An Australian Perspective on Impact and Benefit Agreements

by Ciaran O'Faircheallaigh

During the past few years both indigenous organizations and academic analysts in Australia have tended ~ to focus less on the details of individual impact and benefit agreements (IBAs) and more on the broader common law and legislative framework of native title rights within which IBAs are negotiated.

Until 1992 no judicial, legislative, or constitutional recognition of inherent indigenous rights had occurred in Australia. Thus indigenous Australians were able to achieve IBAs only where specific legislative enactments created a statutory right to negotiate or where individual mining companies determined that it was politically advisable to enter into such agreements. The result was enormous variation in the scope and content of IBAs, depending on the existence and the terms of relevant legislation and on the capacity of individual indigenous organizations to exploit the available opportunities. For example, agreements negotiated by the Northern Territory land councils under the Aboriginal Land Rights (Northern Territory) Act 1976 and by the Cape York Land Council under provisions of Queensland's Mineral Resources Act 1989 provided for substantial royalty payments, extensive employment, training, and business development initiatives, protection of cultural heritage, participation in environmental management, and, in some cases, equity participation. Elsewhere (e.g., Western Australia), the few IBAs negotiated provided for only modest contributions to community infrastructure.

In its 1992 Mabo judgment, Australia's High Court overturned earlier judicial rulings by determining that indigenous ownership of land, in the form of native title, survived the imposition of British rule in 1788. Native title would continue to survive unless extinguished by a valid and specific act of government or by virtue of the fact that indigenous landowners had been permanently separated from their land and ceased to practice traditional law and custom relating to it. The ruling related to a small island off Australia' s northern coast, but the judgment opened the way for indigenous people in many parts of Australia to seek common law recognition of their rights in land. In 1993, in response to the Mabo judgment, the federal Labor government introduced the Native Title Act, which

provided for the exercise of a right to negotiate by native title holders in relation to certain future acts, including granting of mining leases. The practical impact of this legislation was greatly expanded in 1996 by a second High Court judgment (Wik), which determined that native title could survive the granting of pastoral leases, a form of tenure in place throughout much of Australia. It appeared that indigenous people were at last gaining a basis on which to negotiate substantive IBAs in many parts of the country.

Since Wik, however, a considerable political backlash has forced indigenous people to struggle to retain the gains made from 1992 to 1996. They received a substantial set back with the passage of the Native Title Amendment Act 1998, which substantially toughened the registration test for native title claimants and removed or diminished indigenous procedural rights in relation to areas such as renewal of mining leases, development of private mining infrastructure, and mineral exploration. The new act also conferred on state governments, traditionally enthusiastic supporters of large-scale resource development, the capacity to develop alternative regimes to the right-to-negotiate provisions of the Native Title Act 1993.

As the nature of the regimes implemented by state governments will greatly affect the capacity of indigenous people to negotiate substantive IBAs, indigenous organizations are now committing substantial effort and resources to try to ensure that the state regimes protect their remaining procedural rights. The outcome will have profound implications for the number and nature of IBAs negotiated in Australia in future years.

While these judicial and legislative developments have been under way, indigenous communities and organizations have, of course, continued to negotiate IBAs. The following sections briefly canvass some issues which, in my experience, have been particularly important and/or contentious in IBA negotiations.

Many contemporary IBAs in Australia include substantial ongoing cash payments to indigenous interests, a situation that appears to distinguish Australian IBAs from many of their Canadian counterparts. Aspects of financial provisions that attract considerable attention include the following: 

The scale of cash payments. This varies considerably between state jurisdictions and between individual projects within jurisdictions. Critical factors in explaining variations are the specific legislative framework that applies in each case; the scale of the project and whether the agreement involves a "greenfields" development or represents a new arrangement being applied to an existing operation; and the technical and political resources available to the indigenous group concerned. During recent years some regional land councils have gradually built up substantial technical capacity and political skills that are clearly reflected in the scale of payments provided for in IBAs they negotiate.

The use to which cash payments should be put. This debate reflects a belief on the part of some commentators that, while royalty-type payments should be spent for the communal good, they have often been spent on individual consumption. Some recent IBAs have tied payments to specific communally based activities, such as provision of recreation facilities and development of communally owned business enterprises. Other indigenous groups have strongly resisted this trend, however, insisting that payments should come "without strings attached" so that the recipients can make their own decisions about the best way to use them.

The form in which payments occur. There are two aspects to this issue. The first involves whether payments are in the form of royalties, i.e., they move in line with the volume or value of output, or in the form of fixed annual payments that vary only in line with inflation. Some mining companies oppose royalty-type payments in principle, on the basis that only the Crown should have the right to charge royalties. Subsidiaries of the British-based multinational Rio Tinto, for instance, will not negotiate royalty-type arrangements unless indigenous people can require them to do so under statute (which occurs only in the Northern Territory).

The second issue arises where royalties are paid and involves the type of royalty mechanism used. Traditionally, conventional, flat-rate royalties were calculated as a percentage of the value of mineral production or on the basis of so many cents or dollars per tonne. More recent IBAs have explored more complex and flexible approaches and reveal a growing capacity by indigenous people to devise tax regimes to suit specific circumstances. For instance, one Cape York IBA, relating to a new project strongly supported by the indigenous community and that included a processing facility, involved a modest, flat-rate royalty designed to help ensure the project's viability in its early years. However, the agreement also provided for a substantial royalty on the processed product (rather than the raw mineral) in later years, allowing the community to reap substantial benefits from each phase of the operation once it was established. 

One of the most contentious issues in recent negotiations has been indigenous participation in project management. Indigenous people have increasingly taken the view that they will achieve their goals in environmental management, employment and training, and cultural heritage protection only with some degree of control over project management. They wish to play a real role in decision making, rather than being "consulted" or informed of decisions after they have been made. Many project developers have jealously guarded their traditional control over operational decisions, yet some have shown an increasing willingness to involve indigenous people in decisions specifically affecting their interests (such as cultural heritage and indigenous employment), while retaining full control over matters such as production levels and the timing of investment.

Negotiations on the issue have resulted in quite different outcomes depending on the attitudes of specific developers and the strength of indigenous negotiating positions. In some cases indigenous people have been able to achieve only more systematic and broadly based consultative mechanisms, with project operators maintaining control over decision making. At the other end of the spectrum, one Cape York IBA provides for a joint management committee, equal representation from the project operator and the indigenous community, that has decision-making (not advisory) powers in relation to issues of central concern to indigenous people. Another Cape York IBA identifies three broad categories of decisions:

• Those that are clearly commercial in nature, over which the operator has complete control
• Those of specific interest to indigenous people, where a joint management group has full responsibility
• Those that are of key concern to indigenous people and also involve wider legal and commercial implications for the project operator, where the joint management group has a strong advisory and policy development role but where the operator retains ultimate authority

Indigenous people have always been aware that the signing of an IBA does not, in itself, guarantee the delivery of the benefits it envisages or the protections it offers. Particularly in employment and training and cultural heritage protection, effective systems need to be designed and maintained to ensure that relevant initiatives required to realize those benefits are implemented, monitored, evaluated, and adapted over extended periods of time.

It is now some 20 years since the "first generation" of IBAs was negotiated for mining projects in Australia, and a retrospective evaluation of their implementation shows results that are far from encouraging. An extensive audit of the 1978 Ranger uranium agreement found major failures in implementation, with both the developer and the relevant government authorities failing to deliver on a series of commitments in the agreement.

A number of initiatives are being adopted in IBAs to try to enhance the prospects for successful implementation. These include the following:

• Creation of joint indigenous-developer management committees with specific authority on key implementation issues
• Provision of resources to support implementation as part of the agreement
• Attempts to make the terms of IBAs more specific and explicit to ensure that the nature of the parties' commitments are unambiguous
• Negotiation of effective mechanisms allowing parties to seek redress for non-implementation and for settling any continuing disputes

More work is needed in this area. In particular, existing sanctions for non-implementation tend to be "all or nothing" in nature; e.g., legal action leading to the suspension or forfeiture of mine leases or termination of agreements. Because of the serious nature of such sanctions and the expense and uncertainty they usually involve, indigenous groups are often reluctant to pursue them, which seriously undermines their efficacy. Some alternative approaches are being explored. For instance, one draft IBA in negotiation contains a formula under which failure to fulfil employment and training commitments would require the developer to make additional payments into a community business development fund, and payments would rise exponentially for each year the commitments are unfulfilled. An escape clause allows penalty payments to be waived where the project operator can show that the failure to meet commitments resulted from factors beyond its control.

The foregoing matters are only some of the issues that concern indigenous people. Another major question involves the provision of funding to support negotiation of IBAs. Australian governments have generally been very reluctant to fund negotiations, despite the fact that the co-operative approach to resource development that IBAs can allow has major benefits for the state (for example, by minimizing delays to project timetables and so to commencement of government revenue streams). Other issues of concern include employment and training, business development opportunities, the activities of non-indigenous workers, and environmental and cultural heritage management regimes.

However, in the short term, the issue of most concern to indigenous Australians will continue to be the defence of their native title rights, because if they lose the battle on this front, their capacity to negotiate acceptable IBAs will be seriously diminished.