Australian Treasurer Jim Chalmers has initiated unprecedented legal proceedings for alleged non-compliance with Australia’s foreign investment law. For the first time, the Treasurer is taking a foreign shareholder in Northern Minerals Ltd to court for allegedly defying an order to sell their shares. This claim represents a decisive step in the Commonwealth government’s increased enforcement of foreign investment law on national security grounds in the critical minerals sector.
Background
The action was brought against Indian Ocean International Shipping and Service Company Ltd (Indian Ocean) and a former associate, both foreign investors with links to Chinese interests, including entities associated with the Chinese-controlled Yuxiao Fund.
Northern Minerals is an ASX-listed company developing the Browns Range heavy rare earths project in Western Australia. The company is of strategic significance to Australia, as it is one of the few non-Chinese sources of critical minerals such as dysprosium and terbium. These minerals are essential in the production of high-performance magnets used in military guidance systems, renewable energy technologies, and electric vehicles.
In June 2024, the Treasurer issued Disposal Orders requiring Indian Ocean and four other foreign investors to sell their shares in Northern Minerals by September 2024. Those orders were reportedly not complied with.
The Disposal Orders followed FIRB’s 2023 decision to block an attempt by Yuxiao Fund to increase its stake from 9.81% to 19.9%, citing national security concerns. On 26 June 2025, Jim Chalmers filed proceedings in the Federal Court for non-compliance with the orders, making it the first enforcement action taken in an Australian Treasurer’s own name.
Potential Remedies
The Treasurer is seeking declarations, penalties, and costs against the investors. The Federal Court has broad discretion in determining appropriate remedies. A person commits a criminal offence if they engage in conduct which contravenes a Disposal Order. The criminal penalty for this offence may result in up to 10 years’ imprisonment for individuals involved in the contravention (including the directors of a corporation that commits an offence), or a fine of up to 15,000 penalty units (currently $4.95 million) for individuals, or both. For corporations, the maximum financial penalty under these criminal provisions is 150,000 penalty units (currently $49.5 million).
A person who contravenes a Disposal Order is also liable to civil penalties. The maximum penalty for this contravention is the lesser of 2,500,000 penalty units (currently $825 million) or the market value of the benefit obtained by the breach.
Critical Minerals Policy Shift
These proceedings arise during heightened regulatory scrutiny of investments in critical minerals. This follows Australia’s broader policy shift towards safeguarding the national interest and the integrity of the foreign investment framework announced in May 2024. China currently dominates global production of critical minerals, prompting concerns over foreign control of Australian projects and domestic supply chains.
What does this mean?
This highlights the need for rigorous compliance with Australia’s foreign investment laws, particularly in sectors deemed to intersect with national security such as critical minerals. This matter should be of particular interest to investors from the People’s Republic of China and other jurisdictions subject to enhanced scrutiny under Australia’s foreign investment framework.
Considering the government’s willingness to take enforcement action, we recommend early engagement with legal advisers. Our team at McCullough Robertson has extensive expertise in navigating FIRB requirements and can assist in managing regulatory risk at all stages of a proposed investment.