An international arbitration tribunal has ruled that the Pacific island state should pay the money, following Sandline's involvement in an aborted anti-terrorist operation on Bougainville Island in 1997 that almost sparked a coup. Colonel Tim Spicer, a Sandline executive and Falklands veteran, was arrested and deported.
Sandline is run by Mr Spicer, a former British special forces officer, and Tony Buckingham, a flamboyant businessman. The company has been involved in a number of controversial operations. Earlier this year it was at the centre of the "arms-to-Sierra Leone" scandal which caused great embarrassment to the Foreign Office and Robin Cook, the Foreign Secretary. Sandline executives maintained that they had told the Foreign Office of their involvement in assisting in the overthrow of rebels in Sierra Leone.
The Papua New Guinea contract arose from the long dispute between the government and Melanesian secessionists on Bougainville Island. About 20,000 islanders - one in seven of the population - have died in the conflict.
The deputy prime minister and defence minister of Papua New Guinea turned to Sandline "security consultants" after Bougainville rebels cut off a major copper mine - a vital income generator for the country. They contracted Sandline to provided military personnel and equipment and paid $18m of the agreed $36m fee up front. By February 1997, Sandline's 80- man special forces team was in the capital Port Moresby, ready to help the Papua New Guinea defence Force (PNGDF) to clear the insurgents.
However, the involvement of foreign troops angered the PNG army, which threatened mutiny. When Sandline's presence was revealed, riots broke out in Port Moresby and the security of the whole region stood at risk. Sandline's team was arrested and deported. Col Spicer was beaten up and charged with firearm offences. He gave evidence to a judicial inquiry that was instrumental in the downfall of the government led by Julius Chan.
Since then, the new government of Bill Skate has refused to pay the outstanding $18m. It has argued that the contract with the previous administration was illegal and unconstitutional. Sandline appealed, and under international law, a tribunal of three former appeal court judges was convened. Sandline proposed the retired English judge, Sir Michael Kerr. Papua New Guinea proposed former Australian judge Sir Darryl Dawson. The chairman is Sir Edward Somers of New Zealand. They have held a series of hearings.
Last week the tribunal awarded in favour of Sandline. The judges ruled that, regardless of what Papua New Guinea's laws might say, under international law, the contract was valid. It awarded Sandline the $18m fee, plus other costs and interest, totalling more than $30m.
Last night, Sandline declined to comment on the case. "We can't comment without the agreement of the other party," said a spokeswoman.