Commonwealth v WMC Resources Ltd - [1998] HCA 8

HIGH COURT OF AUSTRALIA

BRENNAN CJ,
TOOHEY, GAUDRON, McHUGH, GUMMOW AND KIRBY JJ

COMMONWEALTH OF AUSTRALIA APPELLANT

AND

WMC RESOURCES LTD (formerly
WESTERN MINING CORPORATION LTD) RESPONDENT

Commonwealth of Australia v WMC Resources Ltd [1998] HCA 8
2 February 1998
M58/1996

ORDER

Appeal allowed with costs.

Set aside the orders of the Full Court of the Federal Court and in lieu thereof, order that:

(a)the appeal to that Court be allowed with costs;

(b)paragraphs 1 and 2 of the orders of Ryan J be set aside and in lieu thereof, order that the application be dismissed with costs.

On appeal from the Federal Court of Australia

Representation:

J J Spigelman QC with H C Burmester and S J Gageler for the appellant (instructed by Australian Government Solicitor)

G A A Nettle QC with P J Hanks for the respondent (instructed by Arthur Robinson & Hedderwicks)

Notice: This copy of the Court’s Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Commonwealth of Australia v WMC Resources Ltd (formerly

Western Mining Corporation Ltd)

Constitutional law – Acquisition of property – Application of s 51 (xxxi) to areas geographically external to Australia – Statutory permit to explore for petroleum granted in area of disputed sovereignty – Law reducing area covered by permit – Whether permit property capable of acquisition – Whether rights under permit could be extinguished without just terms compensation – Constitutional guarantee of just terms.

The Constitution, ss 51 (xxix), (xxxi).

Petroleum (Australia-Indonesia Zone of Cooperation) Act 1990 (Cth).

Petroleum (Australia-Indonesia Zone of Cooperation) (Consequential Provisions) Act 1990 (Cth).

Petroleum (Submerged Lands) Act 1967 (Cth).

Seas and Submerged Lands Act 1973 (Cth).

BRENNAN CJ.
The context in which the question for determination arises

On 25 June 1977, an exploration permit No WA‑74‑P was issued to a permittee pursuant to the provisions of Div 2 of Pt III of the Petroleum (Submerged Lands) Act 1967 (Cth) ("the PSL Act"). Section 28 of that Act provides:
" A permit, while it remains in force, authorizes the permittee, subject to this Act and the regulations and in accordance with the conditions to which the permit is subject, to explore for petroleum, and to carry on such operations and execute such works as are necessary for that purpose, in the permit area."
The permit area covered by permit No WA‑74‑P consisted of 253 "blocks" which lay within an "adjacent area", those terms being defined in and for the purposes of the PSL Act. To explore for petroleum in an "adjacent area" without a permit is prohibited: s 19. "Blocks" are portions of the surface of the earth bounded by meridians which are separated from each other by 5 minutes of longitude and parallels of latitude that are separated from each other by 5 minutes of latitude and which lie wholly or partly within an adjacent area[1]. An adjacent area means an adjacent area in respect of a State or Territory ascertained in accordance with s 5A, the relevant sub-section of which reads as follows:
" (1) For the purposes of this Act, but subject to sub-section (2), the adjacent area in respect of a State or the Northern Territory is so much of the area described in Schedule 2 under the heading that refers to that State or Territory as comprises waters of the sea that -
(a)are not within the outer limits of the territorial sea of Australia (including the territorial sea adjacent to any island forming part of Australia); and
(b)are within the outer limits of the continental shelf."
Although "adjacent area" is defined as comprising "waters of the sea", s 6 provides that for the purposes of the Act "the space above or below an adjacent area shall be deemed to be in that area".
[1] ss 5 and 17.
The permit entitled the permittee to explore for petroleum within the 253 blocks of the permit area for a period of 6 years[2] but was capable of renewal[3] although, on renewal, the number of blocks to be included in the permit area had to be reduced: s 31[4]. A permit which is varied under the Act has effect in accordance with its terms as varied: s 5(8).
[2] s 29(a).
[3] ss 29 and 30.
[4] Section 31(1) reads as follows:
"Subject to sub-section (2A), the number of blocks in respect of which an application for the renewal of a permit may be made shall not exceed the number calculated as follows:
(a) where the number of blocks in respect of which the permit is in force is a number that is divisible by 2 without remainder - one-half of that number; or
(b) where the number of blocks in respect of which the permit is in force is a number that is one less or one more than a number that is divisible by 4 without remainder - one-half of that last-mentioned number."
At the time when the permit was issued, Australia and the Republic of Indonesia each claimed sovereign rights to explore and to exploit the natural resources of a portion of the continental shelf which overlapped the permit area. But, for the purposes of determining these proceedings by the municipal law of Australia, Australia must be taken to have possessed those sovereign rights at the time when the permit was issued. The Seas and Submerged Lands Act 1973 (Cth) declared and enacted[5] that -
"the sovereign rights of Australia as a coastal State in respect of the continental shelf of Australia, for the purpose of exploring it and exploiting its natural resources, are vested in and exercisable by the Crown in right of the Commonwealth."
Accordingly, these proceedings must be determined on the footing that Australia had those sovereign rights over that part of the continental shelf which became the permit area.
[5] s 11, the validity of which was established by New South Wales v The Commonwealth ("the Seas and Submerged Lands Case") (1975) 135 CLR 337.
However, the competing claims to sovereign rights engendered a reluctance by the permittee[6] to risk further expenditure in exploring the permit area. For that reason, the permittee sought and obtained suspensions of the permit under s 103A of the PSL Act. The suspensions had the effect of extending the term of the permit by periods corresponding with the periods of suspension. In consequence of those extensions, the obligation[7] of the permittee to relinquish not less than half of the permit area on the renewal of the permit was deferred.
[6] There were in fact several corporations interested in the permit, but it is convenient to speak of them collectively as "the permittee".
[7] Section 31 of the PSL Act.
By a Treaty between Australia and the Republic of Indonesia done on 11 December 1989 the respective Contracting States created a Zone of Cooperation between the Indonesian Province of East Timor and Northern Australia. The Zone of Cooperation was divided into Areas designated as A, B and C[8]. Clause 2 of Art 2 of that Treaty provides, inter alia, as follows:
"2. Within the Zone of Cooperation activities in relation to the exploration for and exploitation of petroleum resources shall be conducted on the following basis:
(a)In Area A, there shall be joint control by the Contracting States of the exploration for and exploitation of petroleum resources, aimed at achieving optimum commercial utilization thereof and equal sharing between the two Contracting States of the benefits of the exploitation of petroleum resources, as provided for in this Treaty;
(b)In Area B, Australia shall make certain notifications and share with the Republic of Indonesia Resource Rent Tax collections arising from petroleum production on the basis of Article 4 of this Treaty; and
(c)In Area C, the Republic of Indonesia shall make certain notifications and share with Australia Contractors' Income Tax collections arising from petroleum production on the basis of Article 4 of this Treaty."
The Treaty does not purport to settle the competing claims of Australia and the Republic of Indonesia to sovereign rights to explore and exploit the resources of the continental shelf within the Zone of Cooperation. Clause 3 of Art 2 of the Treaty expressly provides:
"Nothing contained in this Treaty and no acts or activities taking place while this Treaty is in force shall be interpreted as prejudicing the position of either Contracting State on a permanent continental shelf delimitation in the Zone of Cooperation nor shall anything contained in it be considered as affecting the respective sovereign rights claimed by each Contracting State in the Zone of Cooperation."
[8] Art 1.
Consequent upon the making of the Zone of Cooperation Treaty, the Parliament enacted the Petroleum (Australia-Indonesia Zone of Cooperation) Act 1990 (Cth) ("the Zone of Cooperation Act"), the object of which "is to enable Australia to fulfil its obligations under the Treaty"[9]. The provisions of the Treaty were set out in a Schedule to that Act. A Joint Authority between Australia and Indonesia responsible to a Ministerial Council consisting of Ministers of both Contracting States was established pursuant to the Treaty[10] and the Zone of Cooperation Act declared[11] that:
"The Ministerial Council and the Joint Authority exercise the rights and responsibilities of Australia, in relation to the exploration for and exploitation of petroleum resources in Area A of the Zone of Cooperation, in accordance with the Treaty."
Section 7 of the Zone of Cooperation Act provided that "a person must not prospect for petroleum in Area A of the Zone of Cooperation except with the approval of the Joint Authority". That prohibition effectively abrogated the right conferred upon the permittee by s 28 of the PSL Act in respect of those blocks in the permit area which lay within Area A.
[9] s 3.
[10] Arts 5 and 7.
[11] s 4.
Contemporaneously with the commencement of the Zone of Cooperation Act, the Petroleum (Australia-Indonesia Zone of Cooperation) (Consequential Provisions) Act 1990 (Cth) ("the Consequential Provisions Act") commenced[12]. The latter Act amended a number of Acts including the PSL Act[13]. Section 5A of the PSL Act was amended[14] in substance to excise Area A from any "adjacent area". A consequential amendment was needed to exclude from a permit area those blocks which lay within Area A. That was effected by the insertion[15] in the PSL Act of s 30A which reads as follows:
[12] Consequential Provisions Act, s 2.
[13] See Pt 8 of the Consequential Provisions Act.
[14] By s 22 of the Consequential Provisions Act.
[15] By s 23 of the Consequential Provisions Act.
"          (1)        This section applies to any permit that was, immediately before the commencement of this section, in force in respect of blocks all or a number of which were blocks constituted by graticular sections wholly or partly in Area A of the Zone of Cooperation.
(2) Where, as a result of the amendments of section 5A made by the Petroleum (Australia-Indonesia Zone of Cooperation) (Consequential Provisions) Act 1990 (which removed Area A from the adjacent areas) and of the operation of subsection 17(2):
(a)     a block specified in the permit has ceased to exist; or
(b)     the boundaries of a block specified in the permit have changed;
the permit is taken not to specify any block referred to in paragraph (a), to specify each block referred to in paragraph (b) as that block exists immediately after the commencement of the amendments, and to specify each block unaffected by the amendments.
(3)Where:
(a)     before the commencement of this section, an application had been made under section 30 for the renewal of a permit; and
(b)     at that commencement, no decision has been taken to renew, or to refuse to renew, the permit;
the application is taken to specify the blocks which, as a result of the operation of subsection (2), constitute the permit area.
(4) Where, immediately before the commencement of this section, there was in force under section 103A an instrument of suspension in respect of a permit, then, on the commencement of this section:
(a)     the instrument is by force of this section revoked; and
(b)     the permittee is taken to have made an application under section 30 for the renewal by the Joint Authority of the permit in respect of the blocks which, as a result of the operation of subsection (2), constitute the permit area.
(5)Section 31 does not apply to or in relation to an application:
(a)     that is referred to in subsection (3); or
(b)     that a permittee is taken to have made under subsection (4)."
The effect of sub-ss (4) and (5) on Permit No WA‑74‑P was, first, to terminate the suspension of that permit and, secondly, to deem the permittee to have made an application for renewal of that permit in respect of so much of the permit area as lay outside Area A. These provisions overrode the requirement otherwise imposed by s 31 of the PSL Act to relinquish one-half of the blocks in a permit area when applying for renewal of a permit.
The question for determination
At the time when the Zone of Cooperation Act and the Consequential Provisions Act commenced, the respondent WMC Resources Ltd ("WMC")[16] held a 16.25% interest in Permit No WA‑74‑P. Considerable expenditure had been outlaid in exploring the permit area and there were prospects of discovering petroleum deposits capable of exploitation. If a permittee discovers a deposit of petroleum in its permit area, the PSL Act prescribes steps and conditions which, if taken and satisfied, lead to the granting of a licence to a permittee to recover petroleum in a licence area[17] within the permit area. Without a licence, the carrying on of operations for the recovery of petroleum in an "adjacent area" is prohibited[18].
[16] WMC was formerly known as Western Mining Corporation Ltd. It changed its name on 31 May 1996.
[17] Section 52 of the PSL Act provides:
"A licence, while it remains in force, authorizes the licensee, subject to this Act and the regulations and in accordance with the conditions to which the licence is subject –
(a)to recover petroleum in the licence area and to recover petroleum from the licence area in another area to which he has lawful access for that purpose;
(b)to explore for petroleum in the licence area; and
(c)to carry on such operations and execute such works in the licence areas as are necessary for those purposes."
[18] PSL Act, s 39.
A permittee's right to explore for petroleum in an adjacent area and, if a deposit of petroleum is discovered within the permit area, the right to apply for and, subject to compliance with the Act and conditions imposed under the Act, to be granted a licence to carry on operations to recover the petroleum within a licence area are valuable rights. More precisely, they are valuable when the permit area might contain deposits of petroleum which are recoverable in operations that are or might become commercially viable. The rights conferred by permit No WA‑74‑P, and WMC's interest in the permit, are said by WMC to have been valuable. Those rights were susceptible of exercise during the currency of the permit. As a permit may be transferred[19] and interests in a permit may be created or assigned[20] subject to approval, the interests of the permittee and the interests of WMC were susceptible of realisation by sale and assignment. These qualities of the permit and WMC's interest in it are indicative of the proprietorial character of the rights possessed respectively by the permittee and WMC[21].
[19] PSL Act, s 78.
[20] PSL Act, s 81.
[21] R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 at 342-343; Health Insurance Commission v Peverill (1994) 179 CLR 226 at 241.
WMC sued the Commonwealth in the Federal Court of Australia seeking a declaration that the excision from the permit area of those blocks or parts of blocks which lay within Area A effected by the amendments made by the Consequential Provisions Act would be an acquisition of property otherwise than on just terms if it were not for s 24 of the Consequential Provisions Act. That section reads as follows:
"    (1)      In this section, 'acquisition of property' and 'just terms' have the same meaning as in paragraph 51(xxxi) of the Constitution.
(2)      Where, but for this section, the operation of the amendments made by this Part would result in the acquisition of property from a person otherwise than on just terms, the Commonwealth is liable to pay compensation of a reasonable amount to the person in respect of the acquisition.
(3)      Where the Commonwealth and the person do not agree on the amount of the compensation, the person may institute proceedings in the Federal Court for the recovery from the Commonwealth of such reasonable amount of compensation as the Federal Court determines."
WMC seeks compensation pursuant to s 24(3). At first instance, Ryan J made the declaration sought by WMC[22] and an appeal to the Full Court was dismissed by majority[23] (Black CJ and Beaumont J; Cooper J dissenting).
[22]    Western Mining Corporation Ltd v Commonwealth of Australia (1994) 50 FCR 305 at 344.
[23]    Commonwealth of Australia v Western Mining Corporation Ltd (1996) 67 FCR 153.
The question for determination on this appeal by the Commonwealth against the judgment of the Full Court is whether the amendments which effected the excision from the permit area of the blocks or parts of blocks that lie within Area A are a law for the "acquisition of property" within the meaning of that term in s 51(xxxi) of the Constitution.
Acquisition of property: s 51(xxxi)
In Mutual Pools & Staff Pty Ltd v The Commonwealth[24] I said:
" Section 51(xxxi) of the Constitution has a dual effect. First, it confers power to acquire property from any State or person for any purpose for which the Parliament has power to make laws and it conditions the exercise of that power on the provision of just terms. Second, by an implication required to make the condition of just terms effective, it abstracts the power to support a law for the compulsory acquisition of property from any other legislative power[25]".
It follows that, when the validity of a law is challenged on the ground that it offends the constitutional guarantee of just terms, it is necessary to determine whether the law is a law for the acquisition of property for the purposes of the Commonwealth.
[24] (1994) 179 CLR 155 at 177.
[25] Johnston Fear & Kingham & The Offset Printing Co Pty Ltd v The Commonwealth (1943) 67 CLR 314 at 318, 325; W H Blakeley & Co Pty Ltd v The Commonwealth (1953) 87 CLR 501 at 521; Attorney-General (Cth) v Schmidt (1961) 105 CLR 361 at 371; Trade Practices Commission v Tooth & Co Ltd (1979) 142 CLR 397 at 445.
Axiomatically, a law is not a law for the acquisition of property unless it effects an acquisition of property. A law does not fall within s 51(xxxi) by reason only that it has an adverse effect on property not amounting to acquisition. As I pointed out in The Commonwealth v Tasmania. The Tasmanian Dam Case[26]:
"    Where neither the Commonwealth nor any other person acquires proprietary rights under a law of the Commonwealth, there is no acquisition upon which par (xxxi) may fasten."
But where a law of the Commonwealth purports to extinguish the proprietary rights of a person or a State, the law may or may not effect an acquisition. Dawson and Toohey JJ pointed out in Australian Tape Manufacturers Association Ltd v The Commonwealth[27] that "[t]he mere extinction or diminution of a proprietary right residing in one person does not necessarily result in the acquisition of a proprietary right by another". However, s 51(xxxi) would be a "hollow facade"[28] if a law of the Commonwealth which extinguished proprietary rights in relief of the burden or liability which those rights imposed on the Commonwealth or a third party were not held to effect an acquisition of property by the Commonwealth or the third party[29]. In Mutual Pools & Staff Pty Ltd v The Commonwealth[30], I observed that "[i]f rights against the Commonwealth are extinguished by statute and the rights are proprietary in nature, there is an acquisition of property by the Commonwealth". Thus the purported statutory extinguishment of a plaintiff's cause of action against the Commonwealth was held to be an acquisition of property in Georgiadis v Australian and Overseas Telecommunications Corporation[31] and in The Commonwealth v Mewett[32].
[26] (1983) 158 CLR 1 at 247.
[27] (1993) 176 CLR 480 at 528; see also The Tasmanian Dam Case (1983) 158 CLR 1 at 145, 247, 283; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 165.
[28]    Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480 at 510.
[29]    Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 at 223.
[30] (1994) 179 CLR 155 at 176.
[31] (1994) 179 CLR 297.
[32] (1997) 71 ALJR 1102; 146 ALR 299.

In the present case, the permit and WMC's interest can be classified as proprietary rights. But those rights were the creatures of statute, namely, the PSL Act, and their continued existence depends upon the continued existence of their statutory support. If the statute is amended so that the rights are diminished, does the diminution amount to an acquisition of property?
In Georgiadis v Australian and Overseas Telecommunications Corporation[33], Mason CJ, Deane and Gaudron JJ said:
"'[A]cquisition' in s 51(xxxi) extends to the extinguishment of a vested cause of action, at least where the extinguishment results in a direct benefit or financial gain (which, of course, includes liability being brought to an end without payment or other satisfaction) and the cause of action is one that arises under the general law. The position may be different in a case involving the extinguishment or modification of a right that has no existence apart from statute. That is because, prima facie at least and in the absence of a recognized legal relationship giving rise to some like right, a right which has no existence apart from statute is one that, of its nature, is susceptible of modification or extinguishment. There is no acquisition of property involved in the modification or extinguishment of a right which has no basis in the general law and which, of its nature, is susceptible to that course. A law which effected the modification or extinguishment of a right of that kind would not have the character of a law with respect to the acquisition of property within s 51(xxxi) of the Constitution[34]". (Emphasis added.)
[33] (1994) 179 CLR 297 at 305-306.
[34] See Health Insurance Commission v Peverill (1994) 179 CLR 226 per Mason CJ, Deane and Gaudron JJ.
In this passage, their Honours treat "acquisition of property" as a single concept. I agree that, where a purely statutory right is by nature susceptible of modification or extinguishment, its modification or extinguishment works no acquisition of property. But, in my respectful opinion, it does not follow that a law of the Commonwealth which extinguishes purely statutory rights having no basis in the general law can never effect an "acquisition of property" within s 51 (xxxi). If statutory rights were conferred on A and a reciprocal liability were imposed on B and the rights were proprietary in nature, a law extinguishing A's rights could effect an acquisition of property by B. In the present case, where the rights of the permittee and of WMC, though created by statute, are properly to be regarded as proprietary in nature, a Commonwealth law which purported to effect a compulsory transfer of those rights to a third party would be a law for the acquisition of property. But the Consequential Provisions Act does not have that effect. The present case does not turn on the proprietary nature of the rights of the permittee or of WMC; it turns on a different issue, namely, whether the modification of the rights of the permittee and of WMC amounts to an acquisition by the Commonwealth of the rights which the permittee and WMC respectively possessed before the Consequential Provisions Act commenced.
Where a law of the Commonwealth creates or authorises the creation of a right, a statutory modification or extinguishment of the right effects its acquisition if, but only if, it modifies or extinguishes a reciprocal liability to which the party acquiring the right was subject. Thus in Newcrest Mining (WA) Ltd v The Commonwealth[35], the law which sterilised Newcrest's right under its mining lease to carry on "operations for the recovery of minerals" on land vested in the Commonwealth was, in my opinion, a law for the acquisition of property because it extinguished the liability of the Commonwealth to have those minerals extracted from its land and thereby enhanced the property of the Commonwealth[36]. But where a law of the Commonwealth creates or authorises the creation of a right that does not impose on the Commonwealth a reciprocal liability, the mere extinguishment of the right effects no acquisition of the right by the Commonwealth. The Commonwealth's position remains unchanged by the extinguishment.
[35] (1997) 71 ALJR 1346; 147 ALR 42.
[36] See (1997) 71 ALJR 1346 at 1350-1351; 147 ALR 42 at 47-48.
Of course, a statute or the common law may confer on a person a right enforceable by a public law remedy to compel the Commonwealth or its officers to perform a public law duty so that the right and the duty are truly reciprocal. If, by repeal or amendment of the statute, the right and the reciprocal duty are modified or extinguished, one of the indicia of acquisition would appear. But not an indicium of an acquisition of property. That is because a right so to compel the performance of a public law duty is not itself property, and the modification or extinguishment of such a right and duty is not an acquisition of property. Health Insurance Commission v Peverill[37] was such a case.
[37] (1994) 179 CLR 226 at 243-244.
In the present case, although the rights vested in the permittee and in WMC pursuant to the PSL Act at the time immediately prior to the commencement of the Consequential Provisions Act may properly be classified as property, the relevant question is whether those rights were acquired by the Commonwealth or were simply extinguished without acquisition. As Deane and Gaudron JJ said in Mutual Pools[38]:
"[T]he fact remains that s 51(xxxi) is directed to 'acquisition' as distinct from deprivation. The extinguishment, modification or deprivation of rights in relation to property does not of itself constitute an acquisition of property[39]."
[38] (1994) 179 CLR 155 at 185.
[39] See British Medical Association v The Commonwealth (1949) 79 CLR 201 at 270‑271 per Dixon J; The Tasmanian Dam Case (1983) 158 CLR 1 at 145-146 per Mason J; at 181-182 per Murphy J; at 247-248 per Brennan J; at 283 per Deane J; Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480 at 528 per Dawson and Toohey JJ: "It is relevant to note that the Privy Council has also, in the context of interpreting the Malaysian Constitution, drawn a distinction between deprivations and acquisitions: Government of Malaysia v Selangor Pilot Association [1978] AC 337 at 347-348." See also Mabo v Queensland [No 2] (1992) 175 CLR 1 at 43-54.
The source of the rights of the permittee and WMC
It is erroneous to regard the PSL Act as the off-shore equivalent of those provisions which, in Australia, authorise the Crown to alienate interests in the waste lands of the Crown (provisions which I shall call "Land Acts"). If it were the equivalent of Land Acts, it would be arguable that the extinguishing of a permittee's proprietary rights relieves the Commonwealth of a reciprocal burden on its title to land within the permit area and thus constitutes an acquisition of property. The Land Acts assume the existence of the Crown's radical title to land lying above the low water mark, a title which is sufficient to support the alienation of interests in that land and to found the Crown's full beneficial title to that land when there are no other interests or when other interests have been extinguished or are exhausted. In Mabo v Queensland [No 2][40] I examined the nature of that radical title and it is unnecessary now to repeat it. It is sufficient to note that the extinguishing of an interest in land above the low water mark necessarily results in the enhancement of the title which was subject to the interest extinguished. The position in relation to interests in or over the continental shelf is quite different.
[40] (1992) 175 CLR 1 at 43-54.
In New South Wales v The Commonwealth ("the Seas and Submerged Lands Case")[41], Barwick CJ said:
"The colonists inherited the common law: but it operated only in the realm which ended at low-water mark. This was decided in Reg v Keyn[42], a decision with which I respectfully agree. ... Thus, property in and power over the territorial seas could not have come by the common law."
Stephen J observed[43]:
" It may well be that sovereignty over its territorial waters is an attribute of an internationally recognized nation state. If so the Commonwealth possesses that attribute, it has sovereignty in the relevant international law sense, just as, in that same sense, it has sovereignty over the land mass of the Australian continent. In neither case does its lack of full legislative competence or its lack of radical title affect its status as a nation state." (Emphasis added.)
Mason J drew a clear distinction between a proprietary interest in the territorial sea and its seabed and legislative power and jurisdiction over them. Of course, his Honour was considering the claim of the States to territory and ownership of the bed of the territorial sea, and, in rejecting that claim, he denied the States' title to the continental shelf[44]. He said[45]:
" The opinion which I have already expressed as to the authority of Keyn's Case before 1900 answers the submission that the territorial sea and its solum could, in the absence of some addition to the territories of the colonies, or of legislative action, constitute territory of the colonies situated outside the colonial boundaries. The plaintiffs argued that the solum of the territorial sea was waste land of the colonies. However, the power given to the colonies to alienate waste lands of the Crown was limited to waste lands 'within the said Colony' - see Constitution Act, 1855 (NSW) (18 & 19 Vict c 54), s 43; Constitution Act, 1855 (Vict) (18 & 19 Vict c 55), s 54; Constitution Act, 1867 (Q), s 30; Wastelands Act, 1855 (Imp) (18 & 19 Vict c 56), ss 5, 7."
But his Honour accepted[46] that "[t]he power to make laws for the peace, order and good government of a colony was wide enough to enact laws applying to territorial waters and beyond".
[41] (1975) 135 CLR 337 at 368-369; see also R v Bull (1974) 131 CLR 203 at 219.
[42] (1876) 2 Ex D 63.
[43] (1975) 135 CLR 337 at 445.
[44] (1975) 135 CLR 337 at 472.
[45] (1975) 135 CLR 337 at 467; see also at 367.
[46] (1975) 135 CLR 337 at 468-469.
The PSL Act is a law passed in exercise of the legislative powers of the Commonwealth and a person who seeks and obtains the grant of a permit or licence under that Act cannot deny the authority of the Commonwealth to make the grant, but that is not to say that the Commonwealth has any proprietary interest in the continental shelf or the seas above it. The principle expressed by Mason J with respect to the Crown's grant of off-shore interests is applicable to describe the relationship between the grantee of a permit or licence under the PSL Act and the Commonwealth. His Honour said[47]:
" As between the Crown and a subject, instances may be found of the grant by the Crown without legislative authority of proprietary interests in the foreshore or seabed. As against the Crown the subject could not dispute the Crown's title. But this constitutes no ground for concluding that Keyn's Case is incorrect in relation to the Australian colonies. And the decisions of the United States Supreme Court and the Supreme Court of Canada denying the territorial waters and the seabed formed part of the territory of the States of the Union and the Provinces of the Dominion confirm the absence of any proprietary interest in the Australian Colonies (Reference re Ownership of Off-Shore Mineral Rights[48]; United States v California[49])". (Emphasis added.)
[47] (1975) 135 CLR 337 at 469. See also Bonser v La Macchia (1969) 122 CLR 177 at 184-185.
[48] [1967] SCR 792; (1967) 65 DLR (2d) 353.
[49] 332 US 19 (1947).
Although, by our municipal law the Commonwealth has the power to legislate in respect of the exploration of and the exploitation of the resources of the continental shelf, it has no property in the continental shelf at common law. It is not necessary to consider what the effect might be of a law of the Commonwealth (if the Commonwealth were ever to enact such a law) that purported to declare its property in the continental shelf. The PSL Act does not purport to do so.
The statutory modification or extinguishment of a permit or an interest in a permit is not an acquisition of property by the Commonwealth, for the Commonwealth was under no liability reciprocal to the permit or interest and acquires no benefit by the modification or extinguishment. It follows that the Consequential Provisions Act is not a law for the acquisition of property and is therefore not a law falling within s 51(xxxi).
Therefore I would allow the appeal, set aside the order of the Full Court and in lieu thereof allow the appeal to that Court, set aside pars 1 and 2 of the orders made by Ryan J and dismiss WMC's application. Costs should follow each event.

TOOHEY J. Although the facts relevant to this appeal appear in other judgments, it is hard to avoid some repetition. An appreciation of the circumstances giving rise to these proceedings is critical to a determination of the issues between the parties.
The central question is whether the partial extinguishment of mining rights by the Parliament, in an area of disputed national rights, amounted to an acquisition of property within s 51(xxxi) of the Constitution.
The facts
The island of Timor lies 300 miles north‑west of Australia. The western part of the island became part of the Indonesian Republic after World War 2. The eastern part of the island was incorporated into the Indonesian Republic in 1975, notwithstanding a claim by Portugal to sovereignty over East Timor. The Timor Trough is a geomorphological feature which lies in the Timor Sea between 40 and 70 miles from Timor and over 200 miles from the Australian coastline. Australia asserts that its sovereign rights extend up to the Timor Trough. Indonesia asserts sovereign rights at least to the median line between Timor and Australia. As a result there is an "area of overlapping claims, which is wholly outside Australian and Indonesian territorial waters"[50]. Lumb[51] describes the process by which the Timor Gap arose:
"    An Agreement ... was entered into in 1972 between Australia and Indonesia in relation to seabed boundaries to the north and south of the area adjacent to East Timor ... [Between the boundaries drawn] there is a gap (the 'Timor Gap') in the area of the seabed opposite East Timor ... which extends across the north‑eastern portion of the Trough."
[50]    Horta v The Commonwealth (1994) 181 CLR 183 at 190.
[51]    "The Delimitation of Maritime Boundaries in the Timor Sea", (1981) 7 Australian Year Book of International Law 72 at 73.
The respondent WMC Resources Ltd ("WMC")[52] held a permit ("the Permit") authorising exploration for petroleum by it in an area which lay within the Timor Gap. The Permit was issued on 25 June 1977 under the Petroleum (Submerged Lands) Act 1967 (Cth) ("the P(SL) Act")[53]. At the time it was publicly known that the Timor Gap was an area of disputed sovereign rights between Australia and the Republic of Indonesia.
[52] Formerly Western Mining Corporation Ltd.
[53] The permit was originally granted to Pelsart Oil NL. On 4 October 1983 WMC acquired the interest of Mesa Petroleum Co which had earlier acquired 16.25% of Pelsart's interest in the permit.
Pursuant to s 28 of the P(SL) Act, a permit authorises the permittee to "explore for petroleum, and to carry on such operations and execute such works as are necessary for that purpose, in the permit area"[54]. A permit remains in force for an initial period of 6 years but may be renewed for further periods of 5 years[55]. Any petroleum recovered in the permit area by a permittee becomes the property of the permittee[56]. Exploration is prohibited except under and in accordance with a permit. A breach is an offence[57]. As Cooper J noted in the Full Court of the Federal Court, the "regime established ... is to provide for a general prohibition of specified conduct in defined areas ... without a relevant authorisation and to enforce the prohibition with a criminal sanction"[58].
[54] References to the P(SL) Act are to the Act as it appears in Reprint No 2, reprinted as at 31 August 1986. The Reprint was accepted by the parties as the state of the legislation for the purposes of the appeal.
[55] s 29.
[56] s 127.
[57] s 19, unless otherwise permitted by Pt III of the Act.
[58] Commonwealth v Western Mining Corp (1996) 67 FCR 153 at 200; 136 ALR 353 at 395.
Exploration permits are defined in the P(SL) Act by areas known as "blocks"[59]. These are areas beyond the territorial sea of Australia but within the limits of the continental shelf. The total area is defined as the "adjacent area"[60]. The Permit comprised blocks in the adjacent area most proximate to Western Australia. The conditions attached to the Permit are detailed in the judgment of Beaumont J[61]. I shall do no more than draw attention to those conditions of most relevance to the appeal. Condition 1 required the permittee to expend minimum amounts in each year of the term of the permit. Condition 2 prohibited the recovery of any petroleum from the present area except as a result of production testing of a well. Condition 4 required the permittee to pay a royalty in respect of petroleum recovered in the permit area. By Condition 5 the permittee must take adequate measures for the protection of the environment.
[59] ss 5, 17, 149.
[60] The definition of "adjacent area" in s 5A brought the Permit within the s 19 prohibition.
[61] Commonwealth v Western Mining Corp (1996) 67 FCR 153 at 171; 136 ALR 353 at 368.
There was a difficulty for permittees in that the area covered by permits was the subject of a sovereignty dispute between Australia and Indonesia. Articles 1 and 2 of the 1958 Convention on the Continental Shelf ("the 1958 Convention") had the effect that the area within the Permit was within the sovereign rights of Australia. The Seas and Submerged Lands Act 1973 (Cth), s 11 provided that "the sovereign rights of Australia as a coastal State in respect of the continental shelf of Australia, for the purpose of exploring it and exploiting its natural resources, are vested in and exercisable by the Crown in right of the Commonwealth". However, Indonesia is not a party to the 1958 Convention and disputes Australia's assertions of sovereign rights. Indonesia's claims are not based on its continental shelf (having not signed the 1958 Convention). But, as mentioned, Indonesia claims sovereign rights at least to the median line between Timor and Australia. A resolution of the dispute or permanent "continental shelf delimitation" is still pending. The Treaty between Australia and the Republic of Indonesia on the Zone of Co‑operation in an Area between the Indonesian Province of East Timor and Northern Australia ("the Treaty") was intended as an interim measure pending final resolution[62].
[62] On 14 March 1997 Australia and Indonesia signed The Treaty between the Government of Australia and the Government of the Republic of Indonesia establishing an Exclusive Economic Zone Boundary and Certain Seabed Boundaries. This treaty has not yet been ratified. The measures provided in the interim treaty are expressly preserved. For a discussion of the treaty of 14 March 1997, see Piotrowicz, "Australia and Indonesia tie the maritime knot", (1997) 71 Australian Law Journal 916.
The position of the permittees under the Permit is described by the primary judge, Ryan J[63]. They were required to expend $11,640,000 over 6 years in an area where, because of the sovereign rights disputes, their own rights were uncertain. Further, under the renewal procedures in the P(SL) Act a permittee was required to relinquish not less than 50% of the permit area before renewal[64]. The permittees were reluctant to make such a selection and the Commonwealth was of the view that renewal over a smaller area might damage Australia's sovereignty claims. As a result, a request by the permittees to suspend the Permit and extend its period was granted by the Joint Authority on 22 May 1983. The suspensions were possible under s 103A of the P(SL) Act[65]. Although the Permit was suspended, the right to "carry on and execute marine geophysical surveys in the area" was preserved[66].
[63] Western Mining Corp v Commonwealth (1994) 50 FCR 305 at 319‑320; 121 ALR 661 at 673‑674.
[64] s 31(1).
[65] This had been inserted in 1980, with effect from 14 February 1983. In 1985 this provision was again amended to allow for suspension of leases as well as permits: see s 38 and the Schedule to the Petroleum (Submerged Lands) Amendment Act 1985 (Cth).
[66] Western Mining Corp v Commonwealth (1994) 50 FCR 305 at 320; 121 ALR 661 at 674.

On 18 February 1991 the Petroleum (Australia‑Indonesia Zone of Cooperation) Act 1990 (Cth) ("the Cooperation Act") came into operation[67]. Its object was to enable Australia to fulfil its obligations under the Treaty: s 3. The Treaty is annexed as a schedule to the Cooperation Act. That Act gives a "Ministerial Council" and a "Joint Authority" authority to exercise the rights and responsibilities of Australia under the treaty[68]. Both the Ministerial Council and Joint Authority are defined as having the meaning provided in the Treaty[69].
[67]    The validity of this Act was upheld by the High Court in Horta v The Commonwealth (1994) 181 CLR 183.
[68]    s 4.
[69]    s 5(1).
The Treaty created a regime for the exploration of minerals in the disputed area which would not prejudice the claims of either Australia or Indonesia to sovereignty or sovereign rights[70]. The disputed "Timor Gap" area was divided into three areas: Areas A, B and C. Responsibility for administering the exploration and exploitation of minerals in Area A was given to the Ministerial Council and the Joint Authority. The Ministerial Council was defined as a body of "Ministers" of equal numbers from the Contracting States with overall responsibility for matters of exploration of and exploitation of the petroleum resources in Area A[71]. The Joint Authority was responsible for management of such activities and was subject to directions from the Ministerial Council[72]. Australia was given the primary regulatory power for Area B, Indonesia for Area C[73].
[70]    Art 2(3).
[71]    Arts 5, 6.
[72]    Arts 7, 8.
[73]    Art 4.
The Permit consists of 253 blocks in the Timor Gap. Its area falls wholly within Australia's continental shelf and Australia asserts sovereign rights over the area as a result. On the other hand, Indonesia refers to the fact that part of the Permit extends past the median line between Australia and Timor. As already noted, Indonesia asserts sovereignty at least up to the median line. The Treaty was established to allow exploitation of petroleum resources pending a permanent agreement delimiting the continental shelf boundary between Australia and Timor. In relation to the Permit, some blocks fell within Area A, some within Area B , some within both and some wholly outside the Zone of Cooperation (Areas A, B and C). It was agreed, by exchange of letters, at the time of the Treaty, that when considering applications for exploration or exploitation, holders of Australian permits wholly or partly within Area A were to be given a right to match the best bid for contract areas which fell significantly within the area of the existing permits.
At the same time as the commencement of the Cooperation Act, the Petroleum (Australia-Indonesia Zone of Cooperation) (Consequential Provisions) Act 1990 (Cth) ("the Consequential Provisions Act") came into operation[74]. Section 22 of the Consequential Provisions Act amended s 5A of the P(SL) Act so that permits did not extend to any areas which fell within Area A. Section 7 of the Cooperation Act forbade prospecting in Area A unless "with the approval of the Joint Authority", with a penalty of imprisonment for 5 years. As a result, s 23 of the Consequential Provisions Act inserted s 30A into the P(SL) Act. This new section was deemed to apply to all "blocks ... wholly or partly in Area A of the Zone of Cooperation"[75]. The section provides that where, by reason of the amendments made to s 5A, a block specified in a permit has ceased to exist, or the boundaries of such a block have changed, the permit is taken to specify only that part of the block outside Area A[76]. Section 30A(4) covers the precise situation of the Permit, which as mentioned, had been suspended. It reads:
"Where, immediately before the commencement of this section, there was in force under section 103A an instrument of suspension in respect of a permit, then, on the commencement of this section:
(a) the instrument is by force of this section revoked; and
(b)the permittee is taken to have made an application under section 30 for the renewal by the Joint Authority of the permit in respect of the blocks which, as a result of the operation of subsection (2), constitute the permit area."
[74] s 2.
[75] s 30A(1)
[76] s 30A(2).
It should be noted that the reference to "Joint Authority" is a different "Joint Authority" to that established under the Treaty and the Cooperation Act. In 1980, Pt IA had been inserted into the P(SL) Act providing for a Joint Authority in respect of areas covered by the Permit. The Joint Authority in this case consists of a Minister of the Commonwealth and a Minister of the State of Western Australia[77].
[77] s 8A.
As a result of s 30A, the Permit no longer extended to Area A and an application was deemed to have been made to the Joint Authority for renewal of the remaining area of the Permit.
The proceedings
In the Federal Court WMC sought a declaration that the reduction in size of the Permit constituted an acquisition by the Commonwealth of its property, otherwise than on just terms. WMC also claimed compensation pursuant to s 24 of the Consequential Provisions Act which reads:
"(1)   In this section, 'acquisition of property' and 'just terms' have the same meaning as in paragraph 51(xxxi) of the Constitution.
(2)    Where, but for this section, the operation of the amendments made by this Part would result in an acquisition of property from a person otherwise than on just terms, the Commonwealth is liable to pay compensation of a reasonable amount to the person in respect of the acquisition.
(3)    Where the Commonwealth and the person do not agree on the amount of the compensation, the person may institute proceedings in the Federal Court for recovery from the Commonwealth of such reasonable amount of compensation as the Federal Court determines."
The entitlement to declaratory relief was ordered be heard prior to any other issue in the action[78]. Ryan J granted a declaration that, but for s 24 of the Consequential Provisions Act, the reduction in the size of the area covered by the Permit was an acquisition of the property of WMC otherwise than on just terms. This had the effect of imposing on the Commonwealth a liability to pay compensation.
[78] O 29 r 2 of the Federal Court Rules.
The Commonwealth argued before Ryan J and before the Full Federal Court that the rights attaching to the Permit were not "property"; that the rights were not acquired; and that even if there had been an acquisition of property it was on "just terms". Ryan J and the majority of the Full Court (Black CJ and Beaumont J, Cooper J dissenting) rejected these arguments. Before this Court the Commonwealth did not persist with its submission that the rights attaching to the Permit did not constitute property.

42
42The issues

The Commonwealth's attack on the declaration made by Ryan J and upheld by the Full Court was made on several fronts.
1.While no longer contending that the rights attaching to the Permit were not property, the Commonwealth argued that there was no acquisition of property. It will be necessary to look at the argument more closely but, in effect, the submission was that the rights were inherently susceptible to modification or extinguishment and that the rights were not acquired by the Commonwealth but simply ceased to exist.
2.Further, it was said, the relevant law should not be characterised as a law with respect to the acquisition of property because
(i) s 51(xxxi) does not apply to areas geographically external to Australia;
(ii) what happened was the adjustment of competing rights and obligations on the part of Australia and Indonesia;
(iii) any acquisition was merely incidental to the primary purpose of implementing the Treaty in domestic law.
3.Finally, if there was an acquisition of property within s 51(xxxi), the acquisition was on just terms.
Section 51(xxxi)
To set s 51(xxxi) in context, I repeat a passage from my judgment in Health Insurance Commission v Peverill[79]:
[79] (1994) 179 CLR 226 at 254‑255.
" Section 51(xxxi), it has been said, serves a double purpose[80]:
[80] Bank of NSW v The Commonwealth ("the Bank Nationalization Case") (1948) 76 CLR 1 at 349 per Dixon J.
'It provides the Commonwealth Parliament with a legislative power of acquiring property: at the same time as a condition upon the exercise of the power it provides the individual or the State, affected with a protection against governmental interferences with his proprietary rights without just recompense.'
It follows that if a law of the Parliament constitutes an acquisition of property, par (xxxi) will invalidate the law unless it provides just terms.
Inevitably the focus of inquiry has been whether there has been an acquisition of property. The purpose of the paragraph was seen in this way by Dixon J in Grace Bros Pty Ltd v The Commonwealth[81]:
'The power conferred by s 51(xxxi) is express, and it was introduced as a specific power, not, like the Fifth Amendment, for the purpose of protecting the subject or citizen, but primarily to make certain that the Commonwealth possessed a power compulsorily to acquire property, particularly from the States. The condition "on just terms" was included to prevent arbitrary exercises of the power at the expense of a State or the subject.'
The passage does serve to demonstrate the need to identify an acquisition of property and to avoid erecting par (xxxi) into a wider guarantee than the Constitution warrants."
[81] (1946) 72 CLR 269 at 290‑291.

Was there an acquisition of property?

As mentioned earlier, the Commonwealth did not argue before this Court that the rights attaching to the Permit were not "property". Senior counsel for the Commonwealth expressly disavowed that submission. What was submitted was that the nature of the rights is such that they cannot be acquired, hence that they are not property within par (xxxi). Put much the same way, although the rights attaching to the Permit constitute property, they are not rights capable of acquisition and therefore there is no acquisition of property upon which the constitutional guarantee can operate.
In the Full Court Black CJ concluded that the rights attaching to the Permit were clearly identifiable, assignable, stable, potentially of very substantial value and were not, because of their statutory foundation, inherently defeasible[82]. Beaumont J held that the rights were substantial, liable to cancellation only for sufficient cause, did not require continual adjustment and amounted to a statutory but assignable title[83]. Cooper J, who was in dissent as to the outcome of the appeal, approached the matter on the footing that the Permit created rights to engage in particular activity in defined areas and a right to apply for a lease or production licence in the permit area. His Honour held that the Permit and the rights attaching to it were capable of ownership and assignment and should be regarded as incorporeal property[84]. It was in refusing to take the next step, namely that there was an acquisition, that he departed from Black CJ and Beaumont J.
[82] (1996) 67 FCR 153 at 161‑165; 136 ALR 353 at 359‑363.
[83] (1996) 67 FCR 153 at 187‑188; 136 ALR 353 at 383‑384.
[84] (1996) 67 FCR 153 at 202; 136 ALR 353 at 397.
Whether there was an acquisition of property from WMC depends upon the operation of the Cooperation Act (including the amendments it effected to the P(SL) Act) which prohibited petroleum prospecting or operations in Area A of the Zone of Cooperation except with the approval of the Joint Authority and which, as amended, had the effect of reducing the area covered by WMC's exploration permit. Was there in consequence an acquisition of rights attaching to the Permit held by WMC?
It is helpful to see why Cooper J was not prepared to take the step which Black CJ and Beaumont J were willing to take. His Honour explained that the Cooperation Act was one of general application "to control, amongst other things, the conduct of persons in Area A of the Zone of Cooperation in relation to petroleum exploration and exploitation"[85]. It did not purport to acquire any property but rather purported to give effect to the Treaty for the purposes of municipal law. It did not purport to have a particular operation in respect of WMC nor did it purport to acquire the Permit held by WMC or any of the rights attaching to the Permit.
[85] (1996) 67 FCR 153 at 206; 136 ALR 353 at 400.
The Commonwealth argued that the approach taken by Cooper J finds support in the decision of this Court in Health Insurance Commission v Peverill[86] and also in passages in the judgments in Georgiadis v Australian and Overseas Telecommunications Corporation[87]. Cooper J referred to the joint judgment of Mason CJ, Deane and Gaudron JJ in Georgiadis which emphasised that not every compulsory divesting of property is an acquisition within s 51(xxxi) and which further emphasised the difference between a "taking" which directs attention to whether there has been a divesting and an "acquisition" which directs attention to whether something is or will be received[88]. At the same time, it is not necessary that what is acquired correspond precisely with what was taken[89]. It is enough if it be shown that the Commonwealth acquired an interest in the property of WMC, even though the interest acquired be slight or insubstantial[90].
[86] (1994) 179 CLR 226.
[87] (1994) 179 CLR 297.
[88]    Georgiadis (1994) 179 CLR 297 at 304‑305.
[89]    Georgiadis (1994) 179 CLR 297 at 305.
[90]    The Commonwealth v Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1 at 145. See also Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480 at 499‑500.
In passing, it must be remembered that the Commonwealth had a further argument, namely, that the Cooperation Act was an Act with respect to external affairs, not an Act with respect to the acquisition of property. Although the arguments tended to blend at times, I shall keep them separate for the present analysis.
In Peverill there was a retrospective reduction in the amount of benefits assigned by patients to a medical practitioner for pathology tests and payable pursuant to the Health Insurance Act 1973 (Cth). The Court determined that there had been no acquisition of property by the Commonwealth. However there were differences in the approach taken by the members of the Court. Mason CJ, Deane and Gaudron JJ held that the extinguishment of the right to receive payment of a larger amount was effected not only as a genuine adjustment of competing claims made by patients, pathologists, the Health Commission and taxpayers, but also as an element in a scheme for the provision of welfare benefits from public funds. Brennan J and Dawson J each held that, while the value of the right acquired from patients was reduced, there was no debt and the Commonwealth did not acquire any property. I held that it was impossible to identify any property or interest in property acquired by the Commission and further that the operation of the relevant legislation lay outside the scope of par (xxxi). McHugh J held that the practitioner's entitlement to payment was conferred subject to the condition that it could be altered or revoked at any time by the Parliament.
It is time now to return to the Permit and the context in which it operated, in order to determine whether there was property capable of acquisition and, if so, whether there was in truth an acquisition by the Commonwealth of an interest in that property.
Rights attaching to the Permit
It is clear that such rights as WMC possessed under the Permit existed because of the P(SL) Act. They had no existence except pursuant to a law of the Commonwealth. But it does not necessarily follow that the rights were subject to modification or diminution by legislation without attracting the operation of s 51(xxxi). Intellectual property rights which are the creature of statute, may lie within the scope of par (xxxi)[91]. On the other hand, analysis of particular rights created by statute may show that the rights were transient, defeasible and did not give rise to the possibility of acquisition.
[91] Tape Manufacturers (1993) 176 CLR 480 at 527.
The rights attaching to the Permit were transient, only in the sense that they lasted as long as the Permit lasted. But the Permit was for a finite term and capable of renewal for finite terms. The fact that the Commonwealth was not obliged to renew the Permit has a bearing upon its value. But it does not carry the consequence that, during any period of its operation, the Permit did not confer rights capable of acquisition. The holder of an exploration permit has the right to make application for a production licence[92]. A royalty is payable on petroleum recovered. As Black CJ observed[93]:
"These activities [of exploration and production] are, of their nature, most likely to involve substantial commercial risks and very large outlays ... [T]he time frame for the exercise of consecutive rights under the P(SL) Act can be a very long one."
[92] s 39A of the P(SL) Act.
[93] (1996) 67 FCR 153 at 161‑162; 136 ALR 353 at 359.
The Commonwealth sought to attach importance to the provision in s 5(8) of the P(SL) Act that a reference in the Act to a permit is a reference to a permit "as varied for the time being under this Act" and also to s 28 which provides that a permit authorises the permittee "subject to this Act". The latter expression, it was said, means the Act as amended from time to time. The provisions in question do little more than state the obvious. There can be no doubt that the P(SL) Act was intended "to attract the interest [and] the kind of money which is necessary to explore and develop" the resources of the area and provide security where "the titles of those who were willing to enter ... into this field were uncertain"[94].
[94] House of Representatives, Parliamentary Debates (Hansard), 26 October 1967 at 2376, NH Bowen QC introducing the P(SL) Bill.
In Mutual Pools and Staff Pty Ltd v The Commonwealth[95] Dawson J and I held that the extinguishment of a right to proceed against the Commonwealth was not an acquisition of property because "when a chose in action is extinguished, the debtor receives merely a financial advantage, not a proprietary interest in the chose in action"[96]. However, that was a minority view and, in light of Georgiadis v Australian and Overseas Telecommunications Corporation[97] and Commonwealth v Mewett[98], it must be accepted that where a distinct financial benefit is conferred upon the Commonwealth, the extinguishment of a cause of action will amount to an acquisition of property[99]. What is clear is that acquisition involves obtaining "some identifiable benefit or advantage relating to the ownership or use of property"[100].
[95] (1994) 179 CLR 155.
[96] (1994) 179 CLR 155 at 195.
[97] (1994) 179 CLR 297.
[98] (1997) 71 ALJR 1102; 146 ALR 299.
[99] (1997) 71 ALJR 1102 at 1111, 1127‑1128, 1142; 146 ALR 299 at 310, 317, 332‑333, 353.
[100] Mutual Pools (1994) 179 CLR 155 at 185.
Can it be said that the Consequential Provisions Act had the effect of conferring on the Commonwealth some identifiable benefit or advantage relating to the ownership or use of property? WMC answers the question "yes" on the footing that by reducing the scope of the Permit and abolishing its operation in Area A, the sovereign right to explore resources within the excised area was revested in the Commonwealth. In turn this freed the Commonwealth to deal with this right. It also enabled the Commonwealth to enter into treaty arrangements to its financial benefit and towards the resolution of the ongoing dispute with Indonesia as to sovereign rights in the Timor Gap.
It might be argued that the Consequential Provisions Act did no more than reduce the scope of the immunity from prosecution conferred by the Permit. But in that regard there is no analogy with Tape Manufacturers[101] where the conferral of immunity upon infringers of copyright was held not to amount to a proprietary right. There the immunity acquired could not be seen as sufficiently proprietary in nature as it lacked a permanent character, assignability or exclusivity[102]. In the present case an immunity, granted on certain conditions, was removed. As earlier stated, the immunity lost here was identifiable, assignable, exclusive and valuable. Indeed in Tape Manufacturers a "royalty" payable by those selling or distributing blank tapes was sufficiently proprietary. In relation to this the majority said[103]:
" If it were not a tax, that compulsory transfer of property would constitute an 'acquisition of property' by the transferee from the transferor. Notwithstanding a submission of the Commonwealth to the contrary, the Act would not, if that were so, provide 'just terms'".
[101] (1993) 176 CLR 480.
[102] (1993) 176 CLR 480 at 499‑500, 528.
[103] (1993) 176 CLR 480 at 511.

From what has been said so far in these reasons, I would conclude that there was an acquisition of property from WMC within s 51(xxxi) of the Constitution.
Characterisation
The alternative argument of the Commonwealth was that the relevant law cannot be characterised as a law with respect to the acquisition of property. Rather, it was said, the law was one with respect to external affairs.
It is true that there are certain heads of power within s 51 that have been held not to attract the operation of par (xxxi). Obvious illustrations are laws with respect to taxation[104], the seizure of enemy property under the aliens power[105] the sequestration of the property of a bankrupt[106] and the exaction of fines and penalties in the case of prohibited imports[107] or unlawful activity[108].
[104] Commissioner of Taxation v Clyne (1958) 100 CLR 246 at 263; The Tasmanian Dam Case (1983) 158 CLR 1 at 282; MacCormick v Federal Commissioner of Taxation (1984) 158 CLR 622 at 638‑639.
[105] Attorney‑General (Cth) v Schmidt (1961) 105 CLR 361 at 373.
[106] Mutual Pools (1994) 179 CLR 155 at 170.
[107] Burton v Honan (1952) 86 CLR 169 at 180; R v Smithers; Ex parte McMillan (1982) 152 CLR 477 at 488.
[108] ReDirector of Public Prosecutions; Ex parte Lawler (1994) 179 CLR 270.
However, there is nothing in the nature of par (xxix) that is inconsistent with the operation of par (xxxi). While the term "State" in par (xxxi) must refer to a State within Australia, "person" is not so limited. Because the Cooperation Act operates outside Australia, it does not cease to be a law for the acquisition of property. In any event as Gaudron J observed in Newcrest Mining v Commonwealth[109] in relation to other legislation:
" A purpose of the Conservation Act is the performance of Australia's international obligations; that is a purpose in respect of which the parliament has power to make laws under s 51(xxix); para (xxxi) operates to fetter the implementation of that purpose by means of a law with respect to the acquisition of property.[110] The Commonwealth cannot enact laws for a purpose which falls within s 51 without the condition which attaches by para (xxxi)".
[109] (1997) 71 ALJR 1346 at 1372‑1373; 147 ALR 42 at 78.
[110] Mutual Pools (1994) 179 CLR 155 at 188‑189.
Equally, the operation of par (xxi) cannot be dismissed on the ground that what is involved is merely "the adjustment of ... competing rights, claims or obligations". This is the language of the majority in Nintendo Co Ltd v Centronics Systems Pty Ltd[111]. But that language was used in a context where intellectual property rights are conferred on persons other than the owner and must inevitably impact on existing proprietary rights. Here there was no adjustment of competing claims in the Nintendo sense. Rights of property were directly extinguished by the amending legislation which was clearly directed towards the acquisition of property.
[111] (1994) 181 CLR 134 at 161.
Likewise, it is unreal to dismiss the Cooperation Act as merely incidental to a primary purpose of implementing the Treaty in domestic law. A law having such a purpose does not destroy its character as a law for the acquisition of property.
Just terms
The final argument advanced by the Commonwealth was that in any event any acquisition was on just terms.
The argument was put on the basis that the Permit was always subject to alternative claims under Indonesian law and further that WMC was given an entitlement to renewal of the whole of the unexcised portion of the Permit without the normal requirement of relinquishing 50% of the existing Permit area[112] and that WMC was given preferential treatment in the allocation of new exploration areas in the Zone of Cooperation[113].
[112] P(SL) Act, s 30A(5).
[113] According preferential treatment was pursuant to an exchange of letters. This cannot aid in determining whether the law challenged by WMC was a law for the acquisition of property on just terms.
The Commonwealth emphasised that "just terms" imposes a requirement of fairness rather than equivalence[114]. However, where terms depart from equivalence this may be a strong indication that they are not fair, not just. On its face, what WMC received was less valuable than what it had before the Cooperation Act was amended. These are matters relevant to the assessment of compensation under s 24(3) of the Consequential Provisions Act.
[114] Grace Brothers Pty Ltd v The Commonwealth (1946) 72 CLR 269 at 290; Nelungaloo Pty Ltd v The Commonwealth (1952) 85 CLR 545 at 600; The Tasmanian Dam Case (1983) 158 CLR 1 at 291.
I would dismiss the appeal.

GAUDRON J. The respondent, WMC Resources Ltd ("WMC"), was at all relevant times a member of a joint venture consortium which held a petroleum exploration permit granted to Pelsart Oil NL ("the Permit"). The Permit was granted over 253 blocks or graticular sections bounded by opposing meridians of longitude and parallels of latitude separated, respectively, by 5 minutes of longitude and 5 minutes of latitude[115] in that part of the Timor Sea known as the Timor Gap. Australia and the Republic of Indonesia each claim sovereign rights over the Timor Gap, as they did when the Permit was granted.
[115] Section 17 of the Petroleum (Submerged Lands) Act 1967 (Cth).
The Permit was granted in 1977 pursuant to s 22 of the Petroleum (Submerged Lands) Act 1967 (Cth) ("the P(SL) Act"). It was initially granted for a period of six years but was suspended and extended for five years in 1983 and, again, in 1988. It was, thus, still in force on 9 February 1991 when the "Treaty between Australia and the Republic of Indonesia on the Zone of Cooperation in an area between the Indonesian province of East Timor and Northern Australia" ("the Treaty") came into force. The Treaty was carried into effect by the Petroleum (Australia-Indonesia Zone of Cooperation) Act 1990 (Cth) ("the Cooperation Act")[116] and the Petroleum (Australia-Indonesia Zone of Cooperation) (Consequential Provisions) Act 1990 (Cth) ("the Consequential Provisions Act").
[116] The Treaty is set out in the Schedule to the Cooperation Act.
In general terms, the Treaty designated the Timor Gap area over which Australia and Indonesia each claim sovereign rights as a "Zone of Cooperation" and divided it into three areas, namely, Areas A, B and C, with Australia and Indonesia exercising joint control over petroleum exploration and exploitation in Area A, Australia exercising control in Area B and Indonesia in Area C[117]. The Treaty also established a Ministerial Council and a Joint Authority to exercise control in Area A[118].
[117] Articles 2, 3 and 4.
[118] Articles 3, 5, 6, 7, 8 and 9.
Some of the blocks included in the Permit were either wholly or partly in Area A. However, the Cooperation Act, which came into force on 18 February 1991, established a new regime for Area A, providing that petroleum exploration and exploitation could only be carried out in that Area with the approval of the Joint Authority established by and under the Treaty[119]. And the Consequential Provisions Act, which also came into force on 18 February 1991, amended various provisions of the P(SL) Act relating to exploration permits. In particular, it amended s 5A of the P(SL) Act so that blocks wholly within Area A ceased to exist as blocks and the boundaries of those partly within that Area were changed and their areas reduced[120]. It also inserted s 30A into the P(SL) Act, sub-s (2) of which had the effect of excising from the Permit that part of its area within Area A[121].
[119] Sections 7 and 8.
[120] Section 22 of the Consequential Provisions Act. See also s 17(2) of the P(SL) Act.
[121] Section 23 of the Consequential Provisions Act.
In the view I take, it is not necessary to refer to the other amendments which the Consequential Provisions Act made to the P(SL) Act. It is, however, necessary to refer to s 24(2) of the Consequential Provisions Act. That sub‑section provides:
" Where, but for this section, the operation of the amendments [to the P(SL) Act] would result in the acquisition of property from a person otherwise than on just terms, the Commonwealth is liable to pay compensation of a reasonable amount to the person in respect of the acquisition."
Section 24(1) defines "acquisition of property" and "just terms" as having the same meaning as in s 51(xxxi) of the Constitution.
The question in this appeal is whether, but for s 24, the amendments to the P(SL) Act would infringe s 51(xxxi) of the Constitution by effecting an acquisition of property other than on just terms. That question was answered in favour of WMC by Ryan J in proceedings commenced by WMC against the Commonwealth in the Federal Court of Australia[122]. An appeal to the Full Federal Court was dismissed by majority (Black CJ and Beaumont J, Cooper J dissenting)[123]. The Commonwealth now appeals to this Court.
[122] Western Mining Corporation Ltd v Commonwealth of Australia (1994) 50 FCR 305; 121 ALR 661.
[123] Commonwealth of Australia v Western Mining Corporation Ltd (1996) 67 FCR 153; 136 ALR 353.
Section 51(xxxi) of the Constitution confers power on the Commonwealth to legislate with respect to "the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws". Clearly, s 51(xxxi) is primarily a grant of legislative power[124]. However and because it is a specific grant of power subject to a qualification or condition, other grants of legislative power are construed as not extending to the acquisition of property[125]. At least that is so unless a contrary intention is manifest, as in the case of the taxation power[126], or the acquisition is of a kind that does not permit of just terms - for example, a penalty by way of forfeiture[127]. Because it operates in the manner described, s 51(xxxi) is, within its area of operation, a guarantee of just terms.
[124] See Grace Brothers Pty Ltd v The Commonwealth (1946) 72 CLR 269 at 290-291 per Dixon J. See also Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 at 168-169 per Mason CJ; Re Director of Public Prosecutions; Ex parte Lawler (1994) 179 CLR 270 at 284-285 per Deane and Gaudron JJ.
[125] See Attorney-General (Cth) v Schmidt (1961) 105 CLR 361 at 370-372 per Dixon CJ. See also Johnston Fear & Kingham & The Offset Printing Co Pty Ltd v The Commonwealth (1943) 67 CLR 314 at 317-318 per Latham CJ; WH Blakeley & Co Pty Ltd v The Commonwealth (1953) 87 CLR 501 at 520-521; Trade Practices Commission v Tooth & Co Ltd (1979) 142 CLR 397 at 445-448 per Aickin J.
[126] See Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 at 169-171 per Mason CJ, 185-188 per Deane and Gaudron JJ; Re Director of Public Prosecutions; Ex parte Lawler (1994) 179 CLR 270 at 283-284 per Deane and Gaudron JJ; Nintendo Co Ltd v Centronics Systems Pty Ltd (1994) 181 CLR 134 at 160 per Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ; Newcrest Mining (WA) Ltd v The Commonwealth (1997) 71 ALJR 1346 at 1388; 147 ALR 42 at 99-100 per Gummow J.
[127] See Re Director of Public Prosecutions; Ex parte Lawler (1994) 179 CLR 270 at 285 per Deane and Gaudron JJ; Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297 at 306 per Mason CJ, Deane and Gaudron JJ; Newcrest Mining (WA) Ltd v The Commonwealth (1997) 71 ALJR 1346 at 1388; 147 ALR 42 at 99 per Gummow J.
The Commonwealth's first argument is that, although the Consequential Provisions Act operated to extinguish rights conferred by the Permit and the P(SL) Act over blocks wholly within Area A and, in the case of blocks partly within Area A, to confine those rights to a reduced area, the Act operates in an area which is outside the guarantee effected by s 51(xxxi). It puts that argument in two ways: first it is said that the Consequential Provisions Act does not effect any acquisition of property; secondly it is put that, if it does, it is, nonetheless, not properly characterised as a law with respect to the acquisition of property. The Commonwealth's alternative argument is that the Consequential Provisions Act does not infringe the guarantee effected by s 51(xxxi) because it operates in such a way that just terms have been provided. In the view I take, it is unnecessary to consider that alternative argument.
Because s 51(xxxi) is, in effect, a guarantee of just terms, it is construed liberally[128]. In particular, the expression "acquisition of property" is not construed as requiring a precise correspondence between what is taken and what is received[129]. Even so, for there to be an acquisition there must be a taking and a receipt of some kind. As was pointed out in The Tasmanian Dam Case, "it is not enough that [the] legislation adversely affects or terminates a pre-existing right that an owner enjoys in relation to his property; there must be an acquisition whereby the Commonwealth or another acquires an interest in property, however slight or insubstantial it may be."[130]
[128] See Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297 at 303 per Mason CJ, Deane and Gaudron JJ, referring to Bank of NSW v The Commonwealth ("the Bank Nationalization Case") (1948) 76 CLR 1 at 349-350; Attorney-General (Cth) v Schmidt (1961) 105 CLR 361 at 370‑371; Clunies-Ross v The Commonwealth (1984) 155 CLR 193 at 201-202; Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480 at 509.
[129] Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297 at 304-305 per Mason CJ, Deane and Gaudron JJ; Newcrest Mining (WA) Ltd v The Commonwealth (1997) 71 ALJR 1346 at 1410; 147 ALR 42 at 129 per Gummow J.
[130] The Commonwealth v Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1 at 145 per Mason J. See also at 246-248 per Brennan J, 282-283 per Deane J; Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 at 184-185 per Deane and Gaudron JJ.
In Georgiadis v Australian and Overseas Telecommunications Corporation, Mason CJ, Deane J and I pointed out that, prima facie at least, a statutory right is inherently susceptible of statutory modification or extinguishment and no acquisition of property is effected by a law which simply modifies or extinguishes a statutory right that has no basis in the general law[131]. That is because, ordinarily at least, a law of that kind does not confer an interest in property or any other benefit on the Commonwealth or any person; and, ordinarily at least, it does not constitute a law that is properly characterised as a law with respect to the acquisition of property. Thus, when s 51(xxxi) is invoked, it may be helpful to ask whether the law in question does no more than modify or extinguish a statutory right which has no basis in the general law and which is inherently susceptible to modification or extinguishment. However, the questions which, ultimately, have to be answered are whether the law effects an acquisition of property and, if so, whether it is properly characterised as law with respect to the acquisition of property.
[131] (1994) 179 CLR 297 at 305-306. See also Health Insurance Commission v Peverill (1994) 179 CLR 226 at 237 per Mason CJ, Deane and Gaudron JJ.
If a law modifies or extinguishes a statutory right which has no basis in the general law in circumstances in which some person obtains some consequential advantage or benefit in relation to property, that law may and, ordinarily, will effect an acquisition. And there may and, ordinarily, will be an acquisition if a law operates to transfer a right to some other person, even though the right has no basis in the general law and is inherently susceptible of modification or extinguishment. So, too, there may and, ordinarily, will be an acquisition if a law extinguishes a right of that kind (particularly a monopoly right) and vests a similar right or a right with respect to the same subject-matter in some other person. In cases of that kind, there is something more than the mere modification or extinguishment of a right that is inherently susceptible to that course; the law also operates to confer a benefit.
It is necessary, at this stage, to say something of the rights conferred by an exploration permit and the P(SL) Act. An exploration permit confers a licence which, for practical purposes, is an exclusive licence[132] "to explore for petroleum, and to carry on such operations and execute such works as are necessary for that purpose, in the permit area."[133] In the event that petroleum is discovered, the holder of a permit may nominate a block or blocks for declaration as "a location"[134] and may then apply for a retention lease[135] or production
[132] Note that s 112 of the P(SL) Act provides that an "access authority" may be granted to, for example, a permitee, lessee or licensee, to conduct limited operations within a block the subject of a permit held by another person where it is necessary or desirable "for the more effective exercise of the rights, or for the proper performance of the duties", of the permitee, lessee or licensee.
[133] Section 28 of the P(SL) Act.
[134] Sections 36 and 37 of the P(SL) Act.
[135] Section 38A of the P(SL) Act.
[136] Sections 39A, 40 and 41 of the P(SL) Act.
[137] Provision is made for the holder of a lease to apply for a production licence: see ss 40A and 40B of the P(SL) Act.
[138] Section 38B of the P(SL) Act.
[139] Sections 43 and 44 of the P(SL) Act.
licence[136] in respect of that location[137]. A lease[138] or production licence[139] must be granted to the applicant if specified conditions are met.
It may well be that if, after the discovery of petroleum, an exploration permit were extinguished or modified with the consequence that the right to apply for a lease or production licence was destroyed or otherwise negated, that would constitute an acquisition for the purposes of s 51(xxxi) of the Constitution. In that situation, some benefit with respect to that petroleum would accrue to the Commonwealth or, perhaps, to the authority charged with the grant of leases and production licences. And that would also be the case if an exploration permit were modified or extinguished with the consequence that the holder of a permit were denied a lease or production licence to which it was otherwise entitled. But none of those considerations apply in this case.
Clearly, the Consequential Provisions Act operated to deprive the consortium of which WMC was a member of the right to explore for petroleum in that part of Area A previously included in the Permit. But that is not determinative of the matter. It is necessary, also, to ask whether anyone else thereby obtained anything, including, for example, relief from a burden on land, as in Newcrest Mining (WA) Ltd v The Commonwealth[140], or from liability with respect to an accrued cause of action, as in Georgiadis[141].
[140] (1997) 71 ALJR 1346; 147 ALR 42.
[141] (1994) 179 CLR 297. See also The Commonwealth v Mewett (1997) 71 ALJR 1102; 146 ALR 299.
WMC argues that the Commonwealth obtained a benefit as a result of the modification of the area covered by the Permit, contending that "[b]ecause [WMC's] interests constituted an encumbrance on the underlying estate asserted by the Commonwealth in the area ... located within Area A, the extinguishment enhanced that estate." Additionally, WMC puts two other arguments. Its second argument is that the extinguishment of the right to explore within Area A conferred a benefit on the Commonwealth by enabling it to implement the Treaty. The third is that that extinguishment conferred a direct benefit on the Commonwealth and the Ministerial Council and the Joint Authority established under the Treaty.
WMC's first argument expressly assumes and, perhaps, its third argument impliedly assumes that there is an underlying proprietary estate or interest in the continental shelf or, at least, that part within Area A which was excised from the Permit. I do not doubt that, in the exercise of sovereign rights as a coastal nation, the Commonwealth may make laws creating proprietary estates or interests in its territorial seas, the lands under those seas and the resources of those seas and lands. And if it were also to enact a law modifying or extinguishing a statutory right with the consequence that some estate or interest in the sea, the underlying land, or its or their resources were enhanced, that would, in my view, effect an acquisition of property. However, the Commonwealth did not at any stage create any estate or interest within that part of Area A excised from the Permit. It simply conferred a right to explore for petroleum, buttressing that right by making it an offence for anyone else to do so[142]. There was, thus, no estate or interest which was or, even, could be enhanced by modification of the Permit.
[142] Section 19 of the P(SL) Act.

Moreover, by extinguishing the permits in Area A of the Zone the Commonwealth effectively recouped any petroleum or other natural resources in the seabed which might otherwise have become the property of the permittees. Whether or not the Commonwealth had rights of ownership in the seabed is irrelevant. The permittee had, under PSLA, exclusive rights to explore for and exploit any petroleum which it found in an area covered by its permit rights in Area A of the Zone. On the tests which this Court has recognised for differentiating mere extinguishment from acquisition[363], this was a case of acquisition.
[363] Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 at 172‑173, 185, 223; Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297 at 305, 311; Newcrest Mining (WA) Ltd v The Commonwealth (1997) 71 ALJR 1346 at 1351, 1410; 147 ALR 42 at 48, 129.
Supervening legislation is characterised as an acquisitions law
The Commonwealth's second argument was that CPA should not be characterised as a law "with respect to ... [t]he acquisition of property" within s 51(xxxi) of the Constitution. The Commonwealth advanced three basic reasons in support of this proposition.
The first, in point of logic, was that s 51(xxxi) could have no application to areas geographically external to Australia. Some support for this theory was found in the reasoning of McHugh J in his dissenting opinion in Newcrest[364]. The argument rested upon the juxtaposition in par (xxxi) of the subjects of the acquisition, namely "any State or person". As a State is, by definition, part of and within Australia so, it was submitted, the "person" contemplated by the paragraph could not be at large. By its association with the word "State" and its place in the federal chapters of the Constitution, it was confined to an "acquisition within a State".
[364] (1997) 71 ALJR 1346 at 1381; 147 ALR 42 at 89-90.
There is no substance in this submission. In the context in Newcrest, McHugh J was dealing with the proposition that the paragraph extended to federal territories. He was not addressing the ambit of its operation to protect the property of a State or of a person which happened to be outside Australia. The notion that such property could be vulnerable to compulsory acquisition under federal law without just terms is self-evidently unacceptable. Even at federation, but still more today, property interests may be held by Australian connected persons and even by States which have their locus outside Australia. Given that "property" extends to intangible, innominate and anomalous interests[365], the property rights of a State or person referred to would clearly extend to interests in foreign capital markets which may have no necessary physical manifestation in Australia save perhaps for electronic messages. The notion that such property interests in the global capital market are outside the protection of s 51(xxxi), and could be acquired by federal legislation, valid without the provision of just terms, is as alarming as it is absurd. Whatever the limits of s 51(xxxi)[366], it is confined neither by its language nor by its purpose to property physically within the territory of Australia. But if s 51(xxxi) applies to property in foreign countries, it clearly extends to property in interests related to off-shore areas brought under the jurisdiction and control of the Commonwealth by federal law. The continental shelf is such an area. It is so by international law. But more relevantly, it is so by Australia's municipal law[367].
[365] Bank of NSW v The Commonwealth (1948) 76 CLR 1 at 349; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 197-198.
[366] In the United States of America, the protection has been applied to the property wherever situated in favour of United States citizens. See Reid v Covert 354 US 1 (1957). Citizenship is an unexpressed and doubtful limitation in the context of s 51(xxxi) of the Australian Constitution.
[367] PSLA and SSLA. See also Newcrest Mining (WA) Ltd v The Commonwealth (1997) 71 ALJR 1346 at 1392; 147 ALR 42 at 104 per Gummow J.
The Commonwealth's second basis for this argument was that CPA, properly characterised, was not a law with respect to the acquisition of property but a law providing for the adjustment of competing rights, claims and obligations of a larger order, namely those asserted in the international sphere respectively by the Republic of Indonesia and the Commonwealth of Australia. In this regard, the Commonwealth relied on the following passage in the reasons of the majority in Nintendo Co Ltd v Centronics Systems Pty Ltd[368]:
"[A] law which is not directed towards the acquisition of property as such but which is concerned with the adjustment of the competing rights, claims or obligations of persons in a particular relationship or area of activity is unlikely to be susceptible of legitimate characterisation as a law with respect to the acquisition of property for the purposes of s 51 of the Constitution."
[368] (1994) 181 CLR 134 at 161. See also Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 166, 198.
In Nintendo, the character of the Act in question[369] was determined to be beyond the reach of the constitutional guarantee of just terms. There have been other, similar cases[370]. The difficulty has been to draw a satisfactory line between such cases and others where valuable rights are affected by legislation in a way adverse to the interests of the property owner. No formula of universal application can be expressed. This is because the task of characterisation which is invoked obliges the Court to evaluate all of the features of the law in question in order to classify it as falling within, or outside, the operation of the guarantee in s 51(xxxi).
[369] Circuit Layouts Act 1989 (Cth).
[370] Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480 at 510; Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 at 171-173, 177-178, 188-189; Re Director of Public Prosecutions; Ex parte Lawler (1994) 179 CLR 270 at 285-286.
Some interests, of their nature, are much more likely to be catalogued as protected by the guarantee than others. If the interests are ephemeral, prone to ready variation or dependant upon benefits paid out of the consolidated revenue, they will much more readily be classified as falling outside the constitutional protection than where they are exclusive, transferable, require substantial investment, impose significant obligations and partake, by analogy, of the familiar features of stable and valuable property interests long recognised by the common law. The creation of new property interests by federal legislation can scarcely be a consideration which, of itself, puts such interests beyond the protection of s 51(xxxi). After all, the Commonwealth can ordinarily create property interests only by legislation. Several interests created by federal legislation have been held to attract the protection of s 51(xxxi). Newcrest is but the latest case to deny the proposition that all legislative rights are inherently provisional and of their nature liable to repeal without the provision of just terms.
When the rights conferred by the permit in question here are considered, they can, on no account, be described as defeasible according to their nature. Nor can CPA properly be characterised as a law merely "adjusting" competing rights, claims and obligations of the kind that was inherent in the statutory scheme under which those rights were granted in the first place. On the contrary, a supervening legislative scheme, with entirely new and different rights, was introduced to provide for quite different entitlements for a completely different purpose of the Commonwealth. The acknowledged property interests of permittees such as the respondent were then pro tanto diminished in Area A of the Zone. The sterilisation which was imposed on the exercise of the respondent's rights in that area was indistinguishable from that attempted in Newcrest[371]. This was not statutory "adjustment" of the kind spoken of in Nintendo[372]. It was an acquisition of clear and stable property rights for the purposes for which the Parliament undoubtedly had power to make laws under the external affairs power. However, it could only acquire such property rights, seen as an impediment to the pursuit of its new purpose, on condition that the law doing so provided just terms to the property owner.
[371] (1997) 71 ALJR 1346 at 1350-1351, 1410-1411, 1412-1413; 147 ALR 42 at 48, 130, 133.
[372] (1994) 181 CLR 134 at 161.
Acquisition not wholly incidental to another head of power
The Commonwealth’s third argument was that this was a case, like earlier ones[373], where any acquisition of property was to be regarded as necessarily incidental to, consequential upon and inherently involved in a legislative purpose different from that contemplated by s 51(xxxi). That purpose was identified as the purpose of implementing the Treaty in domestic law for which both ZCA and CPA were valid and necessary exercises of the external affairs power under the Constitution.
[373] Attorney-General (Cth) v Schmidt (1961) 105 CLR 361 was instanced and the Trading with the Enemy Act 1939 (Cth) was cited.
It must be accepted that a long line of cases in this Court recognises that some compulsory and involuntary acquisitions of property are of such a nature that they fall outside the guarantee of s 51(xxxi). They have been treated as inherent in a specific constitutional grant of legislative power which must be given full effect. Such grant would be defeated if it were necessary to provide compensation to the property owner. Examples include the sequestration of the property of a bankrupt[374], the levying of taxation[375], the imposition of fines or the confiscation of prohibited imports[376] and the seizure of enemy property in time of war[377]. By analogy, it was argued, the legislation in question here was to be characterised as falling wholly within par (xxxix) of s 51 and unaffected by par (xxxi).
[374] Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 at 170.
[375] Commissioner of Taxation v Clyne (1958) 100 CLR 246 at 263; MacCormick v Federal Commissioner of Taxation (1984) 158 CLR 622 at 638-639.
[376] Burton v Honan (1952) 86 CLR 169 at 180; R v Smithers; Ex parte McMillan (1982) 152 CLR 477 at 488-489; Re Director of Public Prosecutions; Ex parte Lawler (1994) 179 CLR 270 at 285.
[377] Attorney-General (Cth) v Schmidt (1961) 105 CLR 361 at 373.
This argument is also unconvincing. It has never been necessary for a law which has the effect of authorising the acquisition of property to be characterised as wholly or exclusively concerned with that purpose[378]. The question is whether Pt 8 of CPA, which affects the respondent's rights under the Permit in respect of exploration blocks in Area A of the Zone, can be characterised as a law with respect to the acquisition of property or not[379]. In my view it can. The effect on the permittees' property interests could not possibly be said to be so subservient to the other purpose of the law as to have "no recognisable independent character"[380]. On the contrary, the removal of the impediment which the pre‑existing permits were thought to present was the dominant purpose of Pt 8 of CPA[381]. It is true that the overall purpose of ZCA and CPA can be described as being to give effect to a treaty between Australia and Indonesia. However, that alone would not relieve the Parliament of its duty to ensure that any acquisition effected by such a law conformed to the constitutional requirement[382]. The external affairs power covers potentially so many subject matters of legislation that to treat a law, made under s 51(xxix) of the Constitution or giving effect to a treaty pursuant to that power, as inherently outside the requirements of s 51(xxxi) would be to authorise a most serious diminution of the effectiveness of the constitutional guarantee. There is nothing necessarily antithetical to the pursuit of Australia's external affairs interests in the operation of s 51(xxxi). On the contrary, the express language of the Constitution subjects laws made with respect to external affairs under s 51(xxix) to the other provisions of the Constitution. These include s 51(xxxi).
[378] Newcrest Mining (WA) Ltd v The Commonwealth (1997) 71 ALJR 1346 at 1352; 147 ALR 42 at 50 per Brennan CJ.
[379] Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 at 188; Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297 at 307-308.
[380] Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 at 171 per Mason CJ.
[381] Commonwealth of Australia v Western Mining Corporation Ltd (1996) 67 FCR 153 at 168-169; 136 ALR 353 at 365-366.
[382] Newcrest Mining (WA) Ltd v The Commonwealth (1997) 71 ALJR 1346 at 1351‑1352, 1368, 1372, 1399, 1426; 147 ALR 42 at 49, 71, 77, 114, 151.
The Commonwealth doubtless hoped that it could abolish the respondent's relevant property rights, without providing just terms. It could perhaps view its endeavour in that regard as a pursuit of a larger national interest which the Treaty and supporting legislation were designed to achieve. However, such hope was misplaced. The larger object was indeed attainable under the Constitution. But only on the condition of providing just terms to a property owner whose rights were acquired. The position is indistinguishable from Newcrest. There, a corporation enjoying established property rights created under legislation was expected, in effect, to foot the bill of providing an enlargement of a national park of great benefit to the public. The Commonwealth did not seek to acquire the mining tenements there in order to prospect for minerals itself any more than here it acquired the property of the permittees in Area A of the Zone in order itself to prospect for petroleum. In Newcrest it simply sought to pursue another purpose, also under the external affairs power, namely to expand the Kakadu National Park. Here, the permittees (including the respondent) were expected to forfeit part of their property interests to clear the path for a practical settlement of a seabed boundary dispute with a neighbouring country. In neither case was such uncompensated self-sacrifice of property rights lawful. If the Australian community, through its Parliament, wishes to pursue such objectives, it cannot expect to do so at someone else's economic cost[383].
[383] Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 at 213, 219; Newcrest Mining (WA) Ltd v The Commonwealth (1997) 71 ALJR 1346 at 1421-1422; 147 ALR 42 at 145.
One of the institutional strengths of the Australian economy is the constitutional guarantee of just terms where the property interests of investors are acquired under federal law. This Court should not undermine that strength by qualifying the guarantee. Neither the Court’s past authority not economic equity require such a result. If it can happen here it can happen again and investors will draw their inferences.
Just terms were not otherwise provided
The Commonwealth's third argument was that, if there were an acquisition of property, it was made on "just terms" within s 51(xxxi) of the Constitution. Accordingly, there was no basis to invoke either the constitutional guarantee or the statutory entitlement[384].
[384] CPA, s 24.
It was pointed out that the Permit was always subject to alternative claims under Indonesian law and, to that extent, contingent or uncertain. Following the Treaty and ZCA and CPA, the respondent became entitled outside Area A of the Zone to the renewal of the entire unexercised part of the Permit. Such entitlement was freed from the normal requirement, imposed by the PSLA that the permit holder relinquish fifty percent of the existing permit area before renewals[385]. The offsetting benefit of relief from this provision was enacted by CPA[386]. Moreover, the respondent, as the holder of a permit extinguished, in effect, by the creation of the Zone, was afforded preferential treatment in the allocation of new exploration areas in the Zone pursuant to what was described as "the formal understanding" between Australia and Indonesia recorded in the exchange of letters which occurred at the time of the entering into the Treaty. The Commonwealth submitted that these three consequences of the Treaty, and of the federal laws enacted to give it effect, viewed in combination, amounted to "just terms" sufficient to meet the constitutional guarantee and so to relieve it of the requirements of s 24 of CPA.
[385] PSLA, ss 30A(5) and 31.
[386] CPA, s 23.
In order to meet the requirement of "just terms", it is necessary that provision be made of appropriate "terms" to ensure economic fairness to the party whose property has been acquired. There is little judicial elaboration of what the phrase means. In one case it was suggested that "the pecuniary equivalent of the property acquired"[387] must be paid. However, that suggestion seems unduly narrow. Where the law is challenged for a failure to provide "just terms", it is necessary to consider the way in which the law operates and the comparative position of the property owner before and after the acquisition. Because the requirement to provide "just terms" is a condition of the grant of legislative power, it is necessary that provision for just terms should be made by or under that law[388]. This does not mean that it must be contained in the acquisition law itself so long as it can be derived as necessarily inherent in that law[389].
[387] Bank of NSW v The Commonwealth (1948) 76 CLR 1 at 300 per Starke J; cf Grace Brothers Pty Ltd v The Commonwealth (1946) 72 CLR 269 at 290; Nelungaloo Pty Ltd v The Commonwealth (1948) 75 CLR 495 at 546.
[388] PJ Magennis Pty Ltd v The Commonwealth (1949) 80 CLR 382 at 402.
[389] Minister for Primary Industry and Energy v Davey (1993) 47 FCR 151 at 166-167; 119 ALR 108 at 123.
It is true, as the Commonwealth pointed out, that drilling commitments under the Permit were in fact deferred after only two and a half years of operation and then at the request of the permittee. It is also true that the dispute over sovereignty in the area covered by the Permit was publicly known at the time the Permit was granted. It would have been well known to the respondent at the time it acquired its interest. Moreover, the Permit was suspended in 1983 and 1988 in accordance with PSLA[390]. Had such suspensions not occurred, the permittees would have been obliged to relinquish half of their allocation on each successive renewal[391].
[390] PSLA, s 103A.
[391] Pursuant to the scheme in PSLA, s 31.
These considerations are irrelevant to the validity of the law. The factual situation and the knowledge of the dispute over sovereignty cannot alter the constitutionality of the law affecting the rights of the Permit previously granted. Either the law provides for "just terms" or it does not. If it does not, it is invalid and can only be saved by s 24 of CPA.
The exchange of letters relied upon by the Commonwealth is not part of the scheme of the law provided by CPA. Nowhere in that law, expressly or by necessary implication, are such letters referred to. In any case, the letters expressed no more than an "understanding" that an application made by the permittees (including the respondent) for a production-sharing contract within Area A of the Zone, and formerly within the Permit area, would be given "favourable consideration" by the Joint Authority created by the Treaty[392]. The only aspects of the Treaty introduced into Australian domestic law are those dealt with by ZCA and CPA. Neither of those Acts conferred any enforceable rights in Area A of the Zone on permittees under PSLA, including the respondent.
[392] Western Mining Corporation Ltd v Commonwealth of Australia (1994) 50 FCR 305 at 323; 121 ALR 661 at 677.

The relevant assessment criteria published by the new Joint Authority, pursuant to Article 11 of the Petroleum Mining Code for Area A of the Zone of Cooperation[393] gave a permittee such as the respondent an option of "matching" the best bid for the contract area that corresponded to the area in respect of which its rights under the Permit had been acquired[394]. However, neither the Petroleum Mining Code nor the assessment criteria have been enacted as part of the law of Australia. They do not therefore confer enforceable rights on the permittees, including the respondent. They are not part of the law which must be demonstrated on its face to include, or provide for, "just terms". Thus a refusal on the part of the new Joint Authority (or Ministerial Council) administering the Zone to afford the permittees, including the respondent, the option of "matching" the best bid received in relation to the comparable area would not appear to be reviewable under the Administrative Decisions (Judicial Review) Act 1977 (Cth)[395]. The enforceability of the right to match and of rights consequent thereto is highly problematical.
[393] Annex B to the Treaty: see ZCA, Sched 1.
[394] Western Mining Corporation Ltd v Commonwealth of Australia (1994) 50 FCR 305 at 324-326; 121 ALR 661 at 678-679.
[395] See the definition of a "decision to which this Act applies" in s 3(1) of the Administrative Decisions (Judicial Review) Act.
I accept that some of the considerations raised by the Commonwealth under this part of its argument would be relevant to the ascertainment of the compensation to which the respondent is entitled. But that is a task which has not yet been ventured, having regard to the procedural course which the litigation took in the Federal Court. To the extent that CPA failed to enact or provide for just terms for the permittees such as the respondent, it was not a law with respect to the acquisition of property on just terms. But for s 24, the part of CPA providing for acquisition would therefore be unconstitutional.
Orders
The result is that each of the three objections by the Commonwealth to the declaration made by the Federal Court of Australia fails. The appeal from that court should therefore be dismissed with costs.