On 10 January 2017, the Democratic Republic of Timor-Leste ("Timor-Leste") formally notified the Commonwealth of Australia ("Australia") of its desire to terminate the 2006 Treaty between Australia and the Democratic Republic of Timor-Leste on Certain Maritime Arrangements in the Timor Sea (the "CMATS"). The move is the latest development in the two States' on-going maritime dispute regarding the Timor Sea.

The CMATS is one of three agreements between the two States regarding maritime arrangements on resource exploitation and revenue sharing in the Timor Sea. It provides for the shared distribution of revenue derived from the Greater Sunrise oil and gas field located in the Timor Sea, where Australia and Timor-Leste have overlapping maritime claims. The CMATS also put on hold the right of both States to assert, pursue or further their claims to sovereign rights and jurisdiction and maritime boundaries in the disputed area. Further, Timor-Leste and Australia agreed that neither Party would commence or pursue any proceedings against the other Party before any court, tribunal or other dispute settlement mechanism that would raise issues or result in findings of relevance to maritime boundaries or delimitation in the Timor Sea.

The CMATS became the subject of controversy in 2012 when an allegation was raised that, during 2004, Australia planted covert listening devices in Timor-Leste's cabinet office for the purpose of gathering information related to the two States' negotiations. In 2013, Timor-Leste launched arbitration proceedings administered by the Permanent Court of Arbitration contending that the CMATS was invalid and ineffective because Australia's spying violated the requirement under the Vienna Convention on the Law of Treaties that treaties be negotiated in good faith. These proceedings are still on-going. In addition, in 2014, Timor-Leste submitted a request for indication of provisional measures with the International Court of Justice regarding Australia's seizure of documents held by Timor-Leste's lawyers. The Court found that Australia's actions violated Timor-Leste's sovereign rights and ordered Australia to return the documents. In 2015, Timor-Leste initiated further proceedings against Australia before the Permanent Court of Arbitration. In those new arbitration proceedings, Timor-Leste disputed Australia's assertion of having absolute and exclusive jurisdictional rights, including taxation rights, over the entire length of a petroleum export pipeline. These proceedings also are on-going.

On 11 April 2016, Timor-Leste initiated separate compulsory conciliation proceedings pursuant to Article 298(1)(a)(i) and Annex V of the United Nations Convention on the Law of the Sea, to which both States are parties. The purpose of the proceedings, which also are being administered by the Permanent Court of Arbitration, is to resolve the differences between the two States over maritime boundaries in the Timor Sea. A conciliation commission consisting of a panel of five independent experts was established on 25 June 2016. On 19 September 2016, the conciliation commission rejected Australia's objections to competence. It concluded that it was competent to hear the matters set out in Timor-Leste's 11 April 2016 notification, despite the Parties' agreement in the CMATS not to pursue any means of dispute settlement regarding maritime boundaries or delimitation in the Timor Sea.

In a joint statement released on 9 January 2017 by the governments of Timor-Leste and Australia and the conciliation commission, the three disclosed that between "10 to 13 October 2016, the governments of Timor-Leste and Australia participated in a series of meetings" and "agreed to an integrated package of measures intended to facilitate the conciliation process and create the conditions conducive to the achievement of an agreement on permanent maritime boundaries in the Timor Sea". As part of the package of measures, Timor-Leste decided to deliver to the Australian government a written notification of its wish to terminate the CMATS. The CMATS will cease to be in force as of three months from the date of the notification.

The termination of the CMATS will remove the prohibition on pursuing maritime interests. Along with the agreed package of measures, which have yet to be disclosed, it could constitute a step in resolving the on-going dispute between the neighbours. In the meantime, both governments stated that they will "remain committed to their close relationship and continue to work together on shared economic, development and regional interests". They also "recognised the importance of providing stability and certainty for petroleum companies with interests in the Timor Sea and of continuing to provide a stable framework for petroleum operations and the development of resources in the Timor Sea".