How the English High Court approached force majeure, repudiation, damages, and vessel substitution under a GAFTA FOB contract.
“A wrongful declaration of force majeure does not, by itself, remove the innocent party’s burden of proving that it could have performed the contract had there been no repudiation.”
The OLAM case arose from an appeal to the English High Court under section 69 of the Arbitration Act 1996 against a GAFTA Board of Appeal award. The dispute concerned an FOB sale contract for yellow corn under which Olam agreed to supply Holbud with a cargo for delivery between 1 and 15 March 2022. The contract allowed Olam to choose between Ukrainian or Romanian origin and identified several possible Black Sea load ports, including Pivdennyi, Odessa, Chornomorsk and Constanta.
The factual background is closely tied to the outbreak of war in Ukraine. On 24 February 2022, Russia launched its full-scale invasion, and later that same day Ukraine announced the closure of its Black Sea and Azov Sea ports. Between those two events, Olam declared Ukrainian origin. Holbud rejected that course and insisted that the cargo should instead be shipped from Romania. Holbud then nominated the vessel MV The Finder, with an ETA of 6/7 March 2022. On 26 February 2022, Olam nominated Pivdennyi, in Ukraine, as the load port, although the Ukrainian Black Sea ports had by then already been closed for two days. Olam subsequently served a force majeure notice under clause 13 of GAFTA 49, asserting that performance of the contract was suspended.
Holbud did not accept Olam’s force majeure position. It maintained that Olam remained bound to perform and that it should do so by loading Romanian-origin corn from Constanta. The parties exchanged further correspondence during March 2022. Holbud eventually stated that Olam’s refusal to withdraw its force majeure declaration amounted to a repudiation of the contract, but it did not accept that repudiation immediately. Instead, it kept the contract alive for a time. It was later found that from 16 March 2022 Holbud had employed The Finder on other work, and it was only on 26 April 2022 that Holbud formally accepted Olam’s repudiatory breach and terminated the contract.
In the arbitral proceedings, Olam first argued that its obligations had become limited to delivery from Ukraine and that performance was excused by the invasion and the closure of Ukrainian ports. That argument failed before the GAFTA Board of Appeal and was not the subject of the later court appeal. Even so, the Board made several findings that remained important. It found that Pivdennyi was unsafe when Olam nominated it, that Olam’s force majeure notice was invalid because a seller could not nominate an unsafe port after the relevant force majeure event had already arisen and then rely on that nomination for relief, and that Olam was in default on 26 April 2022, the date on which Holbud accepted the repudiation.
The key issue before the High Court concerned damages. Olam argued that Holbud could not recover substantial damages unless it proved that, but for Olam’s repudiation, Holbud itself would have been able to perform the contract. Olam relied on the compensatory principle discussed in Flame SA v Glory Wealth Shipping Pte Ltd, namely that an innocent party claiming damages must show that it would have been ready, willing and able to perform its own side of the bargain. Since The Finder had been redeployed from 16 March onwards, Olam argued that Holbud could not show that it remained able to perform and therefore could not recover more than nominal damages.
The GAFTA Board rejected that argument in brief terms. It regarded Olam’s position as “unattractive” given that Olam had itself declared force majeure, and it awarded Holbud substantial damages calculated by reference to the difference between the contract price and the market price. The damages awarded amounted to €4,820,760.
The High Court disagreed with this approach. Mr Justice Trower held that a wrongful declaration of force majeure does not, without more, relieve the innocent party of the burden of proving that it could have performed the contract had there been no repudiation. That remains the ordinary rule unless some separate legal basis, such as waiver or estoppel, prevents the repudiating party from insisting on proof of the other side’s ability to perform. In this respect, the judgment draws a clear distinction between establishing breach and establishing recoverable loss.
Holbud sought to preserve the award by arguing, in substance, that Olam’s force majeure declaration amounted to a representation that performance was suspended and that Holbud relied on that representation when it redeployed The Finder. On this basis, Holbud contended that Olam was estopped from later arguing that Holbud needed to remain ready and able to perform. The court rejected that argument. It held that the necessary factual findings had not been made by the Board of Appeal. There was no express finding as to the content of the alleged representation, no finding of reliance, and no sufficient basis from which those elements could inevitably be inferred. The judge also placed weight on the fact that estoppel had not actually been argued before the Board in the form later advanced before the court.
Holbud also argued that, even if The Finder had been redeployed, it could still have substituted another vessel under clause 6 of GAFTA 49. That argument also failed. The court held that clause 6 required notice of substitution to be given no later than one business day before the ETA of the originally nominated vessel, and that this requirement had to be complied with strictly. The relevant ETA was the original ETA given when The Finder was nominated. The court rejected the suggestion that the original ETA had somehow become irrelevant because Olam had later nominated an unsafe port. It also rejected the idea that the contractual delivery period had been extended in a way that preserved a later right of substitution.
The judgment went further. It observed that, even if Holbud had retained a legal entitlement to substitute another vessel, the Board had made no finding that Holbud actually could and would have done so. Since an appeal under section 69 is limited to questions of law, the court could not make those factual findings for itself. Nor was it appropriate to remit the matter to the Board so that Holbud could repair evidential or factual gaps in its case after the event. The court considered that such a course would be contrary to the principle of finality in arbitration.
The case is significant for several reasons. First, it reaffirms a basic principle of damages: a wrongful repudiation does not automatically entitle the innocent party to substantial recovery. Loss still has to be proved. Secondly, it shows that even in highly disrupted wartime conditions, force majeure arguments remain subject to the structure and wording of the contract itself. A party cannot create a force majeure defence by nominating an unsafe port after the disruptive event has already occurred. Thirdly, the judgment illustrates the limits of judicial deference to trade arbitration awards. Courts will read GAFTA awards commercially and sensibly, but they will not uphold them on the basis of factual or legal foundations that were never actually established.
More broadly, the decision confirms the continuing importance of certainty in mercantile contracts, especially in relation to nomination and substitution clauses. Timing provisions in commodity and shipping contracts are not treated as incidental formalities. They form part of the contractual machinery through which predictability is maintained in fast-moving commercial markets.
In that sense, the OLAM case is not only about force majeure or wartime disruption. It is also a reminder that claims for contractual damages remain governed by orthodox principles of proof, causation and performance, even in exceptional circumstances.
Arizon Abogados S.L.P
www.arizon.es