BSGR prepares arbitration case against Guinea government over revoked Simandou iron ore licence

Out-Law News | 21 May 2014 | 10:33 am | 2 min. read

BSG Resources (BSGR) is preparing arbitration proceedings against the president and government of the Republic of Guinea, after its licence to operate in the Simandou iron ore deposit in the west African country was revoked after BSGR was accused of corruption.

BSGR said it has issued a notice of dispute as a "first preparatory step" to initiate arbitration proceedings with the International Centre for Settlement of Investment Disputes (ICSID) against President Alpha Conde and the government of Guinea.

The development is the latest step in a four-way legal battle between BSGR, Vale, which is its partner in the Simandou venture, the Guinea government and Rio Tinto mining company which has previously owned the rights to that part of Simandou which BSGR has lost.

The BSGR action comes after Guinea revoked BSGR and Vale's rights to part of Simandou after a government committee last month concluded that there was “precise and consistent evidence establishing with sufficient certainty the existence of corrupt practices” in the way BSGR won its rights, according to the Financial Times.

BSGR, which is headed by Beny Steinmetz, has denied any wrong-doing. Following the inquiry's conclusion, BSGR said that “it will prove the allegations raised in Guinea’s rigged and illegitimate process are false. International arbitration will provide a fair and transparent forum that finally exposes these fabricated claims to the due process of law that will allow us to establish the truth", reported the Financial Times.

The Guinea inquiry also found that it was "likely" that Vale had not been involved in corrupt practices. However both groups lost their interest when the partnership's rights to the licence were cancelled, on the recommendation of the government inquiry.

A statement issued by BSGR on its website this week said: "BSGR is seeking the restitution of its mining titles and agreements as well as damages arising out of the revocation of these interests, which have been unlawfully expropriated through the illegal and dishonest practices of the corrupt Alpha Conde government in Guinea."

"BSGR will not sit idly while president Conde and his allies attempt to steal BSGR’s assets," the statement said. "It is time for a proper adjudication of these matters in a court of competent jurisdiction rather than through the sham processes imposed by president Conde."

Simandou is said to be one of the richest undeveloped and highest grade iron ore resources in the world. Until 2008 all rights to Simandou were held by Rio Tinto mining company, according to the Financial Times, until part of Rio Tinto's licence was revoked in 2008 and subsequently awarded to BSGR. In 2010 BSGR entered a joint venture with Vale to develop the Simandou and Zogota iron ore deposits, both of which lie in south-eastern Guinea.

According to the Financial Times it is anticipated that Guinea will seek to re-issue the licence and has already said that Vale, which had valued its investment at $1.1bn, would not be excluded from bidding. Rio indicated last year that it might be interested in reacquiring the rights if they became available, the newspaper said.

However it its statement, BSGR said: "Anyone, whether it be the Guinean government, Vale, Rio Tinto or anyone else who has negotiated an interest in Simandou or does so in the future will be dealing unlawfully in BSGR's property. In such circumstances BSGR will take immediate steps to sue those parties who wrongfully interfere in its lawful interests."

Should Guinea move to re-award the licence, it would do so amid a number of legal actions involving BSGR, Vale and Rio Tinto.

Rio last month launched a legal action in New York against BSGR and Vale, accusing them of a conspiracy to steal its rights, according to the Financial Times.

Vale also filed a claim against BSGR in the London Court of International Arbitration last week, said a person familiar with the matter, according to the Financial Times and Reuters. Vale and BSGR have declined to confirm or deny the filing, although a legal representative for Steinmetz was quoted in the Swiss press saying he was aware of an arbitration claim by Vale, the Financial Times said.

A Guinea government spokesman said it had not been formally notified of BSGR’s arbitration filing and would not comment at this stage, according to the Financial Times.