Hague court to arbitrate in East Timor-Australia maritime border dispute

September 26, 2016 5:03 AM EDT

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AMSTERDAM/SYDNEY (Reuters) - The Permanent Court of Arbitration in the Hague has said it will oversee a compulsory conciliation between East Timor and Australia on their maritime boundary, rejecting Australian objections.

East Timor asked for the process that could decide on which side of the border lies a large oil and gas field over which the two countries have a revenue-sharing agreement. The small island nation said Australian espionage on its diplomats rendered recent agreements between them flawed.

The decision will exacerbate a rare diplomatic rift between Australia and its neighbor 610 km (380 miles) to the north, which it supported during a claim for independence from Indonesia in the late 1990s. Australia has resisted negotiating a permanent border until 2056 at the earliest.

Australia and East Timor will now engage in a conciliation process that will take place behind closed doors over the next year, the court ruled late on Monday.

The Australian foreign minister and attorney general said in a statement existing treaties between the countries had been "hugely beneficial" to East Timor but that "Australia accepts the commission's decision and will continue to engage in good faith".

"We are committed to working together to strengthen our relationship and overcome our differences in the Timor Sea," the statement said. It also said the report to be produced by the commission would not be legally binding.

East Timor Minister of State Agio Pereira welcomed the decision.

"This process is an opportunity to set a good example in our region and we will engage with respect for the commission and its recommendations, ever conscious of the importance of

maintaining the best possible relationship with our close neighbor Australia," Pereira said in a statement.

(Reporting by Toby Sterling in AMSTERDAM and Byron Kaye in SYDNEY; Editing by Robin Pomeroy and Paul Tait)

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