Timor Leste withdraws spying case against Australia amid new sea border deal

The government of Timor Leste has withdrawn its 2013 spying arbitration against Australia, which is the latest step towards resolving the long-standing sea dispute between the two nations.

FIle image of the Montara oil field in the Timor Sea. Source: AAP

Timor Leste said on Tuesday it would withdraw a case filed in the International court in 2013 which alleged that Australia had engaged in espionage during 2004 negotiations for the Certain Maritime Arrangements in the Timor Sea (CMATS) agreement.

The case related to accusations that Australian spies had bugged the cabinet office in Dili during negotiations for the treaty.

Australia and East Timor are targeting a September date to agree a new sea border after tearing up a contentious maritime treaty which cut through lucrative oil and gas fields, both sides said Tuesday.

Dili and Canberra have been in dispute over the issue for a decade and last year went to the Permanent Court of Arbitration in The Hague.

Timor Leste announced this month that it has officially notified its southern neighbour that the Certain Maritime Arrangements in the Timor Sea (CMATS) agreement, which carved up future revenue from oil and gas reserves in the area, will cease to be in force from April 10.

The two parties and the court issued a joint statement Tuesday noting "their commitment to work in good faith towards an agreement on maritime boundaries by the end of the conciliation process in September 2017.

"The (conciliation) commission intends to do its utmost to help the Parties reach an agreement that is both equitable and achievable," it said.

Impoverished Timor Leste, which gained independence from Indonesian occupation in 2002, relies heavily on oil and gas exports.

In 2006 it signed the CMATS treaty with Australia, which covers the vast Greater Sunrise gas field between the two nations that is worth billions of dollars.

But Dili later accused Canberra of spying to gain commercial advantage during the 2004 negotiations and demanded the treaty be ripped up.

Australia had argued the treaty was legal, binding and valid, but agreed to end it in line with Dili's wishes on January 9.

All sides "recognise the importance of providing stability and certainty for petroleum companies with current rights in the Timor Sea," the statement said.

"The Parties are committed to providing a stable framework for existing petroleum operations. They have agreed that the 2002 Timor Sea Treaty ... will remain in force ... until a final delimitation of maritime boundaries has come into effect."