Ukraine export restrictions sparked dispute

Posted: 8th July 2014

Ship22A contract dispute triggered by a decision of the Ukrainian authorities to restrict grain exports resulted in lengthy arbitration procedures and a High Court hearing, and culminated in a ruling that a shipping deal was prematurely terminated.

The sellers had agreed to supply the buyers with 30,000 metric tonnes of Ukrainian corn. The buyers’ ship was alongside the wharf when the export restrictions were imposed. The sellers tried to obtain an export licence but ultimately purported to terminate the contract.

Arbitrators held that the buyers had validly extended the contract for 21 days and that the sellers' bid to cancel the contract prior to expiry of that period was premature. The sellers’ repudiatory breach of contract had subsequently been accepted by the buyers, who succeeded in their claim for default damages.

In dismissing the sellers’ appeal against the arbitrators’ award, the Court accepted the buyers’ argument that their interpretation of the contract, which was in industry standard form, was in line with ‘sensible commercial give and take’. In accordance with the natural and ordinary meaning of the relevant clause, the buyers had an unqualified right to extend the contract period.