Earlier this year, the Commercial Court handed down its decision in BP Oil International Ltd v Vega Petroleum Ltd and another¹, allowing a claim in unjust enrichment for amounts paid for the supply of crude oil from the Gulf of Suez which the claimant never received. The decision is a useful reminder of the English courts’ approach to contractual interpretation and a warning to parties that they will face significant hurdles in attempts to escape the apparently clear terms of their contracts.
Pursuant to a joint venture with the Egyptian state-owned oil company (the “EGPC”), the defendants owned rights to some of the Gulf of Suez Mix crude oil produced from petroleum fluids sourced from the Ras El Ush Field in the Gebel El Zeit Concession in Egypt.
Under a series of purchase contracts, which were described on their face as Free on Board (“FOB”) contracts, the defendants agreed to sell that crude oil entitlement to the claimant. Approval from EGPC was required before any oil could be lifted. Although amounts were successfully lifted in 2012 and 2013, by 2015 the claimant had paid over US$17m for around 200,000 barrels which it had not received.
Some attempts were made to effect a swap or assignment of the claimant’s rights with EGPC, but those negotiations were ultimately unsuccessful. The claimant therefore brought a claim against the defendants in unjust enrichment for the return of the sums it had paid, arguing that there had been a total failure of the basis of the payments.
However, the defendant contended that, on a proper interpretation of the purchase contracts, both parties understood that the payments made by the claimant were unconditional, such that the claimant would have no recourse to recover them and that the claimant had received substantial benefits in the form of its entitlement to lift the oil.