Will WA’s extraordinary measures against Clive Palmer pay off?

Among Clive Palmer’s gifts to Australia — which include, arguably, the Morrison government — is a lot of interesting law.

Palmer’s constitutional challenge to Western Australia’s border closure is significant enough, but it’s dwarfed by the wow factor of the law he recently provoked the WA Parliament into passing.

Just before midnight last Thursday the WA governor signed off on an emergency bill designed to block a damages claim from the mining magnate. It had been a race with Palmer’s lawyers, and the WA government believed it had won. But the issue is far from over.

Palmer is now claiming the law is unconstitutional, and he’ll no doubt be asking the High Court to agree. After all, there’s supposedly $30 billion on the line…

What is this all about?

The story starts in 2002, when the government of then-premier Geoff Gallop created the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act. 

This act gave legal force to a “state agreement” made between the government and Palmer’s company Mineralogy, under which WA promised to help Palmer exploit his iron ore mining tenements in the Pilbara. Such agreements had become standard in the state as a means of encouraging the big mining companies to come in and dig deep into WA’s incalculable mineral wealth.

The agreement was extraordinary in its generosity. The basic scheme was that Palmer would come up with proposals for mining projects on the land (including transport, ports and shipping), and the minister was obliged to either approve these proposals or give his approval subject to conditions which had to be “reasonable”. 

Critically, if he took the second course Palmer could then invoke his right to have the minister’s conditions reconsidered in a compulsory arbitration. The arbitrator’s decision on their reasonableness would be binding. (Arbitration is a dispute resolution process conducted privately, outside the court system. It’s supposed to be simpler, faster and cheaper than litigation, but it removes many of the options parties would have if they went to court.)

In 2012 and 2014, then-premier Colin Barnett refused to approve proposals put up by Palmer for his Balmoral South tenements, and an arbitration commenced with former High Court judge Michael McHugh as arbitrator. 

That proceeded in secret, but McHugh has reportedly made decisions in Palmer’s favour. My guess is that he’s determined that Barnett’s refusals were unreasonable and that approval should have been given back in 2014. 

Palmer claims he would have been operational and earning revenue by 2016. The next step would be to determine how much WA owes Palmer for its breach of the agreement. The $30 billion number comes from WA’s attorney-general, stated in parliament as part of his pitch for the extraordinary law last week. Palmer says it didn’t come from him.

Palmer’s latest movements

On Tuesday, Palmer went to the Supreme Court of Queensland, registering the arbitration “awards” made by McHugh, so as to give them the force of law and protection of the courts.

Palmer then approached the Federal Court, seeking to pre-empt the WA government’s attempt to kill his case altogether. That didn’t go anywhere, because the WA bill is now law. 

The new law amends the original 2002 act, with a pile of provisions expressly overriding much of its content and legal effect. 

The central elements of the law are that it says that Palmer’s Balmoral South proposals have no legal effect (that is, they’re dead); and the arbitration is “terminated”. Any awards made by McHugh in 2014 and 2019 are declared to have no effect. Even the arbitration agreement is deemed to be invalid.

Everything else in the amending law (there’s a lot of it) is consequential. The drafters have tried to cover off every possible angle. All legal remedies are explicitly cancelled, the state and everyone in government is immunised from liability. Even freedom of information rights are extinguished.

Palmer has focused on one particularly exotic aspect of the law: its grant of immunity to everyone on the government side from criminal liability. Fairly enough, he’s asking what’s being hidden. Probably nothing really criminal, but it does underline how bizarre the situation is.

Who’s in the right here?

It is not unusual for a government to make laws extinguishing contractual or other rights. Parliament is the supreme law-making body, and its power is essentially unlimited. It can validly do things which have unfair or arbitrary consequences.

State governments are also not bound by the constitution’s restriction on the Commonwealth government that forces it to pay “just terms” when it compulsorily acquires private property. WA has just done that to Palmer, but it’s not legally obliged to compensate him at all.

As to what constitutional rule Palmer thinks WA has breached, it’s not immediately obvious to me. The rule of law does not include, as a fundamental principle, protection of personal spoils. A government can use its legislative power to get itself out of a bad bargain. That’s what is happening here. I don’t think his move in the Queensland court will help; it has no jurisdiction in WA.

Nevertheless, it’s a bad precedent. The real evil was the 2002 state agreement, under which WA gave away its sovereign power and obligation to protect the interests of its people, essentially selling them off to a mining magnate for the promise of royalties. 

I think what WA has done will work, in that it will survive challenge and kill off Palmer’s claims. But, in doing so, it will vindicate what he is saying: that, in terms of sovereign risk, WA is an unsafe place to do business.

It may be distasteful to hear those words from a man like Palmer, but that’s the legacy of WA’s tradition of getting into bed with such people. It is paying the price of its own greed.