find the latest legal job
Corporate Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Highly-respected, innovative and entrepreneurial Not-for-Profit · Competency based Board
View details
Chief Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Dynamic, high growth organisation · ASX listed market leader
View details
In-house Projects Lawyer | Renewables / Solar | 2-5 Years PQE
Category: Generalists - In House | Location: All Australia
· Help design the future · NASDAQ Listed
View details
Insurance Lawyer (3-5 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Dynamic organisation ·
View details
Legal Counsel
Category: Corporate and Commercial Law | Location: North Sydney NSW 2060
· 18 month fixed term contract · 3-5 years PQE with TMT exposure
View details
Chinalco deal flops but China work still tipped

Chinalco deal flops but China work still tipped

Despite the rejection of Chinalco investing in Rio Tinto and the announcement of a new scheme to raise capital, investment flow from China into Australia and the creation of work for lawyers…

Despite the rejection of Chinalco investing in Rio Tinto and the announcement of a new scheme to raise capital, investment flow from China into Australia and the creation of work for lawyers should still be forthcoming, reports Sarah Sharples.

The $19.5 billion Chinalco-Rio Tinto deal would have been the biggest investment deal in both Australian and Chinese corporate history.

But, despite its failure, business in China will recognise that the deal was an "aggressive transaction" and will not be deterred in investing in Australia, says James Philips, Minter Ellison partner and head of M&A in the Sydney office.

"[The deal] included not only increasing the shareholding at the listed company level but it also included acquiring a direct interest in a number of the underlying Australian assets, plus entrenching Chinalco on the board of a number of the operating and marketing companies," he says.

"I think that there will continue to be interest in Australian assets from Chinese buyers ... [but] I think we might see some less aggressive strategy structures like taking minority interest in Australian companies and unincorporated joint ventures."

President (NSW) of the Australia China Business Council and partner at Hunt & Hunt Jim Harrowell AM agrees that Chinese businesses are encouraged to look at investment opportunities outside the country through its "go out policy". He says, however, that he feels frustrated that sometimes too much focus is spent on negative points in relation to China.

"I think the development of China can have a huge positive impact on this country and they want to work with [Australians] - we're regarded well in China. China likes dealing with Australians and we should encourage it," he says.

"The Australian China Business Council has recently launched a publication which shows that China trade can provide a potential benefit of an average of $3400 per Australian household. That must be good."

Lawyers, says Harrowell, should encourage inbound investment with their foreign clients to generate more legal work, particularly in the emerging markets in South-East Asia, China, India, Indonesia and Vietnam where a real growth opportunity exists.

"Work for lawyers will include mergers or acquisitions where Chinese businesses are acquiring equity in Australian businesses. There will be due diligence work [and] regulatory work to the extent that the investment requires FIRB approval. There will be ongoing work acting for new significant clients in Australia, which will include some of the Chinese companies that invest here. So there is potential for completely new clients in many ways," he says

Despite the rejected Chinalco deal, Rio-Tinto announced that it has chosen to raise capital by way of a $US15 billion ($18 billion) rights issue and will also enter into a joint venture with BHP Billiton (BHP) on their respective iron-ore assets in Western Australia worth about $US10 billion.

Allens Arthur Robinson will be working on Rio's rights issue as co-principal advisors with Linklaters and as principal advisors on the joint venture with BHP. Harrowell says legal work would be generated from the joint venture but may not be ongoing.

"The problem it presents is once that process has been gone through, then the legal services providers to BHP and Rio will settle down and just keep doing the thing they've always done for those companies. So it might be a burst of legal activity for the joint venture, but, in terms of ongoing legal work, it will pretty much be the status quo I would think," he says.

However, it has been reported that the Chinese Government will slap trade sanctions on BHP and Rio Tinto if they join their iron ore business without first gaining permission from Chinese competition authorities.

Steel industry leaders have also complained that the new deal will leave them vulnerable to an iron ore "monopoly", but Philips says this is incorrect from his understanding of the transaction.

"It's a joint venture structure so that each of Rio and BHP Billiton will be separately marketing their iron ore - so it's a production joint venture. They're combining their efforts in producing iron ore, but then they're selling it separately. If that's true [then] it would seem that the reporting that it is creating a monopoly is actually inaccurate," he says.

Meanwhile, Harrowell says China will continue to look to invest in Australia, particularly in the resources area, to ensure long-term security for their needs for iron ore and coal, and to continue the growth of the Chinese economy.

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

Chinalco deal flops but China work still tipped
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
LCA president Fiona McLeod SC
Aug 17 2017
Where social fault lines meet the justice gap in Aus
After just returning from a tour of the Northern Territory, LCA president Fiona McLeod SC speaks wit...
Marriage equality flag
Aug 17 2017
ALHR backs High Court challenge to marriage equality postal vote
Australian Lawyers for Human Rights (ALHR) has voiced its support for a constitutional challenge to ...
Give advice
Aug 17 2017
A-G issues advice on judiciary’s public presence
Commonwealth Attorney-General George Brandis QC has offered his advice on the public presence of jud...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...