Richard, I would like to meet with you re these claims and the others referred to in the message below to insure that we have all necessary information regarding them and have the appropriate legal counsel attending to them.  Thank you. Jim

 -----Original Message-----
From: 	Paul Johnson, T  
Sent:	Monday, March 26, 2001 12:15 PM
To:	Sanders, Richard
Cc:	Derrick Jr., James; Evans, Mark
Subject:	Litigation report

A number of pieces of on going litigation and arbitration being conducted on behalf of EML and EMC have very recently come to our attention which we summarise below. We have endeavoured to establish the detail of these cases as quickly as possible, but in some instances await information from outside counsel involved. The summary is therefore necessarily provisional, and will need to be supplemented. There are in addition other claims of which we have been made aware, largely being run by MG Hong Kong and Beijing offices. Details are presently so sketchy that we have not included them until we have been able to verify. A supplementary note on these will follow asap.

1. Corporacion Nacional del  Cobre de Chile ("Codelco" )  v.  MG Ltd, MGAG and MGCC

This is a major, and very serious claim being brought by the Chilean state copper trading company Codelco against, primarily MG AG of Frankfurt, but also against MG Ltd (now Enron Metals Ltd) for recission of futures contracts on the basis that they were procured by fraud (a bribe of US$1.5m paid to the main Codelco trader by MGAG). We have received a brief summary of the claim from Slaughter & May, the lawyers handling the litigation on behalf of EML, which is attached below. As a result of an indemnity from MG AG, MG Ltd has NO financial exposure other than a credit risk to MG AG.

Legal professional privilege must of course be maintained for this document and its contents, and any dissemination outside the legal dept should be made subject to prior approval by legal.

Trial is set down in the Chancery Division of the High Court in London for 5-6 weeks, commencing October 2001. Significantly, and as you will be aware, High Court proceedings take place in public.

 - LT010810084_3.doc 


2. MG Ltd v. China Resources National Corporation

Claim in LME arbitration for payment of US$6m futures losses on client contracts. Award published in favour of MGL on liability alone in August 2000. Damages to be assessed. Thereafter Award to be enforced in China. Solicitors: Clyde & Co.


3. MG Ltd v. London Clearing House

Claim in LME arbitration for delivery of defective tin under warrant. Losses believed to be US$800,000. 7 day time bar defence run by the LCH heard as preliminary issue. Award in approx Feb 2000 in favour of MG (ie time bar inapplicable). This has led to resumption of settlement negotiations with Standard Chartered Bank (trading), who put the metal onto warrant originally (and against whom the LCH would have an indemnity claim). The most recent offer from Standard Chartered is to pay US$437,000; but this is subject to unacceptable conditions. Solicitors: Allen & Overy.

4. Nickel explosion in furnace in Cleveland: Scandia Transport  LMEWarehouse/LCH/EMC/Phoenix /EAC/ Cast Alloys (smelter)

Contaminated nickel supplied by EMC into the US. Amount of loss being established now. Incident much less bad than initial reports suggested, and have therefore deferred explosion survey/investigation lined up on urgent basis earlier this week. Expect indemnity claim to be brought against EMC by Phoenixx in LME arbitration; and to pass same claim on to the LCH. Assume possibility of US tort claim also lying direct from Smelter to EMC (awaiting advice from Limor Nissan/Andy Edison on this). Facts should become sufficiently clear to enable rough quantification within next week (w/c 26/3).

NB. Other similarly contaminated shipments from the same warehouse are known to exist. Warnings to other customers are being prepared.

5. LME arbitration: Chinese receiver/ICD/Brandeis/EMC/EML/LCH/Warehouse

Claim brought by Chinese receivers for supply of defective nickel on LME warrant bought through London clearing. Only US$62,000 claim, but involves significant point of principle, hence decision taken to proceed in arbitration. Should in principle be able to pass on incoming claim to LCH (and beyond). Expect unrecoverable costs (internal and external) to exceed the amount of the claim. Solicitors to be instructed w/c 26/3.