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A $40m award: Clyde & Co client Glencore loses High Court fraud case

Withers‘ client, Romanian oil company OMV Petrom, has succeeded in its high profile dispute against natural resource giant Glencore at London’s High Court, with Glencore, represented by Clyde & Co, ordered to pay out just over $40m for fraudulently shipping oil of a lower than supposed quality to Romania in the 1990s.

Heard at trial over January and February, the dispute over allegations of fraud, deceit and conspiracy was made for damages of over $100m and arose after the defendant (formerly known as Marc Rich & Co) sold 32 shipments to Romanian state firms, which were alleged to have been a blend of various types of cheaper and heavier crude oils than what Glencore charged, thus ‘enabling Glencore to make a greater profit than it would otherwise have done’.

20 Essex Street trio Duncan Matthews QC, Andrew Fulton and Luke Pearce were instructed by Withers for the claimant while 7KBW’s Richard Southern QC and Brick Court Chambers’ Fionn Pilbrow took instruction from Clyde & Co for the defendant.

In a ruling published on 13 March, Justice Flaux held: ‘If, in relation to any given cargo, Glencore had disclosed the true position, Petex and/or Rafirom would have been able to reject the cargo and purchase the recognised grade elsewhere or, if inclined to accept a blend, to renegotiate the price downwards to reflect the lower value of the bespoke blend, a matter to which I return below in more detail in relation to the quantum of the claim.’

Petex, the original commission agent for the oil, previously commenced arbitration against the Swiss company in 2003 claiming breach of contract and/or fraud, however part of Glencore’s defence was that it was time barred and the company was not the successor in title to the Romanian companies which received the cargoes. In this trial Glencore also contended that Petex was aware that the shipment comprised a bespoke blend.

On the latest ruling, Justice Flaux said: ‘It follows that, applying the discount to the total quantity of the claim cargoes gives a figure for the discount of $26.3m. When that is added to the difference between the price paid and the cost, insurance and freight (CIF) price of the blends as calculated by [energy expert] Catherine Jago, the overall loss suffered by Rafirom and hence Petrom as its successor in title as a consequence of Glencore’s deceit is $40.1m.’

Glencore is expected to appeal the ruling.