Seagrain Llc v Glencore Grain Bv
| Jurisdiction | England & Wales |
| Judge | Lord Justice Beatson,Lady Justice Gloster,Lord Justice Rimer |
| Judgment Date | 12 December 2013 |
| Neutral Citation | [2013] EWCA Civ 1627 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2013/1466 |
| Date | 12 December 2013 |
[2013] EWCA Civ 1627
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Hon. Mr Justice Blair
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Rimer
Lord Justice Beatson
and
Lady Justice Gloster
Case No: A3/2013/1466
Michael Nolan (instructed by W Legal Ltd) made written submissions for the Appellant but did not appear at the hearing
Susannah Jones (instructed by Reed Smith LLP) for the Respondent
Introduction:
On 3 December 2013 the court heard the first part of an appeal from the Order of Blair J made on 10 May 2013 dismissing Seagrain LLC's ("the sellers") appeal under section 69 of the Arbitration Act 1996 against GAFTA appeal Award 4277 ("the Award"). At the conclusion of the hearing the court dismissed the appeal. I now give my reasons for doing so.
My reasons are substantially the same as those given by the judge below. It is therefore not necessary to engage in detailed analysis or to repeat in my own words the process of reasoning set out in his decision. As Mummery LJ stated in R (Balding) v Secretary of State for Work and Pensions [2007] EWCA Civ 1327 at [24], reported at [2008] 1 WLR 564, "there is no point in appeal court judges saying things at length simply for the sake of saying something". I am, however, under a duty to provide the reasons for my decision. In order for the reader to understand these reasons, it is also necessary for me to provide a brief summary of the factual background and to set out the material parts of the sellers' submissions.
Before doing so, I make one observation about the hearing. When seeking permission to bring their appeal under section 69 against the Award, the sellers argued that the construction of the Prohibition Clause and the decision of the GAFTA Board of Appeal raised questions of general public importance, a submission which Popplewell J accepted when granting permission. Shortly before the hearing, however, the sellers informed the court that they would not be appearing. They made it clear that this was not because they were abandoning the appeal, and invited the court to allow the appeal on the basis of the submissions in Mr Nolan's replacement skeleton argument. Their decision to pursue the appeal but not to participate in the oral hearing and to rely on Mr Nolan's written submissions is unusual. It is impossible to say whether they took this decision because of a high degree of confidence that the force of those submissions is such as to be unanswerable, a decision to save costs, which a litigant is, of course, entitled to make, or a lack of confidence about the force of the case put. Whatever the reason, the court did not have the assistance of oral submissions from Mr Nolan and had to consider the position on the basis of his written submissions and Miss Jones's written and concise and focussed oral submissions.
The contract:
The appeal concerned the proper construction of the GAFTA Prohibition Clause, clause 18 of GAFTA standard form contract No. 48 ("GAFTA 48") for the shipment of goods from Central and Eastern Europe in bulk on CIF terms. Clause 18 of GAFTA 48 provides as follows:
"PROHIBITION –
In case of prohibition of export, blockade or hostilities, or in case of any executive or legislative act done by or on behalf of the government of the country of origin or of the territory where the port or ports of shipment named herein is/are situate, restricting export, whether partially or otherwise, any such restriction shall be deemed by both parties to apply to this contract and to the extent of such total or partial restriction to prevent fulfilment whether by shipment or by any other means whatsoever and to that extent this contract or any unfulfilled portion thereof shall be cancelled. Sellers shall advise Buyers without delay with the reasons therefor and, if required, Sellers must produce proof to justify the cancellation."
The disputed questions:
The dispute raised two main questions:
i) Is it necessary for an "act" to qualify as an "executive" act "restricting export" within the Prohibition Clause for the "act" itself to be of a nature which purports to impose a restriction on exports, or does it suffice that the effect of the measure is to restrict export of the goods.
ii) Is it necessary, in order for the Prohibition Clause to have effect, for the sellers to demonstrate that they had made all reasonable efforts either to ship the goods or to try to buy replacement goods, or did it suffice for them to demonstrate that there was a qualifying executive act which had the effect of restricting the export of goods of the contractual description in the relevant period.
The first question concerns the scope of the term "executive act" in the Prohibition Clause. I shall refer to it as "the executive act" question. The second concerns whether it is necessary to show a causal connection between a prohibition or restriction and the sellers' non-fulfilment of the contract. I shall refer to this as the "causal connection" question. As a result of directions made by Gloster LJ (see [11] below) the hearing was only concerned with the "executive act" question.
The facts:
I turn to the facts. By a contract made on 6 July 2010 incorporating the terms of GAFTA 48, the sellers agreed to sell Glencore Grain BV ("the buyers"), 3,000 MT 10% more or less at sellers' option of feed wheat of Ukrainian or Russian origin C & F free-out, one safe port, one safe berth, Haifa or Ashdod. The shipment period was from 15 – 31 August 2010 inclusive at sellers' option.
It was common ground (see Award, 6.1) that Russian wheat was subject to an export ban at the material time and that the contract had to be fulfilled by Ukrainian wheat. The sellers' contention was that measures taken by the Ukrainian customs authorities had the effect of restricting the export of wheat within the prohibition clause, that the contract was therefore cancelled, and they were discharged from liability to perform. They relied on a number of actions of the Ukrainian authorities for which (see [17] below) the Board held there was no evidence. Accordingly, their case rested on letters from the Ukraine Customs Control, in a period between 29 April and 2 August 2010, strengthening the controls in relation to the export of cargoes by which customs officers took samples from the goods during loading. The letter dated 29 April related (see Award, 8.6) to sampling and analysis and contained no actual restriction of exports. A letter dated 28 July stated that completion of customs clearance should be made exclusively after receiving the results of research. The letter upon which particular reliance is placed by the sellers is one dated 2 August. It required all customs samples to be sent to the Kyiv Research Forensic Institute Laboratory for analysis.
On 2 September, in response to an enquiry by the buyers about correspondence concerning shipment under the contract, the sellers stated (Award, 4.7) that they were unable to "execute" anything from Ukrainian ports which were "fully blocked by local government for any kind of grains". The buyers sent a notice of default dated 21 September and their invoice for default damages on 27 October, and in due course their notice of arbitration in respect of a claim for damages in the sum of US$270,000 representing the difference between the contract price and the market price on 1 September 2010. On 19 October 2010 the Ukrainian authorities put in place an export quota system which, as the GAFTA Board of Appeal stated (Award, 8.7), has no relevance to this dispute.
The GAFTA Board of Appeal and the judge rejected the sellers' contention that the measures taken by the Ukrainian customs authorities constituted a restriction of the export of wheat within the prohibition clause and that they were discharged from liability to perform the contract. On the "executive act" question, the Board and the judge found that the measures required by the letters did not constitute a restriction of exports because they did not actually restrict exports per se. The fact that the effect of the sampling and testing measures required by the authorities led to delay in obtaining customs clearance did not suffice.
It was not therefore necessary for the judge to address the "causal connection" question. He did not do so because of the pending appeal from a decision of Hamblen J in Bunge SA v Nidera BV [2013] EWHC 84 (Comm), a case about the requirements of the substantially identical Prohibition Clause in GAFTA 49. Hamblen J had decided the "causal connection" question in favour of the buyers and an appeal against that decision was pending in this court. The judge considered that appeal would probably resolve that question in the present case. He concluded that, given his decision on the "executive act" question, there was nothing he could or should add on the "causal connection" question.
Gloster LJ's directions:
In an Order dated 12 August 2013, Gloster LJ directed that the appeal on the "causal connection" question in this case should not be heard until after this court handed down its judgment in Bunge v Nidera. My Lady did so because the judge's conclusion on the "executive act" question would, if resolved in the respondent buyers' favour, be determinative of this appeal. She observed that the judge in this case had resolved the first question without any reference to the second.
The appeal in Bunge v Nidera was...
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Seagrain LLC v Glencore Grain BV
...EWCA Civ 1627" class="content__heading content__heading--depth1"> [2013] EWCA Civ 1627Court of Appeal (Civil Division).Rimer, Beatson and Gloster L JJ. Seagrain LLC and Glencore Grain BV. Michael Nolan (instructed by W Legal Ltd) made written submissions for the appellant but did not appear......