East Timor has threatened to tear up a deal with Australia in order to take a bigger slice of undersea oil and gas reserves.

East Timor is seeking “conciliation” with Australia under a never-before invoked article of the international law of the sea in a bitter dispute over a treaty covering billions of dollars in resources.

The 2006 treaty put a 50-year freeze on maritime boundary negotiations, but East Timor is claiming resources on the Australian side actually fall within its territory.

In legal hearings at The Hague, Australia has challenged the legal basis of the commission to hear the case.

Meanwhile, East Timor has threatened to tear up the Treaty on Certain Maritime Arrangements in the Timor Sea, or CMATS, seeking fresh negotiations on maritime boundaries.

The conciliation commission – comprised of five international legal experts - reportedly asked representatives from both countries over 20 questions in the first three days of hearings.

They were quizzed about the interpretation of CMATS, the conciliation process, and whether there was any conflict between the existing treaty and the law of the sea.

The conciliation comes after Prime Minister Malcolm Turnbull knocked back a request from his East Timor counterpart, Rui Maria de Araujo, for fresh negotiations in march this year.

Australia has emphasised that the outcome of any conciliation is non-binding.

The commission could decide on Australia's challenge to its jurisdiction within weeks, but the main issues in the case could be argued-over for a number of years.

Foreign Minister Julie Bishop has defended the existing treaty, saying it has injected $16 billion into East Timor’s economy.

But Labor says the Coalition Government is ignoring its election pledge to negotiate a new maritime boundary with East Timor.