Australia: Keep the faith! Pitfalls to avoid when negotiating with native title parties

Clayton Utz Insights
Last Updated: 17 May 2015
Article by Tosin Aro and Mark Geritz

Key Points:

Proponents of resources projects should take note: two recent decisions of the National Native Title Tribunal provide graphic illustration of how NOT to conduct native title negotiations.

Two recent decisions (Collins v Nguddaboolgan, decided on 25 March 2015, and Rusa Resources v Wajarri Yamatji, decided on 2 April 2015) contain important pointers for proponents seeking to avoid falling into the trap of having their negotiations found not to have been conducted in good faith.

Negotiation between native title parties in good faith

Where a proposed mineral or petroleum exploration or production permit will cover areas where native title has not been extinguished, the grant of the permit will be invalid for native title purposes unless an appropriate native title procedure has been followed. The procedure most commonly used in these circumstances is known as the "right to negotiate" (RTN).

The RTN is triggered by the "Government Party" issuing a "section 29 notice", following which the Government Party and the "Grantee Party" must negotiate with all "Native Title Parties" for the permit area with a view to obtaining the agreement of the Native Title Parties to the grant of the permit. The key obligation with respect to such negotiations is that they must be carried out in good faith.

If the agreement of the Native Title Parties has not been obtained after a minimum of six months of negotiations from the notification day stipulated in the section 29 notice, any party can refer the matter to the National Native Title Tribunal (NNTT) for a determination about whether the permit can be granted.

As a preliminary point in such a proceeding, the NNTT may be asked to consider whether the Government and Grantee Parties discharged their obligation to negotiate in good faith. The Tribunal will only have power to proceed to determine the substantive question of whether the permit can be granted (from a native title perspective) if it finds that the parties did negotiate in good faith.

Unsurprisingly, the good faith "power point" is one that is taken at the threshold of many such "future act determination applications" (FADAs). Over the years, there have only been seven FADAs in relation to which the Government and Grantee Parties have failed to satisfy the NNTT that negotiations were conducted in good faith. And what is telling is that, of these, while the first three occurred before the middle of 2009, the remaining four have all occurred in the last 13 months (with the two most recent instances falling within the last six weeks). This suggests either a trend by the NNTT towards assessing good faith more stringently, or a growing complacency on the part of proponents when it comes to adhering to their obligation to negotiate in good faith. Either way, the result of such a finding will always be delay (and, likely, added cost) for a project and it could extend to failure of the project to proceed at all.

The "good faith" obligation

The "good faith" obligation has been the subject of much judicial treatment and is well understood. In both of the most recent decisions, the NNTT distilled the following well-known principles from the available NNTT and Federal Court authorities:

  • in general terms, a Grantee Party should approach negotiations in a proactive and open manner and engage with Native Title Parties in a reasonable and fair way with a view to obtaining their agreement to the grant of the proposed permit;
  • the good faith obligation is assessed by reference to what a party has done or failed to do in the course of negotiations and is directed to and is concerned with a party's state of mind as manifested by its conduct in negotiations. (It is insufficient, for example, for a party to merely "go through the motions" with a closed mind or a rigid or predetermined position);
  • the overriding requirement is to communicate, have discussions and confer - with honesty of intention and sincerity - with a view to reaching agreement.

With these principles in mind, in both Collins and Rusa Resources, the NNTT found, having considered overall the negotiations undertaken between the proponent and the relevant native title parties, that the proponent had not fulfilled the requirement to negotiate in good faith.

The finding in Collins v Nguddaboolgan

In Collins, the NNTT found that:

  • the proponent's opening offer was not made until nearly 18 months after the notification day. Further, the proponent claimed the native title party's counter-offers were uneconomic, without providing any financials to support this claim;
  • the proponent consistently withdrew from agreed terms or unilaterally withdrew offers he had made before the native title party had been able to respond; and
  • the proponent refused to deal earnestly with the native title party on issues of cultural heritage management, showing a lack of understanding of the importance of the issue.

The finding in Rusa Resources v Wajarri Yamatji

In Rusa Resources, the NNTT found that:

  • the information provided by the proponent about its proposed exploration program was insufficient to enable the native title party to assess the impact of the proposed program on its native title rights and interests and participate in negotiations in an informed way;
  • the proponent made one offer only (one that even the Government Party considered to be low) and failed thereafter to properly respond to the native title party's counter-offer; and
  • the proponent pointedly refused to fund the native title party to take part in negotiations, even when the latter lowered its demands considerably, with the consequence that it lodged the FADA without having met with the native title party.

Ultimately, it was the proponents' overall conduct during their respective negotiation processes that formed the basis for the NNTT's conclusions that they had not fulfilled the requirement to negotiate in good faith.

Proponents should read both of these decisions carefully. Engaging in the types of conduct highlighted in these cases could well both reduce the likelihood of agreement being reached in any RTN and increase the chances of needing to have recourse to a FADA, while also severely limiting the prospects of success of any such FADA. Such conduct also could mean that a project cannot proceed at all, the ultimate penalty for merely going through the motions in native title negotiations rather than participating in open, honest and meaningful discussions.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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