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Client Update: Proposed amendments to the PNG Land Act

3 May 2016

In brief: Amendments to the Papua New Guinea Land Act have been proposed which, among other things, will restrict ownership of land by non-citizens, including PNG incorporated companies that are wholly or partly owned by non-citizen individuals or companies. Senior Associate Sarah Kuman looks at what is proposed. 

Background

In 2005 the PNG Government embarked on the National Land Development Program with the staging of a National Land Summit in Lae, Morobe Province followed in 2006, by the establishment of a National Land Development Task Force formed to implement the recommendations from the summit.

Recommendations of the summit focused on:

  • improving the system of land administration;
  • improving the system of land dispute settlement processe; and
  • developing a framework for maximizing the development potential of land held under customary tenure.1

In 2006, the Taskforce issued the National Land Development Task Force Report that contained 54 recommendations, 47 of which were aimed at the Department of Lands and Physical Planning (DLPP). One of the 47 recommendations put to the DLPP was to amend and review legislation administered by the DLPP. In implementing the recommendations of the Taskforce, the DLPP introduced legislation for voluntary customary land registration in 2009, in the form of amendments to the Land Registration Act (Chapter 191) and the Land Groups Incorporation Act (Chapter 147).

The DLPP has also prepared the draft Land (Amendment) Bill (the Draft Bill) to amend the Land Act 1996 (PNG).

The proposed law

Restriction on foreign ownership

Among other proposed changes, under the Draft Bill:

  • PNG incorporated companies, which are wholly or partially owned by a foreign national or entity, will not be eligible to be granted state leases under the Land Act2;
  • Non-citizens will not be eligible to be granted a state lease under the Land Act;3 and
  • at the end of 30 years from the date of commencement of the Draft Bill, all existing titles to state leases held by non-citizens, will be extinguished and the Minister for Lands will advertise such title for tender.4

The terms of the draft Bill indicate that upon extinguishment of a State Lease held by a non-citizen, any existing mortgage or sub-lease registered in respect of the State Lease, will also be terminated.

The provisions of the Draft Bill appear to capture all companies that have foreign shareholders and not just those that are defined as 'foreign enterprises' under the provisions of the Investment Promotion Act 1992. This may include companies which are not considered to be 'foreign enterprises' but which may still be caught by the provisions of the Draft Bill because of their foreign shareholders.

Currently, the Constitution of Papua New Guinea5, prevents non-citizens from acquiring fee simple land, otherwise referred to as 'freehold land'. In addition, restrictions under the Land Act prevent customary landowners from selling or leasing their customary land to non-citizens.

With the introduction of the proposed amendments, non-citizens, whether individuals or corporations, will only be able take sub-leases of freehold or state land, in Papua New Guinea.

The Draft Bill makes no reference to the proposed method of compensation for extinguishing title to state leases currently held by non-citizens. It is assumed that current provisions of the Land Act that provide for payment for improvements on the expiration of state leases, will apply6 although, it remains to be seen whether other provisions of the Land Act, for example, provisions relating to compensation for the compulsory acquisition of land7, will also apply.

Other amendments

Other changes to be introduced by the Draft Bill, include:

  • Repeal of lease-lease back and Special Agricultural and Business Leases (SABLs) provisions – the repeal of all provisions relating to the current 'lease-lease back' arrangements and subsequent grant of SABLs. Currently SABLs may be granted for terms of up to 99 years and the Draft Bill provides that existing SABLs will remain in effect until their terms expire.
  • Repeal of Urban Development Lease (UDL) provisions – the repeal of all provisions relating to the grant of UDLs. Existing UDLs will remain in effect until the term of the UDL expires. UDLs are currently granted for terms of up to five years.
  • Creation of Underwater leases – the introduction of new provisions for the issue of underwater leases of Government land for a term of up to 99 years. The amendments provide that underwater leases shall not be granted for 'private residence purposes' within a physical planning area. Rent determination provisions set out in sections 83 and 84 of the Land Act will not apply to the grant of underwater leases. Instead, rent will be determined according to what the Minister considers is proper. Furthermore, in addition to or in place of rent, the Minister may make an underwater lease subject to the payment of royalties 'on any substance or thing to be recovered or taken off the land the subject of the lease'.

Public consultations

A process of public consultation is planned.

On Thursday 28 April 2016, the DLPP published advertisements in both PNG daily newspapers inviting members of the public to attend a series of workshops to review the proposed amendments to the Land Act. Regional workshops will run over a period of four weeks. Consultation workshops in Port Moresby run from 3 May 2016 to 6 May 2016 and will also be held in Mt Hagen and Kokopo and conclude in Lae.

Conclusion

The Draft Bill will be of particular interest to all non-citizens, both individual and corporate, that currently hold State Leases. Leaseholders and interested parties should attend the regional consultation workshops and, if necessary, make written submissions to the DLPP in respect of the Draft Bill.

We understand that the Bill has not yet been presented to the NEC for approval but we are seeking confirmation of its current status.

We will send out another client update when more is known about the status of the Draft Bill.

Footnotes
  1. Constitutional and Law Reform Commission of Papua New Guinea, Training Manual 1 in Implementation of the Land Group Incorporation (Amendment) Act 2009 and the Land Registration (Amendment) Act 2009 1st Edition 2012, p. 12.
  2. Land (Amendment) Bill 2013 section 16 (2).
  3. Land (Amendment) Bill 2013 section 16(3).
  4. Land (Amendment) Bill 2013 section 16(5).
  5. Section 56(1).
  6. Land Act section 119.
  7. Land Act Part III Division V and Part VI.

For further information, please contact:

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