Saipol v Inerco (FOSFA)

Saipol (claimant) and Inerco (defendant), FOSFA.

Saipol claimed Inerco for the contamination of mineral oil found in a cargo of 16.6000 mts of ukranian sunflower seed oil, one of the lots of the so called food crisis of April 2008.

The facts of the case were the following: Inerco loaded 3.000 tons for Saipol, from the total amount purchased of 16.600 tons from Inerco, among other providers, such as Cargill AT, Rizoil, AWB and Cargill International. The sale was agreed on FOB terms. Prior to loading on the M/T Selandra Swan, the cargo has been mixed within the storage tanks on shore.

Upon the arrival at discharge port of Dunkirk, Saipol began delivering the purchased cargo to its clients, all manufacturers of the food industry. One of them filed a protest against the mineral contents detected on the cargo of seed oil. Weeks later, local authorities have prohibited imports of sunflower seed oil from Ukraine, on this basis.

Saipol brought the matter before FOSFA arbitration, on first instance and arbitration, after which, the appeal has reached the English Courts, appealed by both litigants, before Mr. Justice Field. English law permits the parties to appeal against arbitration awards if the argument is based on points of law solely.

Two arguments of English Law were brought before the High Court Judge: The Sale of goods act 1979 limits damages to the amount of the difference between the merchant value of the clean, “fit for its purpose”, cargo and the contaminated cargo?

FOSFA determined that the difference between the price of the contaminated cargo and of the cargo in perfect state, ought to had been assessed at the moment the contamination was detected, rejecting the argument from Inerco, that sustained the price difference should be calculated at the moment of loading the FOB cargo.

Fields J, without adressing the question regarding the moment when  the price difference should have been assessed, ruled that the English law on the sale of goods, in its articles, permits a claim for further damages related to the breach of contract, not limited to the Price difference, and that the arbitration tribunal has errored in law for denying this possibility.

In respect of the second issue: Could Saipol claim damages from Inerco for receiving a total amount of 16.000t mixed before loading with its cargo of 3.000t, shipped by Inerco. Field J determined that the matter must return to FOSFA, so that the arbitrators may decide on this matter, knowingly that the law at hand permits this claim and that they errored to reject it as a legal possibility.

Read a copy of the full judgment here.



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