Wed Oct 13

Why did the High Court rule against Clive Palmer and what does the judgment mean?

Written by Murray Wesson, Senior Lecturer in Law, The University of Western Australia

The High Court has unanimously rejected ^[1] claims by mining magnate Clive Palmer and his company Mineralogy that legislation passed by the Western Australian parliament intended to prevent him from claiming billions in damages was unconstitutional.

The High Court’s decisions are a resounding victory for the Western Australian government. In the short term, the state has been spared a damages claim that may have amounted to nearly $30 billion – almost equivalent to its annual budget.

WA Premier Mark McGowan called the judgment a “monumental victory” for West Australians, saying it confirmed the parliament did “the right thing” by standing up to Palmer.

So, what did the court find and what will it mean for the state moving forward?

What the dispute is about

The dispute between Palmer and the WA government began in 2012 over an iron ore project in the Pilbara. Palmer argued his development proposals for the Balmoral South iron ore project were unlawfully refused by the previous state government.

These claims were pursued through arbitration – a dispute resolution process that happens outside the courts.

In an extraordinary step last year, the WA parliament passed ^[2] the so-called Mineralogy Act, which sought to protect the state from having to pay any damages to Palmer.

Palmer challenged the Mineralogy Act on a host of grounds, all of which were rejected by the High Court.

The state can amend agreements with mining companies

As is common in the mining industry, Mineralogy holds its mining project rights under a “state agreement” with WA. This is an agreement that sets out a framework for mining approvals and payments and is incorporated in an act of parliament ^[4].

Palmer claimed the WA parliament did not follow the proper amendment process outlined in the state agreement when it unilaterally passed the Mineralogy Act.

However, the High Court said the process in the agreement did not apply to parliament. As such, parliament could unilaterally amend the state agreement.

This could have implications for other state agreements with mining companies, as the state could likely change the terms whenever it wants to.

Denying arbitration awards not unconstitutional

Palmer and Mineralogy were granted two favourable arbitration decisions ^[5] that were key to their damages claims. He had registered the two awards in the Queensland Supreme Court.

However, the Mineralogy Act deems these arbitration awards to be of no effect.

Palmer argued this meant the Mineralogy Act breached section 118 of the Australian Constitution, which requires full recognition of the laws of other states (in this case, Queensland).

The High Court rejected this argument because all states’ commercial arbitration laws permit a court to refuse to recognise an award if it is invalid in the state where it was made, in this case Western Australia.

Not a breach separation of powers

The separation of powers is a key constitutional principle that says powers should be separated between the three branches of government – the legislature, executive and the judiciary.

Palmer argued the Mineralogy Act interfered with the integrity of the state courts and was an exercise of judicial power by the Western Australian parliament.

The High Court found the effect of the Mineralogy Act might be to change existing legal rights, but this did not amount to a breach of the separation of powers.

The law may have been extreme, but the court ruled it did not interfere with the integrity of the courts, nor was it an exercise of judicial power by the parliament.

…or a breach of rule of law

Palmer also argued the Mineralogy Act breached the rule of law by preventing him and his company from pursuing their damages claim.

Although the Australian Constitution does not expressly mention the rule of law, the High Court has said on more than one occasion that it is an “assumption” of the Constitution.

However, the High Court has also said the courts should be wary of giving content to the rule of law that cannot be found in the Constitution itself. In other words, Palmer needed to point to specific provisions of the Constitution that supported his claim the rule of law had been breached. This he was unable to do.

The Mineralogy Act may have changed legal rights, but the court said it did not amount to a breach of the rule of law under the Constitution.

What are the potential implications of the ruling?

Mineralogy and Palmer have a number of other related court cases on foot, including a consumer law claim ^[8] against Western Australia.

While the High Court did not consider the validity of provisions under the new law directly related to these claims, its ruling may still have an impact. By finding in favour of the state for some of the Mineralogy Act provisions, it may undermine the basis for Palmer’s other claims.

From a political standpoint, the outcome is also likely to bolster the popularity of the McGowan government.

Palmer has also claimed the Mineralogy Act would deter companies from investing in WA, but whether the new law – or the High Court judgement – undermines investor confidence in the state remains to be seen.