OMV Petrom SA v Glencore International Ag
| Jurisdiction | England & Wales |
| Judge | Mr Justice Blair |
| Judgment Date | 07 February 2014 |
| Neutral Citation | [2014] EWHC 242 (Comm) |
| Docket Number | Case No: 2008 Folio 417 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 07 February 2014 |
[2014] EWHC 242 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Blair
Case No: 2008 Folio 417
Duncan Matthews QC and Luke Pearce (instructed by Withers LLP) for the Claimant
Richard Southern QC and Fionn Pilbrow (instructed by Clyde & Co LLP) for the Defendant
Hearing dates: 22 January 2014
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 claimant, OMV Petrom SA, is an oil company incorporated in Romania. The defendant, Glencore International AG, is incorporated in Switzerland, and has as part of its business an oil trading business. The proceedings arise out of contracts for the supply of crude oil to Romania between 1993 and 1997. The trial is due to be held commencing 6 May 2014.
The nature of the present applications is as follows. Petrom submits that issues arising in an arbitration that took place in 2005 between Glencore as respondent, but a different party as claimant, should be treated as settled in these proceedings in the Commercial Court. Accordingly, it seeks an order (among other things) striking out parts of the defence as an abuse of process. Glencore contends that it is not an abuse of process to raise these matters again, relying (among other things) on the fact that the arbitration was confidential to the parties to it. It has its own application which it describes as intended to enforce the confidentiality of the award.
The facts
The facts, which are not greatly in dispute for present purposes, are unusual. The dispute arises out of the supply by Glencore of crude oil into Romania between about 1993 and 1997. The supply contracts were between Glencore and a company called SC Petrolexportimport SA ("Petex"), which was a commission agent. The nature of the underlying allegations are that Glencore did not supply crude oil of the contractual specification, but delivered blended cargoes made of up various types of cheaper and heavier crude oils.
In 2003, Petex commenced arbitration in its own right against Glencore claiming that it was in breach of contract, and/or guilty of fraud. Following hearings in 2005, the arbitrators delivered their Partial Final Award on 16 January 2006. The tribunal found that Glencore was in breach of the supply contracts. On that basis, the tribunal did not need to consider separately Petex's claim in deceit.
However, part of Glencore's defence to the claim was that it was time barred. The answer raised by Petex was that its claim was not time barred, because relevant facts had been deliberately concealed by Glencore (s.32 Limitation Act 1980). For various reasons, Glencore maintained that Petex knew or accepted the position. However, this was rejected by the tribunal, which found in favour of Petex on the deliberate concealment point.
The tribunal then went on to consider title to sue. It held that as commission agent, Petex did have title to sue. However, it held that Petex had not suffered any actionable loss. It explained that its principals (two Romanian companies) had ceased to exist, but that Petrom appeared to be the successor in title. (This point is in dispute in these proceedings.) However, it found that Petex had not informed Petrom about the proceedings, and did not intend to account to anyone for the amounts recovered. In those circumstances, it was found that Petex had suffered no loss.
The tribunal went on to consider quantum, observing that it was strictly unnecessary to do so. The damages claim was (and indeed subject to accrued interest still is) in the region of US$64m. Most of this was attributable to a discount of US$2 a barrel which Petex said should have been applied to the cargoes. The other part of the total was based on a revaluation of the blends actually supplied, as put forward in the expert evidence. For reasons given by the tribunal, had Petex been able to maintain its claim, it would have awarded damages limited to the smaller sum.
The appeal of Petex to this court under s.68 Arbitration Act 1996 was unsuccessful. According to Petrom, it was only then that Petex informed it about the facts giving rise to the claim. Petrom then took the following steps. Pursuant to an assignment of Petex's rights under the supply contracts, it commenced arbitration proceedings against Glencore. At about the same time, it began these proceedings in the Commercial Court on 30 April 2008. Pursuant to standstill agreements, these proceedings were stayed pending the second arbitration. However, Petrom's claim in this second arbitration failed, on the basis that as an assignee of Petex, its claim was res judicata by virtue of the award in the first arbitration.
The standstill in these proceedings came to an end in October 2011, but the parties then negotiated as to whether individuals who had been joined as defendants could be let out on the basis that Glencore would accept vicarious liability for their acts (this has taken place). In the event, Glencore's defence was served on 12 November 2012.
By its claim, Petrom seeks damages for conspiracy and/or deceit, on the basis of an agreement to defraud by delivering cargoes which purported to be the contracted cargoes, but were in fact blends made of various types of cheaper and heavier crude oils. The Particulars of Claim were served on 26 October 2012, and amended on 27 February 2013.
By its defence, Glencore's primary contention is that Petrom's claims are time barred. It also pleads that Petrom is not the successor in title to the original Romanian companies. Further, it denies any wrongdoing, alleging that Petex was at all times aware of the material facts. As to damages, it raises in essence the same defences on which it succeeded in the first arbitration.
The contentions of the parties
Petrom submits that this is a plain case of an abuse of process. It would, it is submitted, be manifestly unfair to Petrom for Glencore to be permitted to challenge the conclusions reached by the tribunal in the first arbitration, and to do so would be to bring the administration of justice into disrepute. It emphasises that Petrom was in ignorance of the first arbitration, which Glencore won on the basis that Petrom, rather than Petex, was the true claimant. In these circumstances, now that Petrom is suing in its own capacity, Glencore should not be allowed to require it to relitigate precisely the same issues as were determined by the tribunal.
It submits that although the precise causes of action are different, the principal issues which Glencore seeks to argue by its defence are precisely the same as those in the arbitration. The issues are the same, and so is the evidence on which Glencore seeks to rely in support of its case. No additional allegations are being made. The decision of the tribunal in the first arbitration was reached after full argument and evidence, and it was not a case in which Glencore was at any disadvantage. Because of the passage of time, memories of the individuals concerned will have diminished.
Furthermore, a key witness in relation to the question whether Petex was aware of the material facts was Mr Aurel Fotin Bacila, and he has died since the arbitration. This, it is submitted, is an important factor which adds substantially to the unfairness which would result to Petrom if Glencore was permitted to rely on the arguments in question. Petrom is not an unconnected third party, but was intimately connected with the result of the arbitration. The only reason it failed was that it was Petrom, not Petex, which had suffered the loss. The witnesses Petrom intends to rely on are the same as those who gave evidence in the arbitration, and it would be unfair on the witnesses that they should be subject to further cross examination now on the same facts. The precise paragraphs which it contends should be struck out were set out in a draft order.
Glencore submits that it would be unjust and inappropriate to strike out any part of its defence for the following reasons:
(1) The previous case was an arbitration which was confidential, contractual, and brought by a party who had no business doing so.
(2) Glencore won the arbitration and therefore could not appeal or otherwise challenge the obiter findings of fact.
(3) There is a striking lack of mutuality in Petrom's position.
(4) Glencore was the respondent in the arbitration and is the defendant in this action.
(5) The trial judge will inevitably have to make findings of fact on dishonesty, to which the facts sought to be struck out are highly relevant.
(6) The basis upon which Petrom asserts that Glencore's defence is an abuse of the process of the court is narrow and weak, and in any event Petrom itself is responsible for much of the delay which has caused the matters of which it complains.
(7) The application is made very late, when all (or almost all) the factual evidence is prepared.
(8) There is no unfairness in requiring Petrom to prove the serious allegations it makes.
Discussion and conclusion
This is not a case in which Petrom relies on the doctrine of res judicata and it was not a party to the arbitration (that is, the first arbitration). However, it is well established that independent of the res judicata doctrine, it can be an abuse of process for a party to later proceedings to seek to relitigate issues determined in previous proceedings.
The leading case is Secretary of State for Trade and Industry v Bairstow [2004] Ch 1, in which the authorities are reviewed and the principles summarised by Sir Andrew Morritt V-C at...
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