Australia: A catalytic effect: inbound investment in PNG set to rise following embrace of international arbitration

Last Updated: 3 October 2019
Article by Joshua Paffey and Vaughan Mills

Papua New Guinea is the latest nation state to accede to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

In so doing, and by heeding the guidance of international financiers and investors, the country markedly has improved its inbound investment profile and enhanced its attractiveness as an investment destination. This move by PNG also is a timely reminder of the value of international arbitration in providing a stable, efficient and 'bankable' method of resolving investment and project-related disputes.

An update to PNG's arbitration legislation is overdue. The existing 1951 Arbitration Act (Act) pre-dated the huge growth in foreign investment in the resource-rich nation, best illustrated by the US$19 billion ExxonMobil operated PNG LNG Project, which commenced production in 2014.

Due to its many limitations, parties (both domestic and foreign), rarely arbitrated under the Act. Instead, disputes were resolved through the courts or, in the case of disputes between foreign investors and the State, by relying on international arbitration rules such as those established under the United Nations Commission on International Trade Law (UNCITRAL).

Further to the perceived deficiencies of the Act itself, there are no arbitral institutions to support arbitrations seated in PNG, requiring them to be conducted on an ad hoc basis or by foreign arbitral institutions. Accordingly, while it has been common for investors in PNG (particularly those contracting with the State) to select arbitration as their preferred dispute resolution mechanism, such arbitrations typically were seated in other Asian centres such as Singapore.

Perhaps the greatest concern regarding PNG-related disputes, however, has been the difficulty associated with enforcing arbitral awards in the country. Now that PNG has become a signatory to the New York Convention, this is set to change. Once the now outdated Act is replaced in order to introduce a mechanism that recognises international arbitral awards, the ability to enforce arbitral awards in PNG is set to become more certain and efficient. This will give comfort to foreign investors, and be a fillip for the many large-scale oil and gas and resources projects mooted for the country.

Foreign investment linked to international arbitration

A strong commercial arbitration framework improves foreign investment. One only has to review the decisions of the multitude of global financiers, equity investors, development banks and export credit agencies to understand the criticality of a reliable and stable dispute resolution framework.

Being able to enforce an arbitral award in the country in which an investment is made is an essential factor in many final investment decisions, and if the country in question is not a signatory to the New York Convention, any such investment decision is fraught.

Once seen as revolutionary, the New York Convention has proved to be one of the most successful international treaties, with 160 signatories to date. It creates a familiar and trusted regime which offers substantial additional comfort to business.

At the South Pacific International Arbitration Conference held in Port Moresby in March 2019, international economists expressed their support for PNG's accession to the New York Convention, noting the increases in foreign investment that have been shown to flow to a country once it ratifies the New York Convention.

But international, cross-border investment decisions are not limited to issues concerning enforcement. When making investment decisions, international investors often consider whether a country is supportive of commercial arbitration, including whether the local courts will intervene in the interests of local parties, whether State or private.

PNG has recognised the need to create the right climate to attract inbound investment. Despite its exports of gold, copper and LNG, it has been ranked 108th out of 190 countries by the World Bank in its 2019 'Ease of Doing Business' global ranking. Significantly, this places PNG behind many of its regional counterparts, including Fiji (101), Vanuatu (94), Tonga (91) and Samoa (90).

ADB project for the South Pacific

PNG's accession to the New York Convention has been widely and positively reported in the global community. In this regard, the Asian Development Bank (ADB) took something of a lead on behalf of the international investment community.

In November 2016, the ADB released a Technical Assistance Report, which outlined its project of promoting international arbitration reform in the South Pacific to promote a better investment climate in the region.1 The ADB framework identifies three project outputs aimed to achieve increased foreign investor confidence, in turn leading to greater economic development of nations.

PNG achieved the first project output in July 2019 when it deposited its binding instrument of accession to the New York Convention with the UN Secretary-General, and currently is working towards the second, which requires domestic legislative reform to give effect to the New York Convention and to reflect modern international commercial arbitration standards. Its focus will then turn to the third project output, being the strengthened capacity for international arbitration reforms, achieved by:

  • regional awareness building and dissemination workshops; and
  • tailored trainings of arbitrators, lawyers and judges in international commercial arbitration and recognition of enforcement proceedings under the New York Convention.

The path to legislative reform

With support from ADB, PNG is developing a new Arbitration Act. At present, it remains unclear whether the current legislation will be repealed in full or in part, or whether it will remain in force for domestic arbitrations.

While a draft of the proposed new Arbitration Act has yet to be released publically, a period of consultation is expected. It is anticipated that the new Arbitration Act will primarily be based on the UNCITRAL Model Law on Arbitration with additional features specific to PNG's legal framework, such as the acknowledgement of customary law.

Legislative reform, however, is not the end of the road. Programs to enrich the current expertise of local practitioners and the judiciary will be of immense value in ensuring a smooth transition. The Papua New Guinea Centre for Judicial Excellence provides an ideal platform for such activities.

While investors will continue to consider a multitude of factors when assessing opportunities in PNG, the country's accession to the New York Convention and proposed modernisation of its arbitration regime significantly enhances its attractiveness as an investment destination.

As can be tracked through many developing economies, it will not be a surprise to see the stabilisation of investment-related disputes via international arbitration having a strong, catalytic effect on inbound investment in PNG.



The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Chambers Asia Pacific Awards 2016 Winner – Australia
Client Service Award
Employer of Choice for Gender Equality (WGEA)

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions