Fasken Martineau advises First Quantum Minerals on US$1.25B deal

In one of the largest recoveries ever in a dispute against a sovereign state, First Quantum Minerals has ended the international arbitrations and related proceedings surrounding its mining operations in the Democratic Republic of the Congo (DRC). The settlement was part of a sale by First Quantum of its residual claims and assets in the DRC to Eurasian Natural Resources Corporation (ENRC), for total consideration of  US$1.25 billion. The deal closed on March 2, 2012.

Geoffrey Cowper of Fasken Martineau’s Litigation & Dispute Resolution group, led the portion of the deal relating to the arbitration and court proceedings for First Quantum. He says the case was unusual in that the client had wanted to be reinstated in its properties and hoped to contribute to transparency and legal order in the DRC.

Here is a summary of the dispute, which arose out of steps taken by the DRC in 2009-2010 to exclude First Quantum from its various interests and operations in that country:

The DRC first cancelled the joint venture contract over a multi-billion dollar copper and cobalt tailings reprocessing facility that was 75 per cent built and soon to commence production. First Quantum, together with other shareholders in the joint venture (the International Finance Corporation and the Industrial Development Corporation of South Africa), filed an arbitration at the International Chamber of Commerce’s International Court of Arbitration (ICC) against the DRC.

In apparent retaliation for that step, the DRC government applied for and obtained a US$12 billion judgment from the DRC courts against First Quantum’s subsidiaries for allegedly damaging the country’s reputation in the international mining world. The DRC went on to cancel two other mining permits held by First Quantum, including one covering a large active copper mine that was the country’s largest taxpayer at the time. Those cancellations resulted in First Quantum commencing an International Centre for Settlement of Investment Disputes (ICSID) arbitration against the DRC.

First Quantum also brought companion proceedings in the British Virgin Islands (BVI) against the companies that acquired interests in First Quantum’s DRC operations after its exclusion. The company was represented in the BVI by Paul Girolami, QC, of Maitland Chambers together with Appleby, and assisted by Fasken Martineau.

Cowper credits Fasken Martineau’s success to,

Our ability to operate in a bilingual environment, our expertise in civil and common law, and an innovative approach to strategy in a complex international arbitration case.

Fasken Martineau DuMoulin LLP represented First Quantum in its two international arbitrations against the DRC, as well as on the M&A deal. The firm also advised on Canadian and international government relations and strategic communications.

The Litigation & Dispute Resolution team was led by Geoffrey Cowper, QC, who was assisted by Dominique Gibbens, René Cadieux and Philippe Charest-Beaudry in Montréal, Keri Gammon in Toronto, Colin Edstrom in Vancouver, and Robert Paydon in London. The Paris office of Simmons & Simmons LLP also represented First Quantum in connection with both the transaction and the arbitrations, with a team led by Yves Baratte and including Claudia (Sophie) Gallizioli and Sophie Da Cunha.

The DRC was represented by the Paris office of Bredin Prat with a team led by José Maria Pérez and including Louis Christophe Delanoy, Tim Portwood, Raëd Fathallah and Andrea Pinna.

First Quantum was represented in the BVI proceeding by a team led by Paul Girolami, QC, of Maitland Chambers (London) and assisted by Andrew Willins and Eliot Simpson of Appleby’s BVI office and Ciaran Keller of Maitland Chambers.

ENRC was represented in the BVI proceeding by Kenneth Maclean, QC, and James Nadin of 1 Essex Court (London) and William Hare and Robert Nader of Forbes Hare.

The purchase and sale was shepherded by John Turner and Daniel Batista and including Susan Newell and Jennifer Butcher (M&A) from the Toronto office of Fasken Martineau, with assistance from Nigel Gordon and June Paddock (Corporate/Commercial) and Stuart Hills (Banking) from Fasken Martineau’s London Office, and Christian Victory from Appleby’s Grand Cayman office.

ENRC was represented by a deal team led by Vica Irani and including Denis Bandet, Etienne Dinner, Rhys Phelps, Noura Abdul-Cater (M&A and Corporate/Commercial) and David Fricker (Banking) from the London and Paris offices of Jones Day.

The Government Relations support was provided by Dan Brock of Fasken Martineau’s Toronto office.

Editor: Interestingly, Ernst & Young has ranked resource nationalism as the top risk factor facing the mining sector in its annual report, Business risks facing mining and metals 2011 – 2012.

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