Timor wins challenge over $40 billion oil and gas deposits

AUSTRALIA has lost its argument that an international arbitration court does not have the jurisdiction to hear a maritime boundary dispute between East Timor and Canberra.

Based in The Hague, the Permanent Court of Arbitration has ruled it is "competent to continue with the conciliation process” initiated by East Timor against Australia in April.

At stake are oil and gas deposits in the Timor Sea worth an estimated $40billion.

Under a maritime arrangement signed by East Timor and Australia in a decade ago, a border was drawn up, but East Timor wants that torn up, accusing Australia of spying to gain commercial advantage during the negotiations.

East Timor contends the border should sit halfway between it and Australia, placing most of the oil and gas reserves in East Timor's territory.

East Timor's former prime minister Xanana Gusmao welcomed the court's decision.

"Just as we fought so hard and suffered so much for our independence, Timor-Leste will not rest until we have our sovereign rights over both land and sea,” he said.

Foreign Affairs Minister Julie Bishop said Australia accepted the court's decision and would "continue to engage in good faith as we move to the next phase of the conciliation process”.

"We are committed to working together to strengthen our relationship and overcome our differences in the Timor Sea,” she said.

Australia and Indonesia signed the Timor Gap Treaty in 1989 when East Timor was still under Indonesian control.

The court ruled the dispute should be settled under the UN Convention of the Law of the Sea, rather than the 2006 treaty - the Certain Maritime Arrangements in the Timor Sea - between the countries.

Earlier this year, the court infuriated China when it ruling in favour of the Philippines in a case challenging China's claims to almost all of the South China Sea.

Beijing insisted the court had no jurisdiction in the matter, prompting Ms Bishop to warn China that its reputation would suffer if it ignored the decision.

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