The latest control case study bobbed up last week when Australia appeared – and appeared is a word almost as important as control – to lay down a fresh set of foreign investment rules.

Lynas Corporation was the example which set tongues wagging because the Foreign Investment Review Board ordered China Non-Ferrous to limit its proposed investment in the emerging rare earths miner to less than 50%.

China Non-Ferrous said no thanks, packed its bags and went home.

The same result now seems likely in the case of Yanzhou Coal’s $3.5 billion bid for Felix Resources because of the hardening view on foreign investment in Australian resources.

A glimpse into the somewhat murky world of foreign investment came in a speech on Thursday by FIRB executive director Patrick Colmer.

He told a conference in Sydney that the government was “much more comfortable” with foreign investment in undeveloped projects being limited to less than 50%, and in major projects at less than 15%.

Disregarding that cute word “comfortable”, which can also mean different things to different people, there remains an enormous ambivalence about how Australia views foreign investment – perhaps because governments like the leeway to change views when it suits them, or because they like to play favourites.

The danger of governments picking winners is a question for another day but Dryblower can remember a few governments that came unstuck trying to do that, with the classic being the WA government under disgraced former premier, Brian Burke, who sidled up to Alan Bond and the late Laurie Connell. Oops!

The issue for today is control, which the FIRB and its political master in The Lodge, Prime Minister Kevin Rudd, believe to be one vote less than 50%.

Think about it for a nanosecond. The civil servants and politicians in Canberra actually believe that if you own 49.9% of a company you are not in control.

Good grief. What planet do they come from?

Of course a person, or country, with a 49.9% stake in a business exerts control, for several reasons.

First, because Dryblower can guarantee that someone friendly to the foreign investor will vote with him on disputed matters.

Secondly, it might not even need a vote because all companies have a degree of idle shareholders who (a) don’t actually know they own any shares, or (b) they’re dead and the estate executors haven’t done anything about dispersing assets.

Perhaps the FIRB employees have spent too long in their Canberra comfort zone because in the real world of business a stake of 20% can be regarded as a form of control under takeover laws, and 15% tips the balance under some accounting laws.

If in doubt, take a look at how Perth entrepreneur Kerry Stokes exerted control over the board of WA Newspapers with a stake of 22.3%.

In an amazing demonstration of how control can be obtained despite owning less than a quarter of a company, Stokes has seized effective control of a business.

It gets better, because a lifetime ago the late Robert Holmes a Court seized control of a British company called Associated Communications Corporation despite only owning non-voting shares.

What he proved was that even of you can’t vote, you control a business because you own a big chunk of its capital.

The concept of control even goes a step further. It boils down to a question of corporate (or national) culture. A person, company, or country with a powerful culture can dominate a situation even if severely outnumbered.

Billiton did that when “merging” with BHP. No one really doubts that Billiton emerged as the controlling influence even though it was the smaller company in that deal.

For proof, look at who is in charge today. Marius Kloppers is a career Billiton man and acolyte to the most powerful of all people in that situation, Brian Gilbertson.

Roll all this into a question for the “comfortable” chaps in Canberra: which country has the stronger culture, China or Australia?

No prize for the correct answer, but if you need help ask another question: which country has 5000 years of history behind it, and gave the world an author by the name of Sun Tzu who, in the 6th century BC detailed in his classic, The Art of War, how a smaller force can defeat a bigger force.

What the FIRB needs to learn is that control is in the mind, not in the numbers.

*Dryblower is a weekly column on ILN’s sister publication MiningNews.net.