By Rujun Shen and Sonali Paul
A charity funding social projects in Papua New Guinea is fighting the government for the return of the Ok Tedi copper mine, after the state took full ownership of the mine that BHP Billiton handed over more than a decade ago.
Papua New Guinea's parliament passed laws in September for the government to take 100 percent ownership of the giant mine, and also to remove a 12-year old deal that gave BHP Billiton immunity from environmental claims.
BHP was granted immunity after agreeing to transfer its 52 percent stake in the mine to the PNG Sustainable Development Program Ltd (PNG SDP), a not-for-profit company incorporated in Singapore.
The Ok Tedi mine, in a mountainous region in PNG's west, has been operating since the 1980s. It has been blamed for substantial environmental damage caused by dumping millions of tonnes of toxic mine waste into the river systems.
PNG SDP holds $1.4 billion in trust to be used in the Western Province when the mine eventually closes, according to its 2012 annual report.
The government in 2001 made a "very bad" decision in granting immunity to BHP by preventing its own people to sue for permanent environmental, Prime Minister Peter O'Neill told parliament in September.
Michael Sullivan, a partner at Leahy Lewin Nutley Sullivan Lawyers in Papua New Guinea's capital Port Moresby, said PNG SDP's litigation against the government stood a chance of being successful as it was being pursued outside the country.
Mekere Morauta, who is the chairman of PNG SDP and was prime minister when the immunity deal was struck, told Australian television that the firm had been structured the way it was and incorporated in Singapore because "I feared in the future that sticky, gluey hands would try to penetrate it."
Papua New Guinea has struggled to attract foreign investment to exploit its abundant natural resources due to unclear regulations and endemic graft.
BHP is not involved in the legal action, but said it was confident there was no risk of future claims.
"In relation to the protections that the PNG government has said it would remove from BHP Billiton, we remain confident that we have other indemnities in place and that our shareholders are not exposed to potential claims," BHP said in an email.
PNG SDP is taking legal action to challenge the government on two fronts, with a case in the High Court in Singapore and before an international arbitration tribunal in Washington DC.
PNG SDP wants the Singapore court to block the Papua New Guinea government's removal of its board members and chief executive and declare that the government has no authority over its affairs, case files obtained by Reuters showed.
Through the arbitration, PNG SDP is seeking the return of its share in Ok Tedi, or adequate compensation for the stake, said Nish Shetty, a partner at Clifford Chance Asia who is leading the arbitration effort.
PNG SDP has said it is can no longer fund nearly 100 social and economic development projects.
A government spokesman did not respond to phone calls for comment on the High Court and arbitration claims.
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