Palmali Shipping SA -v- Litasco SA

Challenge

Our client, Litasco (the trading arm of Russian oil company Lukoil), was defending an almost USD 2 billion High Court claim in relation to alleged breaches of a long-term Contract of Affreightment (“CoA”). Palmali alleged that our client had failed to provide cargo owed to it under the CoA and were claiming damages for lost profits. FRA was engaged to provide consulting support and expert witness evidence in relation to the calculation of the alleged damages. Central to our work was the critical assessment of the claimant’s damages model and the construction of alternative models based on the legal arguments set out in the defence. We helped the client deal with a large and complex multi-year transactional data set and ascertain the impact of the contractual obligations.

Action

We prepared a valuation model that transparently embedded the logic of the defence and evidence provided by a shipping industry expert witness. Through careful design we were able to present a model which enabled the efficient modelling of a range of “but for” scenarios of theoretical performance of a variety of contractual obligations by the defendant. We also modified the claimant’s quantum model to demonstrate the effect of assumptions inherent in the same scenarios thus providing a set of comparable damages valuations. Matt Rees submitted three expert reports during the proceedings, as well as a joint statement with the forensic accounting expert instructed by the claimant.

Results

Our work supported legal counsel in reducing the size of the initial claim to less than 5% of its value. Further, The flexibility and clarity of our modelling enabled counsel to identify the most material elements of the case and focus attention on them. Ultimately, Palmali’s claim was dismissed as the CoA was determined to be not binding as well as void under Swiss Law (trial judgment).