Public Company Rise v Nibulon SA

Under the GAFTA prohibition clause, a clause requiring sellers to obtain export licences is read together with, and qualified by, the prohibition clause where the provisions can sensibly operate together. The clause is not confined to a total export ban. It may apply to a partial restriction or other qualifying event which restricts export. Sellers must also prove a causal connection between the qualifying event and their inability to perform. The word “prevent” in the clause forms part of the deeming provision and does not define the qualifying event. Where an arbitration tribunal has not determined causation, and causation is a mixed question of fact and law, the court should remit the matter to the tribunal.

The Sellers appealed under section 69 of the Arbitration Act 1996 against an award of a GAFTA Board of Appeal in favour of the Buyers. The dispute concerned three contracts for the sale of Ukrainian feed corn. Each contract required the Sellers to obtain export licences and incorporated the GAFTA prohibition clause.

Ukrainian quota restrictions limited the quantity of grain that could be exported. The Sellers were unable to obtain the necessary licences and purported to cancel the contracts under the prohibition clause. The Board of Appeal held that the licence obligation was absolute, that the prohibition clause operated only in the case of a total ban, and that the Sellers were restricted rather than prevented from making shipments.

The central issues were the relationship between the two contractual clauses, whether the prohibition clause required a total ban, and whether the quota restrictions caused the Sellers’ inability to perform.

1. The appeal was allowed to the extent that the legal questions were answered in favour of the Sellers, and the Award was remitted to the Appeal Board for further consideration.

2. Contractual provisions must be read together wherever possible. There is no inconsistency merely because one provision qualifies or modifies another. Clause 17 of GAFTA78 therefore qualified clause 11.3, rather than being overridden by it.

3. Clause 17 was not confined to a prohibition amounting to a total ban. Its wording expressly covered an event restricting export, whether partially or otherwise, and applied to the extent of the total or partial restriction.

4. Reliance on clause 17 required proof of a qualifying event and proof that the event caused the Sellers’ inability to perform. It was insufficient to show only that exports were generally restricted. The relevant question was whether the quota restrictions caused the Sellers’ inability to obtain the export licences required for shipment.

5. The Appeal Board had treated the word “prevent” as part of the definition of the qualifying event, or had failed clearly to address the necessary causal question. The word formed part of the clause’s deeming provision. Causation was a mixed question of fact and law for the Appeal Board, and the court could not determine it confidently from the Award.

6. The court accordingly answered the three questions of law as follows:

   • clause 17 qualified clause 11.3;
   • clause 17 was not limited to a total ban; and
   • a restriction, rather than prevention, could constitute the qualifying event, but the event had to cause the inability to perform.

The judgment concerned a section 69 appeal from an award dated 23 April 2014 made by a GAFTA Board of Appeal. The Award was remitted to that Board for determination of whether the quota restrictions caused the Sellers’ inability to obtain the necessary export licences.