Australia says Rio trials opaque, business seeks answers

By Rob Taylor

CANBERRA (BestGrowthStock) – Australia’s Prime Minister Kevin Rudd said on Tuesday that the verdicts in the trial of four executives of global miner Rio Tinto left serious unanswered questions for business about China’s legal system.

But Rudd, keen to draw a line under the squabble with its top export partner, said disagreement over China holding a part of the trial related to the theft of commercial secrets in closed court would not hit the booming resource trade.

“In holding part of the trial in secret, China, I believe has missed an opportunity to demonstrate to the world at large transparency that would be consistent with its emerging global role,” Rudd told reporters in Melbourne.

A Shanghai court convicted four employees of Rio Tinto of taking bribes and stealing commercial secrets, including Australian citizen Stern Hu, handing sentences ranging between 7 and 14 years in prison.

Rio immediately sacked the four, who had pleaded guilty to accusations of bribery, but contested separate charges heard in closed court of stealing commercial secrets.

Rudd said the verdicts left serious unanswered questions hanging over the functioning of China’s legal system just when Beijing was seeking global imprimatur for its growing economic and security clout.

But the case would not affect Australia’s expanding ties with China built on a strong foundation of bilateral trade. China is Australia’s biggest export market with two-way trade worth $53 billion in 2008.

“I believe the bilateral relationship will sustain these sorts of pressures. We’ve had disagreements with our friends in Beijing before. I’m sure we’ll have disagreements again,” Rudd, a China rights expert and fluent Mandarin speaker, said.

Major Australian exports to China include iron ore, wool, copper ore and manganese. Resource-hungry Chinese firms have been behind several tie-ups with Australia firms.

In January, Australia approved China’s biggest-listed gold miner Zijin Mining Group’s $498 million bid for Australia’s Indophil Resources NL.

But several Chinese bids for Australian firms have failed, most notably a $19.5 billion investment by metals firm Chinalco in Rio that fell apart when Rio sought an alternative rights issue and joint venture with fellow mining giant BHP.

BUSINESS SEEKS TALKS

The influential Australian Chamber of Commerce and Industry, which covers 85 percent of the country’s mining and energy companies, said it was seeking urgent talks with Chinese authorities to get clarity in the wake of the Rio trials.

“These broader issues are important to the Australia-China economic relationship, and the necessary confidence Australian business executives require when doing business abroad,” said Nathan Backhouse, manager of trade and international affairs.

Chamber members include Rio Tinto, Fortescue Metals, Newcrest Mining and Woodside Petroleum, who helped reshape the trade relationship with China.

Rio Tinto said it would fire the four convicted employees to distance itself from what it called “deplorable behavior” in a case that dates back to the middle of last year.

The firm said it was up to the defendants and their lawyers to decide whether they would appeal their convictions, and the company was not involved.

“We understand how deeply distressing these events are for the families of those convicted and we are sympathetic. However, we have had no choice but to terminate the employment of those convicted and associated support for the families,” a Rio Tinto spokesperson said.

Australia’s Assistant Treasurer Nick Sherry said he believed Rio was a good corporate citizen and told CNBC the case raised no “broader issues” for the miner.

His comments came after the Greens party, which wields swing votes in the upper house of parliament, sought an investigation into the firm by the Australian Securities and Investments Commission.

In Hong Kong, the Beijing-controlled Wen Wei Po newspaper said the verdicts were a “landmark” and China’s handling of the case showed a Beijing “already melded into the world,” understanding how to defend its national interests.

“Although the Australian foreign minister asserted that the sentence was excessively harsh, the depoliticized verdict not only won over the international community, it also left Australia unable to pick holes,” the officially-sanctioned paper said.

The case would not affect ties between China and Australia, the paper said.

Stern Hu’s lawyer Jin Chunqing said Hu had not yet decided whether to appeal his 10-year sentence and that Hu had 10 calendar days from Tuesday to decide whether to do so.

“We’ll first do our homework, intensive homework, and then reach a decision in coming days,” Jin told Reuters, adding the focus of possible grounds for appeal would be the commercial secrets part of the sentence.

Investment Research

(Additional reporting by Victoria Thieberger and Sonali Paul in Melbourne, Chris Buckley in Beijing; Editing by Ed Davies and Sanjeev Miglani)

Australia says Rio trials opaque, business seeks answers