The High Court has unanimously rejected the claims of mining magnate Clive Palmer and his company, Mineralogy, that a law passed by the Western Australian Parliament intended to prevent them from claiming billions in damages was unconstitutional.
The High Court’s decisions are a resounding victory for the Western Australian government. In the short term, the state has been spared claims of damages, which could amount to about $30 billion – roughly the equivalent of its annual budget.
WA Premier Mark McGowan called the decision a “monumental victory” for West Australians, confirming that Parliament did the “right thing” by standing up for Palmer.
So, what did the court find and what will it mean for the state going forward?
what is the dispute about
The dispute between Palmer and the WA government began in 2012 over an iron ore project in the Pilbara. Palmer argued that his development proposals for the Balmoral South iron ore project had been illegally rejected by the previous state government.
These claims were escalated through arbitration – a dispute resolution process that takes place outside the courts.
In an extraordinary move last year, the WA parliament passed the so-called Minerals Act, which sought to protect the state from paying any damages to Palmer.
Palmer challenged the Mineralogy Act on several grounds, all of which were dismissed by the High Court.
Read more: How Clive Palmer could challenge an act designed to prevent him from receiving $30 billion
State can amend agreements with mining companies
As is common in the mining industry, Mineralogy maintains its mining project rights under a “state agreement” with WA. It is an agreement that sets a framework for mining approval and payment and has been incorporated into an Act of Parliament.
Palmer claimed that the WA Parliament did not follow the proper amendment process outlined in the state agreement when it unilaterally passed the Minerals Act.
However, the High Court held that the process of settlement does not apply to Parliament. As such, Parliament can unilaterally amend a state agreement.
This could have implications for other state agreements with mining companies, as the state can change the terms whenever it wants.
Denial of arbitration awards not unconstitutional
Palmer and Mineralogy were given two favorable arbitration decisions that were critical of their damages claims. He had filed two awards in the Queensland Supreme Court.
However, the Minerals Act considers these arbitration awards to be of no effect.
Palmer argued that this meant that the Mineralogy Act violated Section 118 of the Australian Constitution, which requires full recognition of the laws of other states (in this case, Queensland).
The High Court rejected this argument because the commercial arbitration laws of all states allow a court to refuse to recognize an award if it is invalid in the state where it was made, in this case Western Australia.
does not violate separation of powers
Separation of powers is a major constitutional principle that states that powers should be separated between the three branches of government – the legislature, the executive, and the judiciary.
Palmer argued that the Minerals Act interfered with the integrity of the state’s courts and that judicial power was exercised by the Western Australian Parliament.
The High Court observed that the effect of the Minerals Act may have been to replace the existing legal rights, but it was not violative of the separation of powers.
The law may have been extreme, but the court ruled that it did not interfere with the integrity of the courts, nor was it an exercise of judicial power by Parliament.
Read more: Meet Mark McGowan: the WA leader with an 88% personal approval rating
…or violate the rule of law
Palmer also argued that the Minerals Act violated the rule of law by preventing him and his company from pursuing their damages claim.
Although the Australian Constitution does not explicitly mention the rule of law, the High Court has said on more than one occasion that this is an “assumption” of the Constitution.
However, the High Court has also said that the courts should be wary of giving material to the rule of law which cannot be found in the Constitution itself. In other words, Palmer was required to point out specific provisions of the Constitution that supported his claim that the rule of law had been violated. He was unable to do this.
The Mineral Act may have changed the legal rights, but the court held that it did not violate the rule of law under the Constitution.
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What are the possible implications of the decision?
Mineralogy and Palmer have several other related court cases, including a consumer law claim against Western Australia.
While the High Court did not consider the validity of provisions under the new law directly related to these claims, its decision may still have an effect. By gaining the state’s favor for certain provisions of the Mineralogy Act, it could undermine the basis of Palmer’s other claims.
From a political point of view, the result is also likely to increase the popularity of the McGowan government.
Palmer also claimed that the Mineralogy Act would prevent companies from investing in WA, but whether the new law — or the High Court’s decision — undermines investor confidence in the state, remains to be seen.