OMV PETROM SA V GLENCORE INTERNATIONAL AG

[2016] EWCA Civ 778, Court of Appeal, Civil Division, Lady Justice Black, Lord Justice Kitchin, and Lord Justice Christopher Clarke, 21 July 2016

Contract - Deceit - Bespoke blends of oil sold as crude oil brands - Measure of damages - Market value - Subsequent events - Mitigation - Private International Law (Miscellaneous Provisions) Act 1996

OMV was the successor in title to a Romanian oil importer which had purchased oil from Glencore's predecessor Mark Rich & Co AG on CIF Constantza terms, with payment under letters of credit. The agent in charge of importation and contracts for OMV was Petex. Between 1993 and 1996, Glencore made 80 shipments to Petex of crude oil of three varieties: Iranian Heavy, GOSM and Urals. In some cases, what Glencore supplied instead of the recognised blends was a blend of various crude oils blended for Glencore by the Eilat Ashkelon Pipeline Co, using mostly Egyptian, Nigerian and Yemeni crudes to resemble Iranian Heavy or GOSM at lower cost. Glencore caused to be created a suite of false documents, including bills of lading, certificates of insurance, certificates of quality and quantity, commercial invoices, certificates of conformity, ullage reports and time sheets and master’s receipts for samples, which successfully deceived those in Romania who received and acted on them into thinking that the cargo in each case was Iranian Heavy or GOSM. If OMV had appreciated the true situation, it would not have repaid the bank under the letter of credit or would have pursued Glencore for an indemnity, and it would have rejected the cargoes and purchased the relevant brands elsewhere. The first 29 cargoes were subject to the common law double actionability rule, and the last three to Romanian law. Under each, OMV had a claim against Glencore in deceit and delict respectively. The judge had found that there was intention on the part of Glencore to deceive both Petex and OMV. This was the appeal on the method of calculation of damages for OMV.