Fortescue Metals Group has entered arbitration in London and has less than $1.5m frozen in the US over its suspension of shipping contracts.
Fortescue Metals Group has entered arbitration in London and has less than $1.5m frozen in the US over its suspension of shipping contracts, the iron ore miner revealed today.
Fortescue maintained that it had a legitimate legal entitlement to suspend the contracts.
The 10 contracts had been sealed at the top of a market that has subsequently slumped to a fraction of its previous value.
Shipowners have lined up to sue the company over the action.
?The referral to arbitration of Fortescue"s suspension of the contracts was expected by the company and the continuing operations of the business are not affected,? the company said.
?The alleged face value of claims that have been suggested in recent press articles are considered by Fortescue to be ambit claims.
?Furthermore, any ultimate contract liability would need to have regard to a number of factors, including the shipowner"s obligation to mitigate losses and would likely be substantially less than the contract"s alleged face value.
?One important element in the determination of mitigation is the difference between the volatile spot shipping rate and the contracted rates, and this will change over time.
?Accordingly, any estimate of potential liability, if any, at this stage is not considered to be appropriate.?
Fortescue revealed that parallel claims in US courts had led to $1.5m of its cash being frozen on court order ?as potential security for any payments that may be determined following the arbitration of claims ongoing in the UK and is a normal part of the process for claims of this nature?.