* Ruling from highest court ends eight-year battle
* Company says case an expensive distraction
* Fortescue shares rise 2 pct
(Adds comments from Fortescue, share price)
By Maggie Lu Yueyang
CANBERRA, Oct 2 (Reuters) - Australian iron ore magnate Andrew Forrest and Fortescue Metals Group Ltd won a High Court appeal to overturn a conviction for misleading investors, allowing the billionaire to return as an executive director to the company he founded.
The ruling ends an eight-year legal battle between Fortescue and the country's securities watchdog, and promises to bring clarity to the direction the world's No.4 iron ore miner will take as it struggles with heavy debts, ebbing demand from China and sliding iron ore prices.
"It eliminates one area of uncertainty that has dragged on for quite a while," said Jamie Spiteri, senior dealer, Shaw Stockbroking. "But for Fortescue it comes down to genuine iron ore demand. Their future profitability is dependent upon an improvement in that iron ore price."
Forrest founded Fortescue in 2003 after a decade of promoting everything from Cuban-style nickel mining to underground desert oceans. He owns around one-third of the company, worth more than $3.5 billion at current prices.
Known by his nickname "Twiggy," Forrest is credited with turning Fortescue into the country's third-largest iron ore producer after Rio Tinto Ltd and BHP Billiton Ltd
by selling almost all of the company's output to Chinese steel mills.
But hammered by slowing Chinese demand and slumping iron ore prices just as it ramps up borrowings to fund a surge in production, Fortescue has come under increasing pressure in recent months. In September, the company said it would slash spending and jobs just days after reassuring on its outlook, shocking investors.
"We can now focus our full attention to ensuring the continued success of Fortescue Metals Group for many years to come," Deputy Chairman Herb Elliott said in a statement.
The legal battle had been an "expensive distraction," he said.
Shares in Fortescue rose as much as 2.3 percent when they resumed after a trading halt, although the stock is still some 40 percent lower this year, tracking a similar decline in benchmark iron ore prices.
More stories on Australia's resource boom
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NO MISLEADING STATEMENTS
The long-running case relates to allegations of misleading investors in 2004. Forrest was convicted in February last year and faced a potential ban on being a company director if he had lost his appeal to Australia's highest court.
Forrest stood aside as chief executive of Fortescue in July last year to focus on philanthropic work with indigenous communities.
When asked if the company had any plan to bring Forrest back in an executive position after the ruling, a Fortescue spokesman said he would not speculate on that option.
The court case stems from information provided to the Australian Securities Exchange in August and November 2004 regarding agreements with three Chinese construction companies to build and finance Fortescue's mining project in Western Australia's Pilbara region.
The Australian Securities and Investment Commission (ASIC) accused Fortescue and Forrest of misleading or deceptive conduct, in breach of corporations and trade practices laws, by saying the agreements were legally binding.
The High court unanimously held that the statements made by Fortescue and Forrest regarding their agreements with Chinese investors were neither false nor misleading.
"Because the statements were neither misleading nor deceptive, the Court further found that Fortescue and Mr Forrest had not failed to meet their obligations under the Corporations Act," the court said.
Fortescue and Forrest had initially successfully defended the case against ASIC, but then lost on an appeal in the Federal Court.
If Forrest had lost the case on Tuesday, Fortescue "would have to go back before a federal court judge where there would have been a hearing on penalty," said Mark van Brakle, a lawyer for Fortescue.
(Additional reporting by James Grubel in Canberra and Victoria Thieberger in Melbourne; Editing by Ryan Woo, Lincoln Feast and Richard Pullin)
Keywords: AUSTRALIA FORTESCUE/