Commodities trading is a core sector for our firm, based on deep experience.
Zeiler Floyd Zadkovich advises and represents market-leading buyers, sellers, shippers and owners on commodities transactions and disputes for international and domestic trade.
We look at commodities trading as it is: a global supply chain. This starts at production, requires storage, involves blending, carriage and delivery whether at port or inland, and all related aspects such as selling, financing, insurance and hedging. At each step, on every contract, we can assist.
Markets are connected, such that commodity fluctuations affect various stakeholders in the chain. Traders need lawyers who know what they are doing – who can move with confidence, experience and pace when needs require. Built on years of in-house, insurance and private practice service, we deliver this through an intimate understanding of how the commercial dynamic intersects with the law.
We act for both buyers and sellers in respect of sale and purchase agreements across the broadest spectrum of commodities sales agreements. We have experience acting in disputes relating to energy, petroleum products, LNG, softs, grains, oils, ferrous and non-ferrous metals, among others.
Disputes under international sale and purchase agreements introduce a range of different issues. A detailed investigation into fact and law is usually required. There are claims notification and time bar issues to navigate. If not resolved quickly and effectively, these disputes have the potential to disrupt trading accounts between buyers and sellers.
We act on a variety of cases, including claims for mis-delivery, short delivery, damage in transit, contamination and out of spec cargoes. Acting on these claims requires an understanding of the nature of the underlying commodity, as well as being entirely comfortable with the rules of any applicable arbitration institution. Our experience covers proceedings under the rules applicable to ICC, LCIA, AAA, GAFTA, FOSFA, SAL, LME, LMAA, CIETAC, VIAC and SIAC.Back to top
We support the trading, operations and shipping teams of international trading companies in locations all around the world. Traders have dynamic and demanding teams which require prompt and robust advice. It is important to ensure that legal accuracy, attention to detail and impartiality are not compromised because a matter is urgent and high-pressured.
We review, negotiate, draft and advise on all commodity trading documents. This involves liaising with other support functions of the client’s business in respect of tax issues, financial issues, credit issues, compliance issues and any other areas of risk prior to execution.
A selection of commodity trading documents we draft and advise on:
Our firm also advises on cargo and shipping operational issues, for example, in relation to arrival/delivery windows, shortage and quality/off-spec, laytime and demurrage, issuing guarantees and letters of credit, bills of lading and letters of indemnity.Back to top
Cross-border disputes are at the core of our practice as international litigators and counsel. We have seen almost everything that could go awry in international trade relations, starting from the delivery of carcinogen consumer goods, mouldy cheese, defunct machinery, late deliveries in all constellations, quality and quantity claims. We are well versed with the UN Sales Law, the national applicable sales laws, Incoterms, standard industry association templates, and other international conventions.
Our approach is to proactively seek out our clients’ objectives and devise a strategy to achieve them. Given that counterparties’ assets are often held in distant countries, a key aspect of any strategy is to obtain security if we are claiming, or to consider appropriate protective measures if we are defending. The firm’s lawyers are trained in tracing and securing assets of all kinds, so our clients stand the best prospect of making a full recovery.Back to top
We act for lenders, sellers and buyers on claims arising out of letters of credit, payments against documents, performance guarantees and lines of trade credit. We also act for clients in cases to recover hedging losses and to prosecute disputes under derivatives agreements.
This involves taking action on behalf of lenders to secure their position under documentary credits and other finance agreements, such as exercising rights as the holder of a bill of lading, stopping goods in transit, exercising lien rights against shipowners, obtaining security through court legal action and winding up loan agreements and facility agreements with borrowers.
We also have recent experience pursuing lenders for shipowners, where a lender has taken a position as a primary cargo interest and opened themselves to liabilities under the bill of lading or other transport document.Back to top
Shipping carries the world of commodity trading – literally and figuratively. Our market experience in this area allows us to advise clients across the entire life cycle of a trade.
We routinely advise on issues relating to off-hire, cancelling/damages for failure to deliver a vessel to the correct cleanliness standard, laytime and demurrage, and vessel withdrawal. Our team specialise in these kinds of charterparty disputes. We know that advice is often time-critical. We are responsive, accurate and focused on the critical matters. By getting it right at the outset, we put our clients in the best position to obtain a recovery at the end of the dispute process.
In maritime matters, our ability to obtain security and extract value from a case is clear. We are experienced in vessel arrest, bunker arrest, attachments and liens over cargo, sub-hires and sub-freights. Protecting our clients’ interests means making sure their claims get paid.Back to top
Derivatives play a critical role in hedging a traders’ risk, locking in wins and limiting losses. We have experience drafting and handling disputes on derivatives trading agreements (ISDAs) and advising on the set up of trading desks. We have also assessed electronic trading platforms and how the industry is moving from a paper-based documentary title system to a transfer of rights electronic trading system. We have also handled a variety of commodities cases where hedging losses have formed part of the quantum claimed. There are nuances involved in this head of loss.Back to top
Cargo losses and damage to cargo can arise at any stage of the maritime carriage. At or before loading, during transit, on or after discharge.
We act for a range of market participants, from vessel owners and freight forwarders to charterers and cargo receivers, in bringing or defending claims in respect of damage to cargo, contamination of cargo, cargo shortage and out of spec cargo.
With our extensive insurance experience in acting for P&I Clubs and commercial insurers, as well as in-house experience at an international group P&I Club, we understand that insurance market, and the dynamics involved in defending corporate clients’ as well as insurers’ interests. For corporate clients, we also have a clear understanding of how to liaise with insurers and navigate through possible coverage issues.
Jurisdiction often plays a central role in these cases. Local interests will seek to put claims before local courts, possibly ignoring governing law and jurisdiction agreements. Often the only response is fast, decisive action to obtain anti-suit remedies, followed by prosecuting the case before the competent court. Where necessary, we rely on our extensive network of local contacts to achieve results, whether that is in the main action, or in obtaining security for the claim.Back to top
Storage and blending are essential aspects in controlling and managing commodity prices and risk. There are often temporal issues that arise in supply or demand of commodities. Naturally that affects price. Holding the commodity, or indeed transforming the commodity by blending or other means, are two ways of dealing with those temporal pricing issues. We only need look as recently as the covid-19 pandemic for an example. Demand dropped drastically as the global economy was effectively shutdown overnight. The price of most commodities collapsed, led by oil markets. Traders needed to find storage solutions until prices rebounded.
This dynamic creates a host of issues from a contractual and legal perspective. Often contracts do not properly contemplate the temporal issue. Perhaps they do and one party will suffer significant financial loss. We advise companies through such issues and seek to protect their position as far as possible. This does not only relate to catastrophic recessionary events. We have seen LME warrants for storage in the spotlight over the past decade at differing times, with alleged concerns about market distortion. There is also a myriad of issues that can arise with commodities as they pass through ports and terminals – see our related Logistics and Shipping pages for more details.Back to top
Representation of a Southern European automobile entity in arbitral proceedings against an Eastern European entity regarding an import agreement of automotive vehicles (EUR 30 million, VIAC).
Representation of an Eastern European state in two investment arbitrations against UK investors in the automobile accessories industry (EUR 30 million, SCC).
Assessing criminal and civil options, and coordinating an asset seizure search and attach strategy in Mexico for a major case for shipowners pursuing a Chinese mining conglomerate in Mexico. The underlying case involved allegations of cartel cooperation and fraudulent dissipation of assets (USD 2.5 million).
Representation of a foreign investors in an investment arbitration against an Eastern European state regarding investments in the food production industry (EUR 80 million, ICSID).
Advised an international bank on issues arising from the cancellation of a trade credit facility, assignment of a related insurance claim and pursuing assets of the borrowers (oil traders) in various jurisdictions across the world, including England, Singapore and Belize.
Representation of Asian governmental energy entity in Coronavirus related advice reagrding current portfolio of charter parties.
Representation of major international LNG supplier in Coronavirus related advice on Indian customs regulations regarding presence of armed guards and piracy prevention personnel, off hire and risk assessment.
Representation of a major US oil refinery in relation to disputes under their shipping contracts during the COVID-19 crisis. The dispute related to delays under a bespoke charterparty.
Managed a successful Commercial Court appeal for Romanian metals receiver/trader in relation to fraudulent conduct alleged against a major English metal trader. The appeal was successful and further associated proceedings were launched in Turkey.
Pursued a claim for major US commodities trading house for damages in respect of late delivery / unseaworthiness against vessel owners in LMAA arbitration proceedings. Also handled negotiations with Mediterranean receivers. Brought related actions in Texas and Turkey for discovery and vessel arrest against the owners.
Legal advice to a major petroleum product importer in a dispute relating to out of specification oil products
Legal advice to a major American oil company on disputes relating to their fleet of vessels, including queries relating to demurrage, off-hire and cargo contamination.
Advised a Norwegian chartering company, as borrowers, in relation to an alleged default under a trade finance loan agreement. Client’s financiers commenced the claim in the High Court of England of Wales, seeking approximately US$1.5m.
Assisting a multinational Dutch chemical trading company with regard to day-to-day employment law questions concerning its Austrian subsidiary.
Assessing the laws on lifting the corporate veil on companies in Mexico for a major shipping demurrage case, where the underlying cargo interests were not in a position to accept delivery and the vessel carrying crude ended up waiting for months before discharge could occur (USD 3+ million).
Representation of two subsidiaries of a global packaging and pager company in an arbitration proceeding against a Czech chemical supplier (EUR 2.4 million, VIAC).
Acted on an ad hoc arbitration claim for international London-based trading house, specialising in steel and metals trade, against an Italian receiver for liability under UK COGSA for quality issues.
Acted for a UAE steel trading company in relation to a shareholder’s rights and alleged misappropriation of company funds.
Advised major LNG chartering company on midterm charter parties with multinational oil trading company.
Advised an Italian coal trader relating to the failure of their counter-party to pay under a letter of credit on the basis of alleged fraudulent conduct. This matter involved Singapore anti-suit and arbitration proceedings, Karachi court proceedings and Zurich proceedings against the confirming bank.
Supporting a global leader for industrial gas in preparing and implementing the intended changes to their management, comprising the required employment and corporate measures and the implementation of the necessary changes to the commercial register.
Preparation of bespoke template charterparty documents for vessel owners in the LNG industry. Advising on the terms of ShellLNGTime 1 and ShellLNGTime 2 to provide a comprehensive template/standard form document at an appropriate risk level for clients.
Representation of major international LNG supplier and charterer on their position in respect of a multi-million dollar off-hire claim. The dispute turned on bespoke off-hire wording and complex legal questions in LCIA arbitration.
Advised an Asian governmental energy entity in relation to its insurance requirements for the import, trading and transportation of LNG
Advised Italian shipowner on sanctions related to trade in South and Middle America.
Representation of European bank regarding recovery of a multi-million dollar claim against an insolvent entity under claims relating to mis-delivery of cargo. Assertively pursued security actions against possible assets and successfully obtained an attachment over assets belonging to an alter-ego in a US targeting a vessel in the Southern District of Texas. In a reported decision, successfully defeated post-discovery motion to vacate seizure order and dismiss action. Global litigation included proceedings in UK and East Asia.
Representation of Italian shipowners in defense of numerous cargo claims resulting from signficant vessel incident involving major container loss.
Legal advice to a major petroleum product importer relating to out of specification oil products
Advised on and drafted protective clauses for a major US oil refinery in relation to risk under their shipping contracts during the Covid-19 crisis.
Representing a leading Austrian construction company in four parallel court proceedings against company’s former manager inter alia on the issue of wrongful employment termination and claims for overtime payments (Austrian courts; Committee for Disabled Employees).
Acted for an oil and gas company on proceedings in the High Court against its COO and his related companies for receipt of alleged secret commissions. Worldwide freezing orders were obtained to the value of approx US$25m.
Acted for a trading company in relation to a High Court action brought by a US metals company and related court/arbitration proceedings involving a UK metals trading company. The proceedings involved allegations of fraudulent misappropriation of company funds, sanctions issues and contract default.
Representation of a Southern European state in an investment arbitration against a Western European foreign investor in the steel sector (EUR 72 million, ICSID).
Representation of major international LNG supplier in negotiations of several charter parties with Indian oil corporation.
Representation of major soft commodity trading company in English High Court proceedings, alleging false representation and deceit against a Russian commodity trader. Matter also involved worldwide freezing orders, underlying GAFTA arbitration proceedings in London, English enforcement proceedings and Russian enforcement proceedings; obtained a full judgment and London arbitral award.
Advised Skandinavian shipowner regarding informal arrest of vessel in Venezuela on claims of “stolen cargo” valued at several million USD.
Defended oil spill indemnification claims against client time charterer following oil spill event on Mississippi.
Representation of Asian shipowner in US federal litigation brought against a publicly traded US minerals and mining company in connection with the pursuit of fraudulent transfer claims. In a reported decision, successfully defeated summary judgment motion made by defendant.
Defended an ICC arbitration claim for our Egyptian trader clients, as sellers, for short shipment under a sale and purchase contract.
Advising Mexican subsidiary of a major Austrian group in the oil drilling industry on its day-to-day corporate and employment issues, including the drafting and reviewing of master sales agreements that contain provisions stipulating specific timeframes and transportation information for delivery and return of rental equipment, as well as other complex commercial contracts.
Representation of a Southern European gas trader in arbitral proceedings against a Central European multinational regarding the revision of gas storage contracts (EUR 15 million, ad hoc arbitration/Leipzig, Germany).
Representation of an Eastern European state in an investment arbitration against a Dutch investor in the commodity trading sector (EUR 120 million, PCA).
Acted for an international metals trading house, and then its cargo underwriters, in a major subrogated claim against Owners, Shippers and Receivers in relation to stolen steel cargo. The case involved multi-layered court action across the world, including vessel arrest proceedings in Turkey and Lebanon, and other corporate criminal actions in Russia, Florida and Switzerland.
Acted for a major off-shore oil drilling company in relation to a contractual dispute in the Gulf. The case involved questions of repudiatory breach and late delivery of equipment.
Advised on the commissioning and commercial start-up of a Floating Liquefaction Unit and Floating Storage Unit in West Africa for the sole off-taker trader. Various operational issues arose with significant commercial impact. Required regular advice and draft messages to protect contractual positions and resolve the issues.
Drafted and negotiated a 20-year Sale and Purchase Agreement and associated logistics agreements for a leading trading company for volumes of liquefied helium produced in the Siberian region of Russia which involved containerised carriage by road and sea.
Representation of major LNG supplier on a 15-year Gas Sales Agreement and Terminal Use Agreement for supply of LNG/natural gas in West Africa The project involved intense time pressure; technical and contractual complexity with a Floating Storage Unit and a Floating Regasification Unit and the trader client retaining title to the LNG/gas during the regasification process; local legal requirements; and inherent political and regulatory risk.
Representation of US energy major in defense of general average claims following vessel grounding. Claims not pursued following aggressive pursuit of international discovery and investigation. Handled global coordination of legal and investigatory team.
Advised coal trader on a 1.5 year coal supply contract dispute against the receiver. The receiver argued repudiation for alleged fraudulent conduct, namely backdating a B/L. Client claimed damages for wrongful repudiation in LCIA proceedings. There were related LMAA arbitration proceedings and UK court proceedings for freezing orders and vessel arrest.
Advised shipowner clients and its P&I Club on a cargo misdelivery claim and associated indemnity action. The bill holders’ claim was subject to LMAA arbitration proceedings and the indemnity proceedings were before the English High Court. Our client obtained freezing orders against the commodities trader in England, enforced those in Switzerland and Rule B attachments against the indemnifying party in the US, having defended a sister-ship arrest in Morocco and related proceedings in Dakar.
Representation of a Singaporean shipping company with its main seat of business in London in enforcement and recognition of foreign award proceedings (USD 5.7 million, Mexican courts).
Representation of a North American OEM-supplier in arbitration proceedings against Central European integrator in the aerospace industry (USD 11 million, VIAC).
Acted in a major English Technology and Construction Court claim for French-based international insurers following a catastrophic train derailment in the Midlands, UK. We handled the regulatory investigations into the accident and the litigation. Devised our client’s litigation strategy and the key contractual defences. After six years the case successfully resolved.
Advised a large US commodities trader in an arbitration claim for overpaid hire and bunkers on a time charterparty. This involved insolvency proceedings in Greece and various actions for security.
Drafted a Construction Contract for a Floating Storage and Regasification Unit together with the associated Technical Services Agreement, the Ship Management Agreement and Charterparty on behalf of a trading company for an important strategic project in Russian territorial waters.
Watch Luke Zadkovich and Calum Cheyne on the defense of vessel arrests.
Partner Edward Floyd had the honor this week of briefing a great group from the US intel community on the interrelation between maritime law and national security.
Lerch, Zadkovich and Floyd (authors), “International Uniformity and Maritime Liens over Cargo: An Ocean Not Easily Navigated”, Tulane Maritime Law Journal [44 TUL. MAR. L.J. 251 (2020)].
“International Uniformity and Maritime Liens
over Cargo: An Ocean Not Easily Navigated”
We are excited to share our full journal article published by the prestigious and highly acclaimed Tulane Maritime Law Journal [44 TUL. MAR. L.J. 251 (2020)], co-authored by Aiden Lerch, Luke Zadkovich and Edward Floyd.
“Free Trade Agreements and European Integration of SEE Countries”, Faculty of Law University of Belgrade
Master’s Program, Jean Monnet Project (sponsored by European Commission)
21 and 22 March 2020
It has been widely reported that LNG receivers in China have recently declared force majeure on LNG contracts due to disruptions caused by the 2019 novel coronavirus (2019-nCoV) which has now been given the official name COVID-19 (“novel coronavirus”). This was done after force majeure certificates were issued from the China Council for the Promotion of International Trade (“CCPIT”), with the approval of China’s Ministry of Commerce.
BIMCO rounded off 2019 by releasing an overhaul of the BIMCO Sanctions Clause. Owners previously held the right to ignore charterers’ orders based on owners’ “reasonable judgment”. That right is removed. This will be of some comfort to charterers, who will be pleased to see the back of a subjective test in owners’ favour.
This note reports on an interesting and important US federal court decision concerning sanctions enforcement and, significantly, a rare instance of a business challenging OFAC’s interpretation of a US sanctions regime. Exxon was successful in voiding a US$2 million sanctions penalty. However, for the rest of us this case demonstrates why caution around sanctions remains of paramount importance.