Ep #87 Hedging your bets with Rufus Constable

Case: Rhine Shipping DMCC v Vitol SA Guest: Rufus Constable, Associate at Floyd Zadkovich No Calum this week whilst he is away at Hong Kong Maritime week, however Luke is joined by Rufus Constable, Associate at Floyd Zadkovich. This case addresses the impact of internal hedging practices used by commodities trading houses and their impact on the damages award in a related charterparty dispute. Vitol, a major oil trader, voyage-chartered the MT DIJILAH from Rhine Shipping to transport 920,000 barrels of Brent Crude from West Africa to China. A six-day delay at the second loading port, Djeno (Congo), caused by Rhine, led to a rise in the Brent Dated index price. This increased the purchase price Vitol had to pay its seller, as the price was tied to dates linked to the bill of lading issuance. The trial judge ruled that Vitol’s internal hedging (its practice of offsetting risks within its own trading system) did not reduce the damages due to it from Rhine, even where that internal hedging generated a notional gain in Vitol's books. The issues on appeal were whether the judge was incorrect in excluding the effect of this internal hedging from the damages calculation, and whether Rhine was entitled to raise new arguments following the first instance ruling.