East Timor has terminated the controversial 2006 oil and gas treaty with Australia that eventually sparked claims ASIS agents had spied on Timorese politicians during the negotiations.

In a joint statement, the two countries announced today that East Timor would tear up the treaty, which carves up revenue from the Greater Sunrise oil and gas reserve in the Timor Sea.

East Timor has initiated confidential conciliation talks at the Permanent Court of Arbitration at The Hague as a result of the dispute over maritime boundaries between the two countries.

The statement said the two countries would negotiate permanent boundaries through the conciliation process.

“The governments of Timor-Leste and Australia look forward to continuing to engage with the Conciliation Commission and to the eventual conclusion of an agreement on maritime boundaries in the Timor Sea,” the joint statement said.

Both parties will hold a number of confidential meetings throughout the year, according to the statement, issued by the foreign ministers of both countries and the court.

“The governments of Australia and Timor-Leste remain committed to their close relationship and continue to work together on shared economic, development and regional interests,” the statement said.

The treaty has led to tense relations between the two nations, with claims that Australian agents bugged the offices of East Timor’s cabinet to gain an advantage during the negotiations.

Australia had insisted the treaty was valid as recently as September, Fairfax Media reported.