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The files of law firm Norton Rose have emerged as the key to a Papua New Guinean royal commission, which will examine a $1.2 billion (US$819 million) loan arranged by the Australian arm of UBS for the Pacific nation.
As the royal commission sat briefly on Thursday before being adjourned, it is understood the anticipated challenge of obtaining documents may be less of an issue given the Port Moresby office of Norton Rose acted for the PNG government on the deal.
A PNG legal figure indicated the government could request documents from the law firm that would capture much of the correspondence involving UBS, law firm Ashurst, which represented the Swiss investment bank, and government officials.
When the royal commission was announced in September there were concerns it would have difficulty obtaining documents housed in Sydney or Singapore, where the deal was largely completed.
The 2014 loan was used by PNG to buy a 10 per cent stake in the ASX-listed Oil Search. But when the oil price fell sharply over the following year PNG was forced to gradually sell its stake and is estimated to have lost $420 million (US$286 million) on the deal.
The loan is believed to be one of UBS' most profitable transactions in Australia, netting the firm more than $100 million (US$68 million) in fees and interest.
While the commission will investigate how UBS came to extend the loan and if any laws were broken in the process, its terms of reference are suitably broad to allow related transactions to be scrutinised
Norton Rose partner Anthony Latimer advised PNG on the loan. Latimer left Norton Rose last year and is now a partner in the Sydney office of international law firm Bird & Bird.
Kerenga Kua, PNG's Petroleum Minister and a former attorney-general, said the role of all those involved in the controversial deal would be examined.
“Everybody who had a role to play will be the subject of scrutiny in this inquiry,” Kua has previously said.
PNG Prime Minister James Marape established the royal commission after coming to power in May and said it would be "digging deeper" into the "entire UBS transaction".
A key area of focus will be the role former prime minister Peter O'Neill, who championed the deal and ensured it proceeded without parliamentary approval and with limited support from cabinet.
An arrest warrant for the former prime minister was issued on Wednesday on charges of "official corruption", although it is unclear what this involves.
A report released by the Ombudsman Commission of PNG in May found the loan could have breached 15 laws, and labelled it "highly inappropriate" and "speculative".
The Ombudsman said the deal to purchase the Oil Search shares was “irregular” because of the lack of consultation with state agencies and the bypassing of parliamentary approval.
It was critical of the role played by O'Neill and Marape, who was the finance minister at the time.
Despite the potential for further findings against himself, Marape has appointed a heavyweight panel of local and Australian lawyers.
Retired Australian Federal Court judge John Gilmour QC will sit as a “second commissioner” alongside chairman Sir Salamo Injia.
Perth barrister Matthew Howard SC has been appointed counsel assisting the royal commission, while his junior counsel is fellow West Australian Alexander Mossop.
SOURCE: FINANCIAL REVIEW/PACNEWS
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