CL-2024-000678 - [2025] EWHC 2531 (Comm)

The two definitions that encompass the possible comparator prices, in limbs (a) and (b) of Article 4(A)(1), refer to “the UK factory price applicable to other territories” and to “the Company’s price… applicable to other territories”.

The fact that the definition in limb (a) is qualified by “UK factory” means that the only prices to be considered are prices charged by AML. This is confirmed by the reference to “the Company” (i.e., AML), in limb (b).

Mr Quirk KC suggested that it should in principle be allowable to use the prices charged to retail dealers by AMLNA, in North America, and by AML China, in China; and he suggested that this was what the Tribunal had decided, in the Award at paragraph 398(1)(a). My impression from the Award is that this was not the Tribunal’s intention: the Award does not reflect either side ever advancing this argument; the only way the Tribunal could have concluded that a captive distributor’s price fell within the phrase “UK factory price” would be if they had accepted the evidence of Mr Kipferler, but they clearly refused to have regard to that evidence; and it seems significant to me that, in paragraph 398(1)(a), they repeated the text of the definition in limb (b), re-writing it so as to make it clear that it referred to AML’s price. I therefore do not read the Award in the way that Mr Quirk KC suggested. In any event, I have no doubt that any comparator price must be one charged by AML. Prices charged by AMLNA or AML China do not qualify.

The real debate between the parties, before the Tribunal and before me, related to the word “price” – whether it was restricted to prices charged by AML to a (captive) distributor, or whether it was restricted to a price fixed in the context of a commercial arm’s length relationship. Strong arguments can be and were advanced for each; each argument has its attractions, but neither is overwhelmingly compelling. In short, having had the benefit of more detailed exposition than will have been received by the Court at the stage when leave was granted, I do not find the answer obvious.

If I were considering the word “price” in the abstract, in a commercial context, I would generally assume that the parties meant a commercial price, i.e. one that resulted from arm’s length negotiation. In the context of a commercial contract such as the sale and purchase of goods, and in the specific context of a provision intended to govern how the price of the goods is to be established, I would – again, in the abstract – be, if anything, more likely to make that assumption. It is not normal for commercial parties to agree that one party can fix the price payable to it by reference to its own internal prices, which it sets unilaterally as accounting tools.

I have deliberately twice used the phrase “in the abstract”, in the preceding paragraph, but the reality is that contractual interpretation seldom occurs in the abstract. The iterative process that has now become familiar means that contractual interpretation is generally undertaken with a good deal of surrounding context – not least, whatever evidence there may be about the factual matrix.

If I knew that the circumstances comprising the factual matrix included knowledge on both sides that AMMENA was the only independent distributor doing business with AML at arm’s length, but that there were two captive distributors for whom ITPs were regularly established by AML for internal group accounting purposes, this would be important context that might well affect my abstract view.

However, this is not the position. The Award records no findings to this effect. The indications that I have received from Counsel are not matters on which I can or should rely, but they at least confirm that I cannot assume that AMMENA knew that there were any captive distributors, in April 2018. On that basis, it seems to me difficult to proceed on the basis that the parties intended the non-commercial, non-arm’s length prices fixed by AML for AMLNA and AML China to be within the scope of Article 4(A)(1).

The language of Article 4(A)(1) defines the comparator prices in terms of the UK factory price, and AML’s price to other territories. It does not expressly limit this to prices charged to distributors; nor does it expressly exclude prices charged to retail dealers – i.e., DNPs. Whether or not the language of the provision is restricted to DNPs, its natural meaning certainly includes DNPs charged by AML to retail dealers (for example, in Germany). They are, after all, UK factory prices charged by AML in territories other than the Middle East and North Africa. Mr Chapman KC accepted this.

I recognise that the Distribution Agreement is one under which AMMENA was to act as a distributor, not a retail dealer. If there were in fact other, similar independent distributors doing business with AML on a commercial, arm’s length basis, it might well be right to interpret Article 4(A)(1) on the basis that the comparator prices should be limited to the prices charged to those distributors. At any rate, it would be difficult to exclude the prices charged to those distributors. Equally, there being no other such independent distributors but only captive distributors, if there were evidence that AMMENA knew in April 2018 that there were no independent distributors but only captive distributors, that might at least assist the argument that the parties had in mind the prices charged to those captive distributors, when they agreed Article 4(A)(1).

However, those are hypothetical scenarios. The actual position is that there is no suggestion in the Award (or, if it matters, in Counsel’s submissions to me) that AMMENA knew of the existence of any captive distributors. The natural meaning of the provision includes DNPs (including the DNPs applicable to Germany), which are prices to independent, third-party entities. In my view it does not include ITPs, which are set by AML unilaterally for internal group accounting purposes. There is no sufficient basis to displace that natural meaning.