Seagrain LLC v Glencore Grain B V

An executive act under the GAFTA Prohibition Clause must be a formal governmental restriction on exports. The clause does not extend to every act by an official body which causes delay or disruption. Whether an act qualifies depends on its nature and the particular facts, and is primarily a matter for the specialist GAFTA tribunal. The seller must produce proof justifying cancellation. The court may give considerable weight to the tribunal’s assessment of trade practice and commercial circumstances.

The sellers appealed under section 69 of the Arbitration Act 1996 against a GAFTA appeal award upholding the buyers’ claim for damages for wrongful repudiation. The contract concerned Ukrainian or Russian feed wheat. Russian exports were banned, while Ukrainian customs had introduced inspection and laboratory arrangements which allegedly delayed exports during the contractual shipment period. The sellers argued that those measures were executive acts restricting export under the GAFTA Prohibition Clause and that they were therefore discharged. The central issues were the meaning of an executive act restricting export and whether the sellers had to prove reasonable efforts to perform or obtain replacement goods.

1. Appeal dismissed. The GAFTA Board had been entitled to reject the sellers’ reliance on the Prohibition Clause.
2. The expression “any executive ... act” must be construed in context. It means an act done by or on behalf of the government which is in the nature of a formal restriction on exports. It does not include every action by an official body which has the effect of restricting exports. The court should not impose a prescriptive interpretation, since factual situations will differ and specialist GAFTA tribunals are best placed to assess them.
3. The revised clause could be notionally written into the contract in terms of the restriction. The requirement that samples be sent to a particular laboratory lacked the necessary clarity and did not constitute a qualifying executive act on the facts. The Board had not treated an outright ban as an essential legal requirement.
4. The court gave considerable weight to the views of the trade tribunal, consistent with Andre et Cie v Cook Industries Inc [1986] 2 Lloyd’s Rep. 200. The sellers had failed to produce proof justifying cancellation.
5. The Board’s additional finding that sellers had to show that they had tried all reasonable avenues to perform or obtain replacement goods raised a causal-connection issue. In view of the decision on the first question and the pending appeal in Bunge S.A. v Nidera S.A. [2013] EWHC 84 (Comm), the court declined to add to the law on that issue.

The sellers appealed under section 69 of the Arbitration Act 1996 from GAFTA Appeal Award No. 4277 dated 20 August 2012. Permission to appeal was granted by Popplewell J on 1 February 2013. The High Court dismissed the appeal.