2nd UPDATE: Court Backs Decision To End De Beers-Alrosa Pact

29th Jun 2010 14:32

(Adds comment from De Beers and details.) By Mike Gordon and Robb M. Stewart Of DOW JONES NEWSWIRES Europe's highest court Tuesday upheld a commitment by diamond giant De Beers SA to halt purchases of uncut gems from Alrosa Co., a company that accounts for almost all Russia's rough diamond output. The decision by the European Court of Justice supports a ruling by the European Commission and overturns a lower court ruling that had struck down De Beers's commitment to phase out purchases of diamonds from Alrosa by 2009 to settle European concerns a deal between the companies would harm competition. It effectively dismisses Alrosa's appeal that the settlement was disproportionate. "In adopting the decision, the commission didn't make an error of law or a manifest error of assessment," the Court of Justice said. De Beers and Alrosa in 2002 signed a new supply contract worth $800 million a year, covering about half of Alrosa's production. Met with concerns over its dominance in the diamond industry, De Beers agreed to phase out purchases from the Russian company--a deal accepted by the commission in 2006. However, the Court of First Instance in Luxembourg in 2007 annulled the pact, agreeing with Alrosa that the commitments made by De Beers were excessive and that its right to be heard had been infringed. The Court of Justice rejected Alrosa's pleas and said it hadn't succeeded in showing the commitments offered by De Beers went beyond what was necessary to address the commission's concerns. Lynette Gould, a spokeswoman for De Beers, said the company was considering the implications of the court judgment. De Beers, which is 45% owned by U.K. mining concern Anglo American PLC (AAL.LN), produces and markets about 40% of the world's supply of rough diamonds. Sales by its Diamond Trading Co. unit last year were $3.23 billion. Alrosa accounts for about 20% of the world's rough diamond output. The company in March said it planned to sell $900 million worth of diamonds in the second quarter of the year following $925 million in rough gem sales in the first three months. -By Robb M. Stewart and Mike Gordon, Dow Jones Newswires; +27 11 783 7848; [email protected] (END) Dow Jones Newswires June 29, 2010 09:32 ET (13:32 GMT)