Legal Aspects BHP Billiton Limited

Question: Discuss about the Legal Aspects for BHP Billiton Limited. Answer: Introduction: BHP Billiton is one of the leading resource companies in the world. It is the largest producers of the iron ore, metallurgical coal, uranium and copper. BHP Billiton was formed merging two smaller mining companies, Broken Hill Proprietary and Billiton in the mid 1800 century (5BHP Billiton, 2016). It is the dual-programmed company operated by BHP Billiton limited and BHP Billiton Plc, which was completed in the year 2001. The headquarters of the BHP Billiton Limited are situated in Melbourne and Australia, whereas that of the BHP Billiton Plc is located in the city of London and United Kingdom (7BHP Billiton, 2016). The company has provided employment opportunities to around 42829 individuals in Australia and approximately 82,368 all round the globe. The company is committed to provide utmost level of the governance fostering culture while giving utmost importance to the ethical standards and corporate integrity (8BHP Billiton, 2016). The purpose of BHP Billiton is to make use of the sustainable value of the shareholders by expanding the commodity, market and geography (9BHP Billiton, 2016). The values of the company first include sustainability in which safety and health is given the foremost priority with due importance being given to its responsibilities towards the environment and community (BHP Billiton, 2013). Integrity also forms a part of the companies value, which can be boosted by doing the right thing in a correct manner while working together for the betterment of the organization as well as the community. The values of the company also entail the factor of respect in which trust and team work plays a very important role for valuing the relationships equally. Performance of the company, being a part of its value spreads the notion that positive results can be achieved only with complete efficiency put on the capabilities of the individuals. Lastly, simplicity and accountability contributes largely in enhancing the value of the companies, which can b e maintained by focusing on operation based on their priority and by accepting the roles and responsibilities for delivering necessary outcomes of the commitments (5BHP Billiton, 2016). BHP Billiton is a diversified resource company which markets its products such as metals, coal, iron ore and the petroleum products throughout the world. The business of the company operates in the many divisions. Some of the division are as follows;- Iron ore The company is one of the largest suppliers of the iron ore in the world. BHP Billiton extracts iron ore in Brazil partnering with the Samarco, a Brazilian miner vale. It also operates its business in the Pilbara region of Western Australia joint venturing with Rio Tinto (IBIS World, 2016). Coal Thermal coal which is used by the industries in power generations is marked by the company. BHP Billiton has been operating the mines in many regions which includes; South Africa, Australia, North and South America. The company also provides cooking coal for steel manufacturing globally (IBIS World, 2016). Petroleum and Potash The company extracts petroleum and gas for supplying it into the international markets. Some of the products are natural gas, crude oil, condensate, LPG and LNG. This division of the BHP Billiton also involves the pre-development of Potash (IBIS World, 2016). Copper This division of the company involves the mining of the copper, zinc, silver, gold and uranium. BHP Billiton has the largest uranium deposit in the world which is located in Olympic Dam. This mine produces copper for Australia, Asia and Europe while producing silver and gold for Australian Perth Mint (IBIS World, 2016). Identifying the Regulatory Framework Affecting the BHP Billiton Australian Jobs Act 2013 This act of legislation has imposed unnecessary regulatory difficulties for the companies who are operating businesses in Australia. The project which involves capital of more than 500 million dollars has to prepare and implement the Australian industry participation plan (AIPP), which acts as an additional burden for the companies. BHP Billiton focuses on the procurement strategies in which the availability of local products and competitiveness is primarily maintained. This act has also added an extra cost with complexity for the company in its proceedings related to the procurement of the major invested projects thereby creating confusions in the corporate practice (BHP Billiton, 2014).. Western Australia's Domestic Gas (Domgas) Policy This policy introduced by the Australian government stating the requirement of reserving gas for domestic consumptions has considerably reduced the gas supply investments within Australia. The policy has further increased the risk in shortfall of domestic supply of gas, which in turn restricts Australia from making maximum utilization of the available resources. BHP Billiton has also been affected with the policy as it does not have the permission to supply LNG into the international markets. Hence, this policy has the potential to reduce productivity and restrict the competition of the business in the near future (BHP Billiton, 2014). The Coastal Trading (Revitalizing Australian Shipping) Act 2012 This act of legislation has introduced licensing system and standards of labors which make it difficult as well as costly for the outside countrys vessels to provide interstate and intrastate shipping services. This has led to the reduction in the competitiveness of BHP Billiton in this sector. The shipping cost of the interstate and intrastate distribution has largely increased due to this act. It has also resulted in the decrease of competition for the Australian products, which uses this form as a means of transport (BHP Billiton, 2014). National Access Regime in Part IIIA of the Competition and Consumer Act 2010 The BHP Billiton has experienced the implementation of the part III of Competition and Consumer Act 2010, by responding to Fortescue Metals Group Limited's (FMG's) application of announcement related to the access of the tracks on the companys Pilbara iron ore railways. This has led the company to experience the incurring of heavy expenses, demonstrating export and GDP loss. The company also encountered delays in operational movements, expansion and innovation in the business operations. Part IIIA declaration regime is the discouragement to private investment (BHP Billiton, 2014). Australian Competition Law According to BHP Billiton, the present competition law of Australia is undoubtedly complex, which focuses largely on the statutory form. This law has made an adverse affect on the company which has in turn affected the cost, consistency and business consistency among the international regulations (BHP Billiton, 2014). Minerals Resource Rent Tax and Petroleum Resource Rent Tax The Australian government proposal of imposing 30% tax on the mineral resources has resulted in 22.5% additional tax to be levied on profits of the company dealing in iron ore and coal operations. Petroleum resource rent tax extensions also has an impact on the business of the company in the areas of imports and exports (BHP Billiton, 2011). Identifying the Agreements, Treaties or Conventions and its Impact on the Goods and Services Agreements between BHP Billiton and Rio Tinto on Iron Ore Production Joint Venture BHP Billion has signed an agreement with Rio Tinto for production joint venture on 5th June 2005. The agreement covers the business of both the companies on its iron ore assets. The joint venture includes all the present and future iron ore assets and liabilities. The equal roles and responsibilities will be owned by the both the companies. This agreement will develop the significant cooperation among the companies operate business in Western Australian iron ore. The main focus of this partnership is to produce low cost iron ore. BHP Billiton and Rio Tinto believe that the production and development of this joint venture will bring business of more than 10 billion dollars in the future period of time (4BHP Billiton, 2016). BHP Billiton Agreement with the Government of Western Australia for Royalty Amendment With this agreement, the state agreement act covering the business operations of BHP Billiton will get amended on the areas of the royalty payment on iron ore consignment. The new rate of royalty will be specified according to the Western Australian Mining Regulation. Government of Western Australia and BHP Billiton has made amendments on the other agreements, such as the permit sharing of infrastructure with Rio Tinto. This agreement after the amendment will enable the company to operate in a more efficient manner. The use of rail and infrastructure will improve the operating capabilities, as a result of which more goods will be produced and made available in the Australian market (3BHP Billiton, 2016). New Agreement Signed With Banjima People BHP Billiton has signed an agreement with the Banjima people in Western Australia. The comprehensive agreements included the business operations of the companys Pilabara based iron ore plant covering the areas of 8263 square kilometers. The company believes that the agreement will bring transparency and uniqueness in engaging the indigenous communities. Through this partnership, the Banjima people will get good opportunities to make a well established future with the help of programs and projects of the company. Mining will be done in the area selected by BHP Billiton, which will in turn increase the productivity of the iron ore. Hence, the product will be easily available at a very low cost in the market (2BHP Billiton, 2016). Agreement of sale of interest in IndoMet Coal with the PT Alam Tri Abadi (Adaro) BHP Billiton has done an agreement to sell interest which is 75% in IndoMet Coal partner on equity PT Alam Tri Abadi (Adaro). Equity partners comprise seven major coal contracts in Indonesia. According to the BHP Billiton, the deal was initiated to focus on the important areas of business. With this agreement, the company intends to bring about growth in different important portfolios. This can bring more future investment for the company which will have an influence on the productivity of the business to a large extent (1BHP Billiton. 2016). Agreement with the Australian Government to Undertake a Strategic Assessment on Iron Ore Mines BHP Billiton and Australian government has signed an agreement on 18th September 2012 to undertake planned evaluation of the impact of iron mines development in the future which has association with the national environmental significance. The agreement was according to the Section 146(1) of the Environment Protection and Biodiversity Conservation Act 1999 related to the plans and policies of the company and its implementation. In order to take steps for environmental protection, the company has designed to set up all the activities to carry out its iron ore operations effectively. The agreement on the strategic assessment will identify and measure possible impacts to ensure the ongoing protection and management activities to develop the plans and lessen the impact. This will help the company to maintain integrity in the business and provide opportunity for the people to enhance their support for developing the business of the company. Hence, the agreement will help in developing qua lity products for the customers with better service and easy availability (Common wealth of Australia, n.d.). References BHP Billiton, 2016, sale of interest in IndoMet coal, Invertors and Media, viewed 26 August 2016, https://www.bhpbilliton.com/investors/news/sale-of-interest-in-indomet-coal. BHP Billiton, 2016, New agreement signed with Banjima people, Community Sustainability News, viewed 26 August 2016, https://www.bhpbilliton.com/society/communitynews/new-agreement-signed-with-banjima-people. BHP Billiton, 2016, Latest news, Investors and Media, viewed 26 August 2016, https://www.bhpbilliton.com/investors/news/bhp-billiton-announces-agreement-with-the-government-of-western-australia-to-amend-royalties-and-state-agreement BHP Billiton, 2016, BHP Billiton and Rio Tinto sign binding agreements on iron ore production joint venture, Investors and Media, viewed 26 August 2016, https://www.bhpbilliton.com/investors/news/bhp-billiton-and-rio-tinto-sign-binding-agreements-on-iron-ore-production-joint-venture. BHP Billiton, 2016, Our charter, About Us, viewed 26 August 2016, https://www.bhpbilliton.com/aboutus/ourcompany/charter. BHP Billiton, 2016, Our history, About Us, viewed 26 August 2016, https://www.bhpbilliton.com/aboutus/ourcompany/ourhistory. BHP Billiton, 2016, Our structure, Our Company, viewed 26 August 2016, https://www.bhpbilliton.com/aboutus/ourcompany/ourstructure. BHP Billiton, 2016, Leadership. About Us. viewed 26 August 2016, https://www.bhpbilliton.com/aboutus/leadership. BHP Billiton, 2016, Our Strategy Delivers, About Us, viewed 26 August 2016, https://www.bhpbilliton.com/aboutus/strategy. BHP Billiton 2011, Annual report, A Disciplined Approach a Proven Strategy, pp.1-265. BHP Billiton 2013, Annual Report,. Our Shared Values, pp.1-305. BHP Billiton 2014, Regulation undermining Australias productivity. Submission to The Competition Policy Review, pp. 1-55. Common Wealth of Australia, No date, Strategic assessment of BHP Billiton iron ore expansion for the Pilbara, Environment Assessment, viewed 26 August 2016, https://www.environment.gov.au/protection/assessments/strategic/wa-pilbara-bhp. IBIS World, 2016, BHP Billiton Limited, Premium Company Report Australia, viewed 26 August 2016, https://www.ibisworld.com.au/car/default.aspx?entid=2.