The High Court of Australia has dismissed a challenge by Fortescue Metals (FMG) over the legality of the federal government's minerals resource rent tax.
Investors responded poorly to the verdict. At 1210 AEST, shares in Fortescue were 2.54% lower at $3.83, against a benchmark index fall of 0.97%.
In its judgement, the High Court said it had unanimously dismissed claims that some provisions of the mining tax were not valid laws of the Commonwealth, finding the treatment of state mining royalties under the MRRT Act did not discriminate between states.
Neither did the legislation give preference to one state over another, the court said.
"The court held that the treatment of state mining royalties by the MRRT Act and the Imposition Acts did not discriminate between states and that the Acts did not give preference to one state over another," the judgment said.
"The court also rejected the submissions that the Acts breached the Melbourne Corporation doctrine or contravened section 91 of the Constitution."
Fortesecue had challenged the legality of the MRRT on the basis that the taxation laws discriminated between states and contravened the Melbourne Corporation doctrine.
The Attorneys-General for Western Australia and Queensland had supported Fortescue's challenge to the validity of the MRRT Act and the Imposition Acts.
In the lead decision, Chief Justice Robert French said the MRRT legislation set out to be non-discriminatory.
"The differential treatment and unequal outcome that is involved here is the product of distinctions that are appropriate and adapted to a proper objective," he said.
The MRRT, which came into effect in July 2012, imposes a 22.5% tax on profits over $75 million derived from the extraction of iron ore, coal and coal-seam gas. Miners could offset MRRT liability against expenses including state royalty payments.
Fortescue has not paid any of this tax and does not expect to for a number of years.
Other problems for the miner, including high costs and its heavy debt burden, continue to worry investors (see Tim Treadgold's High costs tarnish Fortescue's appeal).
The coalition has pledged to scrap the tax if it wins the September 7 election.