Anron Bunkering DMCC v Glencore Energy UK Ltd
[2023] EWHC 295 (Comm)
Glencore Energy UK Limited v Nis J.S.C. Novi Sad
23 February 2023
[2023] EWHC 370 (Comm)
High Court
Glencore had to pay for contaminated oil. A deal was made to settle, but they argued about how much Glencore owed. The judge decided Glencore didn't act unfairly, and owed less than NIS said. The judge figured out a fair price using market rates, resulting in Glencore getting some of their money back.
Key Facts
- •Glencore paid US$2,094,000 to NIS via a performance bond due to contaminated crude oil.
- •The contamination resulted in storage fees to Janaf by NIS.
- •A settlement agreement (19 March 2020) aimed to resolve the dispute.
- •The central dispute concerns the interpretation of clauses 33-36 of the Settlement Agreement regarding Glencore's liability for storage charges.
- •Glencore argued the Settlement Agreement limited its liability to charges reflecting Janaf's actual loss and prevailing market rates.
- •NIS contended the agreement required good faith negotiations, and failing that, it could claim under the original Sale Contract.
- •Glencore and NIS had differing views on whether Janaf's charges accurately reflected actual loss and market rates.
- •The court considered witness testimony, expert evidence on market rates, and the factual matrix surrounding the Settlement Agreement.
- •The court examined whether Glencore negotiated in good faith.
Legal Principles
Contract interpretation involves ascertaining the objective meaning of the language used, considering the factual background and commercial context.
Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd (The Ocean Neptune) [2018] EWHC 163 (Comm)
The obligation of good faith requires acting honestly, with fidelity to the bargain, reasonably, and with fair dealing.
Al Nehayan v Kent [2018] EWHC 333 (Comm); Astor Management AG v Atalaya Mining plc [2017] EWHC 425 (Comm); New Balance Athletics, Inc v The Liverpool Football Club and Athletic Grounds Ltd [2019] EWHC 2837 (Comm)
Damages for breach of good faith are assessed by determining the likely outcome of good faith negotiations, considering any special factors.
Petromec Inc v Petroleo Brasileiro SA Petrobras (No. 3) [2005] EWCA Civ 891
Outcomes
Glencore's liability for storage charges is limited by the Settlement Agreement.
The court interprets clauses 34 and 35b as limiting Glencore's reimbursement to the extent the liability accurately reflects Janaf's actual loss and prevailing market rates. The good faith negotiation clause did not override this limitation.
Glencore did not breach its good faith obligation.
While Glencore was dilatory and made information requests that NIS could not fulfill, this conduct was not deemed commercially unacceptable given the circumstances (pandemic, workload, etc.). There was no evidence of deliberate delay to let the Performance Bond expire.
The prevailing market rate for storage was $2/cbm/month.
The court considered various factors including the Glencore-Janaf contract, expert evidence, and market conditions. The Janaf default rate was deemed unsuitable as it was an emergency rate, not a typical market rate. The court determined that factors such as volume and contract length largely balanced out the effects of the market being in backwardation.
Glencore is entitled to judgment for $1,032,000.
This represents the difference between the amount paid to NIS under the Performance Bond ($2,094,000) and the calculated reimbursement due to NIS based on the prevailing market rate ($1,062,000).
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