В статье рассматривается участие Украины в мировом рынке сельскохозяйственной продукции. Особое внимание уделяется институтам, существующим на этом рынке и порядку заключения рыночных контрактов, в том числе их характеристике как договоров поставки. Автор уделяет значительное внимание также порядку разрешения правовых споров, в частности, праву, применимому при их разрешении. В заключение даются рекомендации по заключению международных сделок на упомянутом рынке.
Agriculture has historically been one of the most important industries in Ukraine and is likely to retain such a position in the future. A number of Ukrainian companies have long been participants of the international agricultural market, having learned a hard lesson in working with more experienced and sophisticated international counterparties, and many more are yet to learn it.
The lesson they have learned pertains mainly to the volatility of the international commodity market, where prices may change rapidly and significantly. Therefore, it is common that one side attempts to cancel a contract seeking more favourable terms, and the other side does everything possible in order not to give a single ground for cancellation/termination.
The commodities market is mainly regulated by rules and customs which may be not straightforward as they first seem to be, leaving quite a lot of room for manipulation. Therefore, prior to entering into international commodities sale contracts, parties should thoroughly analyse its provisions and, what is of outmost importance, their application when something goes wrong.
Below, specific focus will be put on legal issues to consider prior to the conclusion of international commodities contracts and complications to be avoided when performing such contracts.
Making a deal vs signing a contract
It is a well-established principle that before trading you should decide on the rules of such trade. Today, international trade provides participants with a variety of laws and rules to satisfy needs, starting from unified commercial terms for transportation and delivery of goods (Incoterms) through specific rules for particular commodities trade ranged by a good type and carriage method (e.g. GAFTA, FOSFA) till universal rules on international sales of goods (1980 UN Convention on Contracts for the International Sale of Goods). As regards national laws being applicable to legal relations, English, Ukrainian or Russian laws will be a definite priority choice for contracts with Ukrainian parties.
When making a deal, traders tend to agree on principal issues such as the quality and quantity of goods, price, payment and delivery terms. So, from the experienced trader’s perspective, the exchange of messages/emails stating some very simple and clear terms and conditions for goods sale and purchase would suffice to make a deal from one party: “10 000 mt of feed wheat (+/— 5 % at Sellers option), Ukrainian crop 2015, FOB Odessa, Price: USD 207 / mt; Delivery period: October 2015; Payment: 70% upon shipment and 30% upon loading”, and: “Ok. It’s a deal!.”, from the other side.
However, such an agreement should follow mandatory rules applied to it by virtue of the contract, place of contract or place where further enforcement might be sought.
Formal requirements to a contract
In order to create a legally binding contract under English law (1) an agreement between two parties must be found, (2) there must be an intention to create legal relations and (3) there must be consideration. The agreement between two parties is constituted by an offer and acceptance. If the above requirements are satisfied even oral contracts are ordinarily valid and, therefore, legally binding.1
The above rule is generally recognized in miscellaneous jurisdictions.
Under Ukrainian law, a contract shall be deemed to have been concluded if the parties reached in due form an agreement on all material terms and conditions applicable to such type of contract2. The Foreign Economic Activity Act prescribes a written form for international commodities contracts, unless otherwise provided by Ukrainian legislation or international treaties to which Ukraine is a party.
However, as of today there are no domestic or international rules providing for other than the written form for international sale-purchase contracts. Furthermore, when signing the 1980 Vienna Convention on contracts on international sale-purchase of goods (CISG), Ukraine made an express reservation to the provisions which permit the conclusion of verbal contracts or written contracts by using telegraph or teletype. Thus, Ukrainian law requires a sale-purchase of goods contract to be made in written form and signed in the original by the parties.
A transaction shall be considered as having been concluded in writing in case it is signed by the parties and its substance is fixed in one or several documents, letters, or telegrams exchanged by the parties3. It should be noted that a non-concluded contract create neither rights nor obligations for the parties thereof4.
Governing law
Under Article 31 (1) of the On Private International Law Act of Ukraine (the PILA), the form of a transaction shall comply with requirements of the law of the place where the agreement is made (lex loci contractus), unless the transaction / contract specifies otherwise. A common mistake is that having chosen a particular foreign law as applicable to a contract concluded in Ukraine, a Ukrainian party thereof considers itself not to be bound by the requirements of Ukrainian law.
However, irrespective of the applicable law, the above rule shall not restrict the validity of imperative (mandatory) provisions of the Ukrainian laws governing the relevant relations5. A foreign trade contract concluded by a Ukrainian entity or individual entrepreneur may be recognized invalid in courts if such contract does not meet the requirements of Ukrainian laws or international treaties.
In all other respects, Ukrainian law allows the parties to choose the law applicable to the content of their legal relations (lex voluntatis). Pursuant to Article 5(2)(4) of the PILA the choice of law shall be explicitly expressed, or straightforwardly arise from the acts of the parties to a transaction, terms and conditions of the transaction, or circumstances of the case, which should be considered in aggregate. The parties may choose the applicable law to a transaction in whole, or to separate part of the transaction; in the latter case the choice of law shall be explicitly expressed. Furthermore, the parties may agree on or exclude application of specific rules or instruments to govern their relations. For example, the CISG, UNIDROIT Principles, GAFTA or FOSFA Rules, etc.
There is no panacea when deciding on governing law and rules. So, the parties shall elaborate on a particular law and/or rules to govern their relations based on their basic needs. The key advice would be to know the rules which you agree on, since they prescribe certain requirements to follow and provide for particular consequences in case of their breach.
Arbitration clause
Now a dispute resolution clause providing that state courts shall resolve disputes arisen out the international commodities contract is rather infrequent, since arbitration prevails as a dispute resolution choice in international trade.
When drafting an arbitration clause, the parties tend to use a model arbitration clause drafted by the preferable arbitration institution. Such an approach definitely facilitates further enforcement of such arbitration clause and eases an initiation of arbitration.
As regards the choice of particular arbitral institution and/or arbitration rules, it would be highly recommended to think about these issues prior to signing the contract. The arbitration institution and its rules shall meet the party’s need and expectations, which could be compared with buying a car. A buyer should definitely know the right proportion of price, quality, facilities/gadgets, brand and reputation. Continuing this analogy, when deciding on the proper arbitration forum, a party shall consider the following questions:
What kind of disputes of major concern for a party could be expected to arise out of a contract (e.g., quality of goods, terms of delivery, payment, etc.)?
What kind of expertise on the part of the arbitrator is required for consideration of a potential dispute (industry expertise, trade practice and usages’ awareness, legal education, etc.)?
Should the parties participate in appointing arbitrators, or should a sole arbitrator be appointed by an arbitration institution?
Shall the choice of arbitrators be limited by a specific list of arbitrators, or shall the parties be free to choose one?
Is a fast track / expedited arbitration proceeding badly needed, or could “slow cooking” arbitration work?
Is an oral hearing a must-have?
The language of contract, correspondence and arbitration proceeding?
What is the maximum amount of arbitration and legal fees and costs that a party can afford?
Should interim measures be available for the parties?
Is detailed legal reasoning required, or could an arbitrator(s) proceed with relief granted only for the sake of timing?
Where is the arbitral award expected to be enforced?
Once clear answers to the above are found and a venue is chosen, then drafting an arbitration clause to a contract will be a rather technical but still important issue. So, there shall be no hesitation to consult with a legal counsel on a proper arbitration clause’s wording, since after the arbitration clause is approved, it can be used in all future contracts.
Counterpart / structure of trade
In current trade huge agricultural holdings prefer to trade through different trading vehicles which, in some instances, are not even a part of such holding. In this case a party should require a holding to be a part of the deal (whether as a party of contract or as a guarantor) or to accept the risks of non-performance of the contact by a trading vehicle. In the latter case, it should be borne in mind that once a default occurs, the party will be alone with a trading vehicle that most likely has no assets to cover damages.
Therefore, prior to concluding a contract, a party shall also ensure that a contract is concluded with a proper counterparty or that proper assurances / guarantees / financing for such contract are received to avoid any possible scams.
Notices
Depending on the rules and/or law chosen, a party shall duly observe the procedure for sending notices regarding performance or non-performance of contract. Otherwise, non-compliance with procedures could have adverse effects for the rights of a party. For example:
1) Quality. Under the CISG the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller a notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer. By contrast, GAFTA Arbitration Rules provide for a strict and very limited period for a notice of dispute regarding quality / condition of the goods — no later than the 21st consecutive day after the date of completion of final discharge or delivery. Failing to observe the said term will ban a claimant’s right to claim.
2) Damages. Unlike the wide approach to damages issues by the CISG, FOSFA and GAFTA standard form contracts provide for specific “Default Clauses” containing a rule for calculating / establishing the date of default which is relevant for assessing the damages and right to claim thereof. So, in case a party declares its counterparty in default in violation of the above default clause under FOSFA or GAFTA rules, this may amount to a breach of contract, giving such counterparty the right to bring the contract to an end and claim damages resulted from such premature default notice.
3) Delivery. Irrespective of the terms and conditions agreed by the parties in the contract, applicable rules and/or law may affect a party’s right thereunder. For instance, the buyer’s right to require delivery within the period fixed in a contract may be waived even after the expiry of that period. So in the Hartley v Hymans case, where the buyer continued to demand and accept deliveries long after the fixed date and then alleged that the contract had been broken by failure to deliver punctually, the court held that the buyer, by his demands after the fixed date, had waived his right to insist that the period of delivery terminated on that date. He was also, by his conduct, stopped from alleging that the period for delivery terminated on the date originally fixed by the contract 6.
The above is only small inset of a total picture of problems that may arise from international commodities contracts. The advice and recommendations provided above to avoid such problems are not exhaustive, but they will hopefully help during consideration of a draft contract.
To sum up, when entering into an international commodities contract, a simple rule should be observed: know and understand the provisions and procedure to be included in a contract. It would be better to have short but clear documents, rather than a 10 or 20 page contract setting out conflicting or nonsensical provisions. In practice, however, clients often ask to provide legal assistance in the dispute that has occurred when specific GAFTA Rules and English law apply, but such GAFTA Rules are not even available to a client, and, no doubt, are almost completely unknown.
1 Chitty on Contracts, Volume I General Principles, Sweet-Maxwell 2004, p. 212.
2 Article 638(1) of the Civil Code and Article 181(8) of the Commercial Code of Ukraine.
3 Article 207 of The Civil Code.
4 Resolution of the Supreme Court of Ukraine dated 30.01.2013 in the case No. 6-162цс12
5 Article 14 (1) of the PILA
6 Chitty on Contracts, Volume II Specific Contracts, Sweet-Maxwell 2004, p. 1409
Автор: Pavlo I. Byelousov
Источник: http://www.ujbl.info/article.php?id=648