Residents in Williamtown, Oakey and Katherine have reached in-principle agreement with the federal government to settle three Federal Court class actions relating to per-and poly-fluoroalkyl substances (PFAS) contamination.
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The breakthrough came on Wednesday night after two days of intense mediation talks between the Department of Defence and lawyers representing the communities.
On this issue: How residents are reacting after the mediation breakthrough
The parties are in the process of finalising the terms of the settlement.
"These terms are confidential and are subject to formal consideration and approval by the Federal Court of Australia," a joint-statement issued by Defence Minister Linda Reynolds and Veterans Affairs Minister Darren Chester said.
"The parties will inform the Federal Court of Australia that an in-principle agreement has been reached at the first available opportunity."
The agreement heads-off a class action hearing that was due to start in April.
A spokesman for the residents' legal team said: "We note the government's statement as an important first step to clean up this mess in communities," he said.
"We will release a statement on Thursday morning after which our legal team will begin the process of updating class action members."
The ministers' statement said the government remained committed to engaging with those impacted by PFAS contamination.
"Reaching a settlement is not the end of defence's engagement in these communities, however, it does represent an important milestone on what has been a difficult journey for many people over the past few years," it said.
"The government remains committed to concluding the environmental investigations into PFAS contamination on and near defence facilities across Australia, and to the ongoing monitoring and engagement with communities once investigations are complete."
Williamtown: The complete Newcastle Herald investigation
Prime Minister Scott Morrison said in Kathrerine last week that the government would approach the mediation process in good faith.
"...previous governments have just kicked that can down the road," he said. "Our government hasn't, we've stepped up and we're engaged in mediation with those communities now."