Soeximex SAS (Claimant/Buyers) v Agrocorp International PTE Ltd (Defendant/Sellers)
| Jurisdiction | England & Wales |
| Judge | MRS JUSTICE GLOSTER, DBE,Mrs Justice Gloster |
| Judgment Date | 31 October 2011 |
| Neutral Citation | [2011] EWHC 2743 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2010 Folio 1549 |
| Date | 31 October 2011 |
[2011] EWHC 2743 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Gloster Dbe
Case No: 2010 Folio 1549
Timothy Young Esq, QC (instructed by Elborne Mitchell LLP) for the Claimant
John Russell Esq (instructed by Hill Dickinson LLP) for the Defendant
Hearing dates: 1 July 2011
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an application by the claimant, Soeximex SAS ("the Buyers"), a company registered under the laws of France, pursuant to s68 of the Arbitration Act 1996 ("the Act") for an order that an award of the GAFTA 1 Board of Appeal ("the Board") in Appeal No.4195 dated 6 December 2010 ("the Award") be remitted to the Board for reconsideration of the arguments presented by the Buyers in relation to (a) the operation of the US Burmese Sanctions Regulations (31 CFR Part 5) paragraph 537.202 ("the US Regulations"); and (b) Article 14 of Council Regulation (EC) No 194/2008, as amended by Commission Regulation 385/2008 ("the EU Regulations").
Background facts and procedural history
The Buyers entered into a contract ("the Contract") for the purchase of 15,000 metric tonnes of (Burmese) "Myanmar Long Grain White Rice EMATA -25% CNF FO Conakry, Benin in Bulk" from the Defendant, Agrocorp International Pte Limited ("the Sellers"), a company registered under the laws of Singapore. The origin of the rice was expressly described as "Myanmar". Payment by the Buyers for the rice was to be by an irrevocable letter of credit in the terms set out in paragraph 3.2 of the Award. These included an express requirement in the following terms:
"L/c to allow TT reimbursement from New York bank with account number details; third party documents and to be freely negotiable in Singapore for 30 days from…".
It was common ground that, in the event, the letter of credit had to be opened by 10 th October 2008 and that the Buyers never did so. The Sellers treated that as a repudiatory breach and claimed damages.
The original GAFTA Award No 13–833 was dated 7 August 2009. The Board held two hearings of the appeal, on 8 December 2009 and on 24 and 25 February 2010. The Award was made available to the parties (subject to payment of its fees) on 18 November 2010. It provided for the Buyers to pay US$375,000 by way of damages, plus interest and costs.
The Buyers' first argument before the Board was that the Sellers had committed a repudiatory breach of the Contract before they, the Buyers, were in breach and that that breach had been accepted by the Buyers. That argument was rejected by the Board 2 and the Board's decision in relation to that argument is not challenged by the Buyers.
The Buyers' second argument was that they were relieved from performance because it would have been illegal for them to have opened a letter of credit:
i) under the US Regulations (which they alleged were relevant because the letter of credit was to allow reimbursement from a New York bank; and/or
ii) under the EU Regulations (which they alleged were relevant because English law was the law of the contract).
The Board found, against the Sellers, that both the US Regulations and the EU Regulations applied to the Contract 3. However, the Board rejected the Buyers' arguments that the Contract was, as a result, void for illegality. The Board's reasoning was as follows 4:
"7.9 The fact that the US and EU Regulations relied on by Buyers applied does not, however, of itself drive the Buyers' argument home. For them to succeed, Buyers would need to prove not only that the Regulations applied but that, on a balance of probabilities, the opening of the letter of credit required by the Subject Contract would indeed violate those Regulations. It is only such putative violation which would allow Buyers to escape from what would otherwise be a breach by Buyers of the payment clause under the Subject Contract.
7.10 For Buyers to be home and dry on the US Regulation, they would need to prove that the money payable through reimbursement under the letters of credit was payable to Burmese persons. For them to succeed on the EU Regulation, Buyers would need to prove that the moneys payable under the letters of credit was payable to the persons listed in Annex VI of the EU Regulation. The question for the Board was whether Buyers had succeeded in proving these two things on a balance of probabilities.
7.11 Buyers sought to establish that a Schedule of Shipments from Myanmar late in 2008 after the dispute had arisen between the parties to the Subject Contract was proof positive that the original suppliers of the goods destined for the performance of the Subject Contract were Burmese (for the purposes of the USA Regulation) and were listed persons (for the purposes of the EU Regulation)—and that moneys paid under the Subject Contract were eventually destined for Burma and/or for Burmese listed persons.
7.12 Looking at the evidence as carefully as we might, however, we took the view that the evidence relied upon by Buyers fell far short of what they needed to prove to establish the defence of illegality to an action for breach. In our view, all that was proven by the Schedule of Shipments was that after the dispute had
arisen between Sellers and Buyers, Sellers had sold to third party buyers in Bangladesh goods which had originated in Burma with listed persons. It did not, however, prove that the goods sold to buyers in Bangladesh were the same physical parcels of goods which Sellers had intended to sell Buyers under the Subject Contract. Neither were we presented with any evidence of an actual contract of purchase upstream from the Subject Contract between Sellers and listed Burmese persons. Neither, indeed, were we presented with any evidence that Sellers intended to pay sums payable under the Subject Contract to listed Burmese persons—much less that they had paid such persons for the same goods destined for delivery under the Subject Contract. In our view, the evidence simply did not stack up to support Buyers' contentions in this regard.
7.13 Before we leave the issue of the link between the goods sold by Sellers to Bangladeshi buyers against Buyers and the goods which had been purchased by Sellers to satisfy the Subject Contract, we need to deal with a pleading point raised by Buyers. In quantifying the losses said by Sellers to have been caused by Buyers' failure to open a letter of credit, a matter with which we shall presently deal more specifically, Sellers had suggested, at paragraph 24.4 of their Statement of Case before this Board, and as one of two alternative measures of loss, 'damages based on its actual re-sale priceof the cargo [emphasis added] at USD348'. Buyers' pleading point was that this short sentence on quantum precluded Sellers from now denying that the goods they sold to Bangladeshi buyers were indeed the goods purchased from Burmese listed persons.
7.14 We took the view that this pleading point, unsupported in any way by any evidence (as we have seen) to prove a necessary linkage between goods purchased upstream and goods sold against default, was an extremely unmeritorious and technical argument, based on an unjustifiably narrow interpretation of a phrase, i.e. 'the cargo' in a short paragraph, namely paragraph 24 in Sellers' Appeal Submissions.
7.15 For these reasons we find that Buyers did not establish, on a balance of probabilities, that the opening of the letter of credit required by the Subject Contract would violate the applicable USA and EU Regulations, such that performance of the Subject Contract would become illegal.
7.16 It follows from our findings so far—and from the fact that it was never denied by Buyers that they had failed to open a letter of credit—that, bereft of the defences which they had failed to establish (namely, the Sellers' alleged renunciation of the Subject Contract and illegality), Buyers were clearly in breach of contract by failing to open a letter of credit—and we so find."
The Buyers' arguments
Mr. Timothy Young QC, who appeared on behalf of the Buyers before this Court (but not before the Board), submitted that the Board failed to deal with two substantial and important arguments addressed by the Buyers. He submitted that this had caused the Buyers substantial injustice, since there was a high probability that the outcome of the Award would have been materially different and in the Buyers' favour, if the omitted points had been considered. Alternatively, even if the Board, having properly addressed the issues, had erred in its conclusions of law in relation thereto, and had found in the Sellers' favour, that would have afforded the Buyers the possibility of an appeal to this Court under s69 of the Act and/or a reference to the Court of Justice of the European Union.
He submitted that the basis of the Board's decision that the defence of illegality was unavailable to the Buyers, was that the Buyers had failed to prove as a matter of fact that the suppliers were "listed Burmese persons" 5. He said that the Buyers accepted that that finding of fact had been made against them and that it disposed of one issue or two distinct issues in relation to the EU Regulations. But, he submitted, that finding did not address:
i) a different and distinct argument, which had been advanced by the Buyers at the hearing of the appeal, in relation to the US Regulations, and which was not dependent on the "listed Burmese persons" argument; and
ii) an analytically distinct and substantially different point...
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