Glencore Xstrata has begun legal proceedings in the Jamaican and English courts against Jamaica-based Clarendon Alumina Production (CAP) after it struck a valuable deal with Noble Group, according to a filing with the US Securities and Exchange Commission.
Glencore Xstrata alleges that delivery of alumina to Noble under a sales agreement with government-owned CAP would mean CAP was in breach of its contractual obligations to Glencore, based on its understanding of CAP’s alumina production forecast.
The legal proceedings could have a “material adverse effect” on CAP’s ability to make payments on its outstanding debt, according to the filing, and could also affect its contractual obligations, including supply contracts.
The filing also states that, on July 19, Glencore Xstrata applied for and gained an interim injunction in the Jamaican courts to stop CAP from delivering a planned shipment of alumina to Noble.
Glencore alleged that CAP’s financial situation would mean CAP would be unable to pay if any financial judgment were made against it, the filing said. On July 22, Glencore made a claim for “substantive action” in the English courts.
CAP successfully gained a discharge of the interim injunction on July 24, allowing it to make its first shipment of alumina to Noble on July 31, but the other legal action is understood to be ongoing.
In the action, Glencore is seeking “declaratory relief and monetary damages”, the SEC filing said, and is also seeking an injunction against CAP to keep it from supplying alumina to Noble unless CAP first has enough alumina available to cover annual quantities due to Glencore.
CAP disagrees with Glencore’s interpretation of the agreements and will defend itself in the proceedings, the filing added. However, it also stated that CAP can offer no assurances that it will win in such proceedings.
As it interprets the agreements with Glencore, CAP believes it will have enough alumina to fulfil its commitments. Jamaica does not have direct responsibility for CAP’s commitments under the Glencore agreements.
Under these arrangements, CAP is required to supply Glencore with specified annual amounts of alumina for the term of the agreements.
According to a news report on the Noble website, in a statement on August 2, Jamaican energy minister Phillip Paulwell said the agreement with Noble could provide the opportunity to “finalise new investor relations”, including an energy solution for the Alcoa-owned Jamalco plant.
Glencore declined to comment. The Jamaican government was not available for comment at the time of writing.