Beny Steinmetz Group Resources ("BSGR"), a company based in Guernsey and accused of bribery in Guinea, has been denied permission by a Magistrate Judge of the Southern District Court of New York ("SDNY") to use certain confidential documents. These documents were produced in a lawsuit before the SDNY filed by Rio Tinto, and were sought to be used by BSGR in a separate but related LCIA arbitration.
The lawsuit and LCIA arbitration against BSGR relate to disputes over concession rights acquired by BSGR over iron-ore deposits in northern Simandou, Guinea, for a period of 25 years. These rights were acquired by BSGR after President Lansana Conté cancelled Rio Tinto's rights to the deposits in 2008, on inter alia the grounds that iron-ore was being mined too slowly.
Following the grant of the concession rights to it, BSGR entered into a JV with a Brazilian company, Vale, to exploit the Simandou deposits. In 2014, however, BSGR's concession rights were rescinded by the Guinea government on the grounds that they had been acquired through bribery.
Lawsuit under the US Racketeering Influenced and Corruption Organizations Act ("RICO")
In April 2014, Rio Tinto brought a lawsuit against BSGR and Vale under RICO (the "Lawsuit"), where it accused Vale of passing confidential information to BSGR that influenced the Guinea government's decision to rescind Rio Tinto's concession rights in Simandou. A former minister of mines, Mahmoud Thiam was named in the lawsuit and accused of taking a bribe from BSGR. Mr Thiam and his banks provided certain documents in the Lawsuit in response to a discovery order.
The SDNY found the Lawsuit to be time barred, and dismissed Rio Tinto's claims. The documents produced in the Lawsuit were however kept under a protective order ("Protective Order") under agreement of the parties.
Also in April 2014, Vale commenced an LCIA arbitration against BSGR (the "Arbitration") under its JV agreement with BSGR, accusing it of fraudulent misrepresentation and claiming damages to the tune of $1.1 billion. Rio Tinto was not a party to the Arbitration.
In the course of the arbitration, Mr Thiam, who was not a party to the arbitration, filed a witness statement in support of BSGR. Vale applied to the SDNY for an amendment to the Protective Order such that it could use some of the documents submitted by Mr Thiam in the Lawsuit as evidence in the Arbitration in order to address some of the points made in Mr Thiam's witness statement. This request was accepted.
BSGR's request for an amendment to the Protective Order
Following Vale's request, BSGR also filed a request for an amendment to the Protective Order. It requested permission to use as evidence for its counter-claim in the Arbitration the following documents produced in the Lawsuit:
- Certain documents produced by Rio Tinto and identified by BSGR as being relevant to it, and
- Transcripts of the examination of the investigators of three firms hired by Rio Tinto.
BSGR justified its request on the grounds that:
- In the Arbitration, the claims of bribery against it were based on statements made by a Rio Tinto employee and by Rio Tinto's investigators;
- The documents at (i) and (ii) (see above) were critical to BSGR's defence as they undermined the reliability of Vale's evidence;
- The SDNY's intervention was necessary as the tribunal in the Arbitration had no power to order disclosure; and
- While Rio Tinto refused consent to the disclosure of the documents, it would suffer no prejudice as the Arbitration was confidential, and also BSGR did not require any further documents to be produced.
BSGR's requests were turned down by the SDNY, which held that there were no grounds to modify the Protective Order. The key reasons behind the SDNY's order are set out below.
- BSGR's use of documents (as opposed to information derived from such documents) produced by Rio Tinto in an arbitration in which it was not a party was directly in conflict with the terms of the Protective Order;
- BSGR was on notice when submitting the Protective Order that Rio Tinto opposed use of such documents in any way in the London Arbitration; and
- Unlike Vale's request, there were no changed circumstances justifying an amendment of the Protective Order, since Rio Tinto had not interjected itself into the Arbitration like Mr Thiam had done.
The court's order is a reminder that entering a carefully crafted protective order is critical where sensitive or confidential client documents will be produced in discovery in litigation, particularly given the often broad scope of discovery allowed in litigation in the United States and other jurisdictions. Here, the court recognized that Rio Tinto had expressly opposed the use of confidential information in other proceedings and that the other parties agreed in their stipulated Protective Order that confidential information produced in the Lawsuit could not be used directly in other proceedings. The court also acknowledged that Rio Tinto had not acted in a manner that would justify an amendment of the parties' agreement—for instance by intervening in the arbitration.
The order thus suggests that the court will enforce the agreed upon terms of a protective order absent a compelling reason, and that counsel should consider the risk that previously produced, confidential material may be discoverable should the client initiate or assume an active role in other proceedings.