Seagrain LLC v Glencore Grain BV
| Jurisdiction | England & Wales |
| Judge | Rimer,Beatson,Gloster L JJ. |
| Judgment Date | 12 December 2013 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 December 2013 |
Court of Appeal (Civil Division).
Rimer, Beatson and Gloster L JJ.
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.
The following cases were referred to in the judgment:
Agrokor AG v Tradigrain SAUNK[2000] 1 L1 Rep 497.
Andre et Cie SA v Cook Industries IncUNK[1986] 2 Ll Rep 200.
Belgium v SpainECAS (Case C-388/95) [2000] ECR I-5121; [2002] 1 CMLR 26.
Bremer Handels GmbH v Vanden-Avenne Izegem PVBAUNK[1978] 2 Ll Rep 109.
Bunge SA v Nidera BVUNK[2013] EWHC 84 (Comm); [2013] 1 CLC 325.
Pancommerce SA v Veecheema BVUNK[1983] 2 Ll Rep 304.
Peter Dixon & Sons Ltd v Henderson Craig & Co LtdELR[1919] 2 KB 778.
R (on the application of Balding) v Secretary of State for Work and PensionsUNK[2007] EWCA Civ 1327; [2008] 1 WLR 564.
Thomas P Gonzalez Corp v Muller's Muhle Muller GmbH & Co KG (No. 2)UNK[1980] 1 L1 Rep 445.
Sale of goods GAFTA prohibition clause Sale of Ukrainian wheat on C&F terms incorporating GAFTA 48 Seller failed to perform relying on measures taken by Ukrainian customs authorities Customs requirements not executive act restricting export Seller's appeal dismissed Act had itself to restrict export not merely make it more onerous to obtain customs clearance.
This was an appeal by sellers (Seagrain) raising a question on the effect of the prohibition clause in the GAFTA 48 form of contract.
By a contract incorporating the terms of GAFTA 48, the sellers agreed to sell to the buyers (Glencore Grain) 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 1531 August 2010 inclusive at sellers option. Russian wheat was subject to an export ban at the material time and 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 cl. 18 of GAFTA 48, the prohibition clause, that the contract was therefore cancelled, and they were discharged from liability to perform. The buyers sent a notice of default and commenced 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. The GAFTA Board of Appeal and the judge rejected the sellers contention that the measures taken by the Ukrainian customs authorities, in particular requiring all customs samples to be sent to the Kyiv Research Forensic Institute Laboratory for analysis, constituted an executive act restricting export within the prohibition clause, because they did not actually restrict exports per se (see[2013] 1 CLC 919). 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.
Held, dismissing the appeal:
The judge was right for the reasons he gave. An act which only made it more onerous to obtain customs clearance might make the obtaining of clearance slower, and thus delay export, but it did not stop export from taking place eventually. The judge's decision left it open to a GAFTA board, the trade arbitrator, to find that an act which implicitly restricted export could fall within the prohibition clause. But the construction of the clause for which the sellers contended would lead to an uncommercial position because any act adjusting a customs regime which resulted in delay or disruption would fall within its scope and result in the cancellation of the contract. The sellers position that the delay or disruption should be substantial or should affect performance to an appreciable extent would not only require the implication of additional wording but also conflicted with the plain meaning of the clause. It was also difficult to apply the deeming provision in the clause to the customs authorities requirements, which were not such as could be notionally written into the contract. The construction for which the sellers contended did not fit into, and cut across, other provisions in the contract.
Beatson LJ: Introduction
1. On 3 December 2013 the court heard the first part of an appeal from the order of Blair J made on 10 May 2013 ([2013] 1 CLC 919) 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.
2. 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 (on the application of Balding) v Secretary of State for Work and PensionsUNK[2007] EWCA Civ 1327at [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.
3. 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.
4. 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.
5. 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...
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