Glencore Energy UK Limited v Nis J.S.C. Novi Sad

A settlement agreement may confine liability for storage charges even where the underlying contract would otherwise provide a broader claim. The court construes the settlement objectively and as a whole. An obligation to reimburse liability only to the extent that it reflects actual loss and prevailing market rates limits the recoverable amount; it is not merely a floor for further negotiation.

Where emergency or unplanned storage lacks a genuine market, the prevailing rate is assessed by reference to comparable spot storage, adjusted for actual additional loss caused by the emergency circumstances. A contractual obligation to discuss in good faith requires conduct which is honest, faithful to the bargain and not commercially unacceptable, but damages require proof of loss beyond the underlying contractual entitlement.

Glencore sought reimbursement of US$2,094,000 paid to NIS under a performance bond after NIS demanded payment for costs arising from contaminated crude oil delivered under a sale contract.

The parties subsequently entered into a settlement agreement. It preserved NIS’s entitlement to claim storage costs paid to Janaf, but limited Glencore’s reimbursement to liability accurately reflecting Janaf’s actual loss and prevailing market rates for storage. The parties also agreed to discuss the level of reimbursement in good faith.

The issues were whether the settlement agreement superseded NIS’s wider claim under the sale contract, what “actual loss” and “prevailing market rates” meant, whether Glencore negotiated in good faith, and the amount recoverable.

1. Disposition. Glencore was entitled to judgment for $1,032,000, representing the excess paid under the performance bond over NIS’s reimbursement entitlement of $1,062,000.
2. Construction of the Settlement Agreement. Clauses 34 and 35b defined and limited Glencore’s reimbursement obligation. The words “up to the extent” indicated a maximum, not a minimum or floor. Clause 36 concerned how the defined Outstanding Claims were to be presented and dealt with under the 2019 Contract; it did not undo the substantive limits already agreed in the Settlement Agreement.
3. Actual loss and market rates. “Actual loss” was not a separate hurdle requiring proof of lost rental income before any reimbursement was payable. It permitted an uplift to ordinary storage rates for additional loss caused by contamination or the emergency nature of the storage. The relevant market rate was for storage at Omisalj and Sisak, for the capacity actually used, over the relevant period, on a spot basis. Janaf’s default or penalty rate of $1.50 per cubic metre per decade was not the prevailing market rate.
4. Good faith. The obligation required conduct which reasonable and honest people would regard as commercially acceptable in the contractual context. Glencore’s delayed responses and requests for supporting information did not, on the evidence, cross that threshold. In any event, NIS could not recover damages exceeding its legal entitlement without evidence that a good-faith negotiation would have produced a different result.
5. Quantum. The prevailing rate was assessed at $2 per cubic metre per month. Applied to 177,000 cubic metres for three months, this produced reimbursement of $1,062,000.