Mercuria Energy Group’s lawsuit against the Baltic Exchange, which opened in the London High Court on October 26, is a fight over who bears the cost when a benchmark stops describing a real market. Mercuria argues the Baltic should have suspended its TD3C assessment, the benchmark rate for 270,000 tonne crude cargoes from the Middle East to China, in early March after US and Israeli strikes on Iran made transit through the Strait of Hormuz nearly impossible. It asks the court to declare the assessments published since then invalid. Mercuria held large short positions in TD3C derivatives, used to hedge its tanker fleet’s earnings and accounting for between a quarter and a half of open interest according to its own trader’s witness statement, so it lost on the derivatives while its ships could not earn the soaring physical rates.
The Baltic Exchange’s lawyers told the court that granting the claim would have “highly destabilising effects” on global shipping markets, because the rate has been used in more than eight months of trading by an indeterminate class of third parties. Mercuria has withdrawn the loss claim of hundreds of millions of dollars from its original filing and now seeks declaratory relief only; its opening submissions still gave an illustrative figure of about $13.8 million a month in hedging losses for a single vessel.
Court documents made public this week added a second front. The Baltic has received two whistleblower claims of attempted manipulation of TD3C since the war began, Bloomberg reported on October 30. One claim was against Mercuria itself, concerning a March 17 charter circulated to brokers at 350 Worldscale points, well below the published rate; the Baltic’s investigation did not establish that the benchmark had been manipulated. A second claim, against an unnamed company, remains under investigation. Mercuria’s lawyers said it “strongly and categorically rejects any allegation of wrongdoing” and argued the allegations are irrelevant to the trial.
The third party in the room is Hunter Group ASA, the Oslo-listed tanker owner, whose executives are attending the hearing. Bloomberg reported on October 31 that Hunter has about $100 million tied to the outcome through a separate charter dispute with Mercuria linked to the same TD3C index. The case is now the reference point for every charter and derivative contract written on the benchmark since March.