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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Mamidoil-Jetoil Greek Petroleum Company SA v Okta Crude Oil Refinery AD [2000] EWHC 208 (Comm) (26 January 2000) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2000/208.html Cite as: [2000] EWHC 208 (Comm)

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IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		26 January 2000

HONOURABLE MR JUSTICE THOMAS

There are before the court four questions of construction of an agreement for the manipulation (handling) of crude oil at the Greek port of Salonica (Thessaloniki) made in March 1993 between the Claimants (Jetoil) and the Defendants (Okta) who operate a refinery in Skopje, in the Former Yugoslav Republic of Macedonia. Before setting out the questions, it is necessary to explain the background.

Background

In the early 1970s OHIS, a state enterprise of the Federal Republic of Yugoslavia engaged in the chemical business, decided to construct with the assistance of the USSR an oil refinery at Skopje which was in the then Yugoslav Republic of Macedonia. Another Yugoslav state enterprise, Jugopetrol was also interested in this project. It was intended that the refinery would process Russian crude oil supplied under barter arrangements.

By far the easiest way of transporting oil to Skopje was through the Greek port of Salonica and then by rail to Skopje where the Mamadakis family had two crude oil discharge and storage installations:

•    One was owned by Jetoil, a company of which Mr Kiriakos Mamadakis was chairman.

•    The other was owned by Mr George Mamadakis and Co. (G Mamadakis), a company of which Mr George Mamadakis, the uncle of Mr Kiriakos Mamadakis, was chairman. Mr. George Mamadakis died in 1987. His heirs sold the company to the Hellenic Petroleum Group (Hellenic) in 1998.

There was strong competition between the two companies. Though on an operational basis the staff of the two companies had discussions, there was little direct contact between the principals as a result of a family dispute in 1968.

The 1979 contracts

In 1979, Jetoil and G Mamadakis each entered into contracts with OHIS and Jugopetrol. The contracts were materially similar; under each of the agreements Jetoil and G Mamadakis were to handle the crude oil at Salonica for a period of 5 years from the arrival of the first crude oil at Salonica. Each was for a minimum quantity of 4m metric tons of crude oil over the contract period. It is only necessary to refer to the terms of articles 1 and 28 which provided:

1. Subject of the present contract is receiving from tankers, storing and delivering crude oil which is OHIS’s property into and out from the installations of [Jetoil] in Thessaloniki, Greece.

28. As transporter by rail wagons (railway means) and as Charterers of wagons are determined by the Railway Organisation of Skopje (ZTP-Skopje) and FERSPED SKOPJE. As importer of crude oil its determined by Jugopetrol-Skopje. Both will be subsigners of the contract.

Each contract was signed by OHIS and in accordance with article 28, Jugopetrol and the railway organisation ZTP and by Jetoil and G Mamadakis respectively.

It was the evidence of Mr Kirinkos Mamadakis, in his affidavit evidence and in his oral examination, that the requirements of the refinery were split evenly between Jetoil and G Mamadakis; that evidence was supported by the affidavit evidence of Mr Kardamakis, a consultant to Mr. Kiriakos Mamadakis who explained that the purpose of having two agreements and using both companies was to ensure that one installation was always available in the event of the other suffering an accident. Mr Kiriakos Mamadakis also stated that,

as the capacity of the refinery was planned to be 2.5m metric tons, it was necessary to use both G Mamadakis’ and Jetoil’s facilities to cover that quantity. There was no substantial dispute about that evidence and I accept it.

It is clear that neither of these agreements gave exclusive rights to Jetoil or G Mamadakis; their protection was that each agreement contained a minimum quantity.

Amendments to the 1979 Jetoil contract

The refinery did not come on stream until 1982 and the first shipment of oil arrived at Salonica on 4 September 1982; it was agreed between the parties the contracts would run from that date. By that time there had been a reorganisation of the ownership of the refinery and of the distribution system within Yugoslavia. As a result, OHIS was replaced by Rafinerija za surova nafta Skopje RO” (Refinery Skopje) and Jugopetrol by “Makpetrol Export-Import” (Makpetrol).

Amendments were made to both of the 1979 contracts; the amendments to the contract with G Mamadakis were not before the court, though the amendments to the Jetoil contract were.

In 1984, two addenda were made to the Jetoil agreement.

•    On 6 June 1984, it was amended by addendum 1; this provided that payments due to Jetoil would be made by “the Refinery Skopje i.e. Makpetrol Skopje...” Mr Kiriakos Mamadakis’ evidence was that Jugopetrol and then Makpetrol paid the fee; I accept that evidence as it is consistent with the invoices and also with other evidence to the effect that Jugopetrol and then Makpetrol were the state enterprises who made the importation.

•    On 13 July 1984 addendum number 2 formally recorded that the replacement of OHIS by Refinery Skopje and of Jugopetrol by Makpetrol. This addendum formally extended the contract period to 1989. Article 7 of the addendum provided:

… The annual quantity of crude oil which is to be manipulated through the Installations, amounts to 600,000 as a minimum. If the Refinery, by its own fault, does not provide for the manipulation of this quantity, Jetoil will be paid refund for each less stored ..US dollars 1.32

In 1988, there was a further addendum increasing the price payable. The contract was informally extended in 1989. In May 1990, a formal addendum was executed extending the contract until 31 October 1992 and the price again increased.

Although article 1 of the agreement stated that the crude oil was the property of OHIS (and therefore after 1982 of Refinery Skopje), in practice the crude oil was all imported by Jugopetrol and Makpetrol; the evidence of Mr Polenak (who was the manager of the company that acted as the shipping agent for the import of the crude) was that under the system of sate ownership in Yugoslavia in the 1970s and 1980s, the oil was in fact the property of the state and not OHIS; article 1 of the contract reflected the fact that the oil was to be allocated to Refinery Skopje for processing. I accept that evidence; although Mr Kiriakos Mamadakis stated in his affidavit that the oil belonged to OHIS, I do not consider this was strictly accurate and the evidence of Mr Polenak accords with the way in which the business was transacted under the 1979 agreement and the general way in which enterprises who had the responsibility for arranging imports operated in the Yugoslav state controlled economy.

1992

On 20 November 1992, Macedonia declared itself independent of the Federal Republic of Yugoslavia and became known as the Former Yugoslav Republic of Macedonia (Macedonia). Companies within Macedonia were faced with a new situation and Refinery Skopje and Makpetrol were no exception.

It was the evidence of Mr Kiriakos Mamadakis and Mr Karachalios (the present general manager of the refinery) that Refinery Skopje decided that it should compete with Makpetrol in the import of crude oil and the sale and distribution of products; as a result, an interim arrangement seems to have been made by an agreement dated 18 December 1992 between Jetoil and Refinery Skopje and on 5 March 1993, a new contract was entered into between Refinery Skopje and Jetoil and a further addendum executed to the 1979 agreements. The interim agreement of 18 December 1992 was very similar to the new contract made on 5 March 1993, but it did not contain an agreement as to price.

It was the evidence of Mr Kiriakos Mamadakis that it was decided that Jetoil should handle all the oil the Refinery imported for its own account and the oil imported by Makpetrol should be handled by Jetoil.

It will be necessary to refer in more detail to this evidence, but it is convenient first to refer to the new agreement and the addendum which were both made on 5 March 1993.

The addendum to the 1979 agreement

The addendum to the 1979 Jetoil agreement was executed by Refinery Skopje, Jetoil and Makpetrol and was to operate from 1 November 1992. It increased the price payable to US$2.35 for the period 1 November 1992 to 31 December 1994. It provided for a waiver of all claims for the period before 1 January 1993. Article 3 provided:

The annual quantity of Crude Oil which is to be manipulated through the installations, determined under Article 7 of the Annex No 2 dated 13 July 1984 amounts to 500,000 Metric tons as a minimum instead of 600,000 metric tons.

The 1993 agreement

This was drafted by Mr Kardamakis of Jetoil and entered into between Refinery Skopje and Jetoil only. It provided:

1. The Refinery wants and Jetoil accepts to manipulate via its Salonica Installations the quantities of not heated crude oil that the Refinery will buy and process for its own account in Skopje Refinery

2. Manipulation under this agreement means receiving the Crude Oil from the vessel, storing in tanks and loading on Rail wagons supplied by the Refinery with destination Skopje Refinery

3. The manipulation fee is fixed to USD 4.00 per MT for the period 1. 11. 1992 until 31. 12. 1994. If, however, during a particular calendar year i.e. 1993 or 1994, the min quantity of 500,000 MT stipulated in the “Three Parties” contract is covered, then for any quantity over the 500,000 MT manipulated through this agreement, a discount of USD 0.50 per MT will be granted.

.......

6. Jetoil wishes and the Refinery agrees to give Jetoil first refusal for the purchases of the Crude Oil that the Refinery will make for its own account.

7. This agreement is valid for 10 years starting from the date of the signature.

There was an annex to the agreement; two clauses are material

1. The ten year initial contract term can be extended by mutual agreement for another 10 years or for an indefinite period....

5. Any dispute arising under or in connection with this agreement and which cannot be amicably solved shall be referred to arbitration in London, English law will apply

The amendment to the G Mamadakis 1979 agreement

On 6 March 1993, the 1979 agreement with G Mamadakis was amended by Refinery Skopje, G Mamadakis and Makpetrol; the price for manipulation was to be US $4.00 for the period from 19 October 1992 to 31 December 1994 and both sides agreed that there were no penalties for the period up to 31 December 1992. Article III provided:

The minimum annual quantity to be manipulated during [19 October 1992 to 31 December 1994] through G Mamadakis installations in Thessaloniki will be 500,000 M. tons per year.

The agreement between Makpetrol and the Refinery

On 5 May 1993, Makpetrol entered into an agreement with the Refinery to refine 500,000 metric tons in 1993 or approximately 50,000 tons per month; the crude oil was to be supplied through Salonica.

The subsequent amendments to the agreements to which Jetoil was a party

Before turning to the evidence about the circumstances surrounding these agreements, it is convenient to set out the subsequent amendments and events.

The amendments to the 1993 agreements

On 14 September 1995, Jetoil and Refinery Skopje amended clause 3 of the 1993 agreement to the following:

The manipulation fee is fixed to USD 4.00 per MT for the period 01-11-1992 until 31 -12 1995. If however, during a particular calendar year, ie 1993, 1994, or 1995, the min quantity of 500,000 MT stipulated in the Three Parties contract is covered, then for any quantity over the 500,000 MT manipulated through this agreement a discount of USD0.50 per mt will be granted....

On 14 December 1995, the parties amended the agreement further; they agreed that for 1996, the manipulation fee should be US $4.00 and that:

If however during 1996, more than 500,000 MT of crude oil are manipulated, then for any quantity over 500,000 MT a discount of USD 0.50 per MT will be granted.

On 6 June 1997, a further addendum was agree fixing the fee for 1997 at US$4 and continuing the same discount. In May 1998, a further addendum was executed extending the terms of the June 1997 addendum until 31 December 1999.

The agreements with G Mamadakis and Makpetrol

The agreement between G Mamadakis and Makpetrol continued; new agreements were made in October 1995, 1996, 1997 and 1998; these provided for the quantities to be manipulated in those years and the fees payable.

Operation of the 1993 contract

It was the evidence of Mr Kiriakos Mamadakis, Mr Moutsakis (manager of the Import and Export Department of G Mamadakis), Mr Kardamakis and Mr Gouvatsos (who had worked for G Mamadakis from July 1960 to September 1998 and retained close contacts with that company and Jetoil), that from the time of the 1993 agreement Jetoil manipulated all the oil imported by Refinery Skopje for its own account and G Mamadakis manipulated all crude oil purchased by Makpetrol.

There were instances when Jetoil manipulated some crude oil purchased by Makpetrol, but I am satisfied that these related to occasions where the help of Jetoil was sought because of operational difficulties. This happened in relation to the shipment on The Mekhanikslauta in December 1993 and later in relation to a small quantity from The Daidalos.

It was common ground that by 1999 the 1979 agreement had been superseded. The evidence of Mr Karachalios was that he had not been able to determine when this had happened, but that it survived the coming into force of the 1993 contract. Jetoil’s evidence was that it was superseded when the 1993 agreement took effect. I do not consider that letters written by Mr Mamadakis in 1999 in which he referred to the 1979 agreement are inconsistent with that evidence; read in their context, I accept his evidence that he was referring to them as part of the history and overall context of the 1993 agreement. He also referred to that agreement because of his argument (to which I shall refer) that the 1993 agreement was also subject to a minimum quantity by reference to the 1979 agreement.

Moreover the documents produced by Jetoil subsequent to the hearing (pursuant to a request which I granted) supported the contention that after the 1993 agreement was entered into the practice of Jetoil was to invoice Refinery Skopje and not Makpetrol which they had done under the 1979 agreement.

Although this evidence might be relevant to the credibility of Mr. Kiriakos Mamadakis, it is evidence relating to the post contractual conduct of the parties and is not admissible evidence in aid of the construction of the 1993 agreement: James Miller & Partners v Whitworth Street Estates [1970] A.C. 572 and the other cases cited in Chitty on Contracts (1999 edition) at paragraph 12-124.

The privatisation of the refinery

In 1998 and 1999, in circumstances which it is not necessary to examine in any detail, the Government of Macedonia considered various proposals to privatise the refinery at Skopje. Amongst those interested in this were Hellenic Petroleum (which owned G Mamadakis) and Jetoil. Eventually the Government of Macedonia decided that the consortium led by Hellenic Group should acquire a majority holding in Refinery Skopje which changed its name to Okta (the defendants to this action). Thereafter their employees became actively involved in the management of the refinery.

Jetoil became concerned initially that privatisation might be effected by a transfer of the assets of Refinery Skopje to a new company, leaving the company with which it had the 1993 contract with no assets. It obtained an injunction from this court restraining Refinery Skopje from disposing of its assets save on terms that the 1993 agreement was honoured. After the purchase of the majority share holding by the consortium led by Hellenic, the refinery purchased crude oil for its own account but did not use Jetoil to manipulate the purchases. In October 1999, Jetoil obtained a without notice injunction to prevent the refinery using any other person to manipulate the crude oil purchased for their own account. On 1 December 1999, I discharged the injunction. The parties agreed that in the first instance four issues of construction relating to the 1993 agreement should be determined. The parties agreed that these questions and other disputes under the agreement should be determined by the court and not by arbitration.

The questions for determination

The questions to be determined were:

(a) whether clause 1 of the agreement obliges the Refinery to make exclusive use of Jetoil for the manipulation of non-heated crude oil purchased and processed by the Refinery for its own account and whether the Refinery is free to use manipulating services other than those provided by Jetoil for such purposes.

(b) whether clause 3 of the agreement obliges the Refinery to submit at least 500,000 metric tons of non-heated crude oil per annum to Jetoil for manipulation pursuant to the contract.

(c) what rights (if any) are given to Jetoil against the Refinery by clause 6.

(d) whether, upon the failure of the parties to agree a price for manipulation services from and after 1 January 2000 pursuant to the agreement:

(1) the agreement is to be treated as discharged

(2) whether any (and if so what) mechanism is available to fix such price.

At the commencement of the hearing the parties agreed that question (c) should be answered, as follows:

Jetoil obtained the right to receive an offer to supply not heated crude oil to the Refinery for its own account on the same terms including price on which the Refinery was in fact prepared to purchase.

A dispute remains to be resolved as to whether the rights under that clause remain effective or whether they have been waived as Otka asserts.

Before answering the other questions, it is necessary to refer in more detail to the evidence surrounding the circumstances in which the 1993 agreement was made.

The circumstances surrounding the 1993 agreement

I have already referred to the fact that it was the understanding of the parties at the time of the agreement that Refinery Skopje intended to compete with Makpetrol in the import of crude oil and the sale and distribution of products. It was also understood that the capacity of the refinery at Skopje, approximately 2.5m metric tons per year, was considerably in excess of the annual consumption of Macedonia which was about 800,000 - 900,000 metric tons per year.

I am satisfied that Mr Kiriakos Mamadakis knew of the 1979 agreement between Refinery Skopje and G Mamadakis and knew that the terms of the agreement were broadly similar to the terms of the Jetoil agreement, even though he may not have been aware of the precise terms of the G Mamadakis agreement. He accepted that that agreement must have had a minimum quantity to enable the investment to be recouped, but that he did not know what it was; I am also satisfied that he must have appreciated that it was in the same order as the minimum quantity in the Jetoil agreement.

The evidence of Mr Kiriakos Mamadakis as to the ending of the 1979 agreement

It was Mr Kiriakos Mamadakis’ evidence, as I have mentioned, that in and after 1993, it was understood that Jetoil would manipulate all of the crude oil imported by Refinery Skopje for its own account and that G Mamadakis would manipulate all the crude oil imported for the account of Makpetrol. When he set out this evidence in his affidavit, no reference was made to the addendum to the 1979 Jetoil agreement executed at the same time at the 1993 agreement; this provided for 500,000 metric tons to be imported annually under the 1979 Jetoil agreement between 19 October 1992 and 31 December 1994. His evidence was that that addendum was not in the file; he only recalled it when it was produced by Otka.

Although at first sight this addendum was contradictory to his evidence, he said however, that it did not change the position. The amendment to the 1979 agreement was made at a time when the economy of Macedonia was changing to a market economy from an economy where the state had purchased the crude oil and allocated it to a refinery. Jetoil was requested by Refinery Skopje and Makpetrol to deal with all outstanding claims under the 1979 agreement and to enter into an addendum to that agreement to regularise the position, as the previous addendum to the 1979 Jetoil agreement had been expressed to run only to 31 October 1992. An addendum would regularise the position after 31 October 1992 and enable the files to be closed. He said the addendum in fact only extended the 1979 contract for a short period, as the last cargo manipulated under that agreement was in February 1993; that apart, the purpose of the addendum was to cover outstanding matters and it was never intended that cargo would be shipped under it once the agreement with Refinery Skopje for its own account importation was finalised and executed.

I accept the greater part of Mr. Kiriakos Mamadakis’ evidence. I accept his evidence that it was generally intended that the oil to be imported by Makpetrol would be imported by G Mamadakis and that the oil to be imported by Refinery Skopje would be imported by Jetoil; it seems clear that no oil was in fact manipulated under the 1979 Jetoil agreement or the 1993 addendum except in the circumstances to which I have referred. He gave his evidence impressively and did his best honestly to assist the court. Moreover his evidence was supported by the documents made available after the hearing; he was the only witness who gave oral evidence as Otka did not call any oral evidence to contradict his evidence. However there is one part of his evidence I cannot accept. I do not accept that the addendum to the 1979 was only intended to regularise matters up to the time of execution; this is wholly inconsistent with the annual minimum quantity specified in the addendum and with the reference in the addendum to the 1993 agreement made in September 1995 to the minimum quantity under the 1979 agreement for the 1993, 1994 and 1995 years. Although no oil was in fact shipped under the 1979 agreement or the addenda to that agreement, it was nonetheless anticipated in March 1993 that oil might be shipped under that agreement if in the uncertain situation then pertaining in Macedonia that proved necessary in the event that Refinery Skopje did not import oil for its own account. I cannot see that there was any purpose in framing the addendum to the 1979 agreement in the terms it was made unless it was contemplated that it might be used.

Was Refinery under an obligation to use Jetoil exclusively under the 1993 agreement and was there a minimum quantity under that agreement?

Although it was accepted by Jetoil for the purposes of these preliminary issues that after the signature of the addendum to the 1993 agreement on 14 December 1995, there was no contractual provision for a minimum quantity that Refinery Skopje was obliged to provide for manipulation, they contended that there was such an obligation under the terms of the 1993 as originally agreed. Thus although therefore I can and do answer question (b) in the negative, the question as to whether there was a minimum quantity under the agreement as originally made may be relevant to the issue of exclusivity. For that reason therefore, it is convenient to consider that issue with the question of exclusivity.

It was argued by Jetoil that although there was no direct reference to a minimum quantity in clause 3, the parties had agreed a minimum quantity of 500,000 metric tons by their reference to the “Three parties” agreement - the 1979 agreement as amended. He described the parties as incorporating the concept of a minimum quantity by a shorthand reference to that agreement.

I cannot accept that submission. The purpose of the reference to the minimum quantity under the 1979 agreement was to provide for a discount if Jetoil continued to import oil under the 1979 agreement for Makpetrol. It seems to me inconceivable that, if the parties had intended a minimum quantity to apply to the 1993 contract, the parties would not simply have put a provision in to that effect. I am not surprised, given the background that they did not. It is, I have said, common ground that Refinery Skopje entered into competition with Makpetrol for the first time in 1993 and thus it is highly unlikely that they would have committed themselves to the importation of a minimum quantity of 500,000 metric tons, particularly given the fact that the total requirement of Macedonia was only 800,000 - 900,000 metric tons. Furthermore no minimum quantity was necessary in 1993 to justify the investment made by Jetoil in its installation; that had been made in 1979 and no doubt recouped by the extensions to the 1979 agreement.

I therefore approach question (a) in relation to exclusivity on the basis that clause 3 did not provide for a minimum quantity to be provided by Refinery Skopje for manipulation. Otka argued that clause 1 was not exclusive; the 1979 agreements had not been exclusive and, in the context of an addendum being executed contemporaneously to the 1979 agreement, it was inconceivable that Refinery Skopje had entered into an exclusive arrangement. The agreement gave the Refinery an option; the benefit to Jetoil was the first refusal provisions of clause 6 in relation to the purchase of crude oil.

I do not accept that argument. If the parties had intended that the 1993 would in effect provide an option to Refinery Skopje, then as a matter of language they would have expressed themselves differently; they would have referred to quantities of oil that Refinery Skopje elected or decided to have manipulated by Jetoil. They would not simply have referred to “the quantities” of oil. In my view the wording chosen pointed to the obligation of Refinery Skopje being an exclusive one imposing an obligation upon Refinery Skopje to have the oil it bought for its own account manipulated by Jetoil. I also consider that the use of the words “the Refinery wants” points to an obligation being undertaken by Refinery Skopje and not merely to it having a option.

This view also accords with the commercial purpose of the agreement in the contest of the surrounding circumstances. Refinery Skopje wanted to be sure that it would have in place the capability to have the oil it purchased for its own account manipulated at Salonica. It is consistent with the common understanding that Refinery Skopje would compete with Makpetrol It seems to me inconceivable that Jetoil would have agreed to give Refinery Skopje the option to make use of its services where no minimum quantity was stipulated without Refinery Skopje being obliged to use its services when it purchased oil for its own account. This was the only agreement to which the Refinery was a party in respect of purchases for its own account.

I reached that conclusion without regard to Mr. Kiriakos Mamadakis’ evidence that the common intention of the parties was that Jetoil would manipulate the oil Refinery Skopje imported for its own account and that G Mamadakis would import the oil which Makpetrol imported. I consider that evidence largely to be evidence of the subjective intention of the parties and thus this inadmissible. In so far as it may be admissible as to the continued effect of the 1979 agreement, his evidence is consistent with the conclusion I have reached on exclusivity.

The position after 1 January 2000

Jetoil submitted that in the event that the parties did not reach an agreement as to the price applicable to manipulation after 31 December 1999, the agreement was not discharged because in the circumstances, the manipulation fee would be a reasonable fee. They submitted that, the agreement was for a 10 year period. Though the parties had initially only fixed the price for the first year, they had, however, agreed to solve disputes amicably and if they did not succeed then to submit them to arbitration. In these circumstances, it was necessary to imply a term that if the parties did not agree a manipulation fee, the fee was to be a reasonable fee. They referred to decision of Robert Goff J in British Steel Corpn v Cleveland Bridge Engineering Co Ltd. [1984] 1 All ER 504 at 511, but that decision was concerned with the payment of a reasonable sum where a contract did not come into existence; restitutionary principles are not relevant to the question in issue.

They also referred by analogy to s. 8(2) of the Sale of Goods Act 1979 and to s. 15(1) of the Supply of Goods and Services Act 1982; s 15 (2) of the 1982 Act provides:

Where, under a contract for the supply of a service, the consideration for the service is not determined by the contract, left to be determined in a manner agreed by the contract…. there is an implied term that the party contracting with the supplier will pay a reasonable charge.

It was common ground that s 15(2) was only applicable if an agreement was found to subsist; it was Okta’s contention that the agreement did not continue to subsist if the parties did not agree on the price and other applicable terms applicable after the first year and any subsequent period for which agreement was reached. They referred me to Foley v Classique Coaches [1934] 2 KB 1 and May & Butcher v The King [1934] 2 KB 17.

In my view Otka are correct. As the cases to which I was referred make clear, there are no universal principles of construction and each case must be decided on the construction of the particular document. It is clear in my view on the construction of the 1993 agreement, at the end of the initial period for which the price was agreed, the parties had to agree not only the new price but also the period for which the new price was applicable; the parties did not provide any mechanism for the fixing of these matters in default of agreement. Although the contract contained an arbitration clause, it was accepted by Jetoil that this was no different to a clause by which the parties agreed to refer the matter to a court; in other words there was nothing distinctive about the choice of arbitration. I do not therefore regard the contract as containing any special mechanism for the fixing of the price or the period for which it was to apply. This is an important consideration.

Moreover the agreement leaves at large questions as to whether the rate is to be affected by the volume of oil manipulated or whether if the price is fixed for a longer period, whether the price should be higher or lower. If a price was to be fixed by an arbitrator in default of agreement, some guidance would be expected as there would be no obvious market price for such work; for example, in long term pipeline contracts, provision is sometimes made for the price to be fixed by reference to the rate of return on the investment in the facility.

In my view, when the parties provided for the agreement to be valid for 10 years, they fixed the maximum period for which it was to apply. They envisaged that the parties would, after the initial period for which the price was agreed, try and agree a new price and the period for which that subsisted; however, the continued subsistence of the agreement was dependent on that agreement being reached; they never envisaged the price payable to be a reasonable one, but a price to be reached by agreement. In other words there would be a series of agreements for which the document signed on 5 March 1993 was the framework.

They had proceeded in this way under the 1979 agreement and, no doubt, foresaw no difficulty in proceeding in that way for the future, bearing in mind the period of time during which Mr. Kiriakos Mamadakis had traded with Macedonia and the dependence of the refinery on the use of the facilities at Salonica.

Conclusion

I therefore answer the questions (a) and (d) as follows:

(a) Clause 1 obliged Otka to make exclusive use of Jetoil for the manipulation of non-heated crude oil purchased and processed by Otka for its own account.

(d) If the parties fail to reach agreement on the price payable for manipulation after 1 January 2000 and the period for which that price is to subsist, the agreement ceases to have effect.