John Leahy, Partner, Leahy Lewin Nutley Sullivan Lawyers, on the origin of the legal code

Investors in Papua New Guinea from common law countries will find the country’s legal system both familiar and intriguing. It is similar to the Westminster system, albeit with its own characteristics, such as a modern written constitution with a large contingent of absolute and qualified rights. PNG has been developing its own common law since gaining Independence in 1975, using the English Common Law and rules of equity – with the exception of royal prerogative – as its starting point, rather than the system used by its colonial forebear, Australia.

Much legislation will have a familiar ring to it: the Companies Act and the Goods and Services Tax Act have been tailored from similar examples out of New Zealand. The competition law bears a resemblance to the original Australian federal Trade Practices Act. And, of course, many of the enactments that were in place prior to independence and sourced from various Australian state and federal laws are still in force. However, there are several examples that make PNG’s laws unique, or at the very least, unusual.

The common law is of course only part of the story with “underlying law”, to which judges must adhere to when making decisions, including not just the common law, but also the customary law.

Meanwhile, the highly sophisticated and recently enacted telecommunications law is a home-grown product, albeit with substantial assistance from consultants that are familiar with the myriad models in use worldwide. In the resource sectors, state agreements are used – though not exclusively – to define the fiscal terms and others upon which investments are to be made. Fiscal stability legislation exists to “lock-in” the tax rules for projects in the resource sector, albeit with a cost in terms of the tax rate.

The formalised land law builds on a base that has its roots in both UK and German legal traditions. The formal system co-exists with the customary system that still applies to “unalienated land”, which is approximately 90% of the nation’s landmass. Even mines and petroleum projects are generally built on land that remains customary, while at the same time are subject to the protection that is afforded to the developer through the issue of a lease under the Mining Act or the Oil and Gas Act, as the case may be.

There are a number of books written on the subject of customary land law, but as a first step, it helps to know that the customary landowner may not sell his or her land. That is the position held by customary law and remains the position under the relevant legislation. The land is effectively held in perpetuity for future generations. Meanwhile, the landowners have certain rights of usage of the land. To add to the complexity, different groups may have different rights over the same land. So in a sense, different groups may each be landowners of the same land.

Against that background, elaborate mechanisms have been developed to accommodate the interests of the traditional landowners. Oil and gas projects, for example, require social mapping and landowner identification studies to be undertaken at various stages, from exploration through to development. The state has the option to acquire equity in such projects, which it then effectively shares with the traditional landowners. Landowners in oil and gas projects are also entitled to a royalty interest.

Complementing these entitlements are also a number of statutory arrangements for the establishment of trusts, as well as for incorporated land groups that have been created under special legislation. Moreover, a development agreement is required to share the benefits of the projects among the entitled persons.

Sitting alongside the legislation and the underlying law is a fiercely independent judicial system. Commercial interests can be asserted, knowing that the judges will seek to follow the common law position, albeit with the subtle differences arising from the UK position vis-à-vis the Australian position.

The law in PNG: Is it familiar? Yes. Is it intriguing?

Yes. Full of traps for the unwary? Most definitely!