UK: HFW Commodities Bulletin - August, 2009

Last Updated: 1 September 2009

Without Prejudice Communications Admissable To Interpret Settlement Terms
By Alistair Feeney

In Oceanbulk Shipping & Trading SA v TMT Asia Limited (29 July 2009) the High Court considered whether without prejudice correspondence leading up to a settlement agreement was admissible as evidence in a dispute over the terms of the settlement.

Oceanbulk and TMT had concluded a settlement agreement in June 2008 after TMT had defaulted under a number of forward freight agreements. One of the terms of the settlement was that "In respect of FFA open contracts between TMT Interests and [Oceanbulk] for 2008, the parties shall crystallise within the ten trading days following 26th June 2008, as between them, fifty per cent of those FFAs at the average of the ten days' closing prices for the relevant Baltic Indices from 26th June 2008 and will cooperate to close out the balance of 50 per cent of the open FFAs for 2008 against the market on the best terms achievable by 15th August 2008".

Oceanbulk brought a claim against TMT on the grounds that TMT breached the settlement agreement, including by not taking steps to close out FFAs, with the result that Oceanbulk were exposed to the large falls in the freight market which occurred during autumn 2008. Oceanbulk claim that if the FFAs had been closed out in August 2008 they would have made a profit of US$47 million, whereas leaving the FFAs open into autumn led them to owe TMT around US$86 million.

Oceanbulk argued that the close out obligations in the settlement agreement only concerned FFAs between Oceanbulk and TMT. However, TMT sought to adduce evidence in the form of without prejudice communications leading up to the settlement agreement, which TMT submitted showed Oceanbulk informing TMT that for each FFA between the parties Oceanbulk held an opposite position under an FFA with another market participant, and that those FFAs were to be closed out at the same time as the FFAs between Oceanbulk and TMT, with the result that Oceanbulk's exposure to market fluctuation would always be limited.

As a general rule, without prejudice communications are not admissible as evidence under English law. One established exception to this rule is that without prejudice communications are admissible if the dispute concerns whether those communications resulted in a settlement agreement. Oceanbulk submitted that this exception did not extend to evidence about the interpretation of a concluded settlement agreement.

The High Court rejected Oceanbulk's submission and held that without prejudice communications were admissible as evidence in a dispute over the interpretation of a settlement. The judge found that there was no good reason to distinguish between evidence of the existence of a settlement and evidence of the terms of a settlement, and it was in the interests of justice to admit without prejudice communications if it assisted the Court to interpret parties' intentions.

This decision provides a useful reminder that even genuinely without prejudice discussions and correspondence may not always be kept from courts and arbitrators, and that the principal advantage of negotiating on a without prejudice is that communications are unlikely to come to the attention of a judge or arbitrator if negotiations fail.

Excluding Rights Of Appeal Against Arbitration Awards
By Matthew East

In the recent case of Shell Egypt v Dana Gas Egypt (7 August 2009) the High Court considered whether an arbitration clause which provided that arbitration awards were to be "final, conclusive and binding" excluded statutory rights of appeal.

The dispute arose from a Farm-In and LNG Cooperation Agreement ("the FIA") relating to concessions for crude oil and gas exploration in the Nile Delta. Shell sought to terminate the FIA by giving a 30-day termination notice under the FIA. This was however an error because the termination clause Shell relied upon no longer had effect. Shell subsequently sought in UNCITRAL arbitration to justify the termination on grounds that Dana had been in repudiatory breach of the FIA.

The arbitral tribunal found that Dana had been in repudiatory breach of the FIA. However, the tribunal also found that Shell had lost its right to terminate for repudiatory breach because instead of accepting the repudiatory breaches as bringing the FIA to an immediate end, Shell had given its 30-day termination notice, and thereby affirmed the existence of the FIA, albeit for a limited period.

Shell applied to the High Court for permission to appeal against the arbitration award. Dana argued that the High Court had no jurisdiction to hear the appeal application, because the arbitration clause in the FIA provided for awards to be "final, conclusive and binding".

The Court rejected Dana's argument and held that the words in the arbitration clause did not exclude Shell's right of appeal on points of law under section 69 of the Arbitration Act 1996. The Court held that the words "final, conclusive and binding" simply meant that the parties agreed to abide by an arbitration award, that the claimant in the arbitration could not bring the same claim again in a fresh arbitration or court action, and that neither party could reopen in a later dispute issues of law or fact which had been determined in the award. If an arbitration clause was to exclude statutory rights of appeal, clear words to that effect were required.

The Court also observed that the rules of the ICC and LCIA specifically state that the parties waive rights of appeal or further recourse against awards, whilst the GAFTA rules, in common with the arbitration clause in the FIA, merely refer to awards being final, binding and conclusive.

This case is another example of the close scrutiny that the English courts give to arbitration clauses, and underlines the need for clarity in the drafting of such provisions. It should probably also be treated as establishing that the GAFTA rules do not exclude statutory rights of appeal under English law.

HFW London Commodities Breakfast Seminars

In October 2009, HFW's Trade & Energy Group will present another series of breakfast seminars covering a range of current issues affecting commodity trading.

The seminars will be held at HFW's London offices on 1, 8 and 15 October 2009. The seminars are primarily designed for in-house counsel, cargo/ ship operators, and risk controllers, but anyone with an interest in the field is welcome to attend.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.