Background
Inerco Trade SA agreed to sell ADM Industries Centers Ltd 60,000 metric tonnes, subject to a 10% option, of Ukrainian corn for shipment between 15 April and 15 May 2023. The English-law contract incorporated GAFTA Form 48. Under the Black Sea Grain Initiative, vessels entering the Black Sea to load grain had to undergo inspection by the Joint Coordination Centre. The nominated vessel, MV Nikolaos S, was awaiting inspection when Russian inspectors stopped processing inbound non-Russian vessels from about 7 to 18 May 2023.
Inerco invoked GAFTA 48’s prevention-of-shipment clause on 16 May, but ADM disputed the notice and maintained that shipment remained due on 15 May. Inerco treated ADM’s position as a renunciation, accepted it, and resold the cargo. A GAFTA Board of Appeal reversed a first-tier ruling for ADM, held that Inerco could rely on force majeure, and awarded it US$3.12 million. ADM appealed under section 69 of the Arbitration Act 1996 on three questions of law concerning foreseeability, timely notice, and the interaction between GAFTA 48’s force-majeure and shipment-extension clauses.
The Court’s Holding
Paul Stanley KC, sitting as a Deputy High Court Judge, upheld the Board’s construction of “unforeseeable” in clause 20. In this contractual context, an event is unforeseeable when, at the time of contracting, its probability of occurring and affecting performance is so remote that it is negligible in commercial terms. The Board was entitled to distinguish a prolonged inspection stoppage from the short interruptions previously experienced and to find the prolonged stoppage unforeseeable.
The Court nevertheless held that clause 20’s requirement that sellers give notice within the specified period is a condition precedent to reliance on the clause. The Board erred by treating the absence of prejudice and considerations of commercial logic or natural justice as sufficient despite the contractual deadline. The award was remitted for the Board to determine whether Inerco’s notice was timely on the facts.
The Court also upheld the Board’s ruling that clause 10 may extend shipment beyond the period produced by clause 20. A seller may claim the clause 10 extension by serving notice no later than the business day following the last shipment date as extended under clause 20.
Key Takeaways
- “Unforeseeable” under GAFTA 48 clause 20 means a risk whose probability was negligible in commercial terms, not an event that was literally inconceivable.
- Timely force-majeure notice under clause 20 is a condition precedent; lack of prejudice does not excuse noncompliance.
- GAFTA 48’s ordinary shipment extension can operate after a force-majeure extension, provided the clause 10 notice is served by the applicable deadline.
Why It Matters
The judgment clarifies how English law allocates low-probability risks under GAFTA’s widely used commodity-sale terms. Commercial arbitrators retain latitude to assess whether a risk was negligible, but they must apply contractual notice provisions according to their terms.
The decision also confirms that GAFTA 48’s extension mechanisms can operate sequentially. Because the notice issue was remitted, however, the sellers’ entitlement to rely on force majeure—and consequently the award based on that entitlement—remained dependent on the Board’s factual determination of timeliness.