AGA Partners successfully represented the client in the FOSFA arbitration

The dispute arose out of a DAP contract under which our client had to deliver the goods to a Polish border station using railway transport. Our client submitted the applications to the electronic railway system to book the railcars for delivery. The said applications had to be approved by a Polish railway with the assistance of a buyer and its consignee. Some of the applications were approved, allowing our client to successfully deliver part of the goods. However, some of the submitted applications were rejected by the Polish side. As a result, the client could not deliver the remaining contract quantity of the goods within the delivery period.

The client insisted that the performance of the contract was prevented by the buyer’s omission, i.e., failing to facilitate the approval of shipment applications by a Polish railway. As a result of this omission, the client incurred substantial default damages, as the non-delivered goods were re-sold at a much lower price. Because the buyer refused to compensate for these damages, the client decided to initiate the FOSFA arbitration proceedings.

During the arbitration, the buyer insisted on the absence of his fault. The buyer stated that under a classic DAP contract, it is a seller who is responsible for the delivery of the goods until the place of destination, bearing all the risks. Our legal team, in turn, referred the Tribunal to numerous contractual provisions which expressly mentioned the buyer’s obligation to facilitate the delivery of the goods and acceptance of the shipment applications. In addition, numerous pieces of evidence were submitted (witness statements, excerpts of Ukrainian legislation, etc) proving that a buyer is playing an important role in the delivery process from Ukraine to Poland.

After a long-lasting exchange of written submissions between the parties, the tribunal fully satisfied the client’s claim awarding the damages in the amount of about USD 2 mln together with interest. The Tribunal in its award admitted that while under a common DAP contract, a seller indeed bears all the risks related to the delivery of the goods to the destination, in the present case the parties in the contract expressly placed additional obligations on the buyer. This decision reminds us once again to carefully study the contractual provisions before signing agreements with counterparties.

The AGA Partners’ team was represented by partners Ivan Kasynyuk and Iryna Moroz, as well as senior associates Ievgen Boiarskyi and Dmytro Izotov.