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Focus: Significant reforms proposed for native title agreements

13 July 2010

In brief: The Federal Government has just released a Discussion Paper outlining a number of measures which, if implemented, would make some significant changes to the negotiation, content, administration and approval of native title agreements. Partner Ben Zillmann (view CV) and Senior Associate Rochelle Carey explore some of the central themes of the Discussion Paper.

• What is a native title agreement?
• Background to the proposals
• Improving native title agreements
• Future act reforms
• Next steps

What is a native title agreement?

In summary, the 'native title agreements' captured within the scope of the Discussion Paper consist of:

• Indigenous Land Use Agreements (ILUAs); and
• 'right to negotiate' agreements (or RTN agreements).

Both of these agreements are contracts first and foremost, but both also attract special recognition under the Native Title Act 1993 (Cth), which authorises parties to those agreements to legally undertake 'future acts' – ie activities that may impact upon native title rights (such as mining, construction of infrastructure, etc.).

Notably, the Discussion Paper broadly applies to all native title agreements. Unlike some discussion papers in this area in the past, this paper does not focus on a single industry, such as mining.

Background to the proposals

Agreements between native title holders or claimants on the one hand, and miners, project developers and governments on the other, can have significant financial and other benefits associated with them – some such agreements deliver many millions of dollars worth of benefits to the native title parties. These benefits have the potential to be 'future shaping' for some Indigenous communities.

Under the current legislation, there is detailed regulation of the process for obtaining a native title agreement. However, there is little by way of prescribing what the substantive content of a native title agreement should or must contain. The Federal Government has increasingly voiced an interest in giving more direction as to the content of such agreements. It repeats in the Discussion Paper the belief and aim that native title agreement making can play an important role in 'closing the gap' between Indigenous and non-Indigenous Australians. With that in mind, the Government's stated aim is to 'improve native title agreement-making'.

The Discussion Paper has been prompted by the growing number of high-value native title agreements that are being entered into by parties.

The centrepiece of the latest Discussion Paper – Leading practice agreements: maximising outcomes from native title benefits – focuses on agreements being 'sustainable'; that is, the agreements must be workable and, importantly, the benefits must be applied for all native title party interests, including for present and future generations.

Improving native title agreements

The Discussion Paper promotes several initiatives that are viewed as potentially improving the native title agreement process:

Governance measures

The Discussion Paper recognises that there is currently no legal requirement as to the manner in which benefits might be paid to native title parties under native title agreements. While some agreements may go into detail in establishing payment structures or mechanisms (eg setting up trust structures to receive benefits for subsequent distribution to the community), not all agreements do this, or do it to varying degrees. This is for a variety of reasons, not least of which is that in some cases, the native title party will consider the administration and distribution of the benefits to be a matter for them and not something that should be mandated in an agreement with a project proponent.

Review function

The Government is considering establishing a new administrative entity, which may be independent of government, that will have a statutory review function in respect of all native title agreements. The stated aim of this proposal is to ensure agreements are structured so as to maximise the positive financial and non-financial benefits from the agreement. Notably, the Government envisages that such an entity would be tasked with reviewing the 'sustainability' of the way the benefits are structured under the agreement.

Importantly, the paper states that while the entity would review the structure of the agreement, it would not review the quantum of the benefits – this would remain a matter for commercial negotiation between the parties to the agreement.

Other notable aspects of this reviewing entity's responsibilities suggested by the Discussion Paper are:

• the assessment of native title agreements against 'leading practice principles';
• advising and assisting parties to implement leading practice in native title agreements;
• reporting on trends and issues about native title agreements by way of annual reports tabled in parliament; and
• advising ministers, including where parties are 'not prepared to adopt leading practice principles' or in relation to measures to further assist parties to native title agreements.

Registration of agreements

There will be a requirement for any native title agreements authorising future acts to be 'registered' with the new review body. This would include any 'ancillary' or related agreements. This is an important point, as under current legislation a practice has developed where substantial commercial details of agreements are sometimes contained in a separate ancillary agreement that is not disclosed to the National Native Title Tribunal for the purposes of registration under the Native Title Act (with the registered agreement sometimes only containing the bare minimum details necessary to authorise a future act and meet statutory requirements).

The registration process proposed adds a further 'quasi-approval' to the native title agreement process. However, while the paper suggests all native title agreements would have to be registered, the Discussion Paper also points out that the review body will not have the ability to veto an agreement.

Review principles

The process proposed is that the review body would assess a native title agreement against 'leading practice sustainability principles', with the aim of identifying the ability of agreements to contribute to the 'intergenerational, social and economic development of native title holders and claimants'. The paper suggests that the leading practice sustainability principles would be published by the review body in advance so that negotiating parties would have some guidance in respect of negotiating the terms of the agreement.

The review body would then report back to the parties, noting any areas where it considers leading practice principles were not met. This is an interesting aspect of the proposal, as clearly the intention of the Discussion Paper is to strongly encourage parties to adopt 'leading practice sustainability principles' in agreements. However, as the currently proposed review body is not to be given the power to impose such principles, or veto agreements lacking those principles, the question has to be asked about the extent to which such assessment reports would be adopted by the parties that will otherwise have already struck a bargain by then and may both be anxious to conclude the agreement process.

It is suggested that considerable resources would need to be given to the review body to ensure that any such assessment reports are delivered efficiently. The native title agreement making process is already often lengthy and expensive, and often imposes a considerable burden the parties to a negotiation. A drawn-out review process, with the potential for requiring further negotiations to adopt or consider additional recommended leading practice principles, could discourage the agreement making process if not handled appropriately.

The Discussion Paper notes that the review body may have a discretion as to which agreements it assesses, and suggests that (for example) agreements relating only to mineral exploration might not be assessed by the body (but nevertheless still need to be registered). Given the stated goals of the Discussion Paper (focusing on sustainability of agreements) and that the reviewing entity would not have a role in reviewing the quantum of benefits under agreements, it is suggested that it would only be the more significant agreements (in terms of benefits provided) that should be subject to the proposed sustainability review process.

Future act reforms

The Discussion Paper also proposes some potential process changes to improve the native title agreement making process. In short, these are:

ILUAs

The paper calls for submissions on three broad proposals in respect of ILUAs:

• possible ways to streamline the ILUA registration process so that they might be registered in a shorter timeframe;
• increasing transparency in agreements by providing additional information about registered ILUAs through public registers, as opposed to the limited information that is currently available; and
• providing an express process to enable 'minor' amendments to ILUAs without invoking a new registration process.

RTN agreements and 'good faith requirements'

The Discussion Paper proposes amendments to the Native Title Act to provide clarification for parties as to what constitutes 'good faith' negotiations. Parties must engage in good faith negotiations if they are seeking an RTN agreement. It is clear from the paper that this proposal has been prompted by a recent Full Federal Court decision¹, which held that a party could satisfy the good faith requirement (and therefore be entitled to refer a matter for determination by the Tribunal) regardless of whether negotiations had reached a certain stage in terms of the extent of negotiation over the substantive content of an agreement. The Government is proposing amendments to 'encourage parties to engage in meaningful discussions about future acts' to overcome the possibility that the Federal Court decision 'could discourage parties to actively engage in negotiations to reach broad and practical agreements' by avoiding substantive negotiations about the future acts.

The existing statutory obligation to negotiate in good faith has already attracted a substantial body of case law. Where parties do not conclude agreements and proceed to a Tribunal determination, allegations about the failure of a party to negotiate in good faith is often the first line of argument in litigation. Any possible amendments adjusting the criteria as to what constitutes good faith negotiations, especially if they potentially add to existing statutory timeframes for negotiations, are no doubt likely to be closely scrutinised by all stakeholders.

Next steps

If the proposals suggested in the Discussion Paper are adopted, parties will need to give greater consideration to governance and sustainability principles when negotiating native title agreements. The proposals will clearly add a further layer of administration to the agreement making process, which could have timing and related costs issues associated with it which would need to be factored into project development programs.

The proposed amendments to the 'good faith' criteria would also need to be carefully considered when parties are entering into negotiations under the 'right to negotiate process', to ensure any new statutory requirements are addressed by the manner in which negotiations are approached and conducted.

The Federal Government has invited submissions on the matters raised in the Discussion Paper by 5 August 2010. Anyone wishing to make submissions should read the Discussion Paper which sets out the specific questions the Government is seeking responses to and gives details regarding how submissions are to be made.

Footnotes

1. FMG Pilbara Pty Ltd v Cox [2009] FCAFC 49.

For further information, please contact:

• Ben ZillmannPartner, Brisbane
  Ph: +61 7 3334 3538
  Ben.Zillmann@aar.com.au
• Chris SchulzPartner, Melbourne
  Ph: +61 3 9613 8772
  Chris.Schulz@aar.com.au
• Marshall McKennaPartner, Perth
  Ph: +61 8 9488 3820
  Marshall.McKenna@aar.com.au