Court applies Japanese law in beer dispute

Posted: 1st August 2013

beerThe Court of Appeal moved into the unfamiliar territory of Japanese law to resolve a bitter dispute about the import from China by a Kent-based company of hop extract used in beer-making.

The company had contracted with a Japanese company for the import of a large volume of extract produced from Marco Polo hops that are only grown in China and are prized for their high alpha acid content. The contracts in dispute related to extract produced from crops gathered in Xinjian Province in 2007 and 2008.

The contracts had been substantially renegotiated prior to completion and had been performed on terms that were substantially less favourable to the company than those that had originally been agreed. After taking delivery of the final consignment, the company had refused to pay the contract price in excess of one million Euros.

The Japanese company sued for payment of that sum but the company argued that it had only agreed to the contract variations under duress. It accused the Japanese company of intimidation, repudiatory breach of contract and misrepresentation. The company also argued that it had lost more than $7.6 million due to the renegotiation of the contracts and counterclaimed for that sum.

The company’s arguments failed at the High Court after a judge found that the claims, both in contract and in tort, were governed by Japanese law. On the facts found by the judge, Japanese law did not confer a right on the company to rescind the variations to the contracts on grounds of duress. The misrepresentation claims failed on the basis that, even if proved, they could not be said to have induced the company to agree to the contract variations.

The company appealed against that decision on the basis that, had the case been decided under English law, it might have been able to successfully rely upon the emerging doctrine of economic duress. However, in dismissing the appeal, the Court found that Japanese law had rightly been applied to all aspects of the dispute.

Noting that the company had agreed to the contract variations and had not sought to terminate them or dispute the contract price until after receiving delivery of the goods, the Court observed that it was not suggested that the Japanese approach to construction of the contracts would differ from that of English law. The judge’s finding that the company’s agreement to the variations had not been caused by any alleged misrepresentations was as fatal to the claim in Japanese law as it would have been had English law been applied to the case.