Dili – On their first day of East Timor's independence, leaders of the new country raised the prospect of taking Australia to court to gain a greater share of the rights to resources in the waters dividing the two countries.

But Australia has effectively blocked such a grab for Timor Sea petroleum resources by withdrawing from the International Court of Justice (ICJ) dispute resolution mechanism for maritime borders.

Australian and East Timorese government leaders today signed a new Timor Gap Treaty in Dili which will allow Phillips Petroleum to pipe gas from its Bayu-Undan field in the disputed territory between the two countries.

East Timorese Foreign Minister Jose Ramos-Horta later said he believed Australia would concede a larger share of Greater Sunrise – a gas field three times larger than Bayu-Undan – through negotiation.

"It's only fair and Australia is a fair-minded country," Mr Ramos-Horta said. "I dread the thought we will have to go to court. It would be a failure of leadership if the two neighbours, friendly countries, can't reach agreement through negotiation on new boundaries to replace those struck with Indonesia."

East Timorese Prime Minister Mari Alkatiri said in his maiden speech in the Australian-donated Legislative Assembly that the treaty signed today under no circumstances represented a maritime border. "The government will use all instruments and international mechanisms to search for a solution," Mr Alkatiri told parliament.

But Prime Minister John Howard said while Australia was open to discussion, the boundaries on which the original treaty with Indonesia was based – which puts 80 per cent of Greater Sunrise in Australian territory – was fair. "We believe that the approach we have taken to date has been very fair; has been generous," Mr Howard said.

He denied that Australia's withdrawal from the ICJ and from dispute settlement under the United Nations Convention on the Law of the Sea was unfriendly. "That is a legitimate protection of a national interest," Mr Howard said.

The treaty signed today gives East Timor 90 per cent of the royalties from gas taken from the so-called Joint Petroleum Development Area.

Opposition leader Simon Crean said the signing was an important first step in the relationship between the two now-independent countries. "Not only in economic terms, but in terms of the way in which we do business, can sit down and renegotiate in the interest of further cooperation and in particular, for the further development and greater economic independence of East Timor," Mr Crean said.