Solomon Islands' Attorney-General has ordered the termination of a deal to lease an entire island to a Chinese state-linked developer.
The move casts further doubt on an agreement between the developer and a provincial government that was feared would give China a strategic inlet into the country.
A strategic cooperation agreement signed last month between the Central Provincial Government and China Sam Enterprise Group which granted exclusive development rights to Tulagi and its surrounding islands, was "unlawful, unenforceable and must be terminated with immediate effect," Attorney-General John Muria said in a statement Thursday.
The five-year lease deal has alarmed locals on Tulagi, Solomon Islands officials and Western diplomats since it was reported in local media.
Central Province Premier, Stanley Manetiva, who signed the agreement on 22 September, has maintained the deal is not legally binding and would not be possible under Solomon Islands land laws.
"The issue is no longer an issue anymore," he told RNZ Pacific in an email on Wednesday, declining to comment further.
China Sam has not publicly commented on the Tulagi deal but executives with the group met with Solomon Islands Prime Minister Mannaseh Sogavare when he visited China this month, weeks after diplomatic relations opened between the two countries.
The agreement contained vague references to trade and minerals, including a possible oil and gas development as part of a "special economic zone". However, its broad wording could have enabled China Sam to build strategic assets such as deep sea ports, according to one senior Western diplomat.
Mr Muria, the attorney-general, said the agreement signed had significant legal "defects", including an illegal clause which would exempt China Sam from having to obtain Foreign Investor status under Solomon Islands laws.
The deal was also not vetted by the attorney-general's chambers, as required of all provincial and national level agreements, he said.