Vale Wins $2 Billion Arbitration Award Against BSGR
April 23, 2019
Cleary Gottlieb successfully represented Vale S.A. (Vale) in a London Court of International Arbitration (LCIA) arbitration seated in London against BSG Resources Ltd. (BSGR), securing a $2 billion victory in the form of one of the largest commercial arbitration awards ever made.
Vale claimed $1.25 billion in damages it suffered in connection with its 2010 joint venture project with BSGR, involving iron ore mining rights in the Simandou region of the Republic of Guinea, an area that is reported to be one of the most valuable unexploited iron ore deposits in the world. Vale also claimed and was awarded interest and costs of approximately $775 million.
In April 2014, the Government of Guinea revoked the exploration and mining rights of Vale’s and BSGR’s joint venture, based on compelling evidence uncovered by the U.S. Federal Bureau of Investigation that BSGR had obtained its mining rights in 2008-2009 through bribery and corruption (notably, by bribing the former Guinea president’s wife, and documenting those bribes in contracts that one of BSGR’s associates, Frederic Cilins, later sought to destroy given their incriminating nature).
The Government of Guinea expressly found that Vale had no involvement in BSGR’s corrupt activity, which had occurred before Vale purchased its interest in April 2010, and which the arbitration tribunal found BSGR had deliberately and systematically hidden from Vale in the acquisition process. Vale promptly initiated an arbitration to recover the losses caused by BSGR’s fraud in concealing its corrupt activity during the parties’ 2010 joint venture negotiations to induce Vale into the deal and its breaches of its representations and warranties in the parties’ agreement.
Those losses consisted of the initial $500 million Vale had paid BSGR for 51% of the joint venture mining rights and the nearly $750 million Vale had invested in BSGR’s ill-gotten project.
Throughout the arbitration, BSGR went to extraordinary lengths to avoid a determination on the merits of Vale’s claims. These included unsuccessfully seeking multiple stays of the arbitration, drawing out the document disclosure process by repeatedly violating the arbitral tribunal’s orders, bringing repeated challenges to members of the arbitral tribunal before its governing body and in civil proceedings in the High Court of England and Wales, instituting a failed § 1782 Petition in the United States District Court for the District of Columbia, and refusing to participate in the two hearings held before the arbitral tribunal.
On April 4, 2019, the arbitral tribunal rendered its final award, ruling in Vale’s favor and awarding Vale $1.25 billion in damages, $775 million in pre-award interest, and post-award interest, costs, and legal fees (totaling more than $2 billion). The 281-page award found that BSGR fraudulently induced Vale, through false statements, representations, and warranties, to enter into the joint venture to develop mining rights that, unknown to Vale at the time, BSGR had obtained by bribing Guinean government officials.
The arbitral award marks the conclusion of this phase of a long-running legal saga related to the Simandou mining rights in which Cleary also successfully represented Vale in obtaining dismissal of civil RICO claims in an action brought by Rio Tinto plc. in the United States District Court for the Southern District of New York.
Moving to the next phase of enforcement, the firm has begun enforcement actions on behalf of Vale, including by filing a petition to confirm the arbitral award in the Southern District of New York on April 23, 2019.
To read more about the arbitration in Global Arbitration Review, click here.