Marine Trade SA v Pioneer Freight Futures Co Ltd BVI & Anor [2009] EWHC 2656 (Comm) (29 October 2009)

Marine Trade SA v Pioneer Freight Futures Co Ltd BVI & Anor [2009] EWHC 2656 (Comm) (29 October 2009)

Where a party is affected by an Event of Default under Section 5(a)(vii)(2) of the ISDA Master Agreement at the time a Settlement Sum falls due, the counterparty is under no obligation to pay or net Settlement Sums under Section 2(a)(iii), and any payment obligation does not accrue. If the non-defaulting party pays under protest due to a mistake as to the default status, restitution may be available if the payment was caused by a relevant mistake.

Citation
[2009] EWHC 2656 (Comm)
Parties
Claimant: Marine Trade S.A.; First Defendant: Pioneer Freight Futures Co Ltd BVI; Second Defendant: Armada (Singapore) Pte Ltd
Jurisdiction
England and Wales
Judgment Date
29 October 2009
Procedural Posture
Commercial Claim (high Court, Commercial Court) / First Instance Judgment After Expedited Trial
Outcome
Claim allowed in part; Pioneer liable to pay Marine Trade the Settlement Sum for January 2009 Contract Month; Marine Trade not entitled to restitution of sums paid under protest.
Legal Topics
Forward Freight Agreements (ffa), ISDA Master Agreement, Events of Default, Netting and Set Off, Restitution for Mistake
Commercial Law Contract Law Financial Derivatives Forward Freight Agreements (ffa) ISDA Master Agreement Events of Default Netting and Set Off Restitution for Mistake

Case Brief

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Parties

Marine Trade S.A.

Claimant

Pioneer Freight Futures Co Ltd BVI

First Defendant

Armada (Singapore) Pte Ltd

Second Defendant

Procedural Posture

Commercial Claim (high Court, Commercial Court) / First Instance Judgment After Expedited Trial

Legal Issues

  1. 1 Whether Pioneer was affected by an Event of Default under Section 5(a)(vii)(2) of the ISDA Master Agreement at the relevant time
  2. 2 Whether netting of Settlement Sums was available to Pioneer while affected by an Event of Default
  3. 3 Whether Marine Trade was affected by an Event of Default at the relevant time

Ratio Decidendi

Where a party is affected by an Event of Default under Section 5(a)(vii)(2) of the ISDA Master Agreement at the time a Settlement Sum falls due, the counterparty is under no obligation to pay or net Settlement Sums under Section 2(a)(iii), and any payment obligation does not accrue. If the non-defaulting party pays under protest due to a mistake as to the default status, restitution may be available if the payment was caused by a relevant mistake.

Court Disposition

Claim allowed in part; Pioneer liable to pay Marine Trade the Settlement Sum for January 2009 Contract Month; Marine Trade not entitled to restitution of sums paid under protest.

Orders

  • Pioneer to pay Marine Trade US$7,085,981.85 for January 2009 Contract Month.
  • Marine Trade's claim for restitution of US$5,030,242.50 paid under protest is dismissed.