20 Aug 2018

Tonga's Supreme Court rules in favour of PM in China space case

3:07 pm on 20 August 2018

The transfer of nearly $US50 million in Chinese aid grants to the company managing Tonga's orbital space was not approved by government, the country's Supreme Court has ruled.

Sentinel-5P satellite.

Sentinel-5P satellite. Photo: Supplied/European Space Agency.

On Friday, the court found in favour of Prime Minister 'Akilisi Pohiva and Tonga's Public Service Association, in their five year battle against Tongasat.

The case concerns two payments totalling $US49.9 million which China made to Tonga after it was found to have placed a satellite in Tonga's orbital space in 2006.

Despite a revenue sharing agreement between Tonga's government and Tongasat, 93 percent of the funds were transferred to the privately owned company.

Princess Salote Pilolevu holds an 80 percent stake in Tongasat, with the remaining shares held by its American founder Matt Nilson.

The Supreme Court ruled that because the funding was grant aid, it was public money for the government to use.

The court rejected the defendants' argument the payments were trust money China intended for Tongasat.

It ruled it was satisfied that Tonga's cabinet had agreed to accept the grant aid funds and not to share them with Tongasat.

"It is difficult to see why the PRC (People's Republic of China) would have any interest in advancing the commercial interests of Tongasat," the judgement said.

Under an existing agreement, Tongasat pays the government 60 percent of its gross annual revenue over $US15 million.

The government expected to share the proceeds from the China aid in a one-off 50/50 revenue split, with the government offsetting around $US9 million in payments owed to it by Tongasat.

But the court found there was no agreement that the government must share any of the grant aid with Tongasat.

The plaintiffs have been granted declaratory relief and costs of the legal action, which will be finalised by August 31.

They are not seeking to recover tranche payments, although it is unclear why.