Allseeds Switzerland SA v Intergrain SA

There is before the court the hearing of the Claimant’s s. 69 Arbitration Act 1996 (‘the 1996 Act’) appeal from a decision of the FOSFA Board of Appeal (‘the Appeal Board’), arising out of a CIF contract of sale.

The following is a brief summary, drawn from the Appeal Board’s Appeal Award dated 13 November 2024 (‘the Appeal Award’).

The underlying contract of sale was dated 3 May 2021 and provided for the sale of 17,000 mt of Brazilian soybeans by the Claimant sellers to the Defendant buyers on CIF Aliaga, Turkey terms.

The vessel arrived in Aliaga on 9 May 2021, and it was observed on arrival that the cargo was in a damaged condition.

The Claimant had not sought an insurance certificate covering the carriage to Turkey until 12 May 2021. At that point the Claimant sought such a certificate, without, as the Defendant contended, disclosing to insurers that the cargo had arrived in a damaged condition.

The insurers issued a revised certificate of insurance, which was forwarded to the Defendant on 18 May 2021.

On 21 June 2021, the Claimant’s insurance brokers informed the Defendant’s sub-buyers that the insurers had rejected insurance cover, ‘claiming same to be null and void’. Through brokers, insurers confirmed their position on 23 June and 9 July 2021, giving reasons including that the damage was already known prior to the insurance cover being taken out by the Claimant but this had not been disclosed.

On 29 July 2021, the Defendant commenced FOSFA arbitration proceedings against the Claimant, claiming on three bases: (i) that the Claimant had failed to arrange adequate insurance for the goods, in breach of the CIF contract; (ii) that the goods had suffered damage whilst waiting at anchorage in Ukraine, for which the Claimant was responsible; and (iii) that as the insurance was null and void the Defendant had no proper recourse.

The Claimant initially sought to stay the FOSFA proceedings on the basis that the question of whether the insurance policy was valid was the subject of ongoing proceedings in Belgium. The FOSFA First Tier Tribunal (‘FTT’) declined to stay the FOSFA proceedings.

In its Award No. 4804 dated 15 October 2023 (‘the FTT Award’), the FTT found that the Claimant was not in breach of contract by reason of the fact that the goods were delivered to the Defendant in a damaged condition. At paragraphs 9.30 – 9.34 the FTT considered the Defendant’s claim that the Claimant had failed to provide a marine insurance policy or certificate covering 102% of the CIF value, covering all risks, FOSFA trade clause A, war clause (HSSC).

In this connexion the FTT Award said this:

‘[9.30] … It is also common ground that the Insurance Certificate was declared null and void by insurers and that Buyers could not, therefore, make recovery under the policy.

[9.31] We do not wish to disrespect the jurisdiction of the Belgian courts to address this issue. However, time has no telling on when the Belgian court will come to find a conclusion and we consider it wholly unsatisfactory that a FOSFA arbitration should be put on hold pending the outcome of the Belgian proceedings, as this is against the nature of an arbitration in this forum. It is contrary to our general duty under s. 33 of the Arbitration Act 1996 to adopt procedures avoiding unnecessary delay or expense. It is also contrary to the introductory words of the FOSFA Code of Practice for Arbitrators, namely that “The object of arbitration is to deliver a fair resolution of disputes by an impartial tribunal, without undue delay or expense.”

[9.32] Under our own jurisdiction, on the evidence placed before us, on balance and, as said, without detracting from the jurisdiction of the Belgian courts, we see no plausible basis where it could be found that Sellers complied with their obligation under the CIF contract to provide insurance cover.

[9.33] At the time of the negotiation of the Contract, Sellers were appraised (sic) of the full facts of the history of the Vessel. On the evidence before us, it would also appear that Sellers sub-seller AMS Ameropa had provided insurance pursuant to Sellers’ purchase contract up until the time when the voyage contemplated by that contract was terminated, and it was Sellers’ obligation to provide ongoing cover. However, Sellers failed to disclose such facts to the underwriters as would have been appropriate in the circumstances and in the face of the absence of such disclosure, it appears to us that underwriters were entitled to avoid the policy. That will ultimately be a decision for the Belgian courts but, under our jurisdiction to adjudicate any dispute arising out of the Contract, it is our conclusion that as the disclosure was not made, it followed that the underwriters avoided cover and that the policy was invalid; Sellers were, therefore, in breach of their CIF obligations to provide such cover pursuant to clause 6 of FOSFA Contract No 54.

[9.34] On balance of the evidence, there is no plausible basis that it could be said that Sellers had completed their obligations under the CIF obligations to provide insurance AND SO WE FIND. Sellers are liable to Buyers for Sellers’ breach in this respect.’

The FTT also considered that the Defendant had not satisfactorily proved the quantum of its claim and invited further submissions and evidence from the Defendant in that regard.

The Claimant lodged an appeal against the FTT Award. The Appeal Board issued the Appeal Award (No. 1209) on 13 November 2024.

In the Appeal Award, the Appeal Board stated (paragraph 8.23) that there were three issues which needed to be addressed:

As to the first, the Appeal Award stated, at paragraphs 8.31-8.32:

‘[8.31] It would seem to the Board that if the First Tier Tribunal meant by “common ground” that all parties had become aware of the cargo insurer’s disclosure, then the statement would be correct. It would seem likely in such circumstances that all parties to the Contract were aware.

[8.32] Whether cargo insurers have “declared” the insurance null and void or have “claimed” that the insurance is null and void, does not alter the fact that Buyers/sub buyers have not been able to pursue their claim.’

As to the second, the Appeal Award stated, at paragraphs 8.42-8.45, as follows:

‘[8.42] The above evidence and the undisputed time line of the Sellers’ request for insurance on the voyage from Pivdennyi to Aliaga does not help Sellers’ case and suggests that if Sellers had not disclosed all material facts to the insurers then Sellers were at risk under their obligations concerning misrepresentation.

[8.43] We agree with the First Tier Tribunal that at the time, the policy was not effective and hitherto remains ineffective and therefore could not be considered a valid policy.

[8.44] Whilst the Board accepts that having a valid policy does not necessarily result in coverage for all potential perils, in this case the underlying issue concerns the actual ability to claim against the policy, irrespective of whether the alleged peril was either covered or not.

[8.45] Here there is sufficient doubt following the broker’s repeated statements regarding voidability that it was not possible. The resulting dispute currently under consideration through the Belgian court adds credence to Buyers’ argument that whatever insurance was put in place was not capable of successfully accomplishing the desired outcome. In this case the desired outcome was certainly not being informed by insurance brokers that the insurance cover was null and void.

[8.46] WE THEREFORE FIND AND HOLD, that as Sellers had put in place a policy that was not effective it was by definition also not valid. WE THEREFORE FIND THAT Sellers were in breach for not providing an insurance policy immediately capable of considering any potential claim irrespective of the peril.’

As to the third question, the Appeal Award contained the following:

‘[8.53] Buyers or sub-buyers under the terms of the Contract had every right to expect that in the event of a cargo claim, there would at least be the option of pursuing the claim with insurers. That has not been possible and consequently WE FIND that Sellers are in breach for not ensuring that process. The cause of the ineffective insurance whatever the reason, rests with Sellers.

[8.54] WE THEREFORE FIND AND UPHOLD the First Tier Tribunal’s findings, that the insurance required under Clause 6 of FOSFA Contract No. 25, and procured by Sellers, has been avoided by cargo insurers, that such insurance was therefore not effective, and that Sellers are in breach of their insurance obligations under the Contract.’

The Claimant issued the claim form in the current arbitration claim on 11 December 2024. It sought permission to appeal the Appeal Award on two points of law, as follows:

The essence of the argument put by the Claimant in its Skeleton Argument in support of permission to appeal was that the Appeal Board had held that the mere fact of rejection of the claim by cargo insurers was sufficient to establish the seller’s breach; and that that could not be right as a matter of law.

The Defendant opposed permission to appeal on the basis that:

The application for permission to appeal was considered by Dias J, on the papers as is usual.

By order dated 9 April 2025, Dias J granted permission to appeal. The Reasons which she gave for that decision were as follows:

‘(1) As recorded in the Award, a key ground of Sellers’ appeal before the Board of Appeal was that the First Tier Tribunal had been wrong to find that Sellers had failed to provide a valid insurance policy/certificate. The error asserted was that the First Tier Tribunal had elided that obligation with a decision purportedly (but not officially) made by insurers to avoid the policy in circumstances where proceedings to determine the validity of the insurance were ongoing in Belgium but had not yet been determined. This substantially reflects the questions of law in respect of which permission is now sought and which were therefore clearly questions which the Board of Appeal was asked to determine.

(2)

On a fair and generous reading of the Award, the Board of Appeal held that:

(a)

it was irrelevant that the validity of the policy under Belgian law had not yet been determined;

(b)

the contract required “a valid insurance policy which must be effective”;

(c)

“effectiveness would depend on whether the policy was successful in producing a desired or intended result, when a cargo claim is made against it”;

(d)

insurers had rejected Buyers’ claim under the policy and claimed/declared that the policy was null and void (as is accepted to have been common ground);

(e)

Buyers were unable to pursue a claim under the policy;

(f)

the policy was in consequence ineffective and thus invalid.

(3)

The Board of Appeal did not on a fair reading find that insurers were entitled to avoid the policy, whether by affirming the decision of the First Tier Tribunal or otherwise. The First Tier Tribunal had held (at least arguably, and presumably as a matter of English law rather than as a finding of fact as to Belgian law) that insurers were entitled to avoid the policy for material non-disclosure. By contrast, the Board of Appeal upheld the First Tier Tribunal’s decision that the policy was invalid on the entirely different basis that the policy was “ineffective” as defined above. This cannot be regarded as any express or implicit affirmation of the First Tier Tribunal’s reasoning. As Buyers themselves have pointed out, the question of whether insurers’ avoidance was correct was not in issue before the Board of Appeal. Buyers’ short answer to the application for permission to appeal is therefore based on an incorrect premise.

(4)

Buyers’ longer answer is also misconceived. While the Board of Appeal found as a fact that Buyers were unable to pursue an insurance claim, it held that this flowed from the rejection of the claim by insurers and purported avoidance of the policy, and was treated as an inextricable consequence of that rejection and purported avoidance rather than as a separate, freestanding requirement.

(5)

The extent to which rejection of a claim and assertions of invalidity/purported avoidance by insurers mean that a CIF seller is in breach of contract is a question of general public importance in the context of the international sale of goods.

(6)

The decision of Board of Appeal is open to serious doubt. Whereas the law as accepted by both parties is that a policy must be effective in the sense that it is valid and not void or voidable (ie the critical factor is validity), the Board of Appeal appears to have transposed these requirements and regarded the touchstone of “validity” as being “effectiveness” defined as above. It is by no means certain that this is a correct reflection of the law.

(7)

The determination of the questions of law will substantially affect the rights of the parties and I consider that in all the circumstances it is just and proper for the Court to hear this appeal.’

At the hearing in front of me, Mr Russell KC on behalf of the Claimant pointed to the questions of law on which Dias J had given permission to appeal. He said that the present case was unusual because there was no substantive dispute as to the correct answers to those questions of law. The Defendant accepted that the law was stated correctly in Benjamin on the Sale of Goods (12^th ed) at [19-072], namely that ‘A CIF seller is under an obligation to provide an effective policy of insurance, ie one which is not void or voidable for misrepresentation.’ In the circumstances, the Court should answer the questions of law for which Dias J gave permission ‘No’ and ‘No’, set the Appeal Award aside, and remit it to the Appeal Board to determine whether the Policy was invalid or ineffective in the relevant sense, namely that it was void or voidable as a matter of Belgian law.

In the course of his submissions, Mr Russell KC accepted that one course open to the Court on this hearing was, in conjunction with answering the questions of law in the way he proposed, to remit the Appeal Award to the Appeal Board, and that on such remission it would be open to the Appeal Board to hold that those answers to the questions made no difference to the result, including on the basis that it had already found that the policy was actually void or voidable.

For the Defendant, Mr Smith KC argued with characteristic force that the questions of law on which permission had been granted were not ones which the Appeal Board was asked to determine. Whilst that submission involved revisiting one of the bases on which permission to appeal had been granted, there was no legal impediment to the court’s doing so. Further or alternatively, he contended that there was no error of law on the part of the Appeal Board given that, as he submitted, the Appeal Board had affirmed the finding of the FTT that the insurers had been entitled to avoid the policy; and in circumstances where the insurers had in fact avoided the policy for material non-disclosure and where the Claimant was not contending that the insurers had been wrong to do so, the Appeal Board was entitled to rely on the insurer’s avoidance of the policy as establishing a breach of contract. In relation to this alternative case, he submitted that, if the court was in doubt as to whether the Appeal put its mind to the question of whether the insurers were entitled to avoid the policy, then the Appeal Award should be remitted.

In response, Mr Russell KC submitted that the court should not revisit the permission stage hurdles; and submitted also that Dias J had been right in her analysis of the Appeal Award.

In The ‘Ocean Crown’ [2009] EWHC 3040 (Comm), at [53], Gross J rejected a submission that, because leave to appeal had been given under s. 69 of the 1996 Act, the court hearing the appeal was bound to accept that a question of law had arisen for decision. Gross J went on:

‘The court hearing the appeal cannot of course reopen the grant of leave and leave cannot properly have been granted unless the judge seised of that issue has concluded (amongst other things) that a question of law did arise out of the award under consideration. But the court hearing the appeal is in no other way bound by the decision of the judge granting leave. On hearing the appeal, the court is not restricted as to its conclusions; so, it may conclude that in reality there is no question or error of law at all. Nor does any such conclusion involve implicit criticism of the judge who granted leave; the task of the judge considering the grant of leave is different from the task of the judge hearing the appeal.’

This topic has been revisited in subsequent cases. In Agile Holdings Corp v Essar Shipping Ltd [2018] EWHC 1055 (Comm), HHJ Waksman QC said this (at [30]-[31]):

‘[30] Second, the route to appeal under s. 69 is a very narrow one, deliberately so in deference to the interest in the finality of arbitral awards. But once a case has successfully navigated that route then it seems to me that there is every reason to move onto the merits of the question of law posed without the distraction of tangential points which have already been decided.

[31] For my part, I would make the following observations:

(1)

It is impossible to see how the issues about public importance, affecting the rights of the parties and justice and convenience can ever be raised on the appeal once leave has been granted.

(2)

The Law Question [viz that there is a question of law arising out of the award] and the Determination Question [viz that the tribunal was asked to determine that question] are in a different category but in my view the appeal court should at the very least give considerable weight to the decision by the Judge granting permission on those points.

…’

In CVLC Three Carrier Corp v Arab Maritime Petroleum Transport Company [2021] EWHC 551 (Comm), Cockerill J said, at [34]:

‘[34] I am satisfied that HHJ Waksman QC was correct in the Agile Holdings case and that the permission stage is intended to be a qualifying hurdle which is not revisited and that, while it may not be impossible to revisit the various component parts of the permission decision, there will have to be highly unusual circumstances justifying this course. Were the course which Mr Berry urges to be adopted, appeals would become much longer and more expensive, with all or most of the questions being relitigated in written and oral argument. This would be consistent neither with the policy of the 1996 Act, nor with the overriding objective.’

Most recently, in Ayhan Sezer Yag ve Gida Endustrisi Ticaret Limited Sirket v Agroinvest SA [2024] EWHC 479 (Comm), HHJ Pearce cited CVLC Three Carrier Corp, (at [82]) and found that there were no ‘highly unusual’ circumstances in that case.

Having had regard to these authorities, I consider the position to be:

In the present case, I do not consider that there are any highly unusual circumstances which justify this court revisiting the issue of whether the questions of law for which permission was given by Dias J were ones which the Appeal Board was asked to determine. I can see that there were significant arguments each way on this point, but Dias J’s conclusion, after what was clearly a careful exercise determining whether there should be permission, was justifiable. To permit revisitation of such a decision would not, as Cockerill J put it in CVLC Three Carrier Corp, be consistent with the policy of the 1996 Act or the overriding objective.

On that basis, there appears to me to be no good reason why the court should not determine the questions of law for which permission to appeal was granted. This is especially so as there was no substantial dispute at the hearing as to what the answer to at least the first of those questions should be. In any event, I do not consider that there is room for much doubt as to what those answers should be.

Thus, in relation to the first question, my determination of that question is:

As to the second question, my determination is:

The present case is, in my view, one where there should be remission of the Appeal Award to the Appeal Board for reconsideration in the light of the above determinations, pursuant to s. 69(7)(c) of the 1996 Act.

As I believe was agreed between the parties, but in any event for the purposes of clarity, I make clear that it will be open to the Appeal Board, on remission, to find that the foregoing determinations of the questions of law do, or do not, have an effect on the result hitherto reached.

The costs of the appeal should be borne by the Defendant, which resisted permission to appeal, and which, on the hearing, urged the court to revisit the question of whether the issues of law on which Dias J had given permission were ones which the Appeal Board was asked to determine. The Defendant has been unsuccessful in relation to those arguments, and should bear the costs of the appeal, as I have indicated.