Free trade and dodgy deals

January 24, 2014
Trade minster Andrew Robb signs a free trade deal with South Korea.

When the NSW Independent Commission Against Corruption (ICAC) found that former union official, John Maitland, and former NSW ALP minister for primary industries, Ian Macdonald, had engaged in corrupt conduct over the granting of a coal exploration licence at Doyles Creek, they said the licence was tainted by corruption and should be declared void.

A similar finding was made against Cascade Coal. ICAC found that Macdonald and former NSW Labor minister Eddie Obeid acted corruptly by agreeing to create a mining tenement over the Obeid family farm at Mount Penny that delivered the Obeids $30 million with the prospect of a further $30 million.

Five of the investors in the company were also found to have acted corruptly by concealing the involvement of the Obeids’ in the mining tenement.

NSW Premier Barry O’Farrell announced on January 21 that he would follow ICAC’s recommendation by introducing special legislation to cancel the coal licences.

One of the investors in NuCoal Resources is a Massachusetts-based investment company, Ventry Industries, which owns 2.5% of the shareholding. The executive director of the company, Rob Roy, was reported in the Australian to be “shocked” that the NSW government could contemplate “expropriating” NuCoal’s assets. Although he had seen these sorts of things in Venezuela and Argentina he thought that Australia was a safe place to invest in, but “that has now changed.”

Roy intends to invoke the provisions of the US-Australia Free Trade Agreement to prevent the NSW government from cancelling NuCoal’s licence.

He and other investors plan to lobby US Congress and US ambassador to Australia John Berry to protect their investment.

Article 11.7 of the free trade agreement provides that governments cannot expropriate or nationalise investments without “prompt, adequate, and effective compensation”.

NuCoal chairman Gordon Galt said compensation could amount to $500 million — a good return on a $94 million buyout of a company that got the licence in the first place courtesy of corrupt conduct.

So-called free trade agreements elevate the rights of investors over those of citizens who get no say in the matter.

As the Australian Fair Trade and Investment Network has reported, earlier this month trade minster Andrew Robb announced an agreement with South Korea which includes the right for foreign investors to sue Australian governments if their laws and policies are not to their liking. The proposed Trans Pacific Partnership Agreement also grants special rights to foreign governments to sue governments.

If NuCoal’s initiative succeeds, the NSW government might be forced to look at its own policies when it comes to corrupt conduct. The state Planning and Assessment Commission’s Code of Conduct for PAC Commissioners defines conflicts of interest and provides for how they should be avoided.

But it comes with the proviso that should a commissioner contravene the guidelines this will “not invalidate any decision of the Commission”. In other words, it warns against conflicts of interest yet rewards it when it occurs.

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