W Nagel (A Firm) v Pluczenik Diamond Company NV

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeThe Hon. Mr Justice Popplewell
Judgment Date13 July 2017
Neutral Citation[2017] EWHC 1750 (Comm)
Docket NumberCase No: CL-2015-000087
Date13 July 2017

[2017] EWHC 1750 (Comm)




Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL


The Hon. Mr Justice Popplewell

Case No: CL-2015-000087

W Nagel (A Firm)
Pluczenik Diamond Company NV

Oliver Segal QC (instructed by DWF LLP) for the Claimant

Robert Anderson QC and Peter Head (instructed by Mishcon de Reya LLP) for the Defendant

Hearing dates: 27 April, 2–4, 8–11 & 16 May 2017

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

The Hon. Mr Justice Popplewell The Hon. Mr Justice Popplewell



Diamonds are not forever. This is a claim by a diamond broker against its client for termination in August 2013 of a relationship which originated in the 1960s, involving the purchase of rough diamonds from De Beers at Sights in London. The claim is for compensation pursuant to The Commercial Agents (Council Directive) Regulations 1993 (SI No 3053 of 1993) ("the Regulations"), alternatively in debt and damages at common law.


The Claimant is a partnership formed in 1991 between Mr William Nagel, known as Willie, and his family company W Nagel Limited. I shall refer to him as Willie Nagel and to the firm as WN. On its formation, WN assumed the brokerage which Willie Nagel had already been performing for the Defendant ("Pluczenik") for some 24 years.


Pluczenik is a Belgian company founded in 1963 by Isaac Pluczenik. It is one of the world's leading diamantaires, purchasing rough diamonds and processing them into polished diamonds and jewellery for retail sale. It also resells rough diamonds as a smaller part of its business.

Sightholders, brokers and De Beers


As is well known, De Beers dominated the market in rough diamonds for much of the twentieth century. By the time Cecil Rhodes died in 1902 De Beers accounted for 90% of the world's rough diamond production and distribution. Its dominance was consolidated and increased under the ownership and leadership of the Oppenheimer family, when other producers channelled their supplies through the De Beers sale system. It was not until the 1970s, when Botswana became a major alternative mining source, that other diamond producers started testing alternative sales channels, and only in the 1990s that other major producers started selling rough diamonds on the world market independently of De Beers, who nevertheless still sold over 80% of the world's rough diamonds at that time. De Beers' market share shrank significantly in the early 2000s following a three year anti-competition investigation by the European Commission and De Beers giving undertakings to reduce and then cease purchasing from Russia's largest diamond company. By 2010 De Beers had approximately 35% of the market by value. It remains the world's largest diamond producer by value and continues to mine, sort and market a significant proportion of the world's rough diamonds.


One of the methods by which De Beers maintained its dominance was control of the supply side by selling rough diamonds to wholesalers at "Sights" in London, held 10 times per year and lasting a week from Monday to Friday. It did so through its selling arm the Central Selling Organisation, subsequently the Diamond Trading Company ("the DTC"), which were trading names of De Beers UK Ltd. In 2013 the selling subsidiary became De Beers Global Sightholders Sales (Pty) Ltd. Nothing turns on the name or corporate identity of the De Beers selling entity and I shall refer to them simply as the DTC or De Beers.


No one could purchase diamonds at the Sights unless they were accredited by De Beers as a Sightholder. Until 2003 new Sightholders were typically appointed twice a year and their status reviewed annually. Because of De Beers' market dominance, being a Sightholder was a coveted position. Until 2003, each Sightholder was required by De Beers to have an accredited DTC broker.


The Sights held at De Beers' premises in Charterhouse Street in London, known as the International or Global Sights, were the main channel by which De Beers released rough diamonds into the wholesale market. De Beers carefully controlled the supply, such that generally all Sightholders were striving to be allocated a larger supply of stones than De Beers made available to them. One of the traditional roles of the DTC broker was to help its client to achieve as large an allocation of stones as possible in the particular sizes, grades and categories it desired.


In addition to these International Sights in London, there were other more minor sights, for example in South Africa, Namibia and Botswana, through which De Beers released rough diamonds for local manufacture/polishing or resale. However it was the London Sights which in the period relevant to this dispute constituted the main source for diamantaires such as Pluczenik to obtain their supply of rough diamonds.


In 2003 the Sightholder system underwent a change. Accreditation as a Sightholder was replaced by accreditation as a Supplier of Choice ("SOC"), although they were commonly still referred to as Sightholders. Under the new SOC system, announced on 12 July 2000 and implemented on 7 July 2003, the Sightholder was given a fixed term contract, at the end of which it had to reapply for SOC designation. The fixed terms were July 2003 to July 2005; July 2005 to July 2008; March 2008 to March 2011, extended to March 2012; and March 2012 to March 2015. When the SOC system was introduced, De Beers ceased to insist that Sightholders had an accredited broker, although it encouraged them to do so. The majority retained a DTC broker, although a significant minority ceased to use one.


The rough diamonds sold at the Sights were sorted by De Beers into defined categories by colour, crystal shape, size and quality, and for the most part sold in boxes of stones by category. In addition there would be "Special" stones of a larger weight, and "Exceptionals" which were very high value stones sold individually.


Being a Sightholder, did not itself ensure the ability to purchase any particular diamonds. Before 2003, the system was that the DTC broker would apply about a month before each Sight for the allocation which its client sought. Shortly before the Sight, the DTC would notify the allocation to each Sightholder through the broker. The basis for allocation by the DTC was entirely discretionary and opaque. At the Sight, the Sightholder could inspect the allocated boxes or specials, and was not obliged to accept the diamonds at the price offered by De Beers or at all. There might sometimes be negotiation over the price. Sometimes additional stones over and above the allocation might be made available at the Sight. The Sightholder might complain that the sorting had gone awry and that the box contained non-conforming stones. In the later years there grew up a practice of permitting the Sightholder to reject up to 10% or 15% of the stones in a box on this basis, but this was not something which happened very often. Although there was no obligation on the Sightholder to buy, there was an incentive to take up the full allocation, not only because of the shortage of supply but also to achieve goodwill for future allocations.


Under the SOC system introduced in 2003, there was a more formalised process of allocation which was intended to be more transparent. Designation as an SOC was based on a substantial and detailed contract proposal questionnaire ("CPQ") completed by or on behalf of the SOC at the beginning of the contract period (called a Sightholder Profile for 2005). The format and criteria changed for different contract periods, but in general terms it required illustration of financial strength and reliability, market position, marketing ability, and technical and manufacturing ability. Based on this information and published criteria, each year the DTC would issue an "intention to offer" detailing the intended allocation for the year. The stones covered by these annual intended allocations were known as "in plan" diamonds. In addition, De Beers might make available to a Sightholder additional supplies at the Sights, known as " ex plan". About a month before each Sight, the Sightholder would submit a notification of the in plan stones it wanted for that month, and a request for ex plan stones. The process at the Sight itself remained as described above. Apart from the periodic process of allocating contracts, there were annual reviews within each contract period.


Estimates varied of the number of Sightholders whom De Beers accredited from time to time. The exact number does not matter. When the SOC system was introduced there was a significant cut, reducing from about 350 to something of the order of 80 to 100. A Bain & Co report of 2011 stated that there were 74, ignoring affiliates.


The number of DTC brokers was much smaller, and each would act for a number of Sightholders. The Claimant was one of the smaller brokers: it had 9 Sightholder clients when SOC was introduced, of whom only 4 still retained their Sight at the date of Pluczenik's termination.


In November 2013 De Beers moved the Global Sight from London to Gabarone, Botswana, which has replaced South Africa as the leading source of diamonds in the world by value. The intention to move was announced in 2011 and the last Global Sights in London were in August and October 2013. It was this move which provided the occasion for the termination of the brokerage between the parties.

The relationship between the parties


Isaac Pluczenik became involved in the diamond industry in the late 1940s after moving from Poland to Belgium. He bought diamonds from De Beers at Sights in...

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5 cases
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