De Beers’ attorneys must be working overtime these days.

The company is finding itself in the middle of a number of legal actions and investigations including three class-action suits, one lawsuit that De Beers has already lost, and continued problems with the European Union.

The irony is that De Beers today may be more compliant with the law and international business norms than it’s ever been. It no longer controls 80% to 90% of the world’s production, and it has made a real effort to become, as they say internally, “legally robust.” Before Supplier of Choice was launched, executives asked the European Commission its opinion of the new direction. When the European Commission issued a “comfort letter” (meaning it had no objection to it), it was considered something of a coup.

But now, even that is looking shakier. Here is a rundown of the legal actions De Beers currently faces:

• Axed sightholders remain bitter about De Beers’ decision to let them go at the launch of Supplier of Choice. Now one of them has sued—and won.
  Antwerp’s A. Spira Diamanthandel argued before the Antwerp Court of Commerce that it had been a sightholder for 70 years and received almost all its rough from De Beers. It asked for six more months to adjust to the new circumstances.
  The court ruled that Spira must stay a sightholder for an additional nine months, on top of the six-month “grace period” all sightholders received.
  De Beers plans to appeal, says spokeswoman Lynette Hori, who added that the case “does not represent a finding that the Supplier of Choice arrangements are in any way flawed.”
  Nevertheless, the fact that a company could sue De Beers in a Belgian court—as opposed to European Union court—does raise the possibility that other sightholders could take legal action in their local jurisdictions.

• Spira is not the only angry sightholder. Shortly after his company was dropped, Daniel Horowitz of Antwerp’s IDH took his gripes to the European Commission and asked it to reopen its investigation of Supplier of Choice. A second company—as yet unnamed—also is said to have complained.
  Horowitz may soon get his wish. A Dutch newspaper said the EC has reopened the investigation. A member of the European Parliament, Richard Corbett, also has urged the EC to take a second look.
  Hori says that talk of the European Commission’s reopening the IDH case is “speculation about which we cannot express a view. As you know, the Commission issued a comfort letter in January 2003 approving the Supplier of Choice arrangements (as amended), following a lengthy and thorough dialogue, and we have complied with our obligations to the Commission.”
  She adds: “We are aware that IDH have raised a number of allegations in respect of the application of Supplier of Choice. The Diamond Trading Company does not accept the allegations made against it and will vigorously defend its position in respect of these allegations.”

• Even if the Supplier of Choice investigation is not reopened, the EC is not out of De Beers’ hair. For more than a year it has been investigating De Beers’ new contract with Russia, and press reports indicate the EC is unhappy with the contract. Until the situation is resolved, De Beers and the main Russian diamond producer, Alrosa, are doing business on a “willing buyer, willing seller” basis.
  “We are still in constructive dialogue with the Commission, and we look forward to hearing from them soon,” Hori says.
  Meanwhile, press accounts—some denied by Alrosa—say the company is talking to Lazare Kaplan and various other suitors.

• De Beers also faces two American antitrust class action lawsuits—one from a New Jersey industrial diamond company, Anco Diamond, and another from a consumer. De Beers declined to comment on the two suits. (See “Diamond Notes,” JCK , February 2004, p. 46.)

In addition, there is another class-action suit targeting De Beers’ actions and work practices during South Africa’s apartheid era. The lawyer bringing the suit is Ed Fagan, the man who won millions on behalf of Holocaust survivors against Swiss banks.

Jared Stammel, the New York attorney who is bringing the Anco case, says that all this litigation is not out of the ordinary for a company the size of De Beers, especially after such a dramatic change in distribution like Supplier of Choice.

“People are naturally upset, so they go to court,” he says. “That’s what people do today—we don’t pull out the guns, we pull out the lawyers.”