Commercial Court Confirms That Findings By An Arbitral Tribunal Can Have Binding Effects Upon Third Parties

Author:Mr Paul Friedman, Conrad Walker, Nicola Vinovrski, Danielle Rodgers, Anna Myrvang, Michael Clark and Emma Holmes
Profession:Clyde & Co

OMV Petrom SA v Glencore Interenational AG (2014)

The claim arose from a supply contract between Glencore International AG (Glencore) and a commission agent Petex for the supply of crude oil to Romania between 1993 and 1997. Petex alleged that Glencore supplied a blended cargo of oil made up of cheaper and heavier forms of crude oil contrary to contractual specifications. An arbitration was commenced by Petex against Glencore, purporting to bring a claim on behalf of its principals, two Romanian companies, for losses resulting from breach of contract and/or fraud.

The arbitration tribunal held that Glencore were in breach of the supply contract. Glencore's defence that Petex's action was time barred was rejected on grounds that Glencore had concealed the relevant facts from Petex. However, while the tribunal concluded that Petex had title to sue, no damages were rewarded in respect of the substantial USD 64 million claim one the basis that Petex had suffered no loss. The loss sustained had been suffered by the two Romanian companies, who had since ceased to exist and had been succeeded in title by OMV Petrom (OMV). Petex had neither informed OMV of the action against Glencore, nor did it intend to account to OMV for any monies received in the event of an award of damages and consequently no damages were rewarded.

OMV were subsequently assigned Petex's rights to sue under the supply contracts and commenced arbitration proceedings against Glencore, but the claim was rendered res judicata by virtue of the first arbitration decision.

Commercial Court proceedings seeking damages for conspiracy and/or deceit on the basis of the oil cargo delivery failing to meet contractual specifications were commenced by OMV in 2008.

Again Glencore contended that the claim was time barred. It also pleaded that OMV were not the successors in title of Petex's principals and denied any wrongdoing since Petex were at all times aware of the material facts.

OMV alleged that to argue that the action was time barred would be an abuse of process; the first arbitration already held that the action by Petex was not time barred by virtue of concealment of the facts by Glencore. Petex contended that the Commercial Court should accept this finding of dishonesty by Glencore. To allow Glencore to relitigate the point would be manifestly unfair and would bring the administration of justice into disrepute.

Blair J held that it was well established that to relitigate matters...

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