Lynas Corp faces more market uncertainty on Monday after the rare earths group confirmed a legal challenge has been lodged against the Malaysian government's decision to renew its operating licence.

In a statement released to the ASX after the market closed on Friday, Lynas said it had received documents filed by three individuals commencing judicial review proceedings in the High Court of Malaya in Kuala Lumpur.

The grounds of the legal challenge relate to the process followed by the government in reaching its decision to renew Lynas' licence in August last year despite public concerns over toxic waste from its operations.

Lynas Corp CEO Amanda Lacaze is due to update the market this week. Credit:Peter Braig

Prime Minister Mahathir Mohamad defied an election promise in 2018, and members of his own cabinet, when he agreed to fresh conditions last year that would allow Lynas to continue operating in Malaysia if it agreed to extract the toxic waste offshore.