CL-2024-000080 - [2025] EWHC 1350 (Comm)

THE TRANSACTIONS

The underlying dispute concerns two contracts of sale in respect of the same cargo of Russian Milling Wheat.

The original contract (“the First Contract”) was entered into on 11 March 2022 and was for the sale by GTCS to CAFI of 28,000 mt of Russian milling wheat, with delivery C&FFO one Egyptian Mediterranean port at a price of US$ 465 per metric tonne. The contract reference number was RMW125-11032022-1. The contract contained an arbitration clause stating:

“Any dispute arising out or under this contract shall be settled by arbitration in accordance with Arbitration Rules N.125 of the Grain and Feed Trade Association, in the edition current at the date of this contract. Such Rules forming part of this contract and of which both parties hereto shall be deemed to be cognizant.

Demurrage/ Dispatch / Detention/ Laytime disputes for the port of discharge could be submitted, at Sellers’ option, to the LMAA arbitration, according to LMAA Terms (2017) or, in disputes up to 100,000 USD, to LMAA Small Claims Procedure (2017).

Arbitration to take place in London / England.”

A cargo of wheat was loaded on board the vessel “NANA LEEN” at Novorossiysk on 14 March 2022, and subsequently appropriated to the First Contract.

While the vessel was en route to Egypt, CAFI informed GTCS that it was having difficulty arranging payment for the cargo because of US sanctions against Russia. This was disputed by GTCS.

The vessel arrived at Alexandria on 21 March 2022. CAFI maintained that it was unable to pay for the goods. GTCS purported to terminate on the grounds of anticipatory breach, by an email dated 23 March 2022 stating:

“It’s clear from your numerous messages that you are not going to perform contract no. RMW …. We treat your conduct as anticipatory breach of the contract and herewith declare you in default and contract RMW… at an end. We reserve all our right to claim all our losses in due course."

CAFI responded the same day, referring to the agreed payment term of the First Contract, which excused direct or indirect non-performance due to sanctions, and saying:

“Buyers have provided supportive evidence coming directly from two financial institutions which rejected to process the payment or finance the cargo … Both of the financial institutions were declared to Sellers at the time of negotiations … However, as per contract it is clear that banks’ rejection to dealt with payment of this cargo will bring the contract to an end and cargo will become Sellers’ liability.”

On 24 March 2022 a broker, Abdullah A. Essawy of Gulltrade, sent an email to both parties suggesting that they “clear out the current situation” and “find a reasonable acceptable agreement”, noting that CAFI had suggested that they would accept a price of USD440 CIFFO Egypt provided certain documentary issues were fulfilled.

After further correspondence, Mr Essawy on 26 March sent a message to the parties summarising the situation. The documents were being despatched from Arab Bank, Switzerland, to Mashreq Bank, with payment, as agreed, to be against new documents with instructions provided by CAFI/Venus (Venus being CAFI’s sister company), and invoices priced at USD440 per metric ton were expected to be paid immediately.

On 28 March CAFI/Venus sent an email to Mr Essawy, copied to GTCS, summarising what had been agreed as follows:

“as agreed between you and Mr Abdel Fadil that you will furnish us by:

1.

Cancellation for the old contract.

2.

New contract by the new terms agreed mentioned that N.O.R. will be tendered after the vessel berthed on the discharge berth.

3.

You have to instruct the marine agency to ask port authority to address the vessel to Dekheila port …

Those should be done today.”

Mr Essawy replied to CAFI, copied to GTCS, confirming point 1 with the one word “Agreed”. On point 2, GTCS disagreed as the vessel had already been there a week and laytime had to start counting from the moment the vessel entered the line-up of El Dekheila port. On point 3, agents had already been instructed to divert the vessel to El Dekheila. Later the same day, Mr Essawy sent a message to both parties with the reference number for the new contract and stated that a draft would follow shortly.

The Second Contract was then concluded. This was a new form of contract with reference GTE25032022, backdated to 25 March 2022 (recorded in the Appeal Award as 22 March 2022), for the sale by GTCS to CAFI of the same quantity, 28,000 metric tons, of Russian milling wheat at a price of US$ 440 per metric tonne. (The Appeal Board referred to the Second Contract as the “re-sale”). The Second Contract contained a Termination Clause stating:

“Both parties have agreed that Contract No. RMW125-11032022-1 dd. 11.03.2022 [i.e. the First Contract] … is terminated and considered void.”

The Second Contract was signed and stamped by both parties. It contained an arbitration clause in the same terms as the First Contract.

On 29 March 2022 CAFI wrote to GTCS and Mr Essawy in respect of documentary instructions and payment, and in the same message requested the Second Contract “with the new terms specially the lay time and NOR which should be start when vessel berthed”. CAFI said it was waiting for these in order to effect payment.

On 1 April 2022 at 10:06 CAFI provided GTCS with a confirmation of a SWIFT payment for USD12,320,000 with a value date of 31 March. On the same day, at 10:35, GTCS sent the Second Contract, signed and stamped, to CAFI.

On 10 April 2022, the vessel berthed and commenced discharge. She completed discharge and sailed on 12 April.