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14 May 2008 - Japan has ordered UK hedge fund, The Children's Investment Fund, to drop plans to double its stake in Electric Power Development Co. (J-Power), 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, reports Thomson Financial.
TCI last month rejected the government's 'recommendation' that it should desist from raising its stake in Japan's top power wholesaler to as much as 20 per cent.
As the request was 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 per cent 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 decision. If the government rejects the complaint, the hedge fund could take the case to court.
The British portfolio could face a 180bn yen ($1.75bn) fine and its head Christopher Hohn up to three years in prison if the fund is found guilty of violating 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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