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In Litasco SA v. Der Mond Oil & Gas Africa SA, the English Commercial Court dismissed sanctions and force majeure defences stemming from an oil contract dispute and granted summary judgment against Der Mond, a Senegalese oil trading company. Der Mond defaulted on an instalment payment for Nigerian crude oil bought from Litasco, a Swiss oil marketing & trading company, wholly-owned by Russian oil company, Lukoil.
Litasco and Der Mond entered into a 2021 contract establishing terms for the sale of Nigerian crude oil which contained force majeure and trade sanctions provisions. After the cargo was delivered, Der Mond made partial payments in November 2021 and January 2022, but failed to pay the balance of the purchase price. Following negotiations, the two parties entered into a Deed of Payment in January 2022 which provided for Der Mond to make five payments over five months. Der Mond made its first instalment payment in two tranches, but was unable to make its second instalment payment. On 18 March 2022, Litasco demanded the outstanding balance of EUR 44.4 million plus interest and subsequently commenced proceedings to enforce the claim arising under the Deed of Payment. In its defence, Der Mond responded by relying on the force majeure and trade sanctions provisions incorporated from the Contract into the Deed of Payment.
The parties engaged in ongoing negotiations about the restructuring of Der Mond’s debt and a revolving credit line was envisaged for Der Mond to source cargo from Litasco to sell to West African customers. An agreement was reached which included force majeure and sanctions provisions; Der Mond’s outstanding balance was to be reduced or extinguished by any cash or letters of credit procured in favour of Litasco. Two payments were made, but a scheduled third payment was not and a letter sent from Der Mond’s representative to Litasco requested more time, explaining that “there was serious difficulty for us finding currency to make the payment” and “a number of our regular customers have shown some uncertainty about completing a deal for oil with origins in Russia.” Litasco subsequently filed Amended Particulars of Claim, Der Mond served an Amended Defence and Counterclaim, and Litasco applied for summary judgment.
Der Mond argued the force majeure clause had been engaged because payment had to be made through the international banking system and no European clearing bank would make payments to Litasco and this inability to make payments was an event “beyond [its] reasonable control”. The court rejected this contention, stating: “The reality is that [Der Mond and its parent company] simply do not have the foreign currency to make the payments, not that they have been hindered by difficulties in the international banking system in making payments they are otherwise able to make.” The court added: “A striking feature of this case is that the Contract was fully executed on Litasco’s part before any alleged force majeure event occurred, and the Defendants’ payment obligations under the Contract had accrued due, and were initially payable before that time.”