about corporate governance of PNGSDP”.
He added: “For all the reasons set out, I hold the state fails entirely in its claim against PNGSDP. It is not entitled to the relief sought.” .
SOURCE: STRAIT TIMES/PACNEWS
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