Australian citizens and businesses that wittingly haul Russian coal to be sold to a third party are breaching Australia’s sanctions regime imposed following Vladimir Putin’s invasion of Ukraine, the Commonwealth has argued in court.
The Department of Foreign Affairs and Trade is locked in a legal stoush with Tigers Realm Coal, a publicly listed company backed by billionaire philanthropists Paul Little and Jane Hansen, over whether it has contravened the Autonomous Sanctions Act, which bans the importation, purchase and transport of Russian coal.
Tigers Realm Coal, which operates in Russia, has launched legal action against DFAT.Credit: Tigers Realm
The case heard in the Federal Court on Monday centres on the statutory interpretation of “transport” and whether Tigers, which digs up the coal and trucks it to a port, is, in fact, transporting the banned commodity to be imported to another country.
“The transport at issue within Russia is for the purpose of export of Russian coal, and inhibiting that transport at issue tends to inhibit the trade in Russian coal,” said Perry Herzfeld, the barrister representing DFAT. “And that’s plainly the intention of the sanctions directed at Russia.”
Through its Russian subsidiaries, Tigers owns and operates a coal mine in the Chukotka Autonomous Okrug district in Russia’s far east, as well as a port. The coal is eventually loaded onto independently owned vessels, which ship it to customers predominantly in north Asia.
Christopher Ward, representing Tigers, implored Justice Geoffrey Kennett to accept that the legislation bans the transportation of coal once it has crossed Russia’s land or sea border, and reject the Commonwealth’s position that Australian citizens and businesses trading Russian coal falls foul of the law.
“The production process is not intended to be captured, but transport for the purpose of movement as part of the process of importation or cross border movement is,” Ward said. “If we are wrong, we have to close down … And the consequences are not simply corporate in a criminal sense, they are potentially personal in relation to directors of this listed company.”
Herzfeld described Ward’s argument there should be a distinction between the production of sanctioned commodities and transportation as a “porous concept”.
“Why is the transport of coal on barges to the ships … part of the process of production?” Herzfeld said. “With the truck movement between the mine and the port, why is that part of the process of production?”
“To say that this is all part of a process of production really conceals the incredibly fuzzy lines which the applicant’s construction necessarily introduces into a provision which is otherwise clear. And that lack of clarity is to be avoided.”
If Kennett finds in favour of Tigers, it potentially leaves a loophole under Australia’s sanctions laws. But if DFAT is successful in its legal bid, questions arise over whether Tigers will be held criminally responsible for continuing to mine Russian coal even after being informed by DFAT in an indicative assessment the company’s activities were likely to be in breach of Australia’s sanctions laws.
Since DFAT’s non-binding findings, Tigers has continued its operations. In an update to the market early this year, the company said it had mined 429 kilotonnes of coal in the December quarter, a 10 per cent increase compared with the previous year.
Ward said the explanatory memorandum of the legislation expressly stated sanctions were to be “highly targeted measures”, and argued it should be implemented “with precision, not broadly and bluntly” to minimise the impact on the general population of the country.
“The closure of the mine and its cessation will be likely to have an impact upon the general population in Russia, that being something to be avoided,” Ward said.
“The workers at the mine would inevitably lose their jobs, that being something to be avoided. Neither of those are intended consequences, we say.”
Tigers Realm hauling coal in Russia’s far east.Credit: Tigers Realm
Tigers’ largest shareholder – controlling 59.89 per cent of the company – is Bruce Gray, who is the non-executive director of Tigers and founder of market darling Sirtex Medical, followed by Russian private equity firm Baring Vostok Mining Holding, which owns 18.2 per cent, according to the most recent annual report published last week.
The Russian Direct Investment Fund, Moscow’s sovereign wealth fund established in 2011 by Vladimir Putin to make it easier for foreign firms to co-invest with the Kremlin in Russian companies, owns 8.41 per cent of Tigers. The fund is widely considered a slush fund for Putin and emblematic of Russia’s broader kleptocracy, with the Australian government moving to sanction its chief executive, Kirill Dmitriev, in March 2022.
Namarong Investments, whose directors include logistics billionaire Paul Little and his wife, University of Melbourne chancellor Jane Hansen, controls 5.63 per cent of Tigers.
The hearing was adjourned.
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