CL-2021-000341 - [2025] EWHC 1684 (Comm)

PRINCIPAL FACTS

The Claimant is a Singaporean commodity trading company, with a branch office in Geneva, Switzerland. The Defendant is a petrochemical company registered in Sudan and located in Khartoum.

Under the Contract, the Claimant agreed to sell the Defendant 40,000 metric tonnes of gasoline +/-10% in the Claimant’s option CFR/ex-tank (“the Product”). The Product was to be delivered at one safe port in Sudan with an initial estimated arrival time of 15-20 February 2020.

Clause 8 provided that the unit price in US dollars per metric tonne CFR/ex-tank would be deemed equal to the average of the mean quotation for premium unleaded 10PPM detailed in Platts European Marketscan with a differential of US$24.20 per metric tonne. This amount would be calculated by reference to the quotations published during the month of delivery, to be determined by the date of the notice of readiness (NOR) tendered by the vessel at the discharge port.

By virtue of clause 9, the Defendant agreed to make an advance payment in Arab Emirates Dirham (AED) of the full cargo value within 3 Dubai banking days of receiving the Claimant’s commercial invoice for the Product.

Clause 12 provided for laytime of 36 hours SHINC (Saturdays and holidays included). Clause 13(A) provided for the Defendant to pay discharge port demurrage to the Claimant at the performing charterparty rate, and, if the performing charterparty was a time charter, the applicable rate would be the daily hire plus bunker costs.

Clause 17 provided that the Contract was governed by English law and that the High Court of Justice in England would have exclusive jurisdiction to settle any dispute which arose out of or in connection with it, notwithstanding the Claimant’s right to commence and pursue proceedings for interim or conservatory relief against the Defendant in any court and jurisdiction. The clause also provided:

“Promptly upon request from Trafigura, the Buyer shall notify Trafigura of an address for service of proceedings in England and Wales and the contact details of lawyers in the jurisdiction appointed to represent them.

A judgment relating to the contract which is given or would be enforced by the High Court shall be conclusive and binding on the parties and may be enforced without review in any other jurisdiction.”

Clause 30 provided:

“30.

Events of default/termination

An event of default (“Event of Default”) shall mean any of the following:

(A)

The failure of the Buyer to make any payment under the contract

[…]

Upon the occurrence of an Event of Default and during the investigation by the Seller of any potential Event of Default of which the Seller has notified the Buyer in writing. Any and all payments due from the buyer to the Seller shall become immediately due and payable and the Seller may in its sole discretion:

(A)

notify the Buyer of an early termination date (which shall be no earlier than the date of such notice) on which date the contract shall terminate (the "Early Termination Date")

[...]

If a notice of an Early Termination Date is given under this clause, the early termination will occur on the designated date whether or not the Event of Default of the Buyer is then continuing.

If an Event of Default occurs and an early termination date is established, the Seller may (in its absolute discretion) treat this contract as terminated by repudiation on the part of the Buyer. The Seller may then (in its absolute discretion) proceed to set off any or all amounts which the Buyer or one or more of its affiliates owes to the Seller or one or more of its affiliates (under the contract. Any other contract and/or on any account whatsoever) against any or all amounts which the Seller or one or more of its affiliates owes to the Buyer or one or more of its affiliates (whether under the Contract, any other contract and/or on any account whatsoever)

[...]

The Buyer shall indemnify and hold the Seller harmless from all losses, damages, costs and expenses including legal fees that the Seller would not have incurred but for the Event of Default and/or the exercise by the Seller of any of its remedies hereunder.”

(2)

Defendant’s failure to pay the sums due

The Claimant presented its commercial invoice for the Product (“the Invoice”) in the amount of AED 80,709,667.50 on 17 February 2020. In the meantime, the Claimant’s performing vessel, MT Alpine Marina (“the Vessel”), had arrived at Port Sudan and tendered NOR at 20.30 on 18 February 2020.

The Defendant failed to make advance payment within three days of receiving the Invoice (20 February 2020), as required under clause 9 of the Contract. The Claimant contacted the Defendant by telephone to ask it why this payment had not been made, and the Defendant explained that the delays were due to their transferring the funds from Sudan to the Claimant’s bank account in Dubai. The Claimant was not immediately concerned as this had been resolved within a few days in prior instances. However, as the delays persisted the Claimant became increasingly concerned that it was incurring demurrage on the Vessel.

To limit demurrage liabilities, the Claimant and Defendant agreed that the Claimant would discharge the Product into tank storage, which the Claimant leased from the Sudan Petroleum Company (“SPC”) at Port Sudan, and then deliver it to the Defendant ex-tank once payment was received.

On or about 12 March 2020, the Defendant made a partial payment in the amount of AED 1,000,000. The Defendant undertook to make a further partial payment of AED 5,000,000 the same day but did not do so.

The Defendant made further partial payments of AED 1,200,000 on 16 March 2020, AED 8,300,000 on 24 March 2020 and AED 2,200,000 on 26 March 2020. No further payments of the purchase price were made by the Defendant, and there remained an outstanding balance of AED 66,761,612.76.

The total amount of demurrage that the Claimant incurred, as a result of the Vessel waiting off Port of Sudan from 18 February 2020 to 3 April 2020, was USD 750,809.28 (on demurrage for 42.904167 days at a daily demurrage rate of US$17,500).

Accordingly, the Claimant served a Notice of Demand on the Defendant on 19 March 2020, with two further notices on 13 May 2020 and 08 June 2020. Having made several attempts to see if the Defendant was able to perform the Contract, the Claimant was informed by a representative of the Defendant over the telephone that the Defendant would not be able to perform the Contract. Subsequently, the Claimant terminated the Contract and sent a notice to that effect on 3 July 2020.

The Claimant attempted to sell the Product to other potential customers in Sudan and concluded that there was no other alternative local buyer than SPC. The Claimant reached this conclusion in light of several factors including the heavy restriction placed on the sale of gasoline by the Sudanese Government and the difficulty in finding buyers outside of Sudan that would want the specific grade of the Product – as it had been tailored for sale in the Sudanese market. Additionally, there were concerns that SPC would expropriate the Product if the Claimant attempted to export it from Sudan.

Accordingly, the Claimant decided to sell the Product to SPC. However, SPC had no available funds to pay for the Product. Both parties agreed to enter into swap agreements to exchange gasoil owned by SPC with the Claimant’s Product, as the gasoil had a greater likelihood of being resold by the Claimant in Sudan than gasoline did, due to less stringent regulations.

The Claimant concluded a total of five such swap agreements with SPC between 6 August 2020 and 25 September 2020. By the time of the swap agreements, the market price of gasoline had fallen, meaning that the value obtained for the Product was less than the Contract price that would have been paid by the Defendant. The swap transactions and the reasons for them are explained in the witness statement dated 2 October 2024 of the distillates trader involved, Mr Mustafa Alaskari of Trafigura. His evidence is as follows:

“26.

We considered whether the Product could be sold to other potential customers in Sudan or the wider region.

27.

Based on my previous interactions with the Defendant, I was also aware that whenever the Defendant had bought gasoline from Trafigura, it had then sold the gasoline on to SPC with extended credit terms, and I knew that there were a small number of other Sudanese companies who operated a similar model.

28.

However, having made enquiries of these companies, we reached the conclusion that there was no alternative local buyer other than SPC in Sudan. This was not surprising as there were a very limited number of companies in Sudan who operated this model, because the sale of gasoline (and therefore the Product) was heavily restricted by the Sudanese government. We also determined that it would be very difficult to find a buyer outside of Sudan as the grade of the Product was very specific to the Sudanese gasoline market. There were also logistical issues, as any sale outside of Sudan would have required us to incur the cost of chartering a vessel and re-loading the Product for transport to any new buyer.

29.

We were also concerned that SPC would expropriate the Product for themselves as, on 29 April 2020, SPC wrote a letter to us saying that we had to remove the Product from the tanks within 30 days otherwise they would expropriate the Product. SPC sent a further letter on 21 June 2020, to which Trafigura responded on 29 June 2020 [MA1/08/38-41].

30.

In addition to the specific threats from SPC above, we were concerned that SPC would not let us remove the Product from the tanks if it suspected that the intention was to export it from Sudan. The Sudan government had a serious need for gasoline in order to avoid fuel shortages and there was a real danger that SPC, as the state-owned oil company, would not allow a substantial quantity of gasoline to be removed from the jurisdiction, regardless of the fact that Trafigura owned that gasoline.

31.

Upon receipt of these letters from SPC, and having determined that it would not be possible to sell the Product to another local customer or to a party outside of Sudan, we reached the conclusion that the only realistic option was to sell the Product to SPC.

32.

However, SPC informed us that it had no available funds to pay for the Product. As a result, we suggested to SPC that we enter into swap agreements pursuant to which SPC exchanged gasoil that it brought to Port of Sudan, with (Trafigura's) Product that was contained in the tanks at the Port of Sudan. This worked for us because it was much easier to on-sell gasoil in Sudan because, unlike gasoline, the sale of gasoil was only a quasi-regulated market in Sudan and there were many more potential customers to whom Trafigura could sell this product.

33.

The way that these swap arrangements worked is that SPC would advise us what quantity of Product they required. We would then determine the market prices of both the Product and gasoil in order to calculate what quantity of gasoil SPC would need to deliver to Trafigura on its side of the swap.

34.

Each time SPC requested a swap, we would consider the market and propose a price for the Product to SPC, based on our assessment of the prevailing market prices. There would then be a discussion with SPC, who would put forward their own views as to the correct market price. In each case, the prices were fixed by reference to average quotations for "Premium Unleaded l0ppm", published by Platts European Marketscan under the heading "Mediterranean Cargoes — FOB Med (Italy), plus an agreed premium of USD 34.00 per MT.

35.

It is common for gasoline prices to be calculated by reference to the Platts index, although in the case of the swaps, this effectively resulted in a fixed price, because the pricing periods for each delivery had already completed at the time each swap was agreed. That is why four out of the five swap agreements specified fixed prices rather than setting out the index linked pricing formula. The exception was the third swap agreement dated 2 September 2020. I am not sure why the pricing formula was left in that contract rather than the fixed price, but the result was the same, as the pricing periods had expired and so the parties knew what the fixed price was at the time of concluding the agreement.

36.

Once the price for the Product was agreed, we would go through the same process to agree a price for the gasoil leg of each swap.

37.

Once the prices were agreed for both the Product and the gasoil, we could calculate what quantity of gasoil was required at the agreed price to ensure that the quantities of gasoil and Product delivered under each swap were of the same value. SPC would then release the appropriate quantity of gasoil into Trafigura's tanks at Port of Sudan, and Trafigura would then release the appropriate quantity of Product to SPC.

38.

There were five swaps in total, as confirmed in contracts dated 6 August 2020, 20 August 2020, 2 September 2020, 16 September 2020 and 25 September 2020. The relevant contracts are attached at [MA1/09/42-90]. There was no written contract for the 6 August 2020 swap, but its pricing/terms were confirmed in the letter that I sent to SPC on 5 October 2020 [MA1/10/91].”

That evidence is in my view consistent with the available documents, and plausible, and I see no reason not to accept it.

The Claimant now claims damages and/oran indemnity under clause 13 of the Contract in the amount of USD 2,118,534.91, and interest pursuant to section 35A of the Senior Courts Act 1981, calculated as follows:

The Claimant also sought to recover pre-judgment interest under section 35A of the Senior Courts Act 1981, which, using a rate of US Prime with no uplift amounted to US$601,928.61 as at the date of the hearing.

The Claimant does not pursue its claim for hedging losses in the amount of USD 995,378.18 as part of the present application.