Federal Court imposes $14 million penalty on Chinese investors over rare earths share sale defiance
The Federal Court has delivered a significant ruling, imposing a substantial $14 million fine on Chinese-linked investors for defying government orders to sell down their stake in rare earths developer Northern Minerals. This landmark case represents the first enforcement action brought by a Treasurer under Australia's foreign investment laws since their introduction in 1975.
Defiance of national interest disposal order
In June 2024, Federal Treasurer Jim Chalmers issued a directive requiring Indian Ocean International Shipping and Service Company, along with four other entities believed to have Chinese connections, to divest 613.6 million shares in Northern Minerals. This substantial holding represented 10.4 per cent of the company and was ordered to be sold on national interest grounds.
However, when the September 2024 deadline arrived, approximately 165 million shares remained unsold. The situation was further complicated when, just one month before the deadline, Indian Ocean transferred its Northern Minerals shares to Jing Tian, who at that time served as the company's director and sole shareholder.
Court finds deliberate breach of disposal order
The Federal Court determined that this share transfer constituted a clear breach of the Treasurer's disposal order. In its ruling, the court declared the transfer unlawful and ordered both Indian Ocean and Ms Tian to pay the substantial $14 million penalty. The enforcement of this fine presents practical challenges, as both parties are no longer major shareholders in Northern Minerals and have likely severed their connections with Australia.
Government sends strong message to foreign investors
Federal Treasurer Jim Chalmers emphasised the importance of the court's decision, stating that "this outcome sends a clear signal to foreign investors in Australia that they must follow the law or face the consequences." He further reinforced the government's position, declaring that "the Albanese government will never hesitate to take decisive action to protect our national interests and preserve our national security."
Ongoing Chinese interest in Northern Minerals
Despite this legal setback, Chinese interests continue to maintain involvement with Northern Minerals. Beijing-headquartered Vastness Investment Group, which holds a 7.7 per cent stake making it the company's largest shareholder, recently lodged a notice to requisition a shareholders meeting. Their objective is to remove executive chairman Adam Handley from his position.
Northern Minerals shareholders will consider Vastness' resolution at the planned annual general meeting scheduled before March 31. The meeting agenda also includes applications from other Chinese-linked candidates seeking board positions, indicating continued strategic interest in the company.
Strategic importance of Browns Range project
The significance of this case extends beyond the immediate legal proceedings to the strategic value of Northern Minerals' operations. The company's Browns Range project, located 145 kilometres south-east of Halls Creek, represents a crucial component of Australia's future critical minerals supply chain. This development has the potential to produce sought-after rare earth oxides essential for electric vehicles, clean energy technologies, and defence applications.
Broader context of Western investment restrictions
This legal action occurs within a broader international context where Western nations, including Australia under the Albanese Government, are adopting stricter approaches to Chinese investment in metals and minerals considered vital for the global energy transition. These measures aim to counterbalance China's market dominance in critical sectors and protect strategic national interests.
