In January 1997, Sandline agreed to assist the Government of Papua New Guinea in its endeavour to end a rebellion on the island of Bougainville. As a result of a change of heart in certain parts of the army, Sandline was prevented from completing the operation for which it had been retained. Following a change of Government in Papua New Guinea, the new Prime Minister, Mr Skate, has resisted the Country's obligation to pay Sandline the balance of $18 million due under that contract.
The dispute was submitted to arbitration by both parties and an International Tribunal of eminent jurists determined, in October 1998, that Sandline was entitled to be paid. With interest, costs and damages the sum now due to Sandline exceeds US$25 million.
PNG has sought to appeal that finding in the Supreme Court of Queensland, the State in which the arbitration took place, and a hearing to determine whether that Court has jurisdiction to entertain an appeal is presently being heard by Mr Justice Ambrose. In the meantime, PNG has eschewed several opportunities to apply for a stay of execution of the Award, although it has complained bitterly that Sandline is seeking to collect a contractual debt which an International Tribunal has said is due.
PNG has sought to move its assets out of various jurisdictions where it considers them to be vulnerable but, in a move which clearly caught PNG unawares, Sandline has successfully secured US$6 million in Belgium, the proceeds of agricultural stabilisation repayments from the European Commission paid under the Lomé IV Convention.
The most recent complaint against Sandline, made by Mr Skate in a press release dated 11 March 1999 and headed "Latest Sandline Con", is an objection to Sandline's perfectly proper approach to a number of organisations with liabilities due to PNG, inviting them to acquire some or all of the debt due from PNG to Sandline which, of course, could lawfully be set off against their own liability. This assignment of debt is common commercial practice.
The Prime Minister's hysterical reaction, as evidenced by his press release, is clearly politically motivated to take the spotlight off the incompetence with which his Government has handled the Sandline claim. PNG abandoned the original defence that the contract was frustrated, arguing instead that it was illegal when, as the International Tribunal held, they had no right to do so. Since then, rather than meet its liabilities or at least giving security for the Award pending its attempt to appeal, it has expressed surprise that Sandline has been taking steps to enforce the Award.
In the meantime, PNG has not only increased its liability from $18 million to $25 million but has also had to meet its own legal fees, which must be in the order of another $2 million, adding a total of 50% to the amount that was sought by Sandline in the first place.
As Sandline intends to be paid it will continue to use all necessary routes through any Court in any country in which assets are available for execution until it has been paid. It intends to treat with disdain the rantings of the Prime Minister. PNG is well known as a country which defaults on judgments, even those made against it by its own Courts. Damage to investor confidence must be incalculable.
A debtor who seeks to avoid its liabilities can hardly be heard to complain when its creditor distrains on its assets. It can attempt to run but it cannot hide.