It is a dispute over Timor Sea oil and gas revenues that has been depicted as a David and Goliath struggle.
Timor-Leste, one of the world's youngest nations, has been up against Australia in a battle over the carve-up of the revenues.
But after conciliation proceedings in the Permanent Court of Arbitration in Copenhagen, a deal has finally been reached.
While details will remain confidential until a number of remaining issues are resolved, both sides appear happy.
The leader of Timor-Leste's delegation, chief negotiator and former president Xanana Gusmão, has hailed the agreement as a historic moment.
He says it marks the beginning of a new era in relations between the two countries.
For her part, Australia's foreign minister, Julie Bishop, says the deal supports the national interests of both nations.
In Melbourne, Kim McGrath, author of Crossing the Line -- Australia's Secret History in the Timor Sea, says Australia has has come a long way in a short time to reach an agreement.
"It's quite remarkable that, just two years ago, even probably 12 months ago, Australia's position was to still defend these series of previous treaties, including one that was tainted by allegations of spying, and maintaining that all of that was fine and there wasn't any need to renegotiate arrangements in the Timor Sea. We're still waiting on the detail, and there will be a lot of interest when that's finally revealed."
Central to any deal is the carve-up of money from the Greater Sunrise oil and gas field.
The deal outlines a maritime boundary as well as revenue-sharing arrangements for the field, estimated to be worth over $60 billion.
Earlier this year, Timor-Leste ended a 2006 treaty with Australia that split revenue evenly, following allegations of spying on Timor-Leste cabinet ministers.
While the details of the latest agreement remain confidential, the court says it addresses the field's legal and revenue issues.
While Timor-Leste welcomed the deal, Deakin University international-politics analyst Damian Kingsbury says it has been forced into it because of its perilous financial situation.
"Australia has behaved reprehensibly. In 2002, it forced East Timor into an unconscionable deal over the Timor Sea, essentially stealing East Timor's resources, and what we are seeing now is Australia again bullying East Timor into accepting a deal that's not entirely in East Timor's favour. But East Timor is desperate. It needs the revenue from that field. So it's not really in a position to hold out any longer."
Kim McGrath says the Australian stance on an oil and gas field that lies much closer to Timor-Leste has caused resentment in the fledgling and impoverished nation.
"It's been quite toxic. In Dili, there's graffiti around the streets of a kangaroo hopping away with oil. It's something that's had a low profile and not much awareness in Australia, but, in Timor Leste, just about everyone across all political persuasions has been very interested in this issue because it's an economic lifeline for them."
And it is an issue, she says, of far more significance to Timor-Leste than it would be to its bigger neighbour.
"What is at stake in the Timor Sea is a drop in the ocean in Australia, in terms of our access to oil and gas revenues, but, for the Timorese, it means schools, hospitals, desperately needed medical services and jobs for young people."
Professor Kingsbury says Australia still looks set to get significant revenue from the Golden Sunrise oil and gas field despite it being in Timor-Leste waters under international law.
"So Australia has done very well out of this at East Timor's expense. Australia should have drawn a line in the middle, which would have given East Timor the oil and gas field. As it turns out, there will be a boundary, the Golden Sunrise field will be divided. East Timor's not going to get the deal it should have. Having said that, it does look like it will get much better than a 50/50 deal, and that will help secure East Timor's economic future, which does give it some certainty."
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