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
Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions