Guest Report

Stephen Roach on the Cobar Option

At 11.30 am on 21st January 1998 I was sitting in the meeting room at the CSA Copper Mine just out of Cobar. Cobar is essentially a mining town of 5500 situated on the Barrier Highway between Nyngan and Wilcannia in Western NSW. The Cobar Shire sign proudly boasts "mining since 1865" with Cobar servicing the world's largest copper mine earlier this century.

The CSA mine (abbreviated after the nationalities of it three founding partners - Cornish, Scottish, Australian) was part of the established mining operation to work the Great Cobar Orebodies. From 1919 low commodity prices forced the closure of almost all mining operations in the region leaving Cobar reliant on farming industries such as shearing to generate income for its declining population. The CSA was reopened for production form 1965 with other operations adding to the prosperity and growth of the region since.

I was initially to be there for negotiations on a new "Enterprise agreement" on behalf of the employees of whom our union has a considerable membership on site.

Consistent with the common understanding of our state and federal political leaders, we assumed we could negotiate a binding agreement and have it certified under the Federal Workplace Relations Act. Whilst the certification of such an agreement would impose obligations on the employer and workforce it would also provide industrial right to the workers. After all the chief object of the Act is to, amongst other things, provide "a framework of rights and responsibilities for employers and employees,.... which supports fair and effective agreement making and ensures that they abide by awards and agreements applying to them" [Section 3(e)].

Until this agreement could be finalised the workforce would be protected by the existing provisions contained in their previous certified State Enterprise Award under the NSW Act, which implies similar guarantees about effectiveness and enforceability of awards and agreements.

The CSA copper mine was Cobar's oldest, largest and arguably proudest continual operation. Its workforce of 267 (including management) were almost all locals with a number of the contractors and supplementary workforce also considered local or "Iron Ringers" (nickname reserved for locals born in Cobar).

Although the CSA was up for sale it had continued to supply its parent company(Ashanti Goldfields of Ghana) and London Based directors and shareholders with a health profit until late 1997 when the international spot price of copper plummeted. While the common practice of hedging on the future market protects mining operations like CSA from the volatility of fluctuating commodity prices, Ashanti had sold CSA's hedges leaving it susceptible and operating in the negative.

In January 1998, when Ashanti made the commercial decisions to disassociate itself from its CSA managing company, (Cobar Mines Pty Ltd) and the debts and accumulated liabilities incurred by it they not only shook a community they also rather savagely illuminated the community to an appalling lack of protection of employees rights and entitlements in cases of corporate insolvency.

This takes me back to 11.30am on Wednesday 21 January 1998.

The door opens and the mine manager introduces us to the newly appointed "administrators" from Price Waterhouse. We are informed that the mine is closed as of midday and a meeting of all creditors is being convened.

We are informed that the majority of assets are under claim by the "secured creditors" and that a small portion of the $10.8 million owed to employees in wages, leave and redundancy entitlements and the $6 Million owed to unsecured creditors such as contractors and local suppliers may be achieved through the dale of milled copper concentrate on the site and at the shiploader in Newcastle.

An air of stunned disbelief descended on the whole community. How can they do this to us? We have an agreement! They can't do this to us - Can they?

The Cobar Option, a term later used by a government member, describing the practice also being adopted by stevedoring company Patrick in their waterfront folly, was well and truly underway. A practice where the real corporate entity with the real money can hide behind a myriad of front (usually financially barren) companies and claim not be responsible for their debts. A practice where no matter how much moral or legal authority a person may have to call in what's owed, under normal circumstances, they have no hope of legally pursuing it.

In the absence of legal options or the money to pursue what legal vagaries existed with Ashanti's methods, the outrage of the Cobar community generated sufficient momentum to enable an eleven monthly campaign to pursue what was rightfully owed to that community and to pressure our political leaders to amend corporate and insolvency laws to better protect employees in times of corporate insolvency.

On 3 March, following an 800km convoy to Canberra by about 250 miners and family members, a delegation met the Prime Minister to put forward a number of options.

It was not our fault the Australia was so backwards when it came to providing tangible protection's to Australian workers in cases such as this. In our view the Australian government was responsible for the state of our laws and therefore should provide financial relief to those disposed as a consequence of our legal shortfalls while the Federal government should pursue Ashanti for the debt as they had the resources and international influence to.

After all, given the governments apparent generosity in relation to offers to solicite and underwrite the financing of up to $500 million in proposed waterfront redundancies at that time our claim for financial assistance amounted to a paltry $17 million maximum in contract with the possibility of recouping most if not all of it. To ensure other people didn't suffer our fate we also proposed:

- A central fund be established for the provision of leave and redundancy entitlements to be administered by the ATO.

- Mandatory insolvency insurance to protect employees and unsecured creditors in cases of corporate insolvency.

- Amending the current order of payment priority in cases of insolvency to elevate employees above secured creditors such as banks and other financial institutions.

We described to the PM and his advisors the devastating effect on the region of the mine's closure and the impact not only on the 267 jobs directly lost but the multiplier effect which would see the loss of 1500 full time jobs affecting the labour market as far away as Dubbo where unemployment would jump from six to eight per cent attributable to the CSA's closure. Cobar unemployment had jump from less that five per cent to over 30 per cent overnight and retrenched workers could not receive unemployment benefits as Centrelink were assessing the workers as having received their entitlements even though the payments had not been forthcoming.

We also described some of the indirect effects. How some families ware now reliant on food and emergency relief from church and benevolent societies and how only three days earlier three former CSA workers lost their lives in a plane crash at Mt Isa while seeking employment at another mining operation.

How families were disintegrating under the burden of financial hardship and of the extended periods of absence of breadwinners away from home in search of work and unable to sell their homes even if they wanted to. The resentment fermenting as people, not used to dealing with government bureaucracy tried to find their way through the maze of paperwork in a vain effort to achieve some assistance from an unfashionable institution like the Department of Social Security.

The PM, to his credit, gave us a good hearing and was visibly concerned with the treatment meted out by Ashanti to the Cobar community. While commitments were given to have the Australian Securities Commission investigate the circumstances of this insolvency (which ultimately provided the necessary pressure to extract a better settlement package form Ashanti), no commitments were made in the area of reform to Australian law.

Reasons offered for not implementing reforms along the lines of what we proposed included:

- Business cannot afford to set employee entitlements aside in a fund because small business might need that money for ongoing operating costs,

- Insurance would be an added cost to business and good business should not have to pay for the actions of bad business operators, and

- If employees were elevated above banks etc, they would be reluctant to loan and may increase interest rates and charges to cover bad debtors.

Theses excuses may offer peace of mind to advocates of business who want to dismiss instances such as Cobar as some sort of glitch without cause or remedy, but the reality is that under simple scrutiny, they do not stand up to logic.

First, it is not unrealistic to expect that an employer can set aside leave and redundancy entitlements. After all it is not the employers money anyway s why should they have ready access to use it (or even gamble it) on their own enterprise particularly without the knowledge or consent of the employees concerned. Even if the employee knew, what rights do they have to inspect books and their employers' continued viability in the way a bank can.

The establishment of funds such as "Wage Guarantee Funds" is not a new concept. They currently exist in most European counties as wall as Japan, Canada, Argentina and some US states in one form or another.

With computer technology and Tax File Numbers it would not be impossible to establish a fund with the capacity to ensure that when an employee chooses to access his/her money that in fact it was going to be there.

Secondly, the notion of a mandatory insurance may well be anther cost impost on business however if there is a potential for an employee's legal entitlements to be jeopardised they are entitled to demand some sort of protection.

I do not enjoy having to pay motor vehicle insurance to drive a car, however we all accept things like third party insurance as a community responsibility. Similarly, no matter how little the incidence of corporate insolvency, business must accept that in the absence of the first option they must provide better security for employee entitlements than currently exists.

Thirdly, given that the secured creditors are generally banks and lending institutions with the capacity to know they're lending the money, what it is for, the viability of the business and the potential for repayment whilst charging an interest premium it would not be unreasonable to expect the unwitting employees "loan" be given priority for repayment in cases of insolvency.

Finally, if a fund were established and, in the absence of the valid contribution to it, a mandatory insurance applied to the employer concerned, I'm sure there wouldn't be too many cases were bankers rights were jeopardised by the humble employee having the power to put their hand out first.

In our view all three options should be favourably examined and properly implemented in conjunction with each other.

The pity of Cobar's experience was not only the harsh reality of a globalised and unregulated business community leaving a trial of broken hearts and promises in the wake of their pursuit of the holy dollar. It was the undermining of the way we like to think business is conducted - particularly in the bush where a handshake and goodwill have traditionally characterised the binding contract.

We are entitled to a society where employees can make agreements confident that they will be abided by and where families can go about their day to day lives free form the pressures of financial insecurity and the psychological impost of paranoia and distrust.

The tragedy of it is that unless our national leaders stop pandering to business and start implementing "fair and enforceable" protection's for the citizens they claim to represent, a continued repeat of the "the Cobar option" is an inevitability.

Stephen Roach was formerly secretary of the Rural Workers Union

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  Issue 9 contents

»	Public Speaks: We Are Not Monsters!
»	Qantas to Dump Aussie Accents
»	Carr�s Faction Call Music to Costa�s Ears
»	But Thumbs Down to Small Business Labor...
»	Blow for Reith's Anti-Unionism
»	Un-Reconstructed Unionists on Study Tour
»	Unionists to Celebrate May Day
»	Tanner to Bragg with Billy

»	Guest Report
»	Sport
»	Trades Hall
»	Piers Watch

»	Social Audit: Where's the Left?
»	Piers, Piers, Piers
»	Conspiracy of Silence?
»	Y2K plus VCR Equals SCAM

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