Billionaire Australian mining magnate and political maverick Clive Palmer has shifted his empire's legal incorporation to New Zealand in preparation for a possible bid to sue the West Australian government for A$45 billion ($47.8b) for alleged expropriation of mining rights.
Palmer told The Australian newspaper his plan was to use the investment treaty between Australia and New Zealand, signed in 2010 to extend the Closer Economic Relations free trade agreement, to mount an action against the state government if it went ahead with plans to cut his company out of the process for approving a proposed mine expansion by Chinese company CITIC.
However, Chapman Tripp partner and international trade agreements expert Daniel Kalderimis believes Palmer, who is also setting aside A$50 million to fund his own political party to 'Make Australia Great' "doesn't appear to fully understand the regime he appears to be invoking".
It was true that the CER investment protocol included clauses guaranteeing freedom from expropriation, so Palmer was "not off the planet" in principle, but the protocol "deliberately does not include an investor-state dispute settlement (ISDS) regime", meaning there was no way for a corporation to sue the Australian federal government, let alone a state government.
While the New Zealand government could choose to take up a New Zealand-based investor's cause in the case of a claimed expropriation by the Australian government, that would be a political and diplomatic decision, in which national interest issues would be the most likely determining factors.
The ability to sue under the CER investment treaty had been described by others as "ghost rights", said Kalderimis, who said Palmer's move appeared "quixotic".
New Zealand Companies Office records show that Palmer used Auckland law firm MinterEllisonRuddWatts to incorporate Mineralogy International Ltd on December 14.
He was originally listed as the sole shareholder, but the shareholders now listed are a business associate, Michael Mashayanyika, his daugher Emily Palmer, and a friend and business associate of Ms Palmer's, Declan Sheridan.
Palmer is personally listed as a owning 0.42 per cent of the New Zealand registered company in his own right.
He told The Australian that he had decided to invest in New Zealand and "I've encouraged that New Zealand company to invest in Australia, which it has", owning his Australian-registered flagship company, Mineralogy, which in turn owns the mining leases covering the A$10b Sino Iron project in the Pilbara region of Western Australia.
CITIC, a Chinese government-owned investment company, is the operator for Sino Iron and has been seeking mine expansion which CITIC says is vital to the operation's viability.
Mineralogy is objecting to elements of the expansion, leading to WA premier Mark McGowan reportedly considering legislation that would remove Mineralogy's approval rights as mining leaseholder.
In a letter to McGowan, Mashayanyika says: "If your government proceeds with amending legislation, MIL will immediately make a claim for A$45b against the commonwealth."
He accused the WA government of "repeatedly" meeting with "executives of Chinese communist government-owned companies in Perth" while refusing to meet "an Australian and a representative of Australian companies who wish to make important representations to you in their commercial and the national interest".
Kalderimis said that even if Palmer could succeed in invoking the CER investment protocol, international investment law tended to exclude attempts by an investor to go 'treaty-shopping' - that is trying to engineer the use of an international investment treaty to secure a commercial outcome.
The most recent example of that in Australia was the Philip Morris tobacco company's attempt to sue the Australian government under investor state dispute settlement (ISDS) provisions in the Australia-Hong Kong trade agreement.
An international tribunal had struck that action down because Philip Morris had moved its operations to Hong Kong after the dispute had arisen in order to mount the action.
"It seems to me there's a lot of legal thinking to do before launching legal action in this case," Kalderimis said.
"Many investment treaty claims have failed where they aren't really protecting foreign investment but are domestic investments dressed up to look like foreign investment."