Background Facts – A trading house bought oil from State A, which, because of a diplomatic dispute, the government of State B claimed was in fact theirs, accusing State A of “looting.” State A meanwhile said that this oil in fact represented compensation for unpaid oil transit fees owed to them by State B. This dispute led to a large legal dispute over ownership of the oil, worth hundreds of millions of dollars in revenues.

Emergency Response Issues – Tensions between State A and State B were very high at the time the dispute arose – with reports that disputes over oil transit payments could lead to war between the two States. In addition, the dispute arose while the cargoes were afloat and the vessels concerned would be unable to discharge without the issue being resolved, and while letters of credit were nearing expiration.

Our Role – The Reed Smith team was instructed on an urgent basis to provide advice and give guidance to the trading house on all aspects of the dispute, and how best to resolve the issue, regarding not only legal and commercial implications, but also the political and diplomatic sensitivities underpinning the dispute.

Outcome – Reed Smith advised cargo interests throughout the crisis. One particular dispute was referred to the court three times (Reed Smith having successfully persuaded the court that it had jurisdiction over this dispute notwithstanding the involvement of sovereign States) and was successfully resolved in our client’s favor.