FEATURE: Rio Tinto case tests relations

In July 2009, four members of mining giant Rio Tinto's iron ore trading team were taken into custody in Shanghai, facing accusations of espionage.

Until recently, the Anglo-Australian iron ore company maintained some hope that Australian Stern Hu and his three Chinese colleagues might not have to face a Chinese court and the likelihood of a prison term.

But prosecutors have decided there is enough evidence to proceed and the Shanghai No. 1 Intermediate People's Court will soon be the scene of trial which is likely to test Australia-China relations.

Linda Mottram and Stephen McDonell

Last Updated: Fri, 12 Feb 2010 13:27:00 +1100

When Liu Caikui, Ge Mingqiang, Wang Yong and Australian Stern Hu go on trial in Shanghai their hearing is likely to be held behind closed doors. Access to the trial for representatives from Rio Tinto, the Australian Government or the men's families is by no means guaranteed.

The announcement of the move to trial came on February 10, 2010, via China's Xinhua Wire Service. The prosecutors from the Shanghai People's Procuratorate had decided that they did have enough evidence to proceed to court. No trial date has been announced but the hearing is unlikely to take place until after the traditional Chinese New Year holidays.

According to court documents, prosecutors will accuse Rio Tinto's iron ore negotiating team of "taking advantage of their position to seek profit for others and asking for, or illegally accepting, huge amounts of money from Chinese steel enterprises". According to Xinhua's translation of Chinese court documents, prosecutors say the Rio executives "lured the heads of Chinese enterprises with promises, or through other illegal means, to obtain the steel companies' commercial secrets on multiple occasions, causing 'extremely serious consequences' for the companies."

With the move to trial, those concerned are hoping more details will emerge about the precise nature of the accusations. Rio Tinto maintains the four men are innocent. A key concern though is that prosecutors rarely lose cases that go to trial in China.

In the meantime, Rio is cementing the company's commitment in China. Last week, it appointed Ian Bauert, a 30 year veteran, to the position of Managing Director, China. Mr Bauert is a fluent Mandarin speaker who set up Rio's first office in China more than 25 years ago.

He takes up his position in the shadow of the tensions over the court case, which stemmed from internal Chinese ructions over iron ore price negotiations last year and as this year's round of iron ore price negotiations are scheduled to have begun.

Announcing its annual profit-report, Rio Tinto was reluctant to comment on the charges laid against its top negotiator and his three colleagues. Rio Tinto's CEO, Tom Albanese, said he couldn't say too much while the legal process continues.

"Our primary concern remains the wellbeing and care of our colleagues, and it would be inappropriate to comment further as the legal progress continues," he said.

When asked whether the matter had hurt the company's relationship with China, Mr Albanese replied demand from its biggest customer has never been stronger.

The Australian government is keeping a very low profile on the case.

Financial services minister Chris Bowen was the only minister to have spoken publicly when asked during an interview on other matters about the then breaking news of the move to trial in the case and particularly about Stern Hu.

"I understand he does have legal assistance in the proceedings he has legal representation and I understand our embassy officials have been in contact with those legal officials, of course we would hope this matter gets resolved as quickly as possible as we have said all the way through," Mr Bowen said.

Responding to the trial news, the office of Foreign minister Stephen Smith issued a statement confirming Australia had been formally notified of the developments and adding:

"As with all legal processes, it is not appropriate to speculate on the outcome or penalties at this time.

"We continue to emphasise to the Chinese authorities the need for the case to be handled transparently and expeditiously," the statement said.

Coincidentally, the committee processes of the Australian Parliament saw officials of Mr Smith's department scheduled to appear for questioning on portfolio expenditure more generally on the same day as the developments in the Rio Case.

"Having read about Stern Hu's indictment this morning in the paper on charges, I was wondering if you could update us on any briefings you've received or discussions," asked committee member Liberal Senator Helen Kroger of officials appearing before the hearings.

"As with all legal processes its really not appropriate to speculate on the outcome and perhaps would be quite unhelpful to do so, but I do want to comment that we certainly continue to emphasis to the Chinese authorities the need fore the case to be handled transparently and expeditiously," said Foreign Affairs official Greg Moriarty.

It was confirmed that the last time Australian officials in Shanghai visited Stern Hu was on January 29. Another visit is planned this month, and it is possible the trial may have begun by then.

Pressed on possible sentences if the men are convicted, another official Graham Fletcher was reluctant to be drawn, in line with Canberra's concern to keep public comment on the issue to a minimum.

"Well one article has a penalty of more than five years," Mr Fletcher said after further questioning.

"That relates to bribery. And the other article has a maximum penalty of seven years ... and a fine," he added.

Earlier in the day the Rudd government had signalled that the Prime Minister would comment on the case. That comment never materialised.

Australia's 's diplomacy in the Rio case has softened as the months have passed. During the second half of 2009, the case became one of a series of aggravations contributing to a major diplomatic rift between Australia and China.

At it's height, that rift saw the Australian Prime Minister Kevin Rudd sternly warn China that the world would be watching how it conducted its legal processes in the Rio case, with the United States weighing in with a similar caution.

By October 2009, both sides drew a line under the spiralling tensions. Within days of each other, Australia's Foreign minister and Chinese vice-premier Li Kerqiang delivered conciliatory speeches.

Since then, Australia's diplomacy over the Rio case, particularly relating to the Australian Stern Hu, has been more constrained.

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