The Court of Appeal has today handed down an important judgment as to the effects of CPR Part 36 and in particular the Court's powers to award enhanced interest. It is the latest decision in a long-running dispute between Petrom (a Romanian oil company) and Glencore, Glencore having deceitfully sold "counterfeit" cargoes of crude oil to Petrom's predecessors in title during the 1990s.

The Chancellor (with whom Kitchin and Floyd LJJ agreed) upheld Petrom's argument that the powers to award enhanced interest on both damages and costs (at up to 10% over base) were not confined to notional compensation for the inconvenience of the litigation or the time value of money, as Glencore had contended. Rather, the Court could use the discretion to create an appropriate incentive towards settlement and/or to mark the court's disapproval of improper or unreasonable conduct.

Glencore's conduct in the litigation was here described as "deplorable, if not outrageous", the company having based its defence to liability on the evidence of liars and blankly refused to engage in any settlement process. In keeping with the thrust of the CPR since the Jackson reforms, it was appropriate to use both the carrot and the stick to promote good behaviour by litigants. In the circumstances, and whilst observing that appeals against the exercise of the judge's discretion are likely to be rare, the Court of Appeal awarded Petrom the maximum allowable enhancements of 10.5%.