“VACCESS”. That AstraZeneca contract – terms and conditions apply.

Following last week’s storm in a vaccine vial between the EU, the UK, and AstraZeneca, a redacted version of the contested contract was published last Friday. Here are the salient provisions, with cl. 18.7 being relevant in the event of the UK placing an embargo on export of vaccines produced at plants within the UK. Clause 5.1 imposes the obligation to use” best reasonable efforts” to manufacture the initial Europe doses. Cl 5.4 again refers to the use of best reasonable efforts to manufacture the vaccine at manufacturing sites within the UK, including those in the UK. This seems to be at odds with what the EU President stated on 29 January that the “best-effort” clause was only valid as long as it was not clear whether AstraZeneca could develop a vaccine.

In construing cl. 13(e) reference needs to be made back to cl.5.1 in determining what “conflicts with or is inconsistent in any material respect with the terms of this Agreement or that would impede the complete fulfilment of its obligations under this Agreement.”

Under clauses 18.4/5 the contract is subject to Belgian Law and Belgian jurisdiction.

“5.1 Initial Europe Dose. AstraZeneca shall use its Best Reasonable efforts to manufacture the Initial Europe Doses within the EU for distribution, and to deliver to the Distribution  Hubs, following Eu marketing authorization, as set forth more full in Section 7. Approximately…..2020 Q1 2021 and (iii) the remainder of the Initial Europe Doses by the end of …..

5.4 Manufacturing Sites. AstraZeneca shall use its Best Reasonable Efforts to manufacture the Vaccine at manufacturing sites located within the EU ( which for the purpose of this Section 5.4. only shall include the United Kingdom) and may manufacture the Vaccine in non-Eu facilities, if appropriate, to accelerate supply of the  Vaccine in Europe….

13 Representations and Warranties.

AstraZeneca represents, warrants and covenants to the Commission and the Participating Member States that:

(e) it is not under any obligation, contractual or otherwise, to any Person or third party in respect of the Initial Europe Doses or that conflicts with or is inconsistent in any material respect with the terms of this Agreement or that would impede the complete fulfilment of its obligations under this Agreement.

18.7. No liability of either party for failure or delay caused by or results from “events beyond the reasonable control of the non-performing party including…embargoes, shortages…(except to the extent such delay results from the breach by the non-performing Party or any of its Affiliates of any term or condition of this Agreement.

The situation or event must not be attributable to negligence on the part of the parties or on the part of the subcontractors.

The non-performing Party shall notify the other Party of such force majeure promptly following such occurrence takes place by giving written notice to the other Party stating the nature of the event, its anticipated  duration (to the extent known) and any action being taken to avoid or minimize its effect. The suspension of performance shall be of no greater scope and no longer durations than is necessary and the non-performing Party shall use Best Reasonable Efforts to remedy its inability to perform and limit any damage.”

Canada and the UK are the countries that have ordered the most vaccines per head of population at 9.6 and 5.5 per person respectively. The figure for the African Union is 0.2 per person.


Apparent good order and condition: apparent to whom?

Shippers are in the nature of things in a position to know rather more about a cargo they are shipping than the carrier who transports them. This can cause problems, as appears from the Court of Appeal’s decision a couple of days ago in Noble Chartering v Priminds Shipping [2021] EWCA Civ 87. The Tai Prize, a 73,000 dwt bulker owned by Tai Shing Maritime, was voyage-chartered by Priminds from time-charterers Noble to carry a cargo of Brazilian soya beans from Santos to Guangzhou in southern China. They presented clean bills of lading to agents who signed it on behalf of the head owners Tai Shing. On arrival the beans were mouldy and damp; this was due to the fact they had been shipped too wet, something which the master had had no reason to suspect, but which Priminds ought to have realised.

The consignees sued Tai Shing in China and got $1 million (in round figures). Tai Shing claimed in turn from Noble, who settled the claim for $500,000. Noble then claimed this sum from Priminds. They relied on their right of indemnity under the charter and an allegation that a dangerous cargo had been shipped, and also argued that the bill of lading that Priminds had sent for signature had been inaccurate, since a cargo which Priminds had had reason to know was over-wet could not be said to have been shipped in apparent good order and condition. The first two claims were rejected by the arbitrator, and nothing more was heard of them; but the arbitrator allowed the third claim. HHJ Pelling on a s.69 appeal held that she had been wrong to do so (see [2020] EWHC 127 (Comm)). Noble appealed.

The issue was simple. “Apparent good order and condition” means good order and condition “as far as meets the eye” (e.g. Slesser LJ in Silver v Ocean SS Co [1930] 1 K.B. 416, 442). But whose hypothetical eye matters here? The master’s, or that of the shipper presenting the bill? The Court of appeal had no doubt: upholding HHJ Pelling, it decided that it was the former. The master here had had no reason to suspect anything wrong with the soya beans in Santos; Tai Shing had there therefore been entitled (and indeed bound) to sign a clean bill. It followed that the clean bill presented had been correct and not misleading, and equally that Priminds had not been in breach.

The arbitrator’s decision on this had, we suspect, been seen by most as heterodox. We agree, and join what we suspect will be the majority of shipping lawyers in welcoming the Court of Appeal’s decision. It is worth making three points, however.

First, this is actually a hard case, even though it does not make bad law. It is difficult not to have some sympathy for the head owners (and through them Noble). On any normal understanding of the law the head owners, having issued entirely legitimate clean bills, were not liable to the receivers at all. It is perhaps tactful not to inquire too closely into how judgment was given against them for $1 million. Priminds, by contrast, were pretty clearly liable for a breach of contract in shipping wet beans. One can see why the head owners’ P&I Club might have felt sore at becoming piggy-in-the-middle and bearing a loss that by rights ought to have fallen on the shippers who escaped scot-free.

Incidentally, it is worth noting one possibility in this respect. A consignee not infrequently has the option, in a case where it is alleged that a clean bill was improperly issued, to sue either the carrier for failing to deliver a cargo in good condition, or his seller for breach of contract in not shipping it in like good condition. It is in most cases more convenient to sue the carrier, if necessary by threatening to arrest the ship at the discharge port. Nevertheless all may not be lost for P&I interests. It seems at least arguable that they may be able to lay off at least some of the risk by bringing contribution proceedings against the seller as a person who, if sued by the consignee, might also have been liable for the same loss. They do not even have to show that they were in fact liable to the consignee: merely that the claim alleged against them was good in law (see s.1(4) of the Civil Liability (Contribution) Act 1978).

Thirdly, Males J in the Court of Appeal at [57] left open the possibility of the liability of a shipper who presented clean bills when he actually knew of hidden defects in the cargo. This will have to remain for decision on another day. But it is certainly hard to have much sympathy for such a shipper: particularly since there are suggestions that a carrier who knows that a cargo is defective cannot legitimately issue a clean bill merely by looking complacently at impeccable outside packaging and then sanctimoniously turning a Nelsonian blind eye to the horrors he knows lurk beneath it (see e.g. Atkinson J in Dent v Glen Line (1940) 67 Ll.L.L.R. 72, 85).

When will a court say “Don’t draw down that bond …” ?

How easy should it be to stop a beneficiary claiming on a performance bond or standby letter of credit? Two cases reported this week (though one was actually decided about ten weeks ago) lead to slightly divergent results.

The first case, decided on Thursday under the name ETC Export Trading v AplasImporter [2020] EWHC 3229 (QB), revolved around what one might diplomatically call a somewhat rum demand under a performance bond. Under a contract containing an English law and London arbitration clause, Swiss sellers agreed to sell $21 million-odd worth of wheat to Aplas, an Ethiopian importer, to be paid for by letter of credit, with (as usual) no duty in the seller to perform unless and until the credit had been opened. In addition the seller was required to open a 10% performance bond in favour of Aplas, Aplas expressly agreeing not to invoke or claim under the bond unless the seller was in breach.

The seller duly instructed its bank, BNP, to open the performance bond. For reasons unexplained, this was done rather indirectly: an outfit called Berhan opened the actual bond, receiving a counterguarantee from Commerzbank, which in turn received another counterguarantee from BNP.

As it happened the deal went off because Aplas never opened the necessary credit. Shortly later, however, Berhan made a demand on Commerzbank, alleging a demand against it by Aplas, though Aplas was to say the least evasive when asked whether it had actually made any such request. ETC was obviously concerned that it would lose something over $2 million, with little hope of recovery, if the demand was paid by Commerzbank and passed back to BNP. It sought an injunction against Aplas on the basis that Aplas would be in breach of contract were the bond to be called. The relevant order sought was an order to Aplas not itself to call in the bond, and to prevail upon Berhan not to take any steps to claim in its name against Commerzbank. ETC also sought an order against Berhan preventing it from making a claim.

ETC succeeded. Having rightly bulldozered away a rather tentative argument that the arbitration clause prevented the court intervening, Pepperall J decided that even if there was not a clear demonstration of fraud, there was a good arguable claim that Aplas would be in breach its obligation were a call to be made. In addition he injuncted Berhan from calling on Commerzbank, since in his view there was a good arguable case that there was no entitlement to payment under the original bond.

His Lordship was clearly right to accept that intervention was possible even where there was no clear case of fraud. Although generally speaking it is not a breach of contract to call on a bond where nothing is in fact owing, provided you do so in good faith (see eg Costain International v Davy McKee (London) Ltd, unrep., CA, 26.11.1990), an express obligation only to call it in when entitled to payment is on a different footing: see Sirius International Insurance v FAI General Insurance [2003] 1 WLR 2214 and more recently Simon Carves v Ensus UK [2011] EWHC 657 (TCC); [2011] B.L.R. 340. Slightly more interesting is the basis of the claim against Berhan, which was not in contractual privity with ETC. Although it is clearly a good idea for the court to be able to injunct unjustified calls on bonds right down the line of promises and counterguarantees, it is not entirely clear what the foundation of this right could be. Perhaps one should draw a discreet veil over that aspect of the case, but remind lawyers that there remains room for serious argument here.

More problematic, however, and certainly more significant, was Pepperall J’s use of words like “good arguable claim” as the standard for court intervention. This is problematical, in that the traditional standard for injuncting the beneficiary, as much as the provider, of a bond is the test sometimes called the “enhanced merits” test. Under that test, the claimant must proffer clear evidence plus strong corroboration. Otherwise, the reasoning goes, we lose the benefit of regarding the bond as effectively a cash substitute in the hands of the beneficiary.

Admittedly on the facts of ETC itself the distinction between the two tests probably didn’t matter, since it is difficuIt to avoid concluding that the drawdown was indeed clearly prohibited under the contract. But the point is an important one, and a different answer is suggested by Foxton J in the second case, decided last September, Salam Air v Latam Airlines [2020] EWHC 2414 (Comm).

Salam involved a claim on a standby letter of credit, similar in many ways to a performance bond, given to back rental payments under a dry aircraft lease. The lessee was an Omani airline in dire straits following COVID, that was desperate to escape the contract. (It even went so far as a quixotic, if hopeless, plea that the whole arrangement was frustrated by the effective closure of Omani skies to virtually all but cargo planes). The claim by the lessee was made against the lessor to prevent it operating the standby credit.

Foxton J was having none of it, and dismissed the application. This was unsurprising. On the facts the rentals remained owing, and even if they did not there was no express promise not to invoke the credit. It followed that the doctrine of autonomy applied as of course.

His Lordship did go on to say, however, that in his view all claims to prevent payment under letter- of-credit-type instruments, be they letters of credit proper, bonds or standby credits, were on principle subject to the “enhanced merits” test. Furthermore, this applied whether they were brought against the credit institution giving the bond or the beneficiary wishing to claim on it, and whether the basis of the claim was fraud or breach of an express undertaking not to claim under the instrument. (Although unable entirely to escape the Court of Appeal outlier in Themehelp v West [1996] QB 84 which might suggest the contrary, he essentially said it ought to be limited to almost identical facts). In other words, the beneficiary’s right to have the instrument treated as cash in his hands trumped any arguments based on breach of contract.

Which leaves us with the question: where there is an alleged express undertaking not to draw on an instrument, should we be talking “good arguable claim” or “enhanced merits”? The view of this blog is the latter. Absent a clear demonstration of a reason for unenforceability, such bonds should remain as good as cash in the bank, and subject to the doctrine of “pay now, argue later”. If businessmen don’t like that, then they shouldn’t agree to give bonds, or if they do they should provide for them to be operable only against some document that independently verifies the counterparty’s claim.

VAT, missing traders, and illegality

Any trader’s recurring nightmare is to find that somebody it has bought goods or services from in the UK or the EU has been guilty of VAT hanky-panky. The classic instance is missing trader fraud; the fraudster charges VAT, does not account for it, and vanishes. The difficulty facing the person who paid the VAT is that HMRC, suspicious gentlemen that they are, are apt to disallow the payment unless the trader making it really had no reason to smell a rat. But a little relief came today from Joanne Wicks QC, sitting in the Chancery Division, in the decision in Colt Technology Services v SG Global Group SRL [2020] EWHC 1417 (Ch). The case also gave some useful confirmation on where a debt is payable, which makes it worth a brief note.

Colt Technology, acting through its Italian arm, bought voice trading services (i.e. super-reliable and super-secure real-time voice communication facilities) from Italian company SGG, based in Rome. All went well until Colt’s auditors warned them that there seemed something fishy about SGG, which looked increasingly like a participant in a missing trader ring. Colt, no doubt concerned at its ability to sustain the relevant VAT deductions when faced with a mercenary and sceptical Revenue, suspended payments to SGG totalling, in round figures, $5 million. SGG brought proceedings in Milan for payment, which were still ongoing. But in January 2018 it took the gloves off and served a statutory demand on Colt in England.

Colt defended, and sought to enjoin presentation of a winding-up petition, on the basis that liability was disputed on substantial grounds. These grounds were based on the rules in Ralli Bros v Cia Naviera Sota y Aznar [1920] 2 KB 287 (no enforcement in England of an obligation required to be performed in a jurisdiction where performance was illegal) and Foster v Driscoll [1929] 1 KB 470 (the colourful Prohibition case making it clear that there could be no enforcement here of a contract contemplating acts in a jurisdiction where they were illegal).

They succeeded on the first ground. Arguably payment was illegal under Italian law; furthermore, since SGG were Rome-based, the presumptive rule applied that Colt as debtor had to seek out its creditor and pay it where it was. Importantly, and correctly, the judge also discounted the fact that post-contract SGG had sent invoices asking for payment in California. What mattered was the contract. True, had Colt acted on these the debts would have been discharged; but this did not affect Colt’s underlying duty to pay in Italy and there alone.

Having held for Colt on the Ralli ground, the judge expressed no view on the Foster argument, namely that the contract involved a crime in Italy (duping the Italian fisc). She did, however, observe – again correctly — that on the authorities it did not seem to be engaged, since at the time of the contract Colt had had no idea of any possible plans by anyone to commit illegality.

Colt no doubt heaved a large corporate sigh of relief. But the case shows that traders remain exposed. There is something to be said for some drafting thought here. At least in the case of debtors with decent bargaining power, there comes to mind some kind of protective clause temporarily protecting a party from liability to pay when advised (say) by a lawyer or accountant that there is a possibility of missing trader fraud, unless and until the matter is settled by a suitable court or other tribunal. Over to you, City firms.

Demand guarantees: interpretations and paradoxes.

Cases about letters of credit and performance bonds often raise points of intellectual interest in commercial law. Waksman J’s decision in Técnicas Reunidas Saudia Ltd v Korea Development Bank [2020] EWHC 968 (TCC), decided 12 weeks ago but only up on BAILII this week, is a case in point. It raised nice issues of contractual interpretation, and also discussed the old chestnut of what to do about non-documentary conditions. And in both cases it got the answer right: a good thing, given that quite big money (something like £8 million) turned on it.

TRS were a big construction company involved in a mega-project in Saudi Arabia. One of its subcontractors was S. The bank, a Korean corporation, issued TRS with what was effectively an advance payment guarantee, operable on first written demand by TRS, to cover TRS’s cash-flow advances to S. The guarantee, which was subject to URDG758, went on to say: “It is a condition for any claim and payment under this guarantee to be made that the funds paid as advance payments subject to the terms of the subcontract must have been received by the sub-contractor on its account number 042-117994-03 held with HSBC.”

S ceased work in circumstances at best murky. TRS called on the guarantee and provided evidence of advances made to the named account number at SABB, a Saudi associate of HSBC which traded on the connection and indeed used the HSBC logo. Meanwhile a court in Korea was asked to issue an injunction preventing the bank from paying. Caught between a rock and a hard place (it being clear that the English court would ignore any Korean court order, Korea being the place neither of the governing law nor of payment), the bank thrashed around for a reason not to pay. It eventually refused on the basis that, payment to an account at SABB was not payment to HSBC and hence the condition was unsatisfied. Waksman J was unimpressed and gave summary judgment for TRS. This he did for two reasons.

First, he said that the generic reference to “HSBC” had to be interpreted to mean HSBC or its associated banks. Not only was this what a reasonable man present at the time of contracting would have understood; it also avoided the awkwardness that would follow from any other answer, which was that the guarantee would have been waste paper from the beginning because it was subject to a condition that could not be complied with. He also added a reference to a further point, often forgotten by busy lawyers, known as the principle of misnomer. If a document referred to an entity by an incorrect name and the reference was not ambivalent between two separate entities, extrinsic evidence was admissible to show which entity was meant. This was the case here.

More interestingly, his Lordship also took the point that the condition in the guarantee was non-documentary, and said that TRS could invoke Art.7 of the URDG, equivalent to Art.14.h of the UCP600, which provides that “[i]f a credit contains a condition without stipulating the document to indicate compliance with the condition, banks will deem such condition as not stated and will disregard it”. The non-documentary condition, he held, simply fell to be excised; from which it followed that even if TRS had failed to comply with it this was irrelevant.

This has always been a matter of controversy, raising the same sort of paradoxical issue as Odysseus’s order to his crew to tie him to the mast as they sailed past the Sirens and to ignore any subsequent commands he might give (they duly disobeyed a subsequent order to untie him, thus assuring his safe arrival in Ithaca). On one argument, parties inserting a non-documentary condition are to that extent contracting out of Art.7 and so the condition still takes effect; but although accepted in Singapore (see Kumagai-Zenecon v Arab Bank [1997] 3 S.L.R. 770), this solution does have the disadvantage of leaving the provision like Cinderella: all dressed up, but with nowhere to go. In the present case Waksman J emphatically rejected it. Even if the UCP and URDG technically became binding on traders by contractual incorporation and were in no way legislative, they were a special kind of instrument not necessarily subject to the ordinary rules of contractual interpretation. And, whatever the logical problems, a court should interpret them so as to give effect as far as possible to all their provisions.

This may not be the last word, especially on Art.7 and its UCP equivalent. It is nevertheless a very sensible word. We at IISTL hope future courts will take it up, amplify and confirm it.

Negotiating damages — maritime-style

Guest blogpost from James M Turner QC, Quadrant Chambers

In Priyanka Shipping Ltd v Glory Bulk Carriers Pte Limited (“The Lory”) [2019] EWHC 2804 (Comm), David Edwards QC (sitting as a Judge of the Commercial Court) dismissed a common law claim for negotiating damages for the breach of a memorandum of agreement (MOA) for the sale of a ship.

The decision is one of the first to grapple with the recent Supreme Court decision in One Step (Support) Ltd v Morris-Garner [2018] UKSC 20, [2019] AC 649. In that case Lord Reed’s majority judgment issued a corrective to jurisprudence which, since the House of Lords’ decision in AG v Blake [2001] 1 AC 268, had seen the award of negotiating damages at common law “on a wider and less certain basis” than had been the case before Blake.

What are “negotiating damages”? Negotiating damages “represent such a sum of money as might reasonably have been demanded by [the claimant] from [the defendant] as a quid pro quo for [permitting the continuation of the breach of covenant or other invasion of right]”: see One Step at [4]). They are “assessed by reference to a hypothetical negotiation between the parties, for such amount as might reasonably have been demanded by the claimant for releasing the defendants from their obligations” (One Step at [25]).

Negotiating damages are commonly encountered in two situations: so-called user damages in tort; and damages awarded under Lord Cairns’ Act.

A claim for user damages arises where the defendant has used or invaded the claimant’s property without causing direct financial loss: an example commonly given is riding a horse without permission. The defendant, having taken something for nothing, is required to pay a reasonable fee for the use made of the claimant’s property.

As for Lord Cairns’ Act: historically, the Common Law Courts could only award damages for past breaches, i.e., where the cause of action was complete at the date the writ was issued. For the future, litigants had to look to the Courts of Equity for orders for specific performance and injunction etc. However, the latter had no power to award damages. That inconvenience was remedied by Lord Cairns’ Act 1858, section 2 of which (now s. 50 of the Senior Courts Act 1981) allowed the Courts of Equity to award damages as well as or instead of an injunction.

Damages may be awarded under Lord Cairns’ Act for past breaches, but are assessed on the same basis as damages at common law.

Damages in lieu of an injunction for future breaches, on the other hand, cannot be assessed on the same basis as damages at common law, as by definition such damages cannot be awarded at common law. Instead, negotiating damages may be awarded.

The Issue. As will be seen, the issue in The Lory was whether negotiating damages were available at common law for past breaches of the relevant term of the MOA.

The Facts. The Defendant Seller sold the Claimant Buyer its vessel on terms that included clause 19, by which the Buyer undertook that it would not trade the vessel and would sell it only for demolition. However, the Buyer traded the vessel. By the time of the trial, the vessel was completing discharge under her second fixture and was fixed for a third. The Seller claimed damages for or an injunction to restrain breach of clause 19 of the MOA (or both).

The Outcome. The Judge awarded an injunction restraining future trading of the vessel (expressly including the third fixture). Damages could in principle be claimed for the first and second fixtures, but – because they were now in the past – only at common law.

The Judge noted that, once the vessel had been sold and delivered, the Seller no longer had any proprietary interest in it, “no right or ability to use the Vessel to trade, and no right or ability to profit from the Vessel’s use … ”. Although the Seller was entitled to be placed in the position it would have been if the contract had not been breached, “it is not obvious how any further trading of the Vessel by the Buyer … could cause the Seller any loss.” [163].

It was “no doubt” for this reason that no conventional damages claim had been made, but only a claim for a hypothetical release fee. The “critical question”, so far as that claim was concerned, was whether the Seller could bring itself within [95(10)] of Lord Reed’s judgment in One Step and show that “ … the loss suffered by the claimant is appropriately measured by reference to the economic value of the right which has been breached, considered as an asset.” [189]

Lord Reed had made clear that “that such an approach is not available in the case of a breach of any contractual right, but only where:… the breach of contract results in the loss of a valuable asset created or protected by the right which was infringed.The paragraph implicitly regards the relevant asset not as the contractual right itself but as something else, a valuable asset “created or protected by the right”.” [190]

The “valuable assets” that Lord Reed had in mind were essentially proprietary rights and analogous rights such as intellectual property and rights of confidence [193]. The Judge rejected the Seller’s submission that its right under clause 19 was within the same class [196]. The Judge regarded the right under clause 19 as more closely analogous to the non-compete obligation at issue in One Step, which Lord Reed did not consider fell within “the category of cases where negotiating damages were available as a measure of the Seller’s loss” [199].

The claim therefore failed. The Judge did, however, grant permission to appeal. We may not, therefore, have heard the last word on this topic.

James M. Turner QC appeared for the Buyers in this case on the instruction of Alex Andrews and Claire Don of Reed Smith.

Something for the New Year. INCOTERMS 2020 are coming.

INCOTERMS 2010 will be updated to INCOTERMS 2020 which comes into effect on 1 January 2020. The main changes are as follows.

Under FCA if the parties agree, the buyer, at its cost and risk, must instruct the carrier to issue to the seller a transport document (e.g. a bill of lading with an on-board notation) stating that the goods have been loaded, which the seller must then provide to the buyer.

Under CIP sellers will need to obtain cargo insurance cover which complies with Clauses (A) of the Institute Cargo Clauses (LMA / IUA) which, subject to certain exclusions, cover “all risks”, subject to the parties’ right to agree to a higher or lower level of cover.

DAT (Delivered at Terminal) now becomes DPU (Delivered at Place Unloaded).

FCA, DAP, DPU now allow the Seller to use its own transport rather than using a third party carrier.

Security obligations are made more prominent.

No implied term qualifying free standing demurrage provision in sale contract

 In Gunvor SA v CruGas Yemen Ltd [2018] EWHC 2061 (Comm) a term contract of sale was made for the sale of  gasoline by 12 monthly consignments cif Hodeidah. The buyer was named as CruGas Ltd but the claimant argued that the contract was made with CruGas Yemen Ltd, and that it had been unaware that within the relevant group there was a Cayman Islands company named CruGas Ltd. The claimant obtained performing vessels from a separate entity within its group of companies, Clearlake Shipping Pte Ltd (Clearlake), under a long-term contract of affreightment on an amended Asbatankvoy form. It claimed demurrage totalling $18m under the sale contract and claimed against CruGas Yemen Ltd and CruGas Ltd in the alternative. The defendants denied liability for demurrage on three grounds. First, the demurrage claims were time-barred by reason of a demurrage time bar provision in the COA. Second, a term should be implied into the sale contract that the claimant was required to prove the demurrage rates claimed were “in line with the market rate”. Third, the claimant had to prove that it paid the demurrage sums it claimed under the sale contract.

Phillips J first found that the contract had been made with CruGas Yemen Ltd, and then proceeded to reject all three of the buyer’s arguments. First, it was established in OK Petroleum AB v Vitol Energy SA [1995] 2 Lloyd’s Rep 160 that words of general incorporation in a sales contract concerning demurrage provisions in a separate charter did not bring in terms ancillary to the accrual of demurrage, such as time bars relating to the presentation of demurrage claims. Second, there was no justification for the implication of the term contended for, which was neither necessary for the business efficacy of the sale contract, nor would give effect to the obvious but unexpressed intentions of the parties at the time they contracted. In any event, expert evidence from a chartering expert, was that the demurrage rates were all consistent with the market, insofar as such a thing could be said. Third, the demurrage provision under the sale contract was free-standing and not an indemnity.


Remedies for delivery without production of the bill of lading

A case in the CA of some interest today. Imagine carriers or forwarding agents have delivered goods to a buyer without getting payment for them. No point in suing the buyer in 99% of such cases: and often carriers and forwarding agents will be men of straw too (remember in addition that P&I clubs won’t sub up for this sort of thing). But had you thought of suing the rich man behind the buyer who sweet-talked the forwarding agent or carrier into letting the goods go without payment? You hadn’t? It’s actually a classic case, in most situations, of inducing breach of contract: a point confirmed by the Court of Appeal in Michael Fielding Wolff v Trinity Logistics [2018] EWCA Civ 2765, upholding Sara Cockerill QC at first instance. Happy hunting.

Rotterdam Rules in Cameroon’s hat-trick of international trade conventions.


Just over a year ago on 11 October 2017 Cameroon ratified or acceded to three UNCITRAL Conventions.

  1. Cameroon ratified the Rotterdam Rules. There are now four states that have ratified. Sixteen more to go before the Convention comes into force. At the current rate we’ll be there in 2058.
  2. Cameroon acceded to the he United Nations Convention on Contracts for the International Sale of Goods (1980) (CISG) which comes into force for Cameroon on 1 November 2018.
  3. Cameron acceded to the United Nations Convention on the Use of Electronic Communications in International Contracts (2005) which came into force for Cameroon on 1 May 2018.