Ukrainian news agencies have recently reported that the Grain and Feed Trade Association (GAFTA) had declared the default of PJSC Rise Company for not implementing an arbitration award in favour of Nibulon S.A.
O. Bakhmatyuk ignores the award made by international tribunals and does not acknowledge the debt
In its turn, UkrLandFarming Group’s press-service informed that UkrLandFarming agricultural holding did not acknowledge the debt of USD 17.536 million to Nibulon S.A. According to the press-service, before being purchased by UkrLandFarming in 2011, Rise signed agreements for the supply of 158 thousand tons of corn. Allegedly objective reasons, in particular, quotas on corn exports from Ukraine at that time, prevented Rise from implementing these agreements. Rise did not receive a prepayment from Nibulon S.A. Despite this, Nibulon S.A. is trying to exact from Rise the amount which equals the cost of undelivered corn and also fines and cost of legal services. Taking into account that Rise was not able to ship the products as export quotas were absent, and Rise did not receive a prepayment, UkrLandFarming considers this dispute as a display of greediness and an attempt to receive illegal benefits at the expense of the Ukrainian producer. Rise does not acknowledge the debt to Nibulon S.A. and will continue appealing against the award in all possible instances. UkrLandFarming states that Her Majesty’s High Court of Justice in England which is considered to be one of the world’s most authoritative, has allegedly supported Rise and decided to reconsider the GAFTA award on March 2, 2015.
NIBULON disproves Rise’s position by providing evidence
NIBULON considers UkrLandFarming Group’s statement to be untrue and delusive. NIBULON provides detailed information on the given events.
In 2010, Nibulon S.A. (the Buyer) and PJSC Rise Company (the Supplier) signed a number of foreign economic contracts for the supply of Ukrainian corn of 158 thousand tons.
According to the arbitration warning specified in the above-mentioned contracts, all disputes arising out of the given contracts were agreed to send to the GAFTA tribunal which headquarters is located in London (Great Britain).
Taking into account delays in product supply, Nibulon S.A. repeatedly continued contract delivery time, thereby creating favourable conditions for PJSC Rise Company to fulfill its obligations.
Rise constantly ignored implementing contractual obligations
And even when the Government cancelled quotas and grain exports licensing, PJSC Rise Company did not carry out contractual obligations and did not supply products according to the contracts, thereby causing losses to Nibulon S.A.
Thus, even when the special export regime was cancelled, PJSC Rise Company continued ignoring contractual obligations. NIBULON realized that the supplier had no intention to solve this problem peacefully. PJSC Rise Company did not supply this corn batch, thereby putting at risk the fulfillment of NIBULON’s own contractual obligations to transnational companies. NIBULON was obliged to compensate losses to its buyers.
Consequently, in August 2011, Nibulon S.A. had addressed itself to the GAFTA tribunal, requiring from PJSC Rise Company to compensate losses caused by unfulfilled contractual obligations.
The dispute adjudication in the GAFTA tribunal of different instances has lasted for almost three years. Both parties actively participated in the case, provided documents and explanations.
On April 12, 2011, UkrLandFarming PLC (Cyprus) purchased a controlling interest of PJSC Rise Company from RISE Group NV (the Netherlands).
During arbitration trial, the GAFTA arbitrators disproved UkrLandFarming statement saying that PJSC Rise Company is not responsible for not fulfilling contracts, as it did not receive a prepayment from Nibulon S.A.
The board of appeal of the GAFTA tribunal reconsidered the initial arbitration award.
The board of appeal of the GAFTA tribunal obliged Rise to pay more than USD 17 million in favour of Nibulon S.A.
According to the award of the board of appeal of the GAFTA tribunal dated 23.05.2014, PJSC Rise Company is obliged to pay Nibulon S.A. USD 17.536 million and interests for the period from 11.01.2011 till the losses of USD 3.997 million as of 07.03.2016 will be compensated completely, and also to compensate expenses for legal support of GBP 48.762 thousand.
The arbitrators rejected all arguments of the returning officer stating that PJSC Rise Company could not obtain export licences because of objective reasons. The respondent did not prove that non-fulfillment of Rise’s obligations was caused by force majeure.
We would like to note that PJSC Rise Company did not prove the fact that illegal actions of the government executive bodies in Ukraine prevented it from obtaining export licences.
But the trade practice is aware of cases when exporters appealed against illegal actions and inactivity of the central authorities issuing licenses.
Thus, for example, NIBULON Ltd won a dispute against the State Agricultural Inspection, the Ministry of Agrarian Policy and the Ministry of Economic Development for not obtaining export licences to supply corn. Although the company won these trial proceedings against authorities, we compensated all losses to our buyers caused by non-fulfillment of contracts because of the absence of export licences. Thus, we hope that PJSC Rise Company, as an honest participant of the international trade relations, will compensate losses to us.
Rise has to compensate losses in the amount of difference in market prices but not the overall cost of products undelivered
UkrLandFarming statements saying that Nibulon S.A. allegedly tries to exact from PJSC Rise Company the amount that equals the cost of all products undelivered are also untrue. According to the arbitration award, the respondent shall compensate losses in the amount of difference in market prices but not the overall cost of products undelivered.
According to the clause 12.6 of the GAFTA Arbitration Rules No. 125 and England legislation, the award of the board of appeal dated 23.05.204 shall be final, conclusive and binding.
PJSC Rise Company did not agree with the arbitration award and appealed against it in Her Majesty’s High Court of Justice in England.
Her Majesty’s High Court of Justice in England did not satisfy the requirements of PJSC Rise Company to discharge or change the arbitration award
Considering PJSC Rise Company’s appeal, on March 24, 2015, Her Majesty’s High Court of Justice in England awarded not to satisfy the requirements of the appellant to discharge or change the arbitration award and referred the only question to the GAFTA board of appeal, in particular, whether export restriction led to the incapability of PJSC Rise Company to obtain the required export licences.
Since March 24, 2015, Her Majesty’s High Court of Justice in England has not received any statements or claims from PJSC Rise Company, and any trials as to the GAFTA board of appeal award dated 23.05.2015 are now absent in Her Majesty’s High Court of Justice in England.
The above-mentioned information disproves UkrLandFarming statement that on March 24, 2015, Her Majesty’s High Court of Justice in England supported PJSC Rise Company and decided to discharge the GAFTA award.
The GAFTA board of appeal carried out the award of Her Majesty’s High Court of Justice in England and on August 24, 2015 made an additional award stating that its award dated 23.05.2014 is effective.
PJSC Rise Company did not appeal against the GAFTA board of appeal award dated 24.08.2015 in Her Majesty’s High Court of Justice in England or any other court.
The award of the board of appeal of the GAFTA tribunal dated 23.05.2014 is still final, conclusive and binding
Thus, the award of the board of appeal of the GAFTA tribunal dated 23.05.2014 is still final, conclusive and binding.
The award finality is confirmed by GAFTA certificates dated 21.07.2014, 27.02.2015 and 27.10.2015.
Her Majesty’s High Court of Justice in England affirmed the award of the GAFTA board of appeal dated 23.05.2014 that is supported by a certification issued by a registrar dated 18.11.2015.
O. Bakhmatyuk rejected all NIBULON’s propositions to carry out the award voluntary
Nibulon S.А. repeatedly sent letters dated 20.05.2014 and 18.01.2016 to PJSC Rise Company and its ultimate beneficial owner O. Bakhmatyuk, suggesting to carry out the arbitration award voluntarily.
Both PJSC Rise Company and O. Bakhmatyuk ignored NIBULON’s propositions.
PJSC Rise Company did not recognize the final arbitration award of the GAFTA board of appeal and refused to pay debt voluntarily, thereby breaking GAFTA Rules, the international grain trade traditions, and good business practice.
The Appeal Court of Kyiv recognized and permitted to enforce the GAFTA arbitration award dated 23.05.2014 in the territory of Ukraine
In connection with it, on September 23, 2014, Nibulon S.A. addressed itself to Svyatoshyne District Court (Kyiv), applying for the recognition and enforcement of the foreign arbitration award.
Trying to delay the implementation of the arbitration award, PJSC Rise Company repeatedly appealed against awards made by Ukrainian national courts of different instances.
By the award dated 14.01.2016, the Appeal Court of Kyiv recognized and permitted to enforce the GAFTA arbitration award dated 23.05.2014 in the territory of Ukraine.
According to the Article 319 of the Civil Procedure Code of Ukraine, the appeal court award shall come into effect since it is declared.
Thus, PJSC Rise Company is obliged to carry out the GAFTA arbitration award dated 23.05.2014 in Ukraine.
PJSC Rise Company continues ignoring the arbitration award and initiates different court proceedings in the Ukrainian courts
Despite the current legislation, PJSC Rise Company continues ignoring the arbitration award and initiates different court proceedings in the Ukrainian courts, arising issues that have been already determined by the international arbitration and foreign court. This undermines basic principles of the international trade and international law based on strict implementation of arbitration awards.
PJSC Rise Company continues exporting agricultural commodities, in particular to the companies (the ultimate beneficial owner of which is O. Bakhmatyuk) registered in low-tax European jurisdictions.
During 2015-2016, GAFTA executive bodies repeatedly notified PJSC Rise Company about its obligation to carry out the award of the GAFTA board of appeal dated 23.05.2014.
PJSC Rise Company ignored these notifications.
On March 08, 2016, GAFTA, according to the clause 22.1 of the GAFTA Arbitration Rules, officially declared the default (non-fulfillment of obligations) of PJSC Rise Company. This information was published in a circular sent to more than 1.5 thousand of companies from 90 countries in the world as well as on GAFTA web-site.
The District Court of Zurich arrested PSC Rise Company’s proprietary interests
In addition, the District Court of Zurich arrested PJSC Rise Company’s proprietary rights of CHF 121,974,325.10 because the company did not carry out the GAFTA arbitration award.
The court froze cash assets belonged to PJSC Rise Company from ULF Trade AG (Switzerland, Zurich) under foreign economic contracts for the supply of agricultural commodities from Ukraine.
ULF Trade AG as well as PJSC Rise Company is a part of UkrLandFarming Group.
As it is stated on UkrLandFarming Group’s official web-site (http://www.ulf.com.ua/ru/our_business/distribution/index.php?sphrase_id=1596), ULF Trade AG was established in 2010 in Switzerland to sell agricultural commodities abroad. ULF Trade AG sells the Group’s agricultural products as well as products purchased from other suppliers. ULF Trade AG sells mostly corn, wheat, barley, and rapeseed.
Marubeni, Bunge, Noble Resources, Cargill, Glencore, etc. are the key clients of ULF Trade AG, UkrLandFarming Group informs.
Thus, the arrest of O. Bakhmatyuk’s company assets in Switzerland may influence trading relations with transnational companies.
Since 1958, Ukraine is a participant of the the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1985), adopted by the United Nations. Having ratified the Convention, Ukraine is obliged to recognize the arbitration awards and enforce them in compliance with the procedural rules of that territory where these awards shall be carried out (Article III).
Rise’s dishonest actions may deteriorate Ukraine’s investment climate
Neglecting the arbitration award by PJSC Rise Company as Ukraine’s resident may deteriorate diplomatic relations with the state, the tribunal of which made the award.
In addition to PJSC Rise Company, Cargill is a shareholder of UkrLandFarming Group. This leading American corporation is the largest agrarian formation in the Ukrainian agrarian complex, controlling the Ukrainian agricultural land-bank of 653 thousand ha. Its securities are placed on the London Stock Exchange (2010) and Irish Stock Exchange (2011). Neglecting the arbitration award creates large risks for Ukraine and undermines confidence of other countries, international jurisdictional bodies, financial organizations, creditors and investors.
According to NIBULON, PJSC Rise Company actions demonstrate its low legal awareness and standards of doing business in the international trade. This damages Ukraine’s investment and business climate, increasing distrust of potential investors.
In addition to neglecting the arbitration award, UkrLandFarming Group tries to lobby different benefits for its companies and to reduce taxes, etc.
Please note that NIBULON faced cases, when it could not fulfill its contractual obligations to foreign investors because of PJSC Rise Company. But NIBULON honestly performed all its obligations to foreign partners.
In order to settle such issues, NIBULON Ltd General Director Oleksiy Vadaturskyy personally met with companies’ managers and found payment solutions which were acceptable to both contracting parties.
Demonstrating transparency in cooperating with trading and financial partners, O. Vadaturskyy personally met with O. Bakhmatyuk and his representatives, suggesting different ways for implementing the arbitration award.
Unfortunately, O. Bakhmatyuk refused any variants and informed he would go to the law in future. At present PJSC Rise Company prefers to ignore the arbitration award.
O. Vadaturskyy is ready to sit down at the negotiating table
Ukrainians must conduct business honestly not only in Ukraine but also abroad. NIBULON is now ready to sit down at the negotiating table together with O. Bakhmatyuk and PJSC Rise Company representatives to find a compromise variant for settling this dispute, recognizing the priority of international law norms and arbitration awards.
