No Extension of Time for Buyers to Commence FOSFA Arbitration Under Section 12 Arbitration Act 1996

(1) SOS Corporacion Alimentaria SA (2) Mataluni Spa v Inerco Trade SA [2010] EWHC 162 (Comm)

Background To Dispute

This dispute arose out of the industry wide contamination of Ukrainian sunflower oil with mineral oil in 2008. Following an urgent alert by the European Commission on 30 April 2008, the European authorities recommended the withdrawal of contaminated goods to safeguard consumer health.

In the present case, the buyers of certain cargoes of Ukrainian sunflower seed oil commenced FOSFA arbitration proceedings against the sellers for contamination of the cargoes. The sale contracts incorporated the standard form FOSFA 54, Rule 2 of which specifies certain time limits for commencing FOSFA arbitration including a time limit of 21 days from discharge for quality/condition claims. Rule 2(d) provides that where the claimant does not comply with these time limits and the respondents raise the non-compliance as a defence, then claims are deemed to be waived and absolutely time-barred unless the FOSFA arbitrators, umpire or Board of Appeal determine otherwise in their absolute discretion.

The cargoes in question were loaded prior to the EU alert and the testing at loadport did not include analysis for mineral oil. When the buyers became aware of the industry wide contamination, they focussed on recalling all products as had been recommended and testing all stocks to determine which had been affected. By the time that they commenced FOSFA arbitration to recover their financial losses in respect of the oil that was found to be contaminated, the time limits specified under Rule 2 of FOSFA 54 had been missed. Nonetheless, the FOSFA arbitrators exercised their discretion under Rule 2(d) to allow the claims to proceed.

The sellers appealed to the FOSFA Board of Appeal which reversed the decision of the First Tier Tribunal and held that the buyers' claims were time barred.

The buyers made two applications to the court. Firstly, they applied under section 12 of the Arbitration Act 1996 (the "Act") for an extension of time to commence arbitration. Secondly, they applied for permission to appeal against the FOSFA arbitration awards pursuant to section 69 of the Act, which relates to appeals from arbitration awards on a point of law.

Commercial Court Decision

Mr Justice Hamblen dealt first with the application for permission to appeal under section 69 of the Act because if that application was dismissed, it would follow that the FOSFA Appeal Board's...