Czarnikow (C) Ltd v Centrala Handlu Zagranicznego Rolimpex Neutral Treatment Indicated

[1979] AC 351, [1978] 2 All ER 1043, [1978] 3 WLR 274, [1978] 2 Lloyd's Rep 305, 122 Sol Jo 506

Court: HL

Judgment Date: circa 1979

Case History

Annotations Case Name Citations Court Date Signal

--

Czarnikow (C) Ltd v Centrala Handlu Zagranicznego Rolimpex

[1979] AC 351, [1978] 2 All ER 1043, [1978] 3 WLR 274, [1978] 2 Lloyd's Rep 305, 122 Sol Jo 506

HLcirca 1979

Neutral Treatment Indicated

On Appeal from

Czarnikow (C) Ltd v Centrala Handlu Zagranicznego Rolimpex

[1978] QB 176, [1978] 1 All ER 81, [1977] 3 WLR 677, [1977] 2 Lloyd's Rep 201, 121 Sol Jo 527

CAcirca 1978

Neutral Treatment Indicated

Cases referring to this caseAnnotations: All Cases Court: ALL COURTSSort by: Judgment Date (Latest First)Treatment Case Name Citations Court Date Signal

Distinguishe d

Mamidoil-Jetoil Greek Petroleum Co SA v Okta Crude Oil Refinery AD

[2003] EWCA Civ 1031, [2003] 2 All ER (Comm) 640, [2003] 2 Lloyd's Rep 635, [2003] All ER (D) 294 (Jul)

CA17/07/200

3

Citation Only Provided

Catchwords & Digest

ACTION - WHO MAY SUE AND BE SUED - FOREIGN SOVEREIGNS AND GOVERNMENTS - AS DEFENDANTS - PROCEEDINGS AGAINST AGENTS - STATE TRADING ORGANISATION -- SEPARATE LEGAL ENTITY

In 1974 the Polish state estimated that for the season 1974-75 enough sugar would be produced by the state to provide for domestic requirements and for export of a large quantity of sugar. accordingly the state authorised an organisation called Rolimpex to enter into contracts with purchasers for the export from Poland of 200,000 metric tons of sugar. Rolimpex was a state trading organisation which was entrusted with the export and import of essential commodities such as sugar. Under Polish law it had a separate legal personality

and was not entitled to claim sovereign immunity. It was, however, under the supervision of, and financially accountable to, the Minister of Foreign Trade and Shipping. He appointed Rolimpex's directors and, technically, had power to direct its trading activities although, in practice, Rolimpex generally made its own decisions on its trading activities. Like other Polish state enterprises Rolimpex was entitled to acquire, possess and use assets in its own name and to exercise rights of property. It was expected to make a profit. Pursuant to the state authorisation Rolimpex entered, in advance of the harvest, into two contracts with Czarnikow, an English company, for the sale to it of 17,000 metric tons of sugar. The contracts were subject to Rules of London Refined Sugar Association. By r 18 (a) of the rules, if delivery in accordance with the contracts was prevented 'by Government intervention ... or any [other] cause of force majeure ... beyond the Seller's control,' the contracts were to become void without payment of a penalty on compliance with the procedure specified in r 18 (a). Under r 21 of the rules Rolimpex was responsible for 'obtaining any necessary export licence' and failure to obtain such a licence did not entitle Rolimpex to claim force majeure if the regulations in force at the time when the contract was made called for an export licence. At the time when the contracts were made a licensing system in respect of the export of sugar was in force, and between May and August 1975 Rolimpex obtained export licences. Following bad weather in the autumn of 1974 the yield of sugar for the 1974-75 season fell below the estimated amount and was insufficient to provide both for domestic requirements and for export under the contracts entered into by Rolimpex. On 5 November the Polish government, without consulting Rolimpex, decided to impose an immediate ban on the export of sugar and to revoke export licences already granted. On the same day a decree was signed by the Minister of Foreign Trade and Shipping giving legal effect to the ban from that date. Because of the ban, fulfilment of the first contract with Czarnikow was completely prevented and fulfilment of the second contract was partly prevented. Czarnikow claimed against Rolimpex for damages for non-delivery. Rolimpex contended that it was exempt from liability on the ground of force majeure by 'Government intervention ... beyond [its] control', within r 18 (a) of the rules. The dispute went to arbitration. The arbitrators held that Rolimpex was protected by r 18 (a) but stated a case for the decision of the court. The judge upheld the arbitrators' decision. Czarnikow appealed, contending (i) that as Rolimpex was a state trading organisation it could not rely on the ban on exports as constituting 'Government intervention ... beyond [its] control', within r 18 (a), since Rolimpex and the government were the same and therefore no government intervention could be said to be beyond Rolimpex's control, and (ii) that, under r 21 Rolimpex was under an absolute duty to obtain export licences which would remain operative until shipment and was, therefore, liable for the failure to obtain such licences even though that failure had been due to the government ban. The Court of Appeal dismissed the appeal holding (a) that Rolimpex had a separate legal personality and could not be regarded as a department of the government and accordingly was entitled to rely on r 18 (a) of the rules as a defence to Czarnikow's claim and (b) that Rolimpex's failure to obtain export licences was due to government

intervention and not to any failure to obtain licences and therefore Rolimpex was entitled to rely on force majeure under r 18 (a) in respect of the failure to obtain export licences which were valid until the goods were delivered. Czarnikow appealed to the House of Lords: Held although Rolimpex was an organisation of the Polish state, the evidence established that it had been set up as a separate entity with a separate legal personality. In those circumstances, it could not be regarded as a department of the government or state and therefore because it had been prevented by 'government intervention' from performing its obligations under the contracts it was entitled to rely on r 18 (a) of the rules to excuse it from liability for that failure; the obligation imposed on the seller under r 21 to obtain a licence did not impose any obligation or warranty to maintain it in force until delivery was required to be made. Rolimpex, in obtaining export licences between May and August 1975, had complied with its obligations under r 21 notwithstanding that the Polish government had subsequently cancelled all licences for the export of sugar. It followed therefore that Rolimpex was not prevented by r 21 from claiming that the contracts were void by reason of force majeure. Appeal dismissed.

SALE OF GOODS - MERCANTILE CONTRACTS - RESTRICTIONS ON IMPORT AND EXPORT - LICENCES - ABSOLUTE DUTY TO OBTAIN LICENCE -- SUBSEQUENT WITHDRAWAL OF LICENCE -- WHETHER WITHIN 'FORCE MAJEURE' CLAUSE

In 1974 the Polish state estimated that for the season 1974-75 enough sugar would be produced by the state to provide for domestic requirements and for export of a large quantity of sugar. accordingly the state authorised an organisation called Rolimpex to enter into contracts with purchasers for the export from Poland of 200,000 metric tons of sugar. Rolimpex was a state trading organisation which was entrusted with the export and import of essential commodities such as sugar. Under Polish law it had a separate legal personality and was not entitled to claim sovereign immunity. It was, however, under the supervision of, and financially accountable to, the Minister of Foreign Trade and Shipping. He appointed Rolimpex's directors and, technically, had power to direct its trading activities although, in practice, Rolimpex generally made its own decisions on its trading activities. Like other Polish state enterprises Rolimpex was entitled to acquire, possess and use assets in its own name and to exercise rights of property. It was expected to make a profit. Pursuant to the state authorisation Rolimpex entered, in advance of the harvest, into two contracts with Czarnikow, an English company, for the sale to it of 17,000 metric tons of sugar. The contracts were subject to Rules of London Refined Sugar Assocn. By rule 18 (a) of the rules, if delivery in accordance with the contracts was prevented 'by Government intervention ... or any [other] cause of force majeure ... beyond the Seller's control', the contracts were to become void without payment of a penalty on compliance with the procedure specified in rule 18 (a). Under rule 21 of the rules Rolimpex was responsible for 'obtaining any necessary export licence' and failure to obtain such a licence did not entitle

Rolimpex to claim force majeure if the regulations in force at the time when the contract was made called for an export licence. At the time when the contracts were made a licensing system in respect of the export of sugar was in force, and between May and August 1975 Rolimpex obtained export licences. Following bad weather in the autumn of 1974 the yield of sugar for the 1974-75 season fell below the estimated amount and was insufficient to provide both for domestic requirements and for export under the contracts entered into by Rolimpex. On November 5 the Polish government, without consulting Rolimpex, decided to impose an immediate ban on the export of sugar and to revoke export licences already granted. On the same day a decree was signed by the Minister of Foreign Trade and Shipping giving legal effect to the ban from that date. Because of the ban, fulfilment of the first contract with Czarnikow was completely prevented and fulfilment of the second contract was partly prevented. Czarnikow claimed against Rolimpex for damages for non-delivery. Rolimpex contended that it was exempt from liability on the ground of force majeure by 'Government intervention ... beyond [its] control', within rule 18 (a) of the rules. The dispute went to arbitration. The arbitrators held that Rolimpex was protected by rule 18 (a) but stated a case for the decision of the court. The judge upheld the arbitrators' decision. Czarnikow appealed, contending (i) that as Rolimpex was a state trading organisation it could not rely on the ban on exports as constituting 'Government intervention ... beyond [its] control', within rule 18 (a), since Rolimpex and the government were the same and therefore no government intervention could be said to be beyond Rolimpex's control, and (ii) that, under rule 21, Rolimpex was under an absolute duty to obtain export licences which would remain operative until shipment and was, therefore, liable for the failure to obtain such licences even though that failure had been due to the government ban. The Court of Appeal dismissed the appeal holding (a) that Rolimpex had a separate legal personality and could not be regarded as a department of the government and accordingly was entitled to rely on rule 18 (a) of the rules as a defence to Czarnikow's claim and (b) that Rolimpex's failure to obtain export licences was due to government intervention and not to any failure to obtain licences and therefore Rolimpex was entitled to rely on force majeure under rule 18 (a) in respect of the failure to obtain export licences which were valid until the goods were delivered. Czarnikow appealed to the House of Lords: Held (1) although Rolimpex was an organisation of the Polish state, the evidence established that it had been set up as a separate entity with a separate legal personality. In those circumstances, it could not be regarded as a department of the government or state and therefore because it had been prevented by 'government intervention' from performing its obligations under the contracts it was entitled to rely on rule 18 (a) of the rules to excuse it from liability for that failure; (2) the obligation imposed on the seller under rule 21 to obtain a licence did not impose any obligation or warranty to maintain it in force until delivery was required to be made. Rolimpex, in obtaining export licences between May and August 1975, had complied with its obligations under rule 21 notwithstanding that the Polish government had subsequently cancelled all licences for the export of sugar. It

followed therefore that Rolimpex was not prevented by rule 21 from claiming that the contracts were void by reason of force majeure. Appeal dismissed.