November 20, 2014 / 11:35 PM / 3 years ago

British firm alleges Poland squeezed it out of mining permit

WARSAW, Nov 21 (Reuters) - British firm Darley Energy has lodged an appeal against Poland’s decision to deny it a potash mining concession, alleging the government dragged out the bidding process in such a way that the permit went instead to Polish mining giant KGHM.

Darley said it submitted an appeal to Poland’s Environment Ministry, which oversaw the bidding process, and has also instructed lawyers to prepare a complaint to be submitted to the European Commission, the executive arm of the European Union.

The ministry denied giving preferential treatment and said KGHM won the concession because it had the strongest bid. The ministry and KGHM declined to comment on the allegations.

KGHM is one of Poland’s biggest companies, as well as being Europe’s No.2 copper producer and the world’s biggest silver miner. The Polish state holds a 31.8 percent stake in KGHM.

Darley bid for the concession in the Baltic coast town of Puck, in 2012. Since there were no other bidders, Darley said that according to Polish law it should have been granted access to the deposit by May 2013. But the process was stretched to give KGHM time to join the bidding and win the concession.

“We know and understand that the mining rule in Poland is not ‘first in, first served,'” said Philip Jeffcock, whose family founded Darley.

“But if the ministry had adhered to the timetable established under Polish procedural law, there would have been no other claimants and Darley would have been awarded the concession long before other parties joined the race.”

Darley has instructed law firm Freshfields Bruckhaus Deringer to prepare a formal complaint to the European Commission, Jeffcock said, adding it should be submitted to the Commission “shortly.”

A ministry spokesman said KGHM’s offer was chosen because it envisaged a wider scope of geological study and also because it planned to mine copper, silver and salt at the site, in addition to potash.

The spokesman declined to comment to Reuters about Darley’s allegations, but did say that the fact that KGHM often loses in bid rounds showed the ministry did not favour any one company. “We treat all parties equally when awarding each concession,” the spokesman said.

Artur Tarnowski, KGHM’s investor relations chief, said he had no comment about Darley’s allegations. “If there are questions from the EC (European Commission), there will also be our answers,” he said. “If there are charges, we’ll address them decisively.” (Writing by Adrian Krajewski; Editing by Christian Lowe and Alan Crosby)

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