Canberra - Australia's secret service has raided the Canberra homes of a lawyer and a former spy who intends to allege in an international court in The Hague that Australia bugged the East Timorese Cabinet ahead of sensitive oil and gas revenue-sharing negotiations.
The spying allegations come a month after revelations from National Security Agency leaker Edward Snowden that Australia attempted to tap the phones of senior Indonesian officials in 2009, which sank Australia-Indonesia relations to their lowest point in more than a decade.
East Timor will go before the Permanent Court of Arbitration on Thursday and use the alleged espionage to challenge the validity of a bilateral agreement struck with Australia in 2006 over sharing seabed oil and gas reserves between the countries worth billions of dollars.
Australian Attorney General George Brandis confirmed that he had authorised search warrants that were executed by the Australian security intelligence organisation, the main national secret service, in Canberra on Tuesday.
Brandis told the Senate on Wednesday that the warrants targeted lawyer Bernard Collaery, who will represent East Timor in The Hague, and a former Australian secret intelligence service officer.
ASIS spies operate out of Australian embassies around the world. It is illegal to name serving or former ASIS spies.
Brandis's office would not confirm or deny media reports that the former spy's passport had been confiscated, preventing him from giving evidence in The Hague.
Brandis told the Senate that serving and former ASIS spies faced criminal charges if they revealed their shadowy organisation's functions.
He said the raids were not conducted to help Australia fight the court case.
"The warrants were issued by me on the grounds that the documents [seized] contained intelligence related to security matters," Brandis said in a statement.
"I have instructed ASIO that the material taken into possession is not under any circumstances to be communicated to those conducting those proceedings on behalf of Australia," he added.
Collaery said the case would proceed without the spy witness.
"This is an attempt to intimidate our witness and to prevent the evidence going forward at The Hague," Collaery told Australian Broadcasting from Amsterdam.
"I can't think of anything more crass than what has occurred," he added.
Collaery said the former spy alleged a team of ASIS technicians inserted listening devices into the walls of Cabinet offices that were constructed and renovated in the East Timorese capital Dili under an Australian aid programme in 2004.
East Timor's Ambassador to Australia, Abel Guterres, said he was awaiting a statement from his Prime Minister Xanana Gusmao before commenting.