Antwerp Court Extended The Sightholder’s Termination Period; However The DTC Won The Legal Arguments – The Legitimacy Of Supplier Of Choice Was Upheld

Wow – don’t we all love “underdogs”, quite happy to go into a frenzy whenever De Beers gets a beating in court? Is the fact that the “judgment” is in favor of a DTC sightholder all that counts, or do we, as journalists, also have an obligation to understand and report on both the reasoning and the operation of the relevant court?  As the lips of the parties in Spira versus DTC are sealed - both sides refuse to talk - it is harder to get “hard” information on the case. As most information comes from third parties having “separate agendas” or from Antwerp’s Diamond High Council, isn’t that a reason for journalists to travel the extra mile and get to the bottom of this – i.e. the judgment itself?

When going the extra mile, one discovers that the interim judgment by the Court of Commerce in Antwerp, extending the DTC sight privileges to one of De Beers’ oldest sightholders, A. Spira Diamanthandel Bvba, for an additional period of nine months beyond the December 31, 2003, termination date, was not decided on the basis of law, but rather on “commercial” grounds. That doesn’t make the judgment any less valid, nor Spira’s victory less sweet, but it enhances the chances that the judgment will be overturned on appeal – and it also may be less relevant as a legal precedent. The opposite may well be the case. In “Spira versus DTC” the Court found in favor of the DTC on the legal arguments. It clearly states that the claimant had not established a clear appearance of rights. That certainly provides a precedent that De Beers will be happy to use in subsequent cases, if and when a situation would arise.

First one needs to understand the nature of the court. The Court of Commerce in Belgium is competent to deal in commercial matters. Cases are generally heard before three judges: only one needs to have a legal background; the two others are laymen jointly chosen by the ministries of justice, economic affairs and by various trade organizations -- and then formally appointed by the King. Generally, both sides to a dispute must be traders (merchants); a trader cannot sue, for example, a non-trader before the Court of Commerce. Interestingly, these courts were created in the Middle Ages – and in these “old days”, all the judges were merchants. So in the Court of Commerce, a majority decision can be reached by representatives of the trade, sometimes in blatant contrast to the relevant legal positions. That is what happened in “Spira versus DTC”. However, any appeal of a judgment by the Courts of Commerce will be heard by a court consisting solely of professional judges who will concentrate on issues of law. It’s no surprise that De Beers has already formally announced that it will lodge an appeal.

The written decision of the Court of Commerce is full of internal inconsistencies. The judges undoubtedly felt great sympathy for the Spira position. Indeed, we also would like to argue that a company that already enjoyed sightholder privileges long before any of the DTC’s current executives were even born and which, as a rough dealer, has assisted De Beers throughout the years in the effective distribution of its diamond product, would certainly deserve some special consideration. We have previously argued in these columns that Supplier of Choice unilaterally cancelled the time-honored industry fabric of trust and loyalties. [The “general business reputation” DTC sight criterion is not the same as “trust” – “trust” is not being scored for input in the SoC computer model.]

But none of these sentiments justify distorting the reporting on the Antwerp decision. The Court, for example, specifically confirmed the Comfort Letter issued by the European Commission earlier this year, approving the Supplier of Choice agreement between sightholders and the DTC. The judgment recognizes that the EC decision was the result of a lengthy investigation by “an authority pre-eminently qualified and competent” to assess compliance with European competition law. It respects the EC findings and is not challenging their validity.

Indeed, the Antwerp Court specifically concluded that in light of the exhaustive EC investigation, it must, in the interim proceedings, uphold the lawfulness of Supplier of Choice.

In a very odd way, this makes the “victory” of Spira’s Alain Schiff rather spectacular: the judges considered the moral, commercial, and maybe humanitarian imperatives so overriding, that it chose to ignore the legal arguments – at its peril. No court likes its decisions to be overturned on appeal, which, in this case, is the more likely scenario.

The Diamond High Council (HRD), on its official website, observes “that the sightholder who petitioned the court in Antwerp noted it has been receiving some 95 percent of its rough diamond supply from De Beers, and would need more than six months to adjust to its new circumstances. The Court agreed with its contention, and suggested that an additional nine-month grace period would be more reasonable. This, legal commentators have suggested, could still be extended.” It isn’t clear who these legal commentators are – but it seems that the HRD, in its report on its website, did not deem it necessary to stress that the Court upheld the lawfulness of the Supplier of Choice arrangement. Instead of alerting the Antwerp public to that fact, the HRD says, “the industry is now waiting to see if any other of the sightholders dropped by the DTC will issue their own suits before the Antwerp Court of Commerce.”

I wouldn’t be surprised if, indeed, other ex-sightholders-in-the-making would follow in Spira’s footsteps. Those who are still undecided certainly would like to get their December rough allocations first – and such approach has merits. But especially because the Spira precedent may be so important in the decision-making of other companies, it is important that maximum information should be made available on the Antwerp judgment. None of the information this commentator has been able to gather suggests that the Court has made a decision on the legal merits. Spira’s case is certainly unique both because of the many generations of sightholder status and also because his business depended so heavily on the DTC. There is no certainty that the same court would reach the same decision in possible other DTC cases – and, indeed, the Spira case itself isn’t over yet. More will come – and the challenge to report fairly and accurately remains. That isn’t easy – as we still don’t have all the facts. But we are trying our best.