Interlegal successfully defended the Seller’s interests in GAFTA arbitration: the Buyer is obliged to pay demurrage
26 February, 2025
26
Interlegal law team successfully represented interests of the American Seller in GAFTA arbitration against the Romanian Buyer regarding late payments and demurrage. The arbitration confirmed lawfulness of the Seller’s claims, recognizing that the Buyer violated its contractual obligations and ordered it to pay close to EUR 40 000 as demurrage, jointly with interest and arbitration costs.
Essence of the dispute
In March 2023, the parties entered into a contract on supply of 3,000 MT of the Ukrainian corn at a price of USD 218/MT on CIF terms, port of Basarabi, Romania. The contract provided the following payment terms:
• 90% payment – within 1 banking day after signing the contract
• 10% – within 2 banking days after discharge
The Seller fulfilled all its obligations, namely, loaded the goods on board of the barge and provided all necessary shipment documents jointly with invoice. However, the Buyer failed to make payment within the stipulated period, having violated the contract. Accordingly, the Seller exercised its right to retain the goods until payment, which resulted in the barge idle stay and demurrage accrual.
The Buyer’s position: attempts to avoid liability
The Buyer attempted to avoid liability for delay in discharge by putting forward the following arguments:
• The Buyer referred to the fact that, based on e-mail correspondence, payment was to be made upon the barge arrival at the port.
• The Buyer argued that the document named River Transport Agreement is not a charter party within the sense of the contract; therefore, demurrage rates specified therein cannot be applied.
• The Buyer referred to clause of the contract Time to stop counting upon completion of loading, arguing that after loading any demurrage accrual is unlawful.
• The Buyer insisted that demurrage should be accrued for each barge separately, which would significantly reduce aggregate claim amount.
The Seller’s position: arguments in defense of rights
Interlegal, as the Seller’s representative, refuted the Buyer’s arguments and proved lawfulness of the Seller’s claims:
• The contract clearly provided that first payment was to be made within 1 banking day after signing the contract.
• The Seller proved that River Transport Agreement is a charter party, because it contains all the necessary elements of a charter party; therefore, its provisions on demurrage rates shall apply to the contract. Accordingly, the Buyer is obliged to pay demurrage at the specified rate.
• Retention of the goods was lawful both under the contract and under the Sale of Goods Act 1979, which grants the Seller a right to retain the goods in case of default by the Buyer.
• Barges were included into single convoy that could not operate without a tugboat.
• The Seller argued that the term loading in the contract was a technical error, and more precisely that in the context of the contract it meant discharge completion time, since it was CIF; so, all the provisions on idle stay and demurrage were tied specifically to discharging process.
Key findings of the arbitration court:
• The Buyer should have made payment within 1 banking day after signing the contract.
• River Transport Agreement is a charter party; accordingly, demurrage rates specified therein shall be valid and shall apply to the contract.
• Demurrage should be charged for two barges and a tugboat, since the barges could not operate separately from the tugboat, demurrage for their idle stay is justified.
• Use of the term loading in the contract was erroneous: the arbitration court found out that it meant discharge.
The Buyer is obliged to pay 36,739.77 EUR as demurrage, interest and arbitration costs.
Interlegal law team helped the client to defend effectively its rights and to charge all due payments. Please do not hesitate to contact us – we will help defend your interests in GAFTA, FOSFA arbitrations and more…
Interlegal partner Aleksey Remeslo and lawyer Larysa Roshu led the case.
