Foreign Minister Bob Carr insists Australia and East Timor remain on good terms despite reports the Australian Secret Intelligence Service (ASIS) broke into and bugged East Timorese cabinet rooms nine years ago.

East Timor's foreign minister, Alfredo Pires, alleges that the ASIS breached international law and Timorese sovereignty by secretly listening during the negotiations over multi-billion-dollar gas revenues.

The allegations of spying prompted East Timor to notify the Australian Government that it was launching a process of arbitration to have the Timor Sea Treaty declared invalid.

While East Timor is furious, Senator Carr insists the two countries are good friends.

"Nothing can rupture the bonds between the people of Australia and the people of Timor Leste," he said.

"I am bound by convention that says Australian Government ministers don't comment on matters of security, intelligence, espionage even when what was said is plain untrue."

Mr Pires's lawyer, Bernard Collaery, says the evidence of spying is irrefutable.

"The evidence is irrefutable and Australian authorities are well aware that we are in a position to back that up," he said.

"Of course, we would not have formed our international litigation team unless we knew where we were."

Greens say Coalition has questions to answer

While Senator Carr remains positive about relations between the two nations, Greens leader Christine Milne does not share his optimism and has suggested that the Coalition had some explaining to do.

"I have absolutely no doubt that East Timor is furious," she said. "The Coalition needs to come clean on the motivation and try and persuade anybody that there is any ability to justify it.

"I don't think there is any ability to justify it [but] let’s hear what they have got to say.

"I don't think Australians are going to be very impressed to hear that there was authorised bugging of East Timor.

"It certainly damages relations with our nearest neighbours and no doubt other countries will be asking: what else did the Howard government resort to in relation to our neighbour?"

Alexander Downer, the foreign minister at the time the alleged bugging happened, also said he could not comment on security matters.

But Mr Downer says the 2004 negotiations were robust and says the new allegations may be about getting a better deal.

"They want to do even better, that is human nature, but the fact is by getting into this endless dispute with the companies and also with the Australian Government they are denying themselves any revenue at all, because the project is not going ahead," he said.

East Timor seeking to tear up treaty

Earlier this month Attorney-General Mark Dreyfus confirmed that East Timor was seeking to tear up the treaty which is used to split revenue from the "Greater Sunrise Gas" project between the two nations.

Mr Dreyfus said East Timor alleged the CMATS treaty was invalid because the negotiations were not fair.

"[East Timor alleges] in the course of negotiating this treaty back in 2004, Australian officials were aware of confidential information belonging to Timorese negotiating team," Mr Dreyfus said.

"We can't comment further on the matter because these issues are going to be dealt with in the course of the arbitration.

"Australia has always conducted itself in a professional manner in diplomatic negotiations and has conducted those CMATS treaty negotiations in good faith."

The Australian Government said then that neither East Timor's claims about the treaty nor its allegations of espionage were new and that the treaty remains in force.