Steinmetz Said to Skip $1.2 Billion Vale Hearing, Risks Loss

(Bloomberg) -- Billionaire Beny Steinmetz’s mining company may be asked to pay as much as $1.2 billion to former partner Vale SA after choosing not to attend an arbitration hearing in London in a dispute over one of the world’s richest mineral assets, two people with knowledge of the case said.

The decision by Steinmetz’s BSG Resources Ltd. to back out of hearings earlier this year will probably cost him the case, the people said, asking not to be identified as the matter is confidential. BSGR felt it wouldn’t be “treated fairly,” according to a letter sent by its lawyers Mishcon De Reya to Vale’s legal representatives dated Jan. 31 and seen by Bloomberg News.

An unfavorable ruling would be the latest setback for the 61-year-old Steinmetz, who’s facing a string of corruption investigations around the world resulting from his failed investment in the giant Simandou iron ore deposit in Guinea. Yet, Vale would still face years of legal battles to enforce any award from the case.

The Brazilian mining giant filed its claim at the private arbitration court in 2014 after Guinea stripped its joint venture with BSGR of its rights to Simandou following a government probe that found licenses were obtained through corruption. It’s seeking the award to cover an upfront payment to BSGR and money it invested in the West African nation.

Seizure Notices

BSGR is confident it will prevail in the dispute, a company spokesman said. The company is unable to comment further given the confidentiality rules of the London Court of International Arbitration, he said. Vale declined to comment.

A call and email to Mishcon de Reya partner James Libson weren’t returned, while the LCIA has a policy of not commenting on any proceedings.

Hearings at the court had been set down for Feb. 20-24 and April 3-7, according to the lawyers’ letter. Vale appeared at the initial hearing with witnesses it would call on, according to one of the people.

The court could hand down its ruling on the award later this year, the people said. If it does rule in Vale’s favor due to Steinmetz’s absence, the Brazilian company’s lawyers will seek to enforce the judgment, requiring court-approved asset-seizure notices, the people said.

Impoverished Nation

In that situation, Vale would likely have to begin the complicated process of having the judgment enforced by courts around the world. Tracing and seizing assets from a litigant who refuses to accept legal rulings is notoriously difficult and time-consuming, especially when those assets are held offshore.

Steinmetz’s sprawling business empire stretches from New York to Europe and Africa, and includes mining and real-estate assets.

Vale acquired a 51 percent interest in the Simandou project from BSGR in 2010 in a deal worth $2.5 billion that established a mining joint venture in Guinea known as VBG. The Brazilian company paid $500 million upfront with the remaining $2 billion to be paid in installments. Those future payments were never triggered. Vale invested about $700 million in another iron-ore project in Guinea, Zagota, and also lost those rights.

The Vale-BSGR venture had planned a $10 billion project at Simandou that would have transformed the economy of one of the world’s most impoverished nations and delivered windfall profits for the developers at a time of record prices for the steelmaking ingredient.

The project has been a magnet over the past three decades for some of the world’s biggest mining companies including Rio Tinto Group and Aluminum Corp. of China, as well as a host of prominent advisers like George Soros and Tony Blair.

Allegations Denied

BSGR’s involvement in Guinea started to sour in 2012 when the government started a review of how the company won its license to Simandou. A year later the U.S. Department of Justice started a grand jury investigation into potential violations of the Foreign Corrupt Practices Act.

Steinmetz was arrested in Israel last year on suspicion that bribes were paid to help BSGR obtain its stake in the Simandou project. Steinmetz hasn’t been charged by Israeli prosecutors though his Israeli and French passports were confiscated. He’s been questioned by authorities in Switzerland.

Steinmetz has consistently denied paying bribes or committing any other wrongdoing. He has said that the investigations stem from a conspiracy to deprive his company of its rights to Simandou. Last month, he sued Soros for $10 billion claiming the fellow billionaire had helped orchestrate the conspiracy against him.

Earlier this month, the former Mines Minister of Guinea Mahmoud Thiam, a co-defendant with Steinmetz’s BSGR in a failed case brought by Rio Tinto concerning the rights to Simandou, was convicted by a New York court of laundering $8.5 million in bribes. The payments came from China International Fund Ltd. to win exclusive rights to mineral licenses in Guinea.

A trial in a second arbitration case involving BSGR is due to start in Paris next week. BSGR filed with the International Centre for Settlement of Investment Disputes against Guinea in 2014, arguing that the company’s rights to Simandou were confiscated illegally “through a deeply flawed process based on unreliable and untested evidence.”

Steinmetz is scheduled to appear via video-link from Israel at the trial next week.

--With assistance from Kit Chellel

To contact the reporters on this story: Jesse Riseborough in London at jriseborough@bloomberg.net, R.T. Watson in Rio de Janeiro at rwatson71@bloomberg.net.

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, James Attwood, Tony Barrett