BSG Resources Limited v. Vale S.A., Filip De Ly, David A.R. Williams and Michael Hwang

At a glance

Parties

BSG Resources Limited (BSGR) v. Vale S.A., Filip De Ly, David A.R. Williams and Michael Hwang

Case no.

CL-2019-262 and 269; [2019] EWHC 2456 (Comm)

Court

High Court of Justice, Queen's Bench Division, Commercial Court (Mrs Justice Moulder)

Underlying award(s)

LCIA award of 4 April 2019 ordering BSGR to pay Vale damages of US$1.247 billion

Sector

Mining (iron ore, Guinea)

Outcome

Vale's application for security for the award was dismissed. Security for costs was set at US$510,000. BSGR's application to set aside the enforcement order, or to stay enforcement, was refused. BSGR was allowed to amend its challenge. Vale's request to make payment of an outstanding costs order a condition of the challenge was refused.

Amount

Award: US$1.247 billion. Security for costs: Vale sought US$710,000 (its estimated costs were US$880,000); the Court ordered US$510,000. Outstanding costs order of Popplewell J: £180,000.

The dispute

BSGR and Vale were partners in a joint venture to exploit iron ore deposits in Guinea. In April 2014, after a change of government and allegations of bribery against BSGR, the mining rights were revoked. Vale then brought an LCIA arbitration against BSGR, and BSGR brought an ICSID arbitration against Guinea. The LCIA tribunal found that BSGR had induced Vale to enter the joint venture by fraudulent misrepresentation and awarded Vale US$1.247 billion on 4 April 2019. BSGR, which has been in administration in Guernsey since March 2018, challenged the award for apparent bias under sections 24 and 68 of the Arbitration Act 1996, relying chiefly on the tribunal's refusal to admit the ICSID transcripts. This judgment decides five interlocutory applications made before the challenge hearing.

Key holdings

1. Vale's application under section 70(7) for security for the amount of the award was dismissed. Vale showed no risk that assets would be dissipated: independent joint administrators, who are officers of the Royal Court of Guernsey, control BSGR. The directors' past conduct, the 2010 transfer of US$500 million and the Niron/Zogota developments did not bear on the present risk. Section 70 may not be used to help a party enforce its award. ¶¶ 19–31
2. Security for Vale's costs of the challenge was set at US$510,000. Vale had not shown a real possibility that costs would be awarded on the indemnity basis. Its estimated costs of US$880,000 for a two-day hearing were not reasonable and proportionate. ¶¶ 32–41
3. In CPR 62.18(9)(b), the words "any application" refer to the application to set aside the enforcement order, not to a section 68 challenge. An award has presumptive validity until it is set aside. BSGR did not bring its challenge within any public policy defence to enforcement. ¶ 47
4. The Court has power to stay enforcement of an award under section 66. There is no general rule that a stay follows a pending section 68 challenge. A stay was refused for three reasons: a claim of apparent bias against experienced arbitrators is not obviously strong; there was no evidence that Vale could not repay; and no other concerns arose about Vale. The order of Bryan J permitting enforcement therefore stands. ¶¶ 54–59
5. BSGR was allowed to amend its claim. It now relies on a single ground of apparent bias, the refusal to admit the ICSID material, and uses the other decisions only as context. The amendment caused Vale no identified prejudice. ¶¶ 60–63
6. Vale asked that BSGR be required to pay the outstanding costs order of Popplewell J as a condition of pursuing its challenge. The Court refused: BSGR is in administration, and payment now would breach the principle of pari passu distribution. Comity and public policy also weighed against such a condition. ¶¶ 64–68

Procedural history

1. April 2014The mining rights in Guinea are revoked. Vale starts an LCIA arbitration against BSGR, and BSGR starts an ICSID arbitration against Guinea.
2. March 2018BSGR goes into administration by order of the Royal Court of Guernsey.
3. 4 April 2019LCIA award orders BSGR to pay US$1.247 billion. On the same day Bryan J grants Vale permission to enforce the award under section 66 of the Arbitration Act 1996.
4. 4 September 2019Hearing of the interlocutory applications before Moulder J.
5. 20 September 2019Judgment: Vale's application for security for the award is dismissed; security for costs is set at US$510,000; the application to set aside the enforcement order or stay enforcement is refused; the amendment is granted; the costs-condition application is refused.
6. November 2019The challenge under sections 24 and 68 is listed for a two-day hearing. The published documents do not show its outcome.

Tribunal, counsel and experts

For the claimant

Mishcon de Reya LLP

For the respondent

Cleary Gottlieb Steen & Hamilton LLP · Boies Schiller Flexner LLP

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Keywords

• BSGR
• Vale
• Guinea
• iron ore
• Zogota
• apparent bias
• section 68 Arbitration Act 1996
• section 70(7) security for award
• security for costs
• stay of enforcement
• section 66 enforcement
• CPR 62.18
• CPR 83.7
• administration
• pari passu
• LCIA
• fraudulent misrepresentation
• presumptive validity

Summary generated with AI from the published documents — refer to the award for the authoritative text.