Feb. 6 (Bloomberg) -- Citic Pacific Ltd. lost a bid to stop Mineralogy Pty from operating a port in Western Australia, part of a dispute stemming from the construction of the biggest magnetite iron-ore development in the country.
Federal Court of Australia Justice Steven Rares yesterday dismissed the lawsuit filed by Citic Pacific units Sino Iron Pty and Korean Steel Pty, ruling the companies failed to prove a government agent made an error in designating Mineralogy as the operator of the Port of Cape Preston or that it was a breach of the rules of natural justice.
Mineralogy, owned by Australian politician Clive Palmer, leased land in Western Australia to Citic Pacific, controlled by China’s biggest state-owned investment company, to construct the iron-ore mine. Mineralogy unsuccessfully tried to kick Citic Pacific off its land after the company spent about A$7 billion ($6.3 billion), more than four times the initial budget, claiming it broke contracts over royalty payments.
Citic Pacific didn’t have “a right to veto, or urge against, the designation of a person as a port operator merely because those parties had a dispute or were, or one was, not prepared to cooperate with the other,” Rares wrote in his judgment, which was publicly released today. “Those matters did not bear on Mineralogy’s ability to undertake the function of port operator.”
The ruling doesn’t affect Citic Pacific’s operations and exports, the company said today in an e-mailed statement. It said it will consider its legal position.
Palmer said he welcomed the decision, claiming the Chinese government-owned companies “occupied the port” and shipped resources out of Australia without paying full consideration in accordance with their contracts.
“I have stood firm against these Chinese-owned companies,” Palmer said in the e-mailed statement today.
The legal disputes between Citic Pacific and Mineralogy are seen as a test case for Chinese companies considering investments in Australia, Citic Pacific President Zhang Jijing said following a speech in Melbourne today.
“Choose your counterparties very carefully,” Zhang said today in the speech.
The Australian government designated Mineralogy as the port operator on Jan. 31. Citic Pacific sought to have the designation set aside, arguing it was a breach of the rules of natural justice because it didn’t have a chance to object to the application and that the government erred by failing to take into account all the relevant considerations.
The Department of Infrastructure and Transport sided with the Chinese company, saying its delegate made a jurisdictional error by failing to consider whether Mineralogy was in a position to operate the whole of the lands and waters comprising the port.
The judge rejected all the objections.
The case is Sino Iron Pty v The Secretary of the Department of Infrastructure and Transport. WAD234/2013. Federal Court of Australia (Sydney).
To contact the reporter on this story: Joe Schneider in Sydney at firstname.lastname@example.org
To contact the editor responsible for this story: Douglas Wong at email@example.com