Asia Times: Country pays for sins of past regime



	April 21, 1999	atimes.com

Oceania

Country pays for sins of past regime
By Andrew Nette

MELBOURNE - It sounds like something outof a low-budget thriller movie: The government of a poor countryhires foreign mercenaries to put down an insurrection in a remoteprovince.

The scheme is discovered and is aborted, after protests fromoutraged members of the country's military. Now, the security firmhas sued the government for the unpaid part of the agreement andcosts.

This scenario, however, is fact, not fiction.

And now the government concerned, Papua New Guinea, is bracingfor a major assault on its cash reserves following the failure ofits last attempt to avoid paying the firm, the UK-based SandlineInternational.

Port Moresby now claims its contract with Sandline is worthlessbecause the hiring of foreign mercenaries is prohibited by PNG'sconstitution.

It has refused to pay the $25 millionSandline says it is owed under the contract, which would have seenthe firm help end the decade-long secession on the island ofBougainville, 800 kilometers northeast of Port Moresby, and re-open its giant Panguna copper mine.

On March 30, a court in the Australian state of Queenslandruled the agreement was valid, raising the prospect of the currentPNG government having to pay the $25 million to Sandline.

Observers say the verdict has shaken already uncertain investorconfidence in PNG, which the International Monetary Fund (IMF)says is already facing a ''full-fledged fiscal crisis."

The PNG government has until Tuesday, April 20, to appeal thedecision, and Prime Minister Bill Skate, who came into powerafter the Sandline scandal, has vowed to fight paying the money.

The lawyers representing PNG declined to comment on whether ornot the government will appeal the decision.

''I expect that they will,'' says one observer who has followedthe case closely. ''They have gone this farand a lot of national prestige rests on this and I think they willtake it all the way."

The Sandline affair has its origins in the mid-eighties, whenlandowners on Bougainville began to protest the environmental andsocial impacts of the huge Panguna copper mine, owned by Australia-based Conzinc Rio Tinto Australia, a subsidiary of British mininggiant Rio Tinto-Zinc Corporation.

They succeeded in shutting down the mine, which had contributed40 percent of Papua New Guinea's national exports and 17 per centof its GDP.

After unsuccessful attempts by the military to defeat thesecessionist movement, the then PNG government of Sir Julius Chanemployed the services of Sandline International, the London-basedcontractor arm of the South Africa-based mercenary operation,Executive Outcomes.

''A highly skilled and trained mercenary unit seemed like avery attractive proposition to a military apparatus that could notwin under its own steam,'' explains Bob Burton, a researcher onmining issues at the Sydney-based Mineral Policy Institute.

Under the 36 million dollar deal, signed by Chan in January1997, Sandline was to provide helicopter gunships, trooptransports, sophisticated electronic warfare equipment and up to40 mercenaries to help the PNG defense forces defeat secessionistsand recapture the copper mine.

The mercenaries arrived in Bougainville in February 1997. Buttwo weeks later, the scheme was aborted when PNG's militarycommander, Brigadier General Jerry Singirok, led a revolt that resulted in the deportation of the mercenaries and the collapse of the Chan government.

Chan paid $18 million to Sandline. The company's presentclaim is for the second, unpaid installment of 18 million dollars,plus 7 million dollars in interest and expenses it claims itincurred because of the military uprising.

International mediation between Sandline and PNG in Queenslandin October found in favor of the security company, prompting PNGto go to court in an effort to avoid payment.

In response, Sandline has instituted a global hunt to identifyand seize PNG's international assets.

Thus, funds have been frozen to bank accounts of, for example, the PNG mission to the European Union in Brussels.

Sandline has registered its claim for outstanding money inseveral other European capitals and the United States. In March,Port Moresby asked Canberra to help protect its Australia-basedassets from being seized.

Sandline's actions have serious repercussions for PNG'seconomy, already widely viewed as in crisis.

''It is certainly causing a lot of uncertainty in certaincircles,'' says Tony Regan, a PNG expert at the AustralianNational University.

Observers say the controversy threatens attempts by the PNGgovernment to raise funds from overseas banks and is jeopardizingforeign aid
After the March 30 court decision in Queensland, Sandline'slawyer, Michael Klug, said: ''Sandline knows where those assetsare. PNG can run but it cannot hide. No amount ofpolitical posturing by PNG will help this country avoidliability."

The PNG government is expected to appeal the March 30 decision,though most observers are pessimistic about success.

Ironically, the Skate government is stuck with the unpleasant -and costly - consequences of the mistakes of its predecessor,even as many things have changed since then.

Today, for instance, Bougainville, the island over which Chanwanted mercenaries to fight in, is the midst of a peace process.

''It's a dreadful situation,'' says Burton. ''One of thepoorest nations in the world is forced to pay out a lot of money,but PNG did enter into a contract which is legally enforceable."

(Inter Press Service)