This article is available in Ukrainian only.
This article is available in Ukrainian only.
On 1 November 2023, the Grand Chamber of the Ukrainian Supreme Court – the highest judicial body in the country – opined on the extension of the arbitration clause to non-signatories in its judgement in case No. 910/3208/22 (Berezan Processing Plant v Grain Power, hereinafter ‘Berezan case’).
This judgement is a landmark one because it takes a liberal approach to the controversial topic of extending the arbitration clause to non-signatories. Before that, although the possibility of extension of the arbitration agreement to non-signatories, including based on succession, alter ego and “piercing the corporate veil” doctrines, was recognised by Ukrainian scholars,1) Ukrainian courts had been reluctant to extend arbitration clauses to non-signatories, grounding their conclusions predominantly on the privity of contracts.
Below, the post will first outline the state of case law prior to the Berezan case. Then, a background of the Berezan case will be briefly outlined before analysing the Grand Chamber’s reasoning. After that, several issues, not directly related to non-signatories but important for developing the pro-arbitral approach of Ukrainian courts, will be elucidated before proceeding to conclusions.
Case Law Prior to the Berezan Case
The judgement of the Civil Court of Cassation of the Supreme Court dated 21 May 2020 in case No. 824/181/19 (New Alternative Oak v Galicia Distillery) was seen as the leading authority. In this case, Galicia Distillery failed to pay an advance payment under the contract with a company called Litco Lumber. A company called New Alternative Oak, which was not a party to the respective sale and purchase contract, paid an advance payment to Litco Lumber instead of Galicia Distillery and signed an additional agreement to the contract between Galicia Distillery and Litco Lumber, under which Galicia Distillery acknowledged that it owed money to New Alternative Oak. The original contract (to which New Alternative Oak was not a party) included an arbitration clause providing for the application of ICDR arbitration rules, but the additional agreement did not.
Following that, New Alternative Oak initiated an arbitration against Galicia Distillery, won, and applied to enforce the award in Ukraine. The Supreme Court determined that New Alternative Oak had not succeeded in any way Litco Lumber’s rights and obligations, and hence, there was no valid arbitration agreement between Galicia Distillery and New Alternative Oak. The Supreme Court refused to enforce the award based on this argument.
Background of the Berezan Case
A Ukrainian agricultural company, Berezan Processing Plant LLC (Seller), concluded a wheat supply contract with a Swiss commodities trader, Orsett Trading SA (Buyer), under a sale and purchase agreement (Contract), as per which the Seller undertook to supply the wheat, and the Buyer undertook to pay the price of the delivered wheat. The Contract contained an arbitration clause providing that any disputes arising out of or within the scope thereof shall be subject to arbitration in accordance with the arbitration rules of the Grain and Feed Trade Association, with London as the seat of arbitration and English as a language of proceedings (GAFTA Arbitration Rules No. 125).
Two weeks later, the Buyer and Grain Power LLC (Guarantor) – another Ukrainian agricultural company – entered into an additional agreement to the Contract under the terms as per which the Guarantor assumed all obligations of the Buyer arising from the Contract (Additional Agreement). The Additional Agreement contained no arbitration clause.
After receiving the goods under the Contract, the Buyer failed to pay the price. Subsequently, the Seller filed a Statement of Claim with the Commercial Court of Kyiv, requesting the court to collect the indebtedness under the Contract from the Guarantor. The court left the Seller’s claim without consideration on merits and referred the parties to arbitration.
However, later, the Northern Commercial Court of Appeal (NCCA) reversed the judgement of the Commercial Court of Kyiv, concluding that the Guarantor is not bound by the arbitration clause contained in the Contract, and referred the dispute for further consideration by the local commercial court.
The Guarantor submitted a request for the annulment of the NCCA’s judgement to the Commercial Court of Cassation of the Supreme Court. The Commercial Court of Cassation transferred the case to the Grand Chamber for its consideration of “an exceptional legal problem,” which was whether non-signatories could be bound by an arbitration agreement.
Grand Chamber’s Reasoning
The Grand Chamber concluded that non-signatories, in principle, can be bound by the arbitration clause in the agreement they had not signed. As noted by the Grand Chamber in para 32 of its judgement,
the inclusion of an arbitration clause by the parties in the contract has the effect of extending the effect of this arbitration clause to the legal relations under this contract with the participation of another person who entered into these legal relations as a party, assumed the respective rights and obligations of the party to this contract, and at the same time the parties did not terminate the arbitration agreement, did not exclude a certain dispute from its scope, did not deprive it of binding force for such a party, and the arbitration agreement did not lose its validity due to other circumstances.
The Grand Chamber explained why it came to this conclusion, which deviated from the Supreme Court’s previous practice, by referring to significant changes in law, namely, the Civil Procedure Code of Ukraine and the Commercial Procedure Code of Ukraine. These codes were significantly amended at the end of 2017 and now oblige the courts to adopt a pro-arbitration approach to the resolution of issues concerning the validity and enforceability of the arbitration agreement.
However, it should be noted that this conclusion was made with regard to a particular situation when a legal entity, which has not been a party to a contract containing the arbitration clause, nonetheless became bound by it by assuming the rights and obligations of the Buyer as a guarantor. The Grand Chamber’s reasoning is predominantly based on the notion that the Guarantor was familiar with the terms of the Contract, including the arbitration clause contained therein (the Guarantor made the respective representations in the Additional Agreement), and that after the Buyer’s default, the Guarantor acquired its contractual obligations.
While transferring the case for consideration by the Grand Chamber, the Commercial Court of Cassation made the following observations:
The effect of the arbitration clause may extend to persons who are directly involved in the performance of the [main] contract […]. […] in some cases, third parties who did not actually sign the arbitration agreement may be bound by it and be able to directly invoke it (for example, but not limited to, succession, including singular, the “group of companies” doctrine, the “alter ego” doctrine, the doctrine of “piercing the corporate veil”.
However, the Grand Chamber avoided mentioning these doctrines and limited itself to a conclusion on the possibility of extending the arbitration clause to non-signatories only in a specific disputed situation without drawing more general conclusions.
Other Important Findings of the Grand Chamber
The decision is also noteworthy with respect to at least three other aspects demonstrating the pro-arbitration shift in the Supreme Court’s practice.
First, the Grand Chamber concluded that courts should not rule on the merits of a dispute referred to them and refer the parties to arbitration even if both parties are Ukrainian legal entities, but the contractual relations between them contain a foreign element. Prior to that, courts could question the applicability of the New York Convention, concluding that certain disputes between Ukrainian legal entities fall under the notion of domestic arbitration, which is subject to different regulations.
Second, in relying on the ICCA’s Guide to the Interpretation of the New York Convention: A Handbook for Judges, the decision suggested that arbitral awards could be considered ‘delocalised,’ which could be interpreted to support the autonomous nature of international arbitration, which is advocated by some prominent scholars, including Emmanuel Gaillard.
Third, it was the first time that the Ukrainian Supreme Court asked the Ukrainian Arbitration Association (UAA), as the leading Ukrainian non-commercial organisation uniting international arbitration practitioners and scholars, and the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (ICAC at UCCI), as the sole Ukrainian arbitration institution, to provide amicus curiae briefs. Prior to that, UAA had already submitted such briefs to the Supreme Court in several notable cases but did so on its own initiative. This development demonstrates the increasing trust of the Ukrainian Supreme Court in the local international arbitration community and its willingness to cooperate with it in order to make Ukraine a more arbitration-friendly jurisdiction.
It is worth noting that the amicus curiae submitted by the UAA and amicus curiae submitted by ICAC at UCCI did not address the issue of extension of the arbitration clause to non-signatories, focusing only on such issues as whether an arbitration clause contained in a contract concluded by two Ukrainian parties is valid from the standpoint of the New York Convention and Ukrainian law.
Conclusion
Although there is no system of binding judicial precedent in Ukraine as is the case in common law jurisdictions, as a matter of practice, judgements issued by the Grand Chamber carry the greatest weight and are de facto binding. Thus, the judgement in the Berezan case will guide Ukrainian courts in similar cases, thereby significantly changing the approach to non-signatories issues.
However, one should be careful with applying the Grand Chamber’s conclusions in the Berezan case in a broad fashion and outside the context of succession and assignment of rights and obligations of the party to a contract containing an arbitration clause. Even in this context, the Grand Chamber’s reasoning indicates that any decision would likely be fact-specific, requiring evidence of the successor/assignee’s knowledge of the underlying contract with the arbitration clause.
It is yet unclear if the Ukrainian courts will adopt similar reasoning in more complicated cases calling for the application of the estoppel, alter ego and other doctrines that are still under development in Ukrainian law or some more controversial doctrines that are currently foreign to Ukrainian law, such as the group of companies.
Viktor Pasichnyk, associate at AGA Partners
This article is available in Ukrainian only.
This article is available in Ukrainian only.
- The Black Sea Grains Agreement was interrupted by Russia, what must happen in your opinion for it to be resumed?
Given Russia's constant blackmailing, Ukraine no longer needs to hope for another "gesture of goodwill" and the reopening of the Grain Corridor. In fact, during the term of the Grain Deal, its execution was sabotaged by Russia through various means. Sometimes, vessels could not pass JCC inspections at all, which paralysed the work. Grain exports from mid-July (after the closure of the Grain Corridor) to early November 2023 were extremely difficult, but a solution was found - a humanitarian corridor coordinated by the Ukrainian Navy, which began operating in September and continues to operate as of today.
In our opinion, there is no point in resuming negotiations on the extension of the Grain Deal at this time. Russia has set unacceptable conditions for the continuation of the Grain Deal, such as the resumption of the work of the ammonia pipeline to Europe and the connection of banks to SWIFT. A compromise on these issues cannot be reached, as Ukraine is not ready to make concessions to the aggressor. Moreover, Ukraine has managed to open the Black Sea on its own, so the issue of reopening the Grain Corridor is not currently on the Ukrainian agenda. Over the period of the humanitarian corridor's existence, more than 200 vessels have left Ukrainian ports, exporting a total of 7 million tonnes of cargo.
- Does the possible unblocking of Ukrainian Black Sea ports reduce the pressure on the transit of grain through frontline countries, including Poland? Is the market paying attention to what is happening in Ukraine, or is the war already over?
The temporary corridor from Odesa ports significantly reduced the degree of tension regarding the export of Ukrainian goods and reduced the congestion of the Danube ports and the Western borders. However, exports through the Odesa ports cannot reach the level of pre-war exports in times of war due to a number of factors: limiting the number of vessels that can simultaneously load within the temporary corridor, military risks of loading in Odesa ports, delays in vessel entry or exit due to active hostilities, etc. In any case, Ukrainian farmers and traders will not be able to completely refuse deliveries by land transport via neighbouring countries. Establishing logistics across the western borders has been and remains a priority for our government and business. In our opinion, in this situation, the only reasonable solution to reduce the pressure is to reach a compromise at the highest level of both countries.
- Is it profitable for Ukraine to invest in storing its agricultural produce at the eastern border and in the railway fleet?
Investments by business and Ukraine in the development of new logistics routes, railway connections and the construction of warehouses on the western borders are certainly promising and beneficial for all parties. The most attractive investment projects are those involving the storage of goods and the construction of terminals close to the western borders, which makes it possible to relieve border congestion and store goods in safer locations. Accordingly, businesses are looking for options to expand storage capacity near the border, in neighbouring countries or in neighbouring ports (Gdansk, Gdynia, Konstanza).
- Who makes money on the export of grain and agricultural products from Ukraine, the state, agroholdings?
Agribusiness is currently the main and fundamental segment of the Ukrainian economy, generating income and turnover for all market participants and the state. When exporting agricultural products, all members receive preferences and income: 1) farmers and agriholdings that grow and export their own products, which makes it possible to reinvest in new crops and harvests 2) traders who can sell the goods at marginal prices 3) the state of Ukraine, which receives taxes 4) related industries that work together with agribusiness (ports, terminals, logistics companies, carriers, shipowners, insurance companies, surveyors, etc.) 5) people who get jobs and employment. It is worth noting that Ukraine is strengthening control over the budget revenues from agricultural exports by creating new rules for the verification and reporting of exporters. Ukraine's policy is aimed at maximising revenues from agricultural exports, which is the main working sector of the economy at the moment.
- How can the frontline countries make money, if at all, from trade in agricultural produce with Ukraine?
In our opinion, it is possible to make a profit from trading agricultural products with Ukraine if stable and partnership-based trade relations are maintained. Ukrainian goods are highly competitive in terms of quality and price. Ukraine is one of the key exporters of raw materials to the EU, Africa, Asia, and India, which creates benefits for neighbouring countries. Neighbouring countries can earn substantial income if they increase port, transshipment, storage and logistics capacities for Ukrainian goods. For example, the transshipment capacities of foreign ports and railways do not reach the level of Odesa ports. Currently, there is a large demand for agricultural exports in transit through neighbouring countries and ports, but neighbouring countries do not have sufficient capacity to meet this demand. In addition, the situation is complicated by long queues and blockades at the borders. Ukrainian traders and manufacturers are constantly looking for new logistics routes. Neighbouring countries that can offer improved logistics and increased exports of Ukrainian goods in transit could generate significant revenues and new investment opportunities for the development of railway, port and warehouse infrastructure.
- Transport costs have recently become much more expensive, which also affects the trade in agricultural raw materials. What does it look like in Ukraine?
Due to complicated logistics, there is a gap between the prices for Ukrainian grain in international contracts and the price received by producers domestically. Today, however, Ukrainian producers and traders operate on a "grow/trade or die" basis. Producers sell their goods knowing that they will not make a profit this year. If they don't grow and trade, hundreds of companies will stop, and the entire industry will feel the impact. Therefore, farmers continue to work in extremely difficult conditions, looking for ways to diversify their business, grow new crops and optimise costs.
- In your opinion, regardless of whether the Polish border was open or closed to agricultural products from Ukraine, grain imports in the current season would remain marginal, mainly for purely economic reasons? – We are unable to answer this question due to the difficulty of forecasting this situation. This question should be addressed to price analysts in the agricultural sector.
- The transit of four agricultural products from Ukraine, i.e. wheat, corn and rapeseed, is still being carried out, although in the meantime there has been a breakdown in diplomatic relations between Poland and Ukraine and a unilateral blockade. How does this conflict affect trade, if at all?
First of all, we would like to point out that there is no diplomatic conflict, as Poland and Ukraine continue to negotiate and find a way out of the situation at the state level. The situation is different with the organisations that actually initiated the blockade - their demands are ultimative, and in such circumstances, the possibility of reaching a compromise is reduced to zero.
It is worth recognising that the blockade of the border has a huge impact on trade not only in agricultural products, but also on the economies of both countries, especially Ukraine. In November, the losses incurred by the Ukrainian economy due to the border blockade were estimated at more than €400 million.
Even when goods are transported in transit, they cannot be delivered to their destination on time due to the border blockades, which creates additional costs in terms of transport downtime, non-fulfilment of export contracts, and deterioration in the quality of goods. In such a scenario, there is only one outcome - contracts are not fulfilled, and losses increase in multiple amounts, which demotivates Ukrainian exporters to use the western borders for exports.
- Do you agree with the opinion that it was not the import ban introduced in May by the EC to five frontline countries that led to a decline in imports of Ukrainian grain, but the market situation made Ukrainian grain no longer competitive. How do you rate it?
We do not agree with this statement. The main factor behind the decline in exports of Ukrainian goods is the blocking of transport for Ukrainian companies. Ukrainian goods are competitive, and Ukrainian traders are even more interested in transit exports across neighbouring borders. If transit is blocked, it significantly reduces the amount of exported goods.
For example, before the war, the largest share of exports was carried out via sea routes - 49.5 million tonnes in 2021. Since the Russian Federation withdrew from the Grain Agreement in July 2023, sea exports began to recover only in October this year, with 5.6 million tonnes in October. Taking into account the situation on the western border, Ukrainian suppliers are now actively working to solve these problems and looking for new markets.
Exporting Ukrainian grain is a matter of logistics, not quality.
- Is Ukrainian agriculture able to quickly transform to EU standards, e.g. in the context of the consumption of active substances recommended in the EU?
In accordance with the Association Agreement with the EU, all EU requirements for the quality and safety of agricultural products have been incorporated into Ukrainian legislation. This is confirmed by the fact that Ukrainian farmers have already been quite successful in exporting their products to the EU, where they are checked for compliance with EU legislation. For full adaptation, Ukraine still needs to develop an internal mechanism for monitoring compliance with the above-mentioned norms.
- What are the current prices of cereals, rapeseed and sunflower in Ukraine? – We are not quite competent to answer this question, so you should ask your brokers.
- Can I ask for data on how many agricultural products Ukraine has managed to export since the beginning of this season? And what countries were they? –
According to the Ministry of Agrarian Policy and Food of Ukraine, in 8 months of 2023, Ukraine exported over 41.1 million tonnes of agricultural products, including over 30.7 million tonnes of grains and over 3.8 million tonnes of oilseeds. 59% were exported to the EU, 15% to the Middle East, 12% to Asia, and 7% to Africa.
Iryna Moroz, partner at AGA Partners
Vladyslav Kapustynskyi, associate at AGA Partners
This article is available in Ukrainian only.
Almost each and every trader, who works with the Black Sea market, has faced a dramatic increase in the number of disputes when procuring grains. A company had to be lucky enough to perform even one contract without any challenges as most transactions are significantly affected by the unprecedented turbulences in the region. The Russian invasion of Ukraine, the imposed sanctions and the flawed operation of the Black Sea Grain Initiative – all these factors together with unpredictable natural conditions had and continue to have a significant impact on the supply chains and commodities contracts. As a result, there have been a vast number of disputes that traders had to handle in their business.
Specializing in commodities trade, AGA Partners were actively involved in resolving hundreds of those disputes. As the turbulences on the market generated genuinely novel situations, this article is designed to provide a ‘helicopter view’ of the recent cases and basic recommendations on how to address the challenges in the Black Sea trade.
UKRAINIAN BLACK SEA PORTS: AGAINST ALL ODDS
Within the last two years, the trade through the Ukrainian Black Sea ports has gone through a critical transition which was marked by numerous disputes between the market players.
- The first stage: The blockade of ports. Before the Russian invasion, ~96% of Ukrainian commodities were exported through the Ukrainian Black Sea ports. However, the situation changed critically with the beginning of the full-scale war when Ukrainian Black Sea ports were blocked by Russia. Ukrainian exporters naturally were not able to live up to their commitments and claimed force majeure under the contracts. Because of the harsh effect of the invasion on Ukrainian business, buyers mostly accepted the cancellation or suspension of sale contracts and there were few cases as to their non-performance (they mainly concerned the payment for the lost goods). At the same time, many vessels that had called the Ukrainian ports before the Russian invasion were blocked there. This triggered disputes on detention and payment of hire under the charters as well as gave rise to insurance cases on constructive total loss of those vessels.
- The second stage: The grain deal. After the Black Sea Grain Initiative was reached on 22 July 2022, the export of Ukrainian commodities from the major Black Sea ports resumed. But the unique mechanism introduced by the Grain Initiative inherently posed serious challenges to the delivery of grain from Ukraine. Because of the delays in inspections of vessels by the Russian side, buyers were often not able to timely tender vessels for loading the cargo while sellers struggled with shipping the goods within the agreed periods. These delays also caused disputes between shipowners and charterers on detention costs which accrued while awaiting inspections. The peak of the tensions happened when Russia withdrew from the Grain Initiative (both in October 2022 and July 2023). Such a development, of course, led to claims as to the impossibility of the performance of concluded contracts.
- The third stage: the humanitarian corridor. In August 2023, Ukraine launched the humanitarian corridor for the export of commodities with the route set as close as possible to the Romanian and Bulgarian borders. As of the time when this article was written, several vessels have already called the port of Chornomorsk for shipment of grains bound for Africa and Asia. While it remains to be seen whether this route will operate at a full scale, any format of shipments from the Ukrainian Black Sea ports – either through the humanitarian corridor or under the revised grain deal – is still likely to involve challenges in the performance of supply contracts.
So, it is advisable for buyers of Ukrainian commodities to revise their contracts and adjust them to the peculiarities of deliveries from Black Sea ports (whether it be agreed on a political level or not). The primary focus should be on the transfer of risk and title, payment terms, insurance, and the order of the contract execution. The contract should clearly address the consequences of events preventing its performance and provide your company with adequate remedies.
EXPORT THROUGH THE DANUBE: THE BEACON OF HOPE
After Russia blocked the Black Sea ports, Ukrainian suppliers started to explore alternative export routes. While many traders supplied commodities through the Western border by road and rail, these routes were not sufficient (and, in some cases, commercially viable) to export the entire crop from Ukraine.
In such circumstances, Ukrainian river ports in Izmail and Reni became huge export hubs where major traders transferred their facilities. The increase in the export capacity was truly impressive: in 2022, the Danube ports processed three times as much cargo delivered from there in 2021. Such a surge could not help but affect the performance of sale contracts as the infrastructure was not first prepared for the large number of vessels calling those ports. The massive congestion to enter the Danube ports caused and continues to cause many disputes on demurrage and detention.
The procurement of grain from the Danube ports was further influenced by natural causes. The Sulina Channel, which leads to them, does not work at night and is closed for entrance in case of adverse weather. As a consequence, there were disputes where Ukrainian sellers were not in a position to ship the goods within the agreed timeframe. Another challenge was the seasonal shallowing of the Danube which led to the short loading of vessels. Having faced the problems caused by adverse weather, suppliers were forced to invoke force majeure and claimed excuse from liability for breaching their contracts.
Within the last months, Russia has launched a new wave of shelling which aims at agricultural facilities and port infrastructure. Sadly, there were numerous accidents of damage to cargo stored at the warehouses which also prompted Ukrainian companies to rely on force majeure and frustration of sale contracts.
Despite these challenges, the Danube ports remain the major export hub in Ukraine which is reported to have the capacity to ensure the export of the entire Ukrainian crop. As the export of commodities via this route involves unique features relating to the passage of vessels to river ports through channels, it is important to customize contracts to these specific deliveries. Updated contracts can decrease the number of disputes between the parties as their agreement will contain guidance on how to proceed in case of typical problems.
SANCTIONS AGAINST RUSSIA: CONTRACTUAL SAFEGUARDS
While Ukrainian suppliers mainly suffer from the logistical problems caused by the blockade of seaports, trade with Russian businesses might be complicated by the imposed sanctions. Those restrictions often have a wide scope – they apply not only to companies expressly included in the sanctions list but also to those entities that are controlled by them. Because of this feature, buyers may accidentally conclude contracts with the companies affected by sanctions or face their illegal execution (e.g. carriage of cargo by a sanctioned vessel).
The conclusion of contracts with sanctioned companies will probably have far-reaching consequences as the sanctions may obstruct the performance of contracts. To avoid detrimental consequences, it is crucial to conduct due diligence on your counterparty. The contract should also provide your company with efficient remedies in case you face (or even are likely to face) a problem with the sanctions restrictions. They may include the right to terminate the contract or suspend its performance, reject the cargo/vessel, or demand their substitution.
Another problem widely reported in the mass media was the delivery of Ukrainian grain from the territories temporarily occupied by Russia. Sellers of such grain and, accordingly, buyers upon its delivery received claims as to those goods from the Ukrainian government. This unexpected development caused substantial turbulences in the performance of the contracts as it involved the detention of the vessel carrying that grain.
To reduce the risks connected with such a situation, buyers may include a clause in their template contract that goods shall not originate from the occupied territories and stipulate legal safeguards in case of its breach. In the same vein, it can be envisaged that parties are prohibited from nominating and loading vessels that had previously sailed to the ports in the occupied regions of Ukraine. These contractual mechanisms may assist your company in avoiding disputes connected with the breach of the sanctions regime or illegal deliveries of grain.
INFERIOR QUALITY OF WHEAT: A WILD CARD
Recently, there has been an increase in the number of quality disputes. This trend is explained by a small crop of milling wheat in the Northern Hemisphere in 2023. In particular, Ukraine harvested less wheat of milling grade not only because Russia occupied a large part of its lands but also due to adverse weather conditions. As a result, purchasers of Ukrainian wheat probably will face problems with the quality of grain which might prompt them to refuse to accept the shipments.
Quality disputes are always complex – there is a thin red line between the situations when buyers are allowed to reject the goods because of their poor quality and when they are not. This nuance comes from the rules of English law which frequently govern commodities contracts and provide that purchasers may refuse the cargo only in case of the breach ‘going to the root of the contract’. In other words, the goods usually can be rejected if the cargo is unacceptable for the purposes it was procured. Such vague rules involve a high degree of uncertainty and, for this reason, require a detailed assessment of the consequences for each particular deviation from the specification.
In this situation, the wording of the contract becomes very important as it will point to the level of quality that can be expected from the goods. The quality clause should contain clear a specification that will not lead to conflicting interpretations (for example, as to possible allowances). It is also recommended to include a clause specifying the purpose for which grain is purchased. Additionally, contract terms should provide for safeguards as to the order of quality determination: the right of the buyer to take samples, test them in the laboratory, and dispute the quality results of the seller, if necessary. Such provisions will strengthen the position of the buyer in the case of a dispute.
It is also essential to prudently conduct correspondence as each word written (or even said) might be taken into account during arbitral or court proceedings. From our experience of handling +50 arbitrations in 2023, the correct communication is often determinative as to the chances of the party to achieve success in the dispute.
Conclusion: Contract terms are vital to minimise the risks
In the light above, it can be said that the challenges in the Black Sea trade have reached their peak. In these circumstances, it is of great importance for buyers of grain to keep abreast of all events on the market and revise the procurement contracts accordingly. Such an approach will help your company to minimize the risks connected with the turbulences in this region and cope with the arising challenges.
Pavlo Lebediev, senior associate at AGA Partners
Oleksandr Zub, associate at AGA Partners
This article is available in Ukrainian only.
This article is available in Ukrainian only.
This article is available in Ukrainian only.
This article is available in Ukrainian only.
This article is available in Ukrainian only.
This article is available in Ukrainian only.