Native title process more sophisticated as parties negotiate, run billions in benefits

Twenty years on from the first recognition of native title in Australia, land-use agreement negotiations and the management of benefits has evolved significantly.

Native title agreements are a crucial building block for mining companies operating in Western Australia and in the past five years the negotiation process, management of benefits and implementation of agreements has become increasingly sophisticated.

While the legacy of some poorly written land-use agreements remains, the stereotype of white-collar lawyers and chief executive-sharks preying on ‘naive’ indigenous groups in the country and making deals with the shake of the hand and a promise is all but a thing of the past.

Instead, multiple parties and years of negotiations are involved before a deal is signed. The management systems developed to deploy compensation involve detailed governance structures, professional fund managers, complex trust structures and various sub-committees.

According to lawyers, financial managers, mining companies and indigenous corporations, that is because of a shift in the recognition of native title and its significance.

Ashurst partner and head of energy and resources Geoff Gishubl has been involved in native title land-use agreements for 20 years and said there was now recognition that aboriginal people had rights and they needed to be engaged with on that basis.

“They are not simply the recipients of some sort of mining welfare or good neighbour treatment, it is much more on a business footing now and the behaviour of mining companies has evolved accordingly,” Mr Gishubl said.

“It is more than a business relationship but there is a central commercial element to the relationship that was absent 20 years ago.

“Frankly, native title was the key driver for that.”

Jackson McDonald partner and expert in the implementation of native title land-use agreements, Adam Levin, said there had been a genuine change of sentiment since the formal apology by the federal government in 2008.

 “The process has gone from fighting for rights, to negotiating those rights and now the last few years has been a process of negotiating those rights on a claim wide basis,” Mr Levin said.

Rio Tinto Iron Ore’s attitude to native title is a good example, with the company having signed agreements with all but three of the native title claimant groups across the land Rio plans to mine. 

Rio Tinto general manager iron ore communities Robyn Sermon told WA Business News that after the High Court’s 1992 Mabo decision, which set native title law rolling in Australia, the company decided the legal process was not going to solve land access issues and that it needed to find common ground with traditional owners.

“The perception is there is a lot of conflict in this area. There is no doubt it is difficult and there are different worlds colliding but I think the perception it is fraught with anger, aggression and completely opposing views is very old fashioned,” Ms Sermon said.

Big numbers

Native title payments are worth billions of dollars across WA and, with the number of projects coming on line in the state, the sums are only going to grow.

In many cases, though by no means all, the big mining companies and traditional owner groups have found common ground in perpetuity.

Instead of just cash, both parties want jobs, contracts, business development and long-term benefits secured in land-use agreements to build community capacity and deliver benefits to future generations.

In a $2 billion deal signed last year between Rio Tinto and four indigenous groups represented by the Yamatji Marlpa Aboriginal Corporation (YMAC), a local agreement and an opt-in regional agreement were formed.

The agreement took care of financial compensation for use of traditional owners’ land and the regional agreement aimed to manage long-term training and employment opportunities, business development and contracting opportunities for all aboriginal people across the 70,000 square kilometres covered by the agreement.

As far as compensation, it was agreed 80 per cent would be placed into a charitable trust to be used strictly for community needs like cultural development and housing. The balance went into what is known as a direct benefits fund – accessible cash.

“If you look at the history of private agreements in somewhere like Canada, the actual native title payment, which is what everyone talks about and focuses on, is a really small benefit compared to the economic outcomes of employment and then an even greater piece is in business development,” Ms Sermon said.

That rings true with Rio’s agreements. Its native title financial payments were close to $100 million last year while its contracts with indigenous businesses were worth $1 billion in the past two years.

Similarly, Fortescue Metals Group hopes to award $1 billion in contracts to aboriginal contractors by the end of 2013. The agreements that Rio signed in 2011 took seven years to negotiate and it was a difficult process at times; it took almost three years for the parties to agree on the level of financial compensation and a year was lost when negotiations stalled.

Fortescue has had some difficult times securing native title land-use agreements; it went to the High Court in 2009 to challenge a decision by the National Native Title Tribunal that its negotiations with the Puutu Kunti Kurrama and Pinikura traditional owner group had not been in good faith.

That issue was resolved in 2010 and a land-use agreement was signed. More recently, in 2011, Fortescue’s negotiations with the Yindjibarndi Aboriginal Corporation got messy when traditional owners were split, with some believing the company was offering a decent deal while others disagreed.

Fortescue has started work at its Solomon Hub project, north of Tom Price, with three mining leases granted. An appeal remains in front of the Federal Court.

Since 2005, the company has negotiated land access with seven native title claimant groups and the company’s native title manager, Tom Weaver, told WA Business News a heavy emphasis was placed on training, jobs, business development and the protection of aboriginal culture in negotiations.

Fortescue founder Andrew Forrest has long been vocal in likening direct financial benefits associated with native title to ‘mining welfare’ and has instead favoured developing programs in training, education and goals for indigenous contracting.

“We view our native title partners as part of the Fortescue family,” Mr Weaver said when asked how the company balanced Mr Forrest’s beliefs with the obligation to engage in native title negotiation.

“We form long-term relationships with the communities, groups and individuals with whom we work and we invest heavily in assisting our partners to succeed.

“Fortescue has seen many lives transformed as a result of entering into a relationship with us, and we are confident that as we grow and prosper, so too the lives of our native title partners and their communities will be materially, and positively, transformed.”

Good governance

One of the more recent developments in land-use agreements are the stipulations for good governance.

Many companies and indigenous groups are writing into agreements requirements for either a professional trustee or a minimum of two independent trustees to sit on the board that oversees the management of land-use agreement benefits. 

BHP Billiton is understood to be including this requirement in its negotiations. 

The popularity of this governance structure has led to companies like Perpetual and Plan B Wealth Management tendering for native title trust management jobs and getting involved in the management of funds going into community and direct-benefit trusts.

Perpetual senior financial consultant Chris Marshall said the business had been developing the correct level of service in-house in order to tender for native title benefits management and to act as a professional trustee for native title claimants’ community trusts.

“It is certainly a space we see as a natural fit for our trustee and investment management services coming together, because of the not-for-profit and charitable trust experience we have,” Mr Marshall said.

Perpetual won work to manage the money flowing to the Gelganyem group from Rio Tinto’s Argyle diamond mine and to manage funds from Chevron’s Wheatstone gas project to the Thalanyji people of Onslow.

Mr Levin is an expert in the legal structure of land-use agreement benefits management and the implementation of land-use agreements (see Challenge is to make agreements workable).

He said that in the past five years, the biggest change in land-use agreement negotiation had been that mining companies and large corporate parties had recognised that support structures and frameworks needed to be put in place in order for indigenous people to take full advantage of the benefits flowing to them.

“Native title holders are the ones who have the right to speak for that money and the right to deal with that money,” he said.

Allowing for native title claimants to have autonomy when managing the use of benefits while ensuring good governance is a balancing act in the native title game, one which Mr Gishubl uses an example closer to home to explain.

“If I have got a whole stack of money and it’s for me and my family, I want to make decisions about how that money is spent, on what and how,” he said.

“But that is not to say I won’t pay someone who knows how to manage money to help me ensure the decisions I make about how to spend the money are done well, (that) I don’t lose the money and I don’t break the law.

“I don’t think there needs to be a huge tension between self-determination in relation to the application of benefits and ensuring the benefits are governed well.”

Yamatji Marlpa chief executive Simon Hawkins said the biggest myth surrounding native title land-use agreements continued to be that aboriginal people wasted money and needed to be regulated more than other sections of the community.

“Invariably, there is a trust that has an established list of objectives and the trustee will only provide benefits in accordance with those objectives,” Mr Hawkins said. “I don’t see many trustees being taken to court because they have failed to deliver against those objectives. 

“The compliance requirements in today’s agreements are quite onerous, it doesn’t provide for the opportunity for mismanagement. Because they are community funds there have to be safeguards in place.”

Changing Act

Earlier this year, federal Attorney-General Nicola Roxon proposed changes to the Native Title Act that would mean all native title payments were tax free (currently only community trust funds are), requirements would be set around ‘good faith’ negotiations and historical extinguishment of native title over Crown land would be abolished.

Making payments capital gains and income tax free was supposed to make negotiations easier but Mr Gishubl was hesitant to agree it would before seeing draft legislation.

“Simply making it tax free isn’t going to address any of these issues in a material way,” he said.

“One of the things that should happen … is to get some clarity around the sorts of structures that can be established to manage benefits for aboriginal groups and encourage good governance of those structures by ensuring there is a certain and minimal tax treatment for structures that involve good governance, capacity building and long-term inter-generational economic development.”

He was also reticent about adding minimum requirements for negotiating in good faith.

“More certainty is useful but if the changes that are proposed are simply going to involve prescribing, in more detail, a process that has to be gone through, there is a risk that will not result in better agreement outcomes,” Mr Gishubl said.

“Most mining companies already engage far beyond the minimum statutory requirements. If those requirements are changed and made more difficult, complicated, onerous etcetera, there is a risk it will result in more litigation and delay.”

But Mr Hawkins was supportive.

“Previously, best endeavours were, ‘we’ll give it a go and if we don’t meet 10 per cent employment, at least we tried’. You could never really measure how much of a genuine effort was there in the first place,” he said.