Glencore-Metro dispute wraps up
27 May 2002
Answer: some of the world's largest banks, several shipowners and oil companies demanding millions of pounds in cash; several dozen actions spread across three continents involving four years of lawyers' fee-earning time; drama on the high seas
and much else besides.
The bulk of the action was concluded in April, although lawyers are booked in to complete odds and ends. They will not be unhappy to see the back of this considerable litigation, sparked by the insolvency in February 1998 of Metro Trading International (MTI), a storage facility that floated off the northern Emirate of Fujairah in the United Arab Emirates. It led to millions of pounds worth of oil being up for grabs. Creditors were lining up for their share, to be distributed by receivers Moore Stephens, advised by Norton Rose corporate partner Roger Heward.
The ensuing legal headaches, which were coordinated by Mr Justice Rix's decision in November 1999 to hold a case management conference in London relating to 35 actions, were exacerbated by the fact that a lot of oil was at sea at the time of the insolvency. This oil was in the process of being sent by Metro to third parties in Singapore and elsewhere in the Far East, including Texaco and Singapore Petroleum.
This brought trading giant Glencore into a whole new wave of dispute. It claims to hold title to a fair proportion of the oil at sea or on board Metro's storage vessels at Fujairah, and this is one of the main issues at stake in the outstanding action. It alleges that Metro had instructed ship-owners to deliver its oil to third parties in breach of Glencore's bill of lading agreements with the shipowners to discharge the oil at Fujairah.
Glencore arrested three ships at Singapore belonging to shipowning companies managed by Dynacom Shipping. Another ship was arrested at Milford Haven.
Although the rest of the claims were being handled by London's Commercial Court, this action took place in Singapore because the defendant Dynacom declined Glencore's invitation to agree English jurisdiction.
This was considered unfortunate, as Dynacom was also involved in a so-called 'phase two' Commercial Court action in London (the case was split into phases for simplification). Phase two related to Glencore's relationship with Metro to establish Glencore's title to the disputed oil and there were several common issues between phase two and the Singapore action.
The phase two judgment was delivered in August 2001, shortly before the trial of the Singapore action, which was also preceded by proceedings being issued by Dynacom in the US state of Georgia against Glencore, Metro and also a Metro-Glencore joint venture, which was not a separate legal entity. Georgia was chosen by Dynacom to resolve the claims relating to the ship arrests for the obscure reason that Metro had a US representative resident in Georgia.
Last November, after Glencore's trial of the Singapore action (which Dynacom has said it will appeal), Glencore won in the Commercial Court an antisuit injunction halting the Georgia case from proceeding. This was upheld on appeal on 18 April by Judge Rix at the Court of Appeal in a judgment described by Howard Townson, Clyde & Co's lawyer acting for Glencore, as "immaculate, persuasively argued and powerfully expressed". The Court of Appeal threw out Dynacom's application for leave to appeal to the Lords.
In this, Iain Milligan QC of 20 Essex Street and Richard Southern of 7 King's Bench Walk were instructed by Townson for Glencore. Peregrine Simon QC of Brick Court and Rachel Toney of Stone Chambers were instructed by partner Ken Scott of Holmes Hardingham Walser Johnston Winter for Dynacom.
This followed a wave of out-of-court settlements, all reached at the beginning of April, between the array of Metro creditors and Metro. All these creditors received a share of the $60m (£41m) held by the receivers.
Creditors include Texaco (represented by Mark Tilley at Hill Taylor Dickinson), Metro Trading International (Miranda Karali at Barlow Lyde & Gilbert), Mobil (Stephen Mills at Rayfield Mills), (Caltex (Glenn Moore at Holman Fenwick & Willan), Arexco (Jamie Wheatley at Mills & Reeve), and banks Credit Agricole Indosuez Bank (Pietro Marino at Theodore Goddard) and Banque Bruxelles Lambert (Craig Hope at Pinsent Curtis Biddle).
Phase three litigation, concerning the extent to which Crédit Lyonnais had security interest in Metro's cargoes and proceeds of its sales, has also settled with Glencore.
Glencore and several shipping firms with minor claims have outstanding cases but the substantive part of the Metro litigation is now finally completed.