International Commerce Law Case Study Questions

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Question 1 (40 marks)

Facts:

[1] Harvey Fresh Agricultural Products Co Ltd (‘Harvey Fresh’) runs a business in Australia. It sells Australian agricultural products overseas. It reached a deal with Louis Quality Foods Imports and Exports Pte Ltd (‘Louis Singapore’), which was incorporated in Singapore and had places of business in many countries (including Singapore and Japan), for the sale of oats from Australia to Japan.

[2] They have arranged the following deal:

Clause 5. Delivery of goods.

The goods are to be delivered FOB Tokyo, Japan. In particular, the carrier should be arranged by the Seller at their own costs. A clean bill of lading should be issued no later than 20 July 2020.

Clause 6. Payment.

The price of goods: USD$800,000

The payment should be made within 30 days after the issuance of the bill of lading. Payment should       be made by a letter of credit arranged by the buyer from HSBC Singapore Bank (‘HSBC’). UCP600 applies.

[3] On 18 July 2020, Harvey Fresh arranged the delivery of goods from Melbourne, Australia to Tokyo, Japan by the ship ‘Sunflower’ owned by Fasttrack Vehicles N.V., a company incorporated in the Netherlands, and currently operated by Highseas Shipping (‘Highseas’), an Indonesian Company, under a bareboat charterparty.

[4] The loading of goods and the export customs were actually finalised on 26 July 2020. Harvey Fresh did not provide any specific instructions to Highseas on the nature of goods or the requirement of its storage, so the oat products were placed on deck. This was because that the goods were finally loaded just before the ship’s departure and there was not enough room below the deck. At the request of Harvey Fresh, Highseas issued the bill of lading dated 20 July 2020. The bill of lading stated that the cargo had been loaded onboard the ship in apparent good order and condition.

[5] During the trip in mid-August a typhoon struck the area of the East China Sea and the Sea of Japan. As a result, the ship stayed in Hong Kong for 10 days, during which time the weather was extremely hot. The clearance of customs and quarantine was also delayed by a lack of staff in both Melbourne and Tokyo due to the impact of the Covid-19. The goods eventually arrived at the Port of Tokyo on 15 September 2020.

[6] When the goods arrived at the Port of Tokyo, however, the goods did not pass the Japanese government’s inspection and quarantine. It was found that at least 40% of the goods were mouldy and not merchantable. Louis Singapore was informed about this and refused to accept the goods. Louis Singapore also requested a third-party authority to inspect the goods.

[7] According to the report of the third-party authority, the mould developed approximately 10 days after the beginning of the carriage of goods. The situation might have been caused by the unusually high moisture content in the products, faulty packaging, as well as the extremely hot and wet environment suffered by the goods during the voyage.

[8] In the meanwhile, a letter of credit had been arranged by Louis Singapore from HSBC, which nominated the Commonwealth Bank of Australia (CBA) as the advising bank. The letter of credit also required a bill of lading to be issued no later than 20 July 2020. On 8 August 2020, Harvey Fresh submitted the bill of lading and other documents demanded by the letter of credit to CBA. A staff of CBA found that the waybill submitted together with the bill of lading stating that the goods were loaded on board on 26 July 2020. The staff also heard rumours that Highseas had previously made backdated bills of lading, so she called HSBC to express the concerns and informed Harvey Fresh that the CBA would hold the documents upon HSBC’s further instructions. On 15 August 2020, HSBC replied to CBA that they had investigated the delay of the carriage of goods and consulted Louis Singapore on 11 August, which replied them on 14 August that the CBA should not pay.

[9] The contract between Harvey Fresh and Louis did not state the governing law. Australia, Singapore and Japan are all Contracting States of the CISG and the New York Convention. They all adopt the UNCITRAL Model Law on International Commercial Arbitration.

NOTE: All four sub-questions must be answered. Some facts or paragraphs above might be relevant to more than one question below.

Question 1.1

Which party in the sale of oats contract shall bear the loss of goods that occurred during the carriage of goods? (10 marks)

Question 1.2

If the seller or the buyer brings a claim against the carrier, discuss the possible grounds for such a claim, and any defence the carrier may rely upon. (10 marks)

Question 1.3

Should the CBA refuse to pay? (10 marks)

Question 1.4

Suppose that you are the legal counsel of Harvey Fresh and are instructed to draft a dispute resolution clause (including the governing law clause) in the contract with Louis Singapore. Please list the key provisions you would propose and briefly explain their advantages in the context of this transaction. (10 marks)

Question 2 (20 marks)

[1] Louis Quality Foods Group is a multinational group of companies purchasing and distributing food products around the world, with the parent company Louis Quality Foods International Inc. (Louis International), incorporated and operated in Delaware, the US. Its Asian-Pacific business used to be operated by Louis Quality Foods Import and Export Singapore Pte Ltd (‘Louis Singapore’), a subsidiary of Louis International.

The restructuring of Louis Quality Foods Group in early 2021 moved many investment interests held by Louis Singapore to a recently incorporated subsidiary, Louis Asia Quality Foods (Australia) Pty Ltd (‘Louis Australia’).

[2] Louis Australia continued the sale of agricultural goods to various countries in Asia and Europe via its own subsidiaries. Louis China Co Ltd (Louis China) is one of them. Louis China was incorporated in China in 1997 by Louis Singapore. It used to be 100% subsidiary of Louis Singapore and now 100% owned by Louis Australia since late 2020. Louis China’s major business is distributing global goods in China.

[3] However, due to the China-Australia trade tensions since mid-2020, many of the existing deals between Australian farms and China were disrupted by the Chinese government’s sanctions or restrictions on various grounds, including new punitive tariffs, recently imposed quotas, and health-related investigations. For example, during 2020 and 2021, China imposed anti-subsidy and anti-dumping duties on Australian wine and barley imports; it imposed new live seafood inspections including checks for traces of minerals and metals; it banned Australian timber after claiming that biohazards were found from Australian products. Louis China’s business has been severely impacted by these sanctions and restrictions and is now in great difficulty.

[4] The China-Australia FTA (2015) included a restrictive ISDS clause that allows the arbitration of any breaches of national treatment. The China-ASEAN Investment Agreement (2010), of which Singapore is a party, included a broad ISDS clause that allows the arbitration of breaches of various obligations, including national treatment, most-favoured-nation treatment, treatment of investment, expropriation, compensation for losses, and transfers and repatriation of profits.

NOTE: Both sub-questions must be answered.

Question 2.1

As an individual enterprise, how should Louis Quality Foods, as well as any of its subsidiaries, protect its/their interests? Please explain the nature of the remedy and the key legal instruments that might be relied upon. In particular, should the claim be brought by Louis Singapore or Louis Australia? (10 marks)

Question 2.2

How should the Australian farms and the Australian agricultural industry, which are also impacted by the sanctions and measures, protect their interests? Please explain the nature of the remedy/remedies and the key legal instruments that might be relied upon. (10 marks)