Wed, May 14, 2008 - Page 11 News List

Japan intervenes to stop UK hedge fund from doubling stake

AFP , TOKYO

Japan yesterday ordered a British hedge fund to drop plans to double its stake in the country's top power wholesaler or face punishment under a national security law, a government official said.

It is the first time that Japan, which has almost no natural energy resources of its own, has invoked the law to block a foreign investment.

The Children’s Investment Fund last month rejected the government’s “recommendation” that it desist from raising its stake in Electric Power Development Co, or J-Power, to as much as 20 percent.

As the request had been rejected, the government “decided to enforce the rule of law,” said an official at the Ministry of Economy, Trade and Industry who spoke on condition of anonymity.

Japan’s foreign exchange and trade law requires overseas investors to secure government approval before acquiring a stake of 10 percent or more in a company deemed vital for national security and the maintenance of public order.

The fund has 60 days to file a complaint against the government’s decision.

If the government rejects the complaint, the hedge fund could take the case to court.

The British portfolio could face a ¥180 billion (US$1.75 billion) fine and its head Christopher Hohn up to three years in prison if the fund is found guilty of breaking the law, the official said.

The British fund, already the top shareholder in J-Power with a stake of 9.9 percent, wants J-Power to raise its dividend payout.

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