Case filed against PSO in US court

ICC Chemical accuses PSO of breach of contract in oil import.


Zafar Bhutta February 27, 2012

ISLAMABAD: ICC Chemical Corporation has filed a case against Pakistan State Oil (PSO) in a US court, alleging that PSO has caused losses to it by breaching a contract for import of base oil.

The case pertained to a contract for import of base oil won by ICC Chemical, but a complaint later from competitor H&H Trading House that PSO had suffered a loss of $2.7 million in the contract halted the whole process, forcing ICC Chemical to approach the court.

In a notice served on PSO, New York attorneys in the lawsuit filed in the Southern District of New York said ICC Chemical, headquartered in New York, had placed an order for 2,000 tons each of base oil group 11, N-150 and N-500 that was to be located at Taiwan in November 2011 and delivered in Karachi, Pakistan.

According to court documents, ICC Chemical said PSO was to produce an irrevocable letter of credit (LoC) to the plaintiff (ICC) at Habib American Bank in New York. PSO issued the LoC on October 26, 2011 in which it was provided that base oil would be located at Taiwan on or about November 15, 2011.

“There were numerous changes required to be made to the terms of the LoC and on October 26, 2011, the plaintiff made and discussed these changes with the defendant PSO which agreed that an amended LoC would be issued forthwith,” ICC said, adding because time was of the essence and a vessel needed to be secured, the plaintiff signed a charter party on October 28, 2011 for the vessel ‘Liquid’ which was to arrive at port on or about November 11, 2011 for loading.

“In spite of repeated reminders and assurances that LoC amendments would be made, the defendant PSO never made them and never produced the LoC,” ICC alleged.

As a result, ICC said it was forced to cancel the vessel charter and temporarily breach its contract with the supplier in Asia. The dead freight and detention charges of the vessel were $350,000 and the vessel owner threatened legal action against it.

“In addition, due to its breach of contract with the supplier, the plaintiff faces a potential liability of $1.4 million due to storage charges, financing and potential loss if the base oil was sold in the market as a distress sale,” ICC added.

Admitting that a suit has been filed, a PSO spokesperson said the company had filed its response and could not comment further as the matter was in the court.

An internal inquiry conducted by PSO says that allegations levelled by H&H Trading House are baseless, concocted and misleading based on mere misinformation, assumptions and unsubstantiated statements and is an attempt to subvert the tendering process and to malign the image and credibility of PSO.

“We fail to understand what standard H&H has applied to arrive at the conclusion that PSO has incurred a loss of $2.7 million by comparing two different products of different origins which is merely a blanket statement reflecting a lack of knowledge about base oil and lubricant business,” the inquiry report says.

Published in The Express Tribune, February 28th, 2012.

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