Article

Note: Soeximex SAS (Buyer), a company registered in France, contracted for the purchase of "15,000 metric tons of (Burmese) 'Myanmar Long Grain White Rice EMATA -25% CNF FO Conakry, Benin in Bulk'" from Agrocorp International Pte Limited (Seller), a company registered in Singapore. Payment was to be made by an irrevocable letter of credit with reimbursement through a New York bank.

A commercial letter of credit that was to have been opened on or before 10 October 2008 under the agreement was not opened. Seller treated Buyer's failure to open the letter of credit as a repudiatory breach and claimed damages under the dispute resolution procedure of the Grain and Feed Trade Association ("GAFTA"). Buyer responded by claiming that Seller had committed an earlier repudiatory breach of the contract and that "it would have been illegal for [Buyer] to have opened a letter of credit." The GAFTA Board of Appeal ("Board") rejected both arguments by Buyer, declaring that Buyer failed to prove both that the U.S. Burmese Sanctions Regulations and the E.U. Council Regulation applied to its case and were violated, and that the money payable through reimbursement under the letters of credit was payable to Burmese persons.

Buyer applied to the English courts for an order that the award of the Board be remitted to the Board for reconsideration of the arguments presented by the Buyer in relation to the U.S. Burmese Sanctions Regulations and the E.U. Council Regulation. The High Court of Justice, Queen's Bench Division, Commercial Court, Gloster, J., ordered that the award be remitted to the Board, ruling that the Board failed "'to deal with all the issues that were put to it' which, in the circumstances, amounted to a serious irregularity which has caused serious injustice to the [Buyer]."

The Judge ruled that Buyer was in breach for failure to establish a letter of credit. However, the Judge ruled that the Board failed to deal with the argument that

there was clearly an entirely separate argument, based on the unchallenged expert evidence of Mr. Newcomb [Buyer's expert witness], to the effect that, if a US Bank were to issue, confirm or advise a letter of credit opened by a buyer of Burmese goods, or if it were to send US Dollars to reimburse a foreign bank's funding of any letter of credit issued for the purpose of paying for Burmese goods, that would be subject to the prohibition in the relevant US Regulation. His statement of the effect of the relevant provisions was very wide:

"[The US Regulations] generally prohibit 'U.S. persons' as defined above from transacting most business involving Burma (a/k/a Myanmar) unless OFAC has issued a license authorising the business in question."

The Judge noted that "the identity of the specific or listed Burmese beneficiaries was irrelevant" and "it was enough if there was an 'indirect supply of financial services to Burma.'" The Judge also remitted for reconsideration Buyer's arguments about the E.U. sanctions.

[JEB/chy]

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