Eagerly awaited landmark decision in The Supreme Court

Wed, 01 July, 2015

The Supreme Court, in a landmark decision eagerly awaited by commodity and contract lawyers, has allowed Bunge SA’s arbitration appeal, after Bunge was previously unsuccessful before the GAFTA Board of Appeal, the Commercial Court and the Court of Appeal.

Bunge SA v Nidera BV [2015] UKSC: landmark decision of Supreme Court on GAFTA Default Clause / sale of goods damages after The Golden Victory

The Supreme Court, in a landmark decision eagerly awaited by commodity and contract lawyers, has allowed Bunge SA’s arbitration appeal, after Bunge was previously unsuccessful before the GAFTA Board of Appeal, the Commercial Court and the Court of Appeal.

(1) The Supreme Court determined once and for all how the GAFTA Default Clause works, an issue which has long spilt the trade and trade arbitrators. It rejected the approach, taken below, of treating the Clause as a complete ‘code’, which entitled a claimant to substantial damages whether it suffered a loss or not and even if the contract would never have been performed (e.g. due to prohibition of export event), and which also ousted normal mitigation principles.

(2) The Court upheld the House of Lords’ decision in The Golden Victory [2007] 2 AC 353 and the principle there laid down, that when assessing damages one can look at subsequent events which show that a loss would not in fact have been incurred. It dismissed the numerous academic and judicial criticisms of the decision.

(3) The Court held that that principle applies just as much to sale of goods contracts as to other contracts, disapproving previous obiter judicial and textbook suggestions for a narrower non-sale of goods application of The Golden Victory and a restrictive interpretation of the decision.

Simon Rainey QC was brought in to represent the Appellant, Bunge SA following the decision of the Court of Appeal; he was instructed by Reed Smith London. He obtained permission to appeal from the Supreme Court and argued the appeal.

He led Mark Stiggelbout.

 Please follow the attached link for a copy of the judgment.