Olam v Holbud: A Costly Lesson in Contractual Damages and Arbitration

Does an innocent party need to prove that it would have been able to perform its contractual obligations where the party in repudiatory breach has declared force majeure?

The recent decision of the Commercial Court in Olam Global Agri Pte Ltd v Holbud Ltd ([2025] EWHC 3187 (Comm)) arose out of an appeal from a GAFTA Award.  The decision confirms that, as a matter of general principle, an innocent party,  faced with a wrongful force majeure declaration by its counterpart, must show it would have been able to perform before it will be entitled to damages, although the outcome in this case could have been different had certain arguments been raised before the arbitral tribunals.

Background and arbitration

Olam Global Agri Pte Ltd (“Seller”) agreed to sell a cargo of yellow corn to Holbud Ltd (“Buyer”) under a FOB sale contract incorporating the general terms of GAFTA Contract No 49. The cargo was to be loaded at one of a choice of Black Sea ports, one in Romania, three in Ukraine, between 1 and 15 March 2022.

On 24 February 2022, Russia invaded Ukraine and later that same day, the Ukrainian ports were closed. Between the invasion being announced and the ports being closed, the Seller declared a Ukrainian-origin cargo. The Seller then nominated a Ukrainian port shortly after its closure, and declared force majeure.

The Buyer rejected the force majeure notice arguing that the Seller could still have supplied cargo from Romania and that force majeure didn’t apply. Even so, the Buyer nominated a vessel to perform and called on the Seller to ship from the Romanian port.

The Seller maintained that performance of the contract was suspended by the force majeure event. The Buyer treated that as a repudiation but decided to affirm the contract to keep open the possibility that the Seller might comply with its obligations.

The Buyer maintained its affirmation of the contract for some time and, in the meantime, employed its nominated vessel on other work. Eventually the Buyer accepted the Seller’s alleged repudiation as terminating the contract, at which time the Buyer had not nominated another performing vessel.

The Buyer claimed damages in GAFTA arbitration. The tribunal, and later the Board of Appeal (“BOA”), agreed with the Buyer that the Seller’s force majeure declaration was unjustified, and was a repudiatory breach, and awarded the Buyer damages.

The Appeal

The Seller appealed to the Commercial Court under section 69 of the Arbitration Act 1996, on the basis that the tribunal had made legal errors when awarding damages. The Seller argued that, having regard to the compensatory principle for the assessment of damages, the burden of proof remained on the Buyer to prove that, had there been no repudiation, it would have been able to perform.  The Seller submitted that the Buyer could not prove this, as their nominated vessel was employed elsewhere and no other vessel was nominated by the time the contract was terminated.

Two questions of law were put before the Court:-

1. Where a party is in repudiatory breach of a contract having wrongly declared force majeure, is the innocent party required to prove (in order to recover substantial damages) that, but for the repudiation, it would have been able to perform its obligations under the contract?

2. On the true and proper construction of Clause 6 of GAFTA 49, and where a party has already nominated a vessel, and the counterparty is in repudiatory breach of the contract, having wrongly declared force majeure, is the party entitled to nominate a substitute vessel at any time prior to acceptance of such repudiation?

Judgment

The Commercial Court judge, Mr Justice Trower, in finding in favour of the Seller, answered “yes” to the first question and “no” to the second.  However, the decision was based specifically on the arguments presented in arbitration and the findings made in the BOA’s Award.

Question 1

The Seller successfully argued that there was no room for dispute as to the general point of principle for the assessment of damages in this case. As per Teare J’s decision in Flame[1], the burden of proof remained on the Buyer to prove that, had there been no repudiation by the Seller, it would have been able to perform its obligations under the contract. The Seller submitted that in the absence of such proof before the BOA, the decision to award damages to the Buyer was wrong in law.

The Buyer argued that the BOA was right to award damages as their conclusion was based on a finding of waiver by estoppel i.e. while the force majeure declaration was wrongful, the Seller represented that they would not rely on their strict legal rights and the Buyer relied on that representation at their detriment.

The issue with this argument was that waiver by estoppel was not argued before the GAFTA tribunals, was not mentioned anywhere in the Award (and neither were the legal principles which underpin it).

It was therefore impossible for the Court to infer that the BOA made any such finding.

Question 2

The Buyer’s case was that, even if the original vessel was no longer available after expiry of the contractual delivery period, the contract — properly interpreted — allowed it to nominate a substitute vessel before the contract was eventually terminated and before the Buyer accepted the repudiatory breach.

The Seller argued that the delivery period in the contract itself had expired by the time the Buyer wanted to substitute, so no substitution could satisfy the contract. Further, there were no findings of fact in the arbitration award showing that the Buyer could and would have substituted a vessel — which is necessary to establish that it was “ready, willing and able” to perform.

The Court ultimately held that the GAFTA contract had clear deadlines tied to the estimated time of arrival of the original nominated vessel and that the Buyer’s right to substitute had expired. Even if the Buyer had the right to substitute, there was no factual finding that they were able and willing to procure a substitute vessel at the relevant time.

Under well-established principles, if a party claims it could have performed, there must be evidence supporting that claim. Without such findings, the Court cannot assume that the Buyer would have nominated a substitute vessel.

Comments

The Commercial Court’s judgment is a useful one for those in the shipping and commodities industry. It neatly summarises principles relating to contractual performance, repudiatory breach, force majeure, the scope of damages and how a Court will interpret an arbitral award on appeal.

Perhaps the most important takeaway in this judgment is that parties in arbitration must ensure they raise all necessary arguments before a tribunal. Since the Buyer had failed to raise the waiver by estoppel argument before the arbitral tribunals, and those tribunals had not therefore made the necessary factual findings to support an estoppel, there was no basis for the Court (which was tasked with considering whether the tribunals had erred in law) to find for the Buyers on that point. Had waiver by estoppel been explicitly raised before the arbitral tribunals, the Buyer’s claim for damages in excess of €5 million may well have been upheld.