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Grain deal & force majeure: two awards in favour of turkish client

In this case, the seller undertook to supply 25,000 mt of Ukrainian corn and wheat in October 2022 under two CIF contracts.

From 29 October to 2 November 2022, russia suspended its participation in the Grain Deal. Because of this situation, the seller referred to the blockade of the grain corridor and requested a free extension for the later performance of the contract. The buyer did not accept that request and the goods were not eventually shipped within the agreed period.

In these circumstances, the buyer declared the seller in default for the failure to perform the contract and initiated arbitration to recover damages. 

The seller’s main defence was that force majeure excused it from liability for the breach. The arbitral tribunal held that there was no force majeure for the following reasons:

  • The contracts were concluded more than six montns after the russian invasion. The seller assumed the possibility of delays and should have planned for this in advance of the shipment period.
  • To take advantage of a force majeure clause, the seller had to make a clear reference to the force majeure event. Instead, it merely requested a free extension in its letter.
  • The seller did not prove that there were issues with the cargo and difficulties with vessels.

On this basis, the arbitrators awarded our Turkish client ~USD 1,300,000 in damages.

This case vividly illustrates that obstacles to contract performance might be treated as force majeure only if they directly prevent the shipment of the goods. Mere difficulties (even grave ones) will not suffice. 

The client was represented by partners Ivan Kasynyuk and Iryna Moroz as well as by senior associate Pavlo Lebediev.

23.11.23