De Beers Wins Suit Against Sightholder

By Rob Bates -- JCK Online, 5/1/2007 2:00:00 AM

De Beers won its lawsuit against Jayam, a sightholder based in Antwerp, Belgium, in a case that could have declared Supplier of Choice legally invalid.

The suit alleges that, in its first Supplier of Choice allocation, De Beers' Diamond Trading Company capped the new sights based on sightholders' previous allocations. Jayam argued that such capping fell outside the announced SoC criteria and constituted a breach of the SoC contracts.

The European Commission's ombudsman for sightholders ruled in favor of Jayam on this question, but Jayam felt the DTC did not implement his decision, leading to the lawsuit.

The judge, however, believed the capping mechanism was “not unreasonable,” and argued there is no evidence Jayam would have done better without it, considering that all the allocations would have to be refigured. “The obvious starting point for the system was the status quo,” he writes. He said new language would be needed to state that the DTC was “completely uninfluenced by [sightholders'] previous purchasing history.”

Just how favorable the ruling was for De Beers is illustrated by the judge's closing words regarding the testimony of Jayam's chief executive, Mahendra Mehta: “In his oral evidence, Mr. Mehta made it clear that he mistrusts the DTC and regards their professions of good faith as laughable. He gave his evidence clearly, courteously, and with good humor; but I was unable to avoid the impression that he has become obsessed with his quarrel with the DTC and allowed it to warp his better judgment.”

A De Beers statement said: “We are gratified that Supplier of Choice has, once again, withstood rigorous scrutiny in the context of the allegations made—and dismissed—by the Court. … We are, of course, sympathetic to the claimant's position in these proceedings. Not having sufficient supply to meet all of the demand that we face, and therefore having to disappoint some of the world's leading diamantaires who are often long-standing clients of ours, is difficult and challenging.”

A Jayam statement said it wished to appeal and added, “Jayam began legal proceedings against the DTC in good faith and as a means of enforcing a determination given by the Supplier of Choice ombudsman in our favor.”

Commentators noted that the case calls into question the purpose of the ombudsman, if the DTC is not going to implement his rulings.