On Tuesday, Ernest “Ernie” Blom (pictured), who recently stepped aside as the president of World Federation of Diamond Bourses (WFDB), scored a legal victory in Antwerp, Belgium, against the group he headed until last month.

Blom’s three-month battle with the WFDB revolved around one of the unique aspects of belonging to a WFDB-affiliated bourse—its arbitration process. The self-regulated system is meant to provide a quick, easy, and legally binding way for members to resolve disputes without going to court. It’s a system that Blom has often championed.

“The dependability, security, and reliability of the WFDB’s arbitration system has never been more crucial,” he said in a statement in March.

And yet, Blom—who had served as WFDB president since 2012, making him the longest-serving leader in its history—has become ensnared in a case involving the system he’d often hailed.

The original dispute concerned a disagreement over who had to foot the bill for South Africa’s 15% value-added tax in a now-canceled diamond deal. That standard business squabble has since sparked a far more interesting one.

In September 2019, three Indian companies brought arbitration proceedings against Blom at the Dubai Diamond Exchange (DDE) in the United Arab Emirates. According to his legal papers, Blom argued that the venue wasn’t proper, as the dealings occurred in his home base of South Africa. He also disagreed with the choice of arbitrators, finding them “conflicted.” He asked to have the arbitration heard in what he considered a more “neutral” venue.

Before the arbitration took place, Blom “left the proceedings in protest,” according to his Dubai complaint. The hearing went on without him, and on Dec. 12, the Dubai Diamond Exchange dispute resolution committee decided that Blom and his company, Blom Diamond Trading, must pay $333,506.76 within 30 days or face disciplinary sanctions.

When Blom didn’t comply, the DDE asked the WFDB to “red flag” that Blom had been suspended from the bourse. 

Blom responded by filing a claim against the DDE in Dubai’s Court of First Instance, challenging the arbitration decision on a variety of procedural and jurisdictional grounds. It noted that DDE bylaws stipulate that “an arbitration cannot proceed until the parties [have] signed an arbitration agreement”—which Blom did not do. He also disputed that he had been suspended from the bourse.

When the DDE continued to ask the WFDB to notify other bourses about the decision, Blom filed suit in Antwerp Commercial Court against the WFDB, seeking an injunction against any red-flag attempt, as well as any attempt to suspend him from his role as WFDB president. (This became a moot point later when he decided to step aside.) It noted that Blom was willing to submit to a “neutral” arbitration.

Blom was never red-flagged—and at one point, the DDE said it would “temporarily suspend” its notification request and let a newly formed dispute review committee look at the December decision. Even so, his filing complained that the DDE provided the decision to the three companies, who then disseminated it on social media, hurting his reputation.

On April 27, in an effort to settle the dispute, the Dubai Diamond Exchange’s parent, the Dubai Multi Commodities Centre (DMCC), wrote Blom’s attorney that “it does not consider the [December] decision to be an arbitral award in any form or effect.”

Still, Blom asserted in his complaint that as long as the threat of being “red-flagged” remained, he lived “with the continuous fear of being formally excluded” from the bourses—which, he said, is equivalent to a “death penalty” in the diamond industry.

“From the moment [of the posting], no diamond firm or trade with the applicants is allowed,” it said. “[A]ny further trade in diamonds is made impossible.”

In response, the WFDB argued that it had no choice but to respond to requests from its member bourses. It contended that it would be impossible for it to verify every member notification request—which number about 300 a year.

Following a May 5 hearing, P. Hannes, president of the Antwerp Commercial Court, came down squarely on Blom’s side, ruling that the WFDB should be enjoined from notifying other bourses about the decision and awarding Blom legal fees.

Hannes noted that the DDE only “temporarily” suspended its notification request.

“The word ‘temporarily’ means that the Dubai Diamond Exchange did not commit itself to anything, nor did the WFDB,” he wrote. “On the contrary, the WFDB states that it would be obliged to comply with a request for notification from one of its members.

“[It’s] remarkable that the WFDB wants to argue that the Dubai diamond bourse acted correctly,” he continued. “Without any underlying arbitral decision, with an enforceable order to pay, no disciplinary sanction could be pronounced by the Dubai Diamond Exchange for disregarding a payment obligation resulting from an arbitration. In view of [the DMCC’s April 27] letter, it is incomprehensible that the Dubai diamond bourse has not formally withdrawn its own notification requests.”

Blom’s Antwerp lawyer, Marc De Block, says that Blom did not want to file suit against the group he long headed, and this case has been very painful for him.

“The WFDB was given every opportunity to be reasonable and stubbornly declined,” he adds. “It’s a pity my client needed to go to court to get justice. All he wanted is a fair hearing.”

Repeated requests for comment from the WFDB and the DDE were not returned by publication time.

Following Blom’s decision to step aside, Yoram Dvash, president of the Israel Diamond Exchange, was named interim WFDB president at an executive board meeting conducted over Zoom.

Dvash is spearheading the effort to turn the Israel Diamond Institute’s online exchange—GetDiamonds.com—into an industry-wide trading platform, which will be set up as a nonprofit subsidiary. The new exchange’s board of directors will include representatives of major bourses, five diamond dealers from various countries, and two public representatives who are not diamond dealers.

The first 10 members of the board, which includes Reuven Kaufman, president of the New York Diamond Dealers Club, were announced Thursday.

(Image courtesy of the World Federation of Diamond Bourses)

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