19/12/2008 - 12:35

Lawsuits are 'ambit' claims: FMG

19/12/2008 - 12:35

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Fortescue Metals Group has dismissed the value of over $190 million of legal claims over the suspension of its shipping contracts as "ambit claims", as it reveals that over $2 million of its funds have been frozen in the United States.

Lawsuits are 'ambit' claims: FMG

Fortescue Metals Group has dismissed the value of over $190 million of legal claims over the suspension of its shipping contracts as "ambit claims", as it reveals that over $2 million of its funds have been frozen in the United States.

Yesterday, it was revealed that FMG is facing a $US130 million ($A190 million) lawsuit from Greek shipping company Angelicoussis Group and a $US2.5 million ($A3.6 million) claim from the Singapore offshoot of Armada Group.

Today FMG said it maintains it legitimate legal entitlement to suspend the contracts but acknowledged that some ship owners were disputing the miner's right to take this action.

"These disputes have led to a number of claims being lodged in the UK arbitration system," FMG said in a statement.

The United Kingdom is the legal domicile for maritime disputes pursuant to the relevant contracts, FMG said.

Earlier this month, FMG suspended all of its long-term cost and freight shipping contracts of (CFR) affreightment and consecutive voyage contracts.

The miner had said about two-thirds of its iron ore sales had been on CFR terms - whereby it covers transport costs and passes them on to customers at a premium.

It would instead increase freight on board (FOB) sales, which involve the customer directly paying a charter company for transporting product.

"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 ship owner's obligation to mitigate losses and would likely be substantially less than the contract's alleged face value.

FMG added that an important element in the arbitration process is the difference between the volatile spot shipping rate and the contracted rates, which could change over time.

The miner would not be reveal the dollar amount of the claims.

It added that it was aware of parallel claims lodged in the US courts where orders have been given to freeze $US1.5 million ($A2.2 million) in funds, as potential security for any payments following the arbitration process.

Shares in FMG were down 11 cents to $2.25 at 14:36 AEDT.

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