Arbitrations And Related Cases Involving Rio Tinto

Arbitration is an important mechanism for resolving mining disputes, which are often complex, high-stakes disputes involving tens of millions of dollars or more. As a prime example of a company engaged in mining and associated controversies, Rio Tinto stands out. This British-Australian multinational corporation is among the largest metal and mining firms globally, and it has sharp elbows. Given the scale and complexity of its global operations, mining disputes can and have frequently arisen over various issues such as contract terms, environmental regulations, and investment agreements. International arbitration provides a private, neutral forum with independent and impartial adjudicators, typically providing the most efficient way to resolve such disputes. Some of the most notable arbitrations and other related cases involving Rio Tinto and its subsidiaries are examined below.

Oyu Tolgoi Mine in Mongolia Dispute

Oyu Tolgoi, in the Umnugovi province of Mongolia, is one of the largest known copper and gold deposits in the world. According to Rio Tinto's website, it is also one of the "most modern, safe and sustainable operations in the world".¹ Rio Tinto's subsidiary, Turquoise Hill Resources, holds a 66% interest in Oyu Tolgoi LLC,² which operates the Oyu Tolgoi copper and gold mine. In February 2020, Turquoise Hill Resources started international arbitration over a tax dispute with the Mongolian Tax Authority. The dispute began with tax assessments issued by the Mongolian Tax Authority for the years 2013-2015 and 2016-2018, which included significant tax claims and reductions in carried-forward tax losses. In February 2020, following years of unsuccessful negotiations, Rio Tinto's subsidiary initiated an LCIA arbitration against the Mongolian government under the  United Nations Commission on International Trade Law (UNCITRAL) Rules in London. The case was settled in April 2021. As part of the comprehensive settlement agreement, Turquoise Hill Resources agreed to waive a USD 2.4 billion debt owed by the Mongolian government. As reported in the media, the settlement agreement also included provisions for improved cooperation and the implementation of measures to enhance environmental, social, and governance (ESG) standards. A class action lawsuit from investors followed in the United States, however. The suit was filed by shareholders who accused the Anglo-Australian mining giant of misleading them about the progress and costs of the Oyu Tolgoi project, concealing delays and huge overrun costs. On 2 September 2022,  a U.S. District Court dismissed some claims against Rio Tinto and various executives and all claims against Montreal-based Turquoise Hill Resources.

Rio Tinto and Ivanhoe Mines Dispute

Another case related to the same project involved an arbitration brought by Rio Tinto against Ivanhoe Mines. Rio Tinto and Ivanhoe Mines were partners in developing the Oyu Tolgoi copper-gold mine in Mongolia. A dispute arose when Ivanhoe Mines adopted a shareholder rights plan, also referred to as a "poison pill", in an attempt to prevent Rio Tinto from increasing its stake in Ivanhoe beyond 49%.³ Rio Tinto initiated arbitration, claiming that Ivanhoe's shareholder rights plan supposedly violated their agreements. The main question in dispute was whether Rio Tinto could increase its shareholding without being diluted by the rights plan. In an arbitration decision issued in December 2011, the tribunal found that Rio Tinto did not breach the private placement agreement with Ivanhoe and dismissed Ivanhoe's counterclaim. As a result, Rio Tinto increased its stake in Ivanhoe Mines to 51% through a private exempt takeover bid, which permitted Rio Tinto to have majority control over the development of the Oyu Tolgoi project.

Rio Tinto v. Liberty House Post-M&A Arbitration

In 2019, Rio Tinto launched an ICC arbitration against Indian billionaire Sanjeev Gupta's Liberty House over the USD 500 million sale of Europe's largest aluminium smelter located in Dunkirk, France.⁴ The arbitration arose from an M&A agreement and Liberty House's purported failure to fulfil its contractual obligations. It has been reported that Rio Tinto initiated the procedure after Liberty House disputed its demand for payment of USD 50 million as part of a post-closure adjustment, including working capital, that was allegedly agreed by both parties in the sale and purchase agreement.⁵ The details of this arbitration are not publicly available.

Alcan-Pechiney Merger Arbitration (ALTEO v. Aluminium Pechiney and RTA)

This ICC arbitration seated in Paris arose from Rio Tinto's acquisition of the Canadian aluminium giant Alcan Inc. and its earlier merger with the French company Pechiney. The arbitration was commenced on 29 May 2017. The dispute related to shareholdings and control over Alcan's assets following the merger. The Award was issued on 10 September 2019, and it was followed by  annulment proceedings before the Court of Appeal in Paris, rejecting Rio Tinto France SAS' request for annulment.⁶

Government of the Province of East Kalimantan v. PT Kaltim Prima Coal and others ( ICSID Case No. ARB/07/3)

ICSID Case No. ARB/07/3 was brought by the Government of East Kalimantan against PT Kaltim Prima Coal (KPC), one of Indonesia's largest coal producers, and other related entities, including Rio Tinto plc and its subsidiaries.

On 28 December 2009, the Arbitral Tribunal issued an Award on Jurisdiction finding in favour of the Respondents, ruling that the government of East Kalimantan did not have the authority to represent the central government in this arbitration. The Arbitral Tribunal, presided by Professor Gabrielle Kaufmann-Kohler, found that the Claimant had no right to bring the claim because it did not represent the state of Indonesia. As indicated in the Award on Jurisdiction, Indonesian law requires the government to consent to ICSID arbitration on behalf of Indonesia and to nominate or designate a third party to assume such representation. In the present case, the government did not nominate or designate the Claimant to represent it. On the contrary, it explicitly stated that it had never granted the Claimant authorization for representation in this case. The Tribunal also held that the Claimant was not a constituent subdivision of Indonesia designated by Indonesia for the purposes of ICSID arbitration and Article 25(1) of the ICSID Convention. Although the Tribunal held that designation did not have to be made in any particular form or through a specific channel of communication, the intention to designate had to be clearly communicated to the ICSID. In the words of the Tribunal, the documents relied upon by the Claimant in this arbitration did not evidence such an intention. As a result, the Tribunal held it had no jurisdiction to hear this dispute. The Tribunal noted, however, that this was an "unfortunate situation" and was mindful that "this legal outcome will disappoint the expectations which the Claimant had placed in ICSID" considering that the province and its people had sought means of addressing this dispute for a number of years without success. The Tribunal finally noted that if the Claimant still intended to pursue its claims, the KPC Contract provided for an alternative dispute settlement mechanism.⁷

Alexis Holyweek Sarei et al. v. Rio Tinto PLC and Rio Tinto Limited ("Sarei v. Rio Tinto")

Following the civil war in Papua New Guinea, which led to Bougainville⁸ obtaining a more autonomous position, a number of the inhabitants of that island sued Rio Tinto in U.S. courts for its alleged role in the war and the process leading up to it. The plaintiffs, current and former residents of the island of Bougainville, claimed that Rio Tinto's mining activities had harmed their health and the environment and that they had helped the Papua New Guinea government in, inter alia, setting up a blockade with disastrous results for the population. The claim was filed under the Alien Tort Claims Act ("ATCA"), 28 U.S.C. §1350, which allows aliens to file a claim in a U.S. court when "the law of nations" has been breached.

In 2002, the U.S. District Court ruled that it had jurisdiction to hear the majority of the claims. However, the Court dismissed the claim in its entirety based on the "political question doctrine", explaining that a ruling on the merits would implicitly contain a qualification of Papua New Guinea's actions during the civil war. The Court held that the policy of Papua New Guinea during the civil war fell within the exclusive domain of the executive branch of the government. However, in 2006, the Court of Appeal overturned the U.S. District Court's judgement, holding that a judicial ruling in this case would not interfere with the duties and prerogatives of the executive branch in Papua New Guinea. In 2007, a three-judge panel upheld the Court of Appeal's decision, permitting the case to move forward and sending it back to the District Court. In 2013, the Court ultimately dismissed the case, relying on the Supreme Court's ruling in  Kiobel v. Shell, which limited the applicability of the ATCA for foreign plaintiffs seeking to bring claims against corporations for actions occurring outside the U.S. Sarei v. Rio Tinto was an important case which had a significant impact on international cases adjudicated in the U.S., especially those involving human rights violations and environmental harm committed by multinational corporations abroad. It also raised questions of corporate responsibility and sparked a general debate about greater accountability and transparency from mining corporations and their impact on local communities.

Rio Tinto and BSGR Dispute over Guinea Mining Rights

Rio Tinto was involved in a significant dispute over the Simandou iron ore project in Guinea, which is one of the world's largest untapped iron ore deposits. As Rio Tinto lost its rights to develop part of the Simandou deposit to the Israeli billionaire Beny Steinmetz's company BSGR, this led to a series of legal battles and investigations over allegations of bribery and corruption in the " Guinean bribery saga". In 2014, Rio Tinto filed a complaint in the United States against several defendants, including Brazil's Vale, Israeli billionaire Beny Steinmetz and BSGR. Rio Tinto asked for compensatory, consequential, exemplary and punitive damages, in an amount to be determined at trial. The U.S. District Court ultimately dismissed Rio Tinto's claims as time-barred in 2015.⁹

Jadar Lithium Project in Serbia Potential Arbitration

The most recent potential case involving Rio Tinto is an investment arbitration Rio Tinto is threatening to commence against Serbia due to the government's decision to halt a lithium mining project known as the "Jadar Project". Jadar is located in western Serbia and is significant for its lithium and boron deposits. Rio Tinto aimed to develop this project as part of its strategy to supply critical minerals for battery production.

However, over the years, the project has been a "stop-and-go affair" in Serbia. After Rio Tinto's license was given the green light in 2019, it was revoked in January 2022 following months of environmental protests and amid the final run-up to Serbia's general election. In January 2022, the Serbian government cancelled a previously issued directive for a spatial plan of special purpose for the exploitation of jadarite at the mine, as well as all permits and regulations that had previously been granted for Rio Tinto's project. The cancellation of Rio Tinto's rights over the project took place during an election period, and government officials even admitted that it was a "political decision". Following the government's actions, Rio Sava, Rio Tinto's subsidiary in Serbia, filed several lawsuits against the Serbian government, challenging the legality of the government's decision to abolish the project and asking for the restoration of the license. On 11 July 2024, the Constitutional Court of Serbia stated that the government's decision to suspend the project was unconstitutional, which provoked another round of massive demonstrations in Serbia in August 2024 (see  Rio Tinto welcomes Serbian court ruling on lithium project).

Rio Tinto is now contemplating initiating arbitration proceedings against the Serbian government under the  UK-Serbia Bilateral Investment Treaty. Previously, Rio Tanto stated that the company was obtaining legal advice "to ensure that [Rio Tinto enjoy[s fair and equitable treatment and that [the investment is not jeopardized in any way by illegal, unreasonable or discriminatory measures". As reported by the  IA Reporter, and  Jus Mundi, in June 2024 Rio Tinto submitted a formal notice of dispute to the Serbian government and is represented in the proceedings by Freshfields Bruckhaus Deringer.

Conclusion

The cases summarized above demonstrate various legal challenges Rio Tinto has been facing internationally, including disputes over environmental issues, human rights, mergers, and large-scale project development. Rio Tinto's experience with international arbitration demonstrates its effectiveness as a dispute resolution mechanism in complex and large-scale disputes. It also re-confirms that arbitration remains an important tool for resolving disputes in the mining sector and will play an even more prominent role as the mining industry continues to evolve.

Footnotes

1. Rio Tinto Website, Operations in Mongolia, Oyu-Tolgi

2. According to the company's website, the ownership is Erdenes Oyu Tolgoi LLC representing the Government of Mongolia (34%), and Rio Tinto (66%).

3.  Rio Tinto wins arbitration ruling against Ivanhoe Mines – Mining Technology (mining-technology.com).

4.  GAR, Rio Tinto brings post-M&A claim over aluminium plant, 2 September 2019.

5. See  Jus Mundi,  Rio Tinto v. Liberty House.

6.  Judgment of the Paris Court of Appeal (Department 5 – Chamber 16) 19/19201 – 11 Jan 2022.

7.  Government of the Province of East Kalimantan v. PT Kaltim Prima Coal and others (ICSID Case No. ARB/07/3), Award on Jurisdiction, 28 December 2009, para. 219.

8. Bougainville is an autonomous region located in the easternmost part of Papua New Guinea. It is part of the Solomon Islands archipelago and lies in the southwestern Pacific Ocean.

9.  Rio Tinto PLC v. Vale S.A., 14 Civ. 3042 (RMB)(AJP), S.D.N.Y. Dec. 17, 2014.

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