PetroTimor, a subsidiary of Denver-based Oceanic Exploration, failed in its quest for billions of dollars in compensation from the Commonwealth for loss of rights to vast oil and gas reserves in the Timor Sea following Indonesia's invasion of East Timor

In its decision handed down yesterday, the full bench ruled the issue could require interference in Australia's international relations and foreign policy and so the court did not have the power to act.

The Commonwealth secured rights to the rich resource field by signing the Timor Gap Treaty with Indonesia in 1989 and is on the verge of signing a new deal with East Timor to carve up the proceeds. However, PetroTimor argued it held pre-existing exploration rights.

PetroTimor sought more than $2 billion from the Australian Government but after dismissing the claim, the court ordered the company to pay legal costs.

Ron Nathans, litigation partner at Deacons which represented PetroTimor in the court case, said last night an appeal to the High Court was possible.