The Australian Government has warned East Timor there will be tough consequences over its decision to launch international arbitration proceedings over its maritime boundary with Australia.

The warning, aiming to "send a message" to the Timorese leadership, was delivered through an intermediary in direct language by a highly placed Australian diplomat one week ago.

The senior diplomat repeatedly warned the Timorese leadership they were being "naive to think the arbitration and maritime boundary issue would not affect the bilateral relationship".

The message came a fortnight after Australia applied to the Permanent Court of Arbitration in The Hague to have the evidence of a former Australian intelligence officer, Witness K, struck out of the arbitration proceedings between East Timor and Australia on the maritime boundary.

The evidence relates to an Australian spying operation during 2004 treaty negotiations over the maritime boundary, when agents from Australia's Secret Intelligence Service (ASIS) bugged the conference room of the then East Timorese prime minister.

Tonight, the ABC's Four Corners program examines the events that have seen rising tensions between the two neighbours.

In an interview with the program, East Timor's lawyer Bernard Collaery calls for a judicial inquiry into the 2004 bugging operation in East Timor, saying it was not in Australia's national interests.

The new diplomatic warning to East Timor's leadership comes just days after the International Court of Justice (ICJ) in The Hague delivered an embarrassing blow to Australia's international prestige by provisionally ordering Australia to "not interfere in any way in communications" between East Timor and its legal advisers.

The order, passed by a margin of 15 votes to one, applies not only to present maritime boundary negotiations between the two nations, but to "any future bilateral negotiations concerning maritime delimitation".

East Timor took Australia to the ICJ after agents from the Australian Security Intelligence Organisation (ASIO) seized documents in a raid on Mr Collaery's legal office and Canberra home last December.

The home of the former senior Australian intelligence agent codenamed Witness K was raided at the same time.

The ICJ ordered Australia not to use the seized documents "to the disadvantage of Timor Leste", and to keep all the documents and all copies "under seal" until further notice.

The Australian diplomat who warned the East Timorese that Australia was "unhappy" also suggested the Timorese leaders should note the comments of Attorney-General George Brandis, who claimed that some of the parties in the case may have acted illegally.

Interviewed on Four Corners, Senator Brandis declined to comment on the ASIS bugging operation in 2004 but said the ASIO raids on Mr Collaery and Witness K were based on "a very strong case" put to him by ASIO.

The spying claims first became public in May last year when then attorney-general Mark Dreyfus and foreign minister Bob Carr dismissed the claims in a press release, saying: "These allegations are not new."

Four Corners has learned this statement was based on advice provided to them that the bugging claims had been previously published.

But a confidential letter delivered to former prime minister Julia Gillard five months earlier had clearly outlined specific details on the new overseas bugging operation.

In an interview with Four Corners, Alexander Downer, the minister responsible for ASIS in 2004, would not confirm or deny the bugging operation.

But the former foreign minister said: "Suffice it to say the Australian Government was on Australia's side in the negotiations and we did our best to make sure that we were able to achieve our objective, which was particularly an objective in relation to the delineation of the maritime boundaries."

While East Timor's relationship with Australia is under strain, its other big neighbour, Indonesia, seems to be warming to Dili.

"Our prime minister [Xanana Gusmao] is taking initiatives for us to create a sub-regional economic zone between Indonesia, Timor-Leste and the northern part of Australia, for us to work together as nations," East Timor's petroleum minister Alfredo Pires told Four Corners.

Producer Peter Cronau recently travelled to East Timor with reporter Marian Wilkinson. Their report can be seen on Four Corners on Monday at 8:30pm on ABC1.

You can watch the full Alfredo Pires interview on the Four Corners website from Tuesday, along with interviews with Attorney-General George Brandis and former foreign minister Alexander Downer.