AGA Partners are glad to share that we successfully represented a major Turkish agricultural holding in London arbitration against the UAE leading grain, wheat, and sunflower oil suppliers.

The essence of the dispute and contractual terms of Buyers’ remedies

The dispute arose from a CIF contract for the delivery of Ukrainian milling wheat. Upon arrival at the port of discharge, the goods were found to be non-compliant with the contract’s quality specifications, specifically in terms of protein content, moisture level, and test weight under the agreed ‘min-max’ indicators. Notably, the protein content fell short of the contractual requirement by 0.02% and was specified in the contract description.

To protect the buyer's interests, the contract included security provisions allowing our Сlient to pay 95% of the value of the goods upon presentation of all contractual shipping documents and to withhold 5% of the payment if the delivered goods failed to meet the required specifications after the respective quality checking.

Failing to reach an amicable solution, our Client justifiably refused to pay for the 5% value of the delivered goods due to their non-contractual quality and above referred contractual provision. Meanwhile, the sellers commenced arbitration and pursued a demand for a 5% payment and reimbursement of damages for the claimed demurrage.

Arbitral award in favour of the Сlient

Bringing this case to arbitration, the sellers argued that the discrepancies in quality specifications were within acceptable commercial trade norms and that the goods were still contractual. They also sought compensation for demurrage, alleging that the buyers were unable to discharge the Vessel within the laytime prescribed in the Contract due to delays on the buyers’ part.

However, the arbitrators upheld the Clients’ claim because the sellers breached the condition to deliver the goods of contractual quality, which entitled the buyers to withhold the payment for the 5% value of the goods with reference to the respective contractual provision. The Тribunal also pointed out that when purchasing goods afloat, it is reasonable to assume that buyers would like to ensure the proper quality of the goods and may provide for the terms of the payment of a certain part of the goods only if their contractual quality is confirmed.

Additionally, the arbitrators found that whereas the protein was specified in the contract description, any breach of it, even if it did not reach 0.02% by the contractual indicator, was not slight but instead a serious breach of the contract. On this ground, the tribunal awarded the Client damages of around USD 230,000.00, together with the compounded interest and compensation of arbitration costs.

Furthermore, through meticulous analysis and presentation of evidence, we successfully proved that the buyers discharged the goods within the agreed laytime. The only reason for the delay in discharging was the late tender of shipping documents by the sellers, and the buyers should not take responsibility for the sellers’ breach.

The AGA Partners’ team was represented by partner Ivan Kasynyuk together with the associates Anastasiia Shevchuk and Maksym Fesenko.