Iron ore mining firm Fortescue Metals Group Ltd (ASX: FMG) has been ordered on Wednesday to pay damages of up to $US3.7 million or $A3.81 million following a shipping contract row with Armada (Singapore) Pte Ltd that arose when FMG cancelled its five-year deal with Armada in January 2009.

The shipping contract dispute prompted Armada to seek arbitration proceedings against Fortescue as it claimed apparent damages of more than $US70 million that FMG flatly rejected.

However, prior to the filing of the arbitration case against it, Fortescue tried appeasing Armada by pushing forward a settlement offer of $4 million, arguing that the amount sufficiently covers two suspended shipments which FMG had initiated in December 2008.

That shipping halt led to the eventual rescinding of the shipping contract between Fortescue and Armada.

The Singaporean firm rejected the settlement offer and on Wednesday Fortescue Metals announced that the arbitration hearing arrived at a decision and the company is set to compensate Armada a total of $US3.7 million for the two suspended shipments in 2008.

Also, the proceedings, according to Fortescue, "fully upheld Fortescue's valid termination of the COA (contract of affreightment) and as such Fortescue will be entitled to recover its costs from Armada."

Following the settlement of the Armada dispute, Fortescue said that all its shipping contract settlements have been finalised as brought about by the crippling effects of the global financial crisis.

Fortescue said that total company losses from the shipping contracts disputes totalled to an estimated $US159 million, which it said is "well within original guidance of $US171 million given in February 2009."

As of 1026 AEDT on Wednesday, Fortescue Metals shares were trading up by 12 cents higher at $5.36.