Case No: 2014 FOLIO 781 
Neutral Citation Number: [2015] EWHC 1815 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Rolls Building
7 Rolls Building
Fetter Lane
London, EC4A 1NL

Date: 24/06/2015

Before :

CHRISTOPHER BUTCHER QC
(Sitting as a Deputy High Court Judge)

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Between :

	LIBERO COMMODITIES S.A.	Claimant	
	- and -		
	ALEXANDRE AUGUSTIN	Defendant	

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Luke Pearce (instructed Holman Fenwick Willan LLP) for the Claimant
Philippa Hopkins (instructed by Watson Farley & Williams LLP) for the Defendant  

Hearing date: 11 June 2015
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JUDGMENT
Mr Christopher Butcher QC (sitting as a Deputy High Court Judge): 
1.	Libero Commodities S.A., which I will call “the Buyer”, appeals against an award of the Technical Appeal Committee (“TAC”) of the International Cotton Association Ltd (“ICA”) dated 30 May 2014.   Permission to appeal was granted by Burton J by order dated 24 February 2015.
The facts and the Award
2.	On 4 November 2011, Alexandre Augustin, whom I will call “the Seller”, concluded a contract with the Buyer (“the Sale Contract”) for him to sell and for the Buyer to purchase 10,000 mt of Brazilian raw cotton of 2012 crop.  The title to the Sale Contract specified that it was in accordance with the ICA’s Bylaws and Rules.   It contained the following further provisions:
“6.  Price and Terms: If at the time of fixation July 12 ICE Futures prices is 74.99 or lower, basis shall be 2.00 USD cents/lb ON July 12; if between 75.00 and 99.99, basis shall be 1.00 USD cents/lb ON July 12; if between 100.00 and 124.99, basis shall be 1.00 USD cents/lb OFF July 12; if between 150.00 and 174.99, basis shall be 3.00 USD cents/lb OFF July 12; if 175.00 or higher, basis shall be 4.00 USD cents/lb OFF July 12.
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15. Special Clauses
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15.10. Price fixation Seller’s call, latest on the trading day prior to respective First Notice Day or 15 days before shipment whichever is earlier, failing which thereafter Buyer’s call.  All fixation orders must be received in writing.  All fixation orders must state the ICE Futures price to be fixed at, the cover month, the quantity to be fixed and the validity of the fixation Order.  In case of partial fixation for a similar shipment period, the final price will be the average of all fixations.
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16. General:
 – This contract incorporates the Bylaws and Rules of the International Cotton Association Limited as they were when the contract was agreed.
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17.  Arbitration Agreement:
1. All disputes relating to this contract will be resolved through arbitration in accordance with the Bylaws of the International Cotton Association Limited. This agreement incorporates the Bylaws which set out the Association’s arbitration procedure.
…”
3.	The price for 2000 mt of the Sale Contract quantity was fixed, in two instalments, without dispute. This left a balance of 8000 mt to be fixed by what came to be called the “Third Price Fixation”.
4.	On 22 June 2012, which was “the trading day prior to respective First Notice Day”, the Seller purported to fix the price for the 8000 mt.  He did so by an SMS message which stated: “I spoke to Alexandre, we have to fix at today’s market, with minimum of 74.17.”  
5.	The Buyer’s position was that this was not a valid price fixation because the ICE Futures market was not trading at the time of the fixation due to a ‘limit down stop’ (a mechanism by which the ICE prevents futures trading from taking place in order to avoid the market price crashing).  In those circumstances the Buyer purported, on 23 June 2012, to fix the price itself, at US $0.6987/lb.  This price was based on the July - December 2012 spread market price at close of business on 22 June 2012 (US $0.6787), together with the 2 c./lb uplift provided for by clause 6 of the Sale Contract.   The Seller did not accept that the Buyer was entitled to fix the price on this basis.
6.	The remainder of the Sale Contract was not performed.  On 28 September 2012 the parties entered into a further agreement (“the September Agreement”).  In its recitals the September Agreement referred to the parties’ desire to close out the Sale Contract.  It also referred to an assignment which meant that the only remaining quantity at issue was an amount of 5,750 mt.  It contained reference to the two competing prices for which the Seller and Buyer, respectively, contended.  That contended for by the Seller, namely US $0.7617/lb, was termed the “Limit Down Price”, and was the price at which July 2012 ICE Futures stopped being negotiated due to the limit down stop, namely US $0.7417, plus the 2c./lb uplift.  The price contended for by the Buyer was, as has already been explained, the amount of US $0.6987/lb, and was termed “the Synthetic Price”.
7.	The September Agreement provided for the invoicing back of the unperformed portion of the Sale Contract.  In essence, the Seller was to pay the difference between the market price at the date of the September Agreement (which was US $0.8153, the market having risen) and the Sale Contract price, whichever of the two contended for prices that was.  This therefore resulted in the payment by the Seller of an undisputed sum; and a payment by him of a further amount, called the “contingent invoice back amount”, in the sum of US $1,111,118.40, representing the difference between the application of the Limit Down Price and the Synthetic Price.   This “contingent invoice back amount” was to be kept by the Buyer’s Brazilian affiliate pending final resolution of which price was applicable. 

8.	Of particular relevance to the present appeal is clause 3 of the September Agreement, which provided as follows:
“3.  FINAL WASHOUT PRICE
3.1 The final price at which the 5,750 MT of Product under the Contract shall be invoiced back (hereinafter referred to as the ‘Final Washout Price’) shall be the average price for the Invoicing Back Weight, having the Final Fixation Price for the Third Fixation as reference for the third price fixation.
3.2  The parties hereby agree to submit the dispute of the Third Fixation Price under the Contract to arbitration by the International Cotton Association, which shall be initiated by the Seller/Debtor, and the parties agree to be bound by the decision.
3.3 The parties irrevocably agree that the price established by the International Cotton Association for the Third Price Fixation on 2012-06-25 (hereinafter referred to as the ‘Final Price for the Third Price Fixation’) shall be final and readily binding on the Buyer/Creditor and on the Seller/Debtor, regardless of homologation of the decision in Brazil.
3.4  In case the Seller/Debtor does not start the consultation or the arbitration proceedings by 2012-10-30, the Final Price for the Third Price Fixation shall be the Synthetic Price.
3.5  In case clause 3.3 is held to be invalid or for any reason does not reach the effect desired by the parties, the parties stipulate that the Final Price for the Third Price Fixation shall be the Synthetic Price.”
9.	On 30 October 2012 the Seller sent a fax to the ICA requesting arbitration.  I have not seen that document. What is apparent is that he did not, at that point, pay any fee to the ICA.
10.	The parties proceeded to make written submissions in the arbitration.  These included the Buyer’s contention that the September Agreement had required the commencement of arbitration to be by 30 October 2012; and that as the Seller had not paid the relevant fee at that stage, there had been no valid commencement of arbitration.  On 11 October 2013 the first tier ICA arbitrators found by a majority that the Seller had not validly commenced the arbitration within the time specified by clause 3.4 of the September Agreement.  They concluded that the result of this, in accordance with clause 3.4, was that the Synthetic Price applied, and therefore that the Buyer should retain the sum of US $1,111,118.40.
11.	The Seller appealed to the TAC of the ICA.  Its Award (“the Award”) was dated 30 May 2014.  In summary, the Award held as follows:
“(1) 	The Seller had commenced arbitration within time for the purposes of the September Agreement; and 
(2) 	The price to be applied was the “Limit Down Price”, based on an application of Rule 224 of the Bylaws and Rules of the ICA.”
The Order for Permission
12.	The Buyer applied for permission to appeal pursuant to s. 69 Arbitration Act 1996.  The Seller had taken no part in these proceedings by the time that Burton J came to consider this application on paper.  By Order dated 24 February 2015, Burton J gave permission to appeal on two points of law, as follows:
“(1) 	Whether a technical arbitration, pursuant to the Bylaws and Rules of the ICA, is validly commenced under Bylaw 302 in the absence of payment of the fee required by Bylaw 302(2).
(2)		Whether the fixation clause, in clause 10 of the [Sale] Contract, was an agreement of the parties that displaced the default provisions of ICA Rule 224.”
The Seller’s involvement
13.	Belatedly, the Seller indicated that he wished to be involved in the appeal.  On 29 May 2015 he issued an application notice seeking, among other things, that the order of Burton J giving permission to appeal should be set aside, that he have a retrospective extension of time for service of a Respondent’s Notice, and that he should be permitted to make submissions on the hearing of the appeal.  I dealt with that application in a separate ruling.  I dismissed the application for an order setting aside Burton J’s order giving permission to appeal. I gave the Seller permission to rely on his Respondent’s Notice, save in one respect.  I also permitted him to make submissions on the appeal – which was not, in any event, opposed by the Buyer.  Miss Hopkins has appeared and represented the Seller.

The first issue: commencement of the arbitration
14.	The first point of law, as formulated, asks when an arbitration is commenced under Bylaw 302 of the ICA Rules.  Miss Hopkins pointed out that, strictly, the relevant question is when arbitration was commenced for the purposes of clause 3.4 of the September Agreement.  However, she accepted that, in order to see whether there had been a valid commencement of arbitration for the purposes of clause 3.4, one would look to the terms of Bylaw 302 to see both how and when an arbitration could be commenced.  I consider that this is the correct approach.  
The Buyer’s contentions
15.	For the Buyer, Mr Pearce referred to Bylaw 302, in its 2011 version which was applicable at the time of the Sale Contract.  It provided as follows:
“Commencement of Arbitration
Bylaw 302
1.	Any party wishing to commence arbitration under these Bylaws (“the Claimant”) shall send us a written request for arbitration (“the Request”), and we shall copy the Request to the other party (“the Respondent”).
2.	When sending the request, the Claimant shall also send:
•	the name, address including email address, telephone and facsimile number of the Respondent,
•	a copy of the written arbitration clause together with a copy of the contractual documentation in which the arbitration clause is contained or in respect of which the arbitration arises,
•	the name of their nominated arbitrator, or, if appropriate, the name of the sole arbitrator agreed by the parties,
•	such application fee as may be due under Appendix C of our Rule Book.”
16.	In addition, Mr Pearce referred to Bylaw 303(a), and in particular 303(a)(1). That provided:
“Upon receipt of a Request made in accordance with Bylaw 302, we shall ask the Respondent to appoint their arbitrator or to agree to the appointment of a sole arbitrator within 14 days (two weeks) and to notify us and the Claimant of the name of their arbitrator.  If the Respondent fails to appoint an arbitrator within this timescale, we will appoint an arbitrator and give notice of the name of the arbitrator so appointed to the parties.”
17.	Mr Pearce submitted that, in order validly to commence an arbitration, the Seller had to comply with the requirements of paragraph (2) of Bylaw 302, as well as those of paragraph (1).   He argued that a request which complied only with paragraph (1) would be meaningless: it would not even include the contact details of the “Respondent” or a nomination of an arbitrator.  It was doubtless for this reason, he said, that paragraph (2) was mandatory (“shall”).  The clear purpose of paragraph (2) was to stipulate the minimum requirements which a request for arbitration had to contain in order for arbitration to be commenced under the Rules.
18.	Mr Pearce submitted further that, once it is accepted that some of the requirements under paragraph (2) are required for an arbitration to be commenced, there is no basis for saying that others are not.  He argued that his case was supported by Bylaw 303(a).  He said that, unless and until the “Claimant” had complied with Bylaw 302, including by paying a fee, the arbitration would not be treated by the ICA as having commenced, and nothing would happen. That, he said, was reflected by what actually happened in the present case: although the Seller’s fax was received on 30 October 2012, the ICA did not write to the Buyer until 9 January 2013 because, as the TAC put it, “the ICA waited until they had received the necessary arbitration fee.”  Furthermore he argued that, were his submissions not correct, it would have the effect that a “Claimant” could prevent a claim becoming time barred simply by sending a fax to the ICA, even though he did not pay the fee then, and might not do so for years thereafter.  Such a result, he argued, must be wrong.
19.	Mr Pearce also contended that the Buyer’s analysis was supported by the ICA itself.  He referred to the fact that the ICA has recently amended Bylaw 302 in such a way as to make it clear that an arbitration is not commenced until the requisite fee has been paid.  A summary of the relevant amendments issued by the ICA explains that the purpose of this amendment was to “clarify” the existing rules.  This, he suggested, indicated that the intention of the ICA had throughout been in line with the Buyer’s interpretation of Bylaw 302.
20.	Mr Pearce submitted that his case was assisted by the authority of Page v Hewetts Solicitors [2012] EWCA Civ 805, and [2013] EWHC 2845 (Ch).  He submitted that by analogy with the decisions in that case, just as a claim would not be considered to be “brought” for the purposes of the Limitation Acts unless the claimant had done “all that he reasonably could do” to bring the matter before the court, so an arbitration should not be regarded as “started” if, as here, the “Claimant” had not done all that was reasonably required of him.
21.	Mr Pearce accepted that there was a principle as stated, for example, by Donaldson J in Bunge SA v Deutsche Conti-Handels-Gesellschaft MBH (No. 2) [1980] 1 Lloyd’s Rep 352 at 358, to the effect that “if there is any doubt about the matter, any ambiguity, the contract should not be construed in such a way as to bar a legitimate claim”.  This had no relevance or application here because, said Mr Pearce, the words used were clear, and could only sensibly bear the meaning contended for by the Buyer.
22.	Mr Pearce also analysed the reasoning of the TAC on the “commencement of arbitration” point.  That reasoning was as follows:
“5.2. … The ICA does not have a definition as to the meaning of ‘consultation’ however the TAC was willing to accept that its inclusion in clause 3.4 allowed more freedom than a very strict interpretation of the “start” of arbitration proceedings. … 
5.4. ..  The TAC examined the intention behind clause 3.4 in the [September Agreement] as well as the evidence of the ICA’s own web site and the ICA’s arbitration request forms.  The TAC concluded that on balance both parties knew on the 30th October 2012 that the Seller wished to pursue their option to arbitrate this dispute.  The application fax sent on the 30th October was in accordance with the Arbitration Act’s determination of when proceedings are commenced.  The contract and its amendments only specified a date by which arbitration would be started.  The date by which arbitration was to be completed was not mentioned.  The delay in payment of the application fee did not cause any direct detriment to the Buyer.  
The TAC examined Bylaw 302.  It acknowledged that Bylaw 302 could be interpreted to require payment, however it accepted that the clause was not written with the current dispute in mind.  The intention of the clause was to provide the ICA the right to stay arbitration proceedings until it had received the necessary funds.  The TAC concluded that whilst the failure to make the payment of the application fee at the same time as the fax request for arbitration would delay the formation of the tribunal, the arbitration process itself was initiated by the receipt of the fax. On receipt of the fax the ICA would have opened a file for this dispute and allocated it an arbitration number.  
The issue of when an arbitration starts is open to a variety of interpretations, it could be argued to be the point when a tribunal is formed or even the point at which all the initial submissions are complete.  The TAC accepted that a majority of the members of the ICA would view the start date as the date of the fax application.  The TAC did not accept the argument that the arbitration did not start until the ICA had received the application fee.”
23.	Mr Pearce argued that each aspect of that reasoning was misconceived.  Given that parts of the reasoning were not adopted or relied upon by Miss Hopkins, I will mention only the following points which he made in this context: 
(1)	That it was irrelevant that both parties knew on 30 October 2012 that the Seller wished to pursue the arbitration.  Bylaw 302 did not merely provide for a request for arbitration, copied to the other party.  
(2)	That it was equally irrelevant whether the fax would have complied with the default provisions of s. 14 Arbitration Act 1996.  Even if that was the case – as to which, Mr Pearce said, there had been no argument before the TAC and there was no evidence before the Court – it would be irrelevant given that the parties had contracted out of the default provisions of the 1996 Act.
(3)	That the fact that the ICA would, upon receipt of the fax, have opened a file for the arbitration, and given it a number, was similarly beside the point.  The internal procedures of the ICA were irrelevant to the proper construction of the Bylaw.

(4)	It was unclear as to what evidence, if any, supported the statement that the majority of the members of the ICA would view the start date as the date of the fax application, and that this was difficult to reconcile with the fact that the majority of the First Tier Tribunal took a different view, and with the ICA’s subsequent change in the Rules.  In any event, the subjective views of members of the ICA were irrelevant to the interpretation of Bylaw 302.
The Seller’s contentions
24.	Miss Hopkins submitted that the Bylaws did not make payment of the relevant application fee a precondition to the effective commencement of an arbitration.
25.	In this context, she submitted that the Bylaws did not provide expressly for payment of the fee to be a precondition, unlike some other well-known arbitral rules.  Furthermore, Bylaw 302(1) defines the written “request” (uncapitalised) as being “the Request” which “any party wishing to commence arbitration under these Bylaws” is to send.  By contrast, 302(2) states that when sending the “request”, the claimant is “also” to send various matters.  What this shows, she argued, is that the matters set out in the sub-paragraphs of 302(2) are separate from the “Request” referred to and defined in 302(1).  It is the “Request” defined in 302(1) which alone is necessary to commence arbitration.  Similarly, Bylaw 303(a)(1) does not assist the Buyer, because it refers to the “Request”: it does not provide, and gives no indication, that the steps 303(1)(a) refers to will not be taken in the absence of submission of materials distinct from the “Request” as defined.
26.	Miss Hopkins further submitted that if the Buyer were correct, then the provision of every part of what is listed in 302(2) would be a precondition to the effective commencement of arbitration.   This would mean, she said, that if a fax number was omitted, or an email address misstated, there would not be an effective commencement of arbitration.  
27.	The Court should give weight, Miss Hopkins argued, to the TAC finding that most members of the ICA would regard the date of the fax request as the date of commencement of the arbitration; and should also give weight to how the ICA would have dealt with the matter, by opening a file.  She further submitted that the fact that the decision of the TAC was to uphold the Seller’s case on what was necessary for the purposes of commencing an arbitration was itself a matter to which I should have regard, as the TAC’s view as to the purpose of the ICA’s own Rules was itself of significance.
28.	Miss Hopkins submitted that any ambiguity in Bylaw 302 should be construed in favour of the Seller.  She referred to the decision of HHJ Hicks Q.C. in Christiani & Nielsen Ltd v Birmingham City Council (1994) 52 Con LR 56, and submitted that his statement (at 62) that the contract there was “a practical document to be put into effect by practical people, not by lawyers searching through the documentation afterwards”, and his conclusion that it should be construed to avoid a trap for the unwary, were apposite to the present case.  She also relied upon the principle as to the proper approach to ambiguity which was propounded by Donaldson J in Bunge SA v Deutsche Conti-Handels-Gesellschaft MBH (No. 2), which I have quoted above.  She contended that, at the very least, Bylaw 302 was unclear, and that, applying this principle, it should be construed so as not to hold that the payment of the application fee was a prerequisite to the commencement of arbitration.  
29.	Miss Hopkins challenged Mr Pearce’s contention that the recent change in the ICA’s Rules assisted the Buyer’s case.  On the contrary, she said, it showed that the previous version of the Rules had not, or at least had not clearly, had the effect contended for by the Buyer: hence the need felt by the ICA to “clarify” the earlier wording.
30.	The decisions in Page v Hewetts Solicitors, Miss Hopkins argued, were of no assistance.  They related to procedures in court, and the issue of whether time is stopped for the purposes of the Limitation Acts when the reason why the Claim Form was not issued may be the responsibility of the court itself.
31.	As to Mr Pearce’s contention that it cannot be right, under the ICA Rules, that a claim can be prevented from becoming time barred simply by sending a faxed request, without payment of a fee, Miss Hopkins argued that that was indeed the effect of the Rules.  She said that it would be another question as to whether, if a “Claimant” did not pay a fee for a significant length of time, he would be permitted or be able to continue with the arbitration; but that did not affect the issue of whether the arbitration had been validly commenced.
Discussion and decision
32.	The process of construction must start with the words which were used.  What must be sought is the meaning which the words which were used would convey to a reasonable person in the situation of the parties.
33.	In my judgment, applying this approach, the correct answer is that such a reasonable person would conclude that it was not a prerequisite to the effective commencement of an arbitration that the “request for arbitration” should be accompanied by the relevant fee.
34.	My reasons for this conclusion are, essentially, four-fold.
(1)	First, Bylaw 302 on its terms draws a distinction between the “written request for arbitration”, which is what “any party wishing to commence arbitration under these Bylaws shall send us” and which is dealt with in 302(1), and other matters which should also be sent “when sending the request”, which are dealt with in 302(2).  These other matters thus appear to be distinct from the initiating request.
(2)	Secondly, there is no statement or provision to the effect that, without the matters specified in 302(2) the arbitration will not be considered to have been started and will not be progressed.  Instead, by 302(1) it is provided that the ICA will send on a copy of the “Request”, ie the “written request for arbitration”, to the “Respondent”, with no provision that this will not be done unless the matters “also” to be sent and which are specified in 302(2) have been received.  Equally, the provision in Bylaw 303(a) as to what will be done by the ICA “upon receipt of a Request” uses the capitalised, ie the defined, term “Request”, and thus refers back to the document referred to in Bylaw 302(1) rather than to the matters which are referred to in 302(2).
(3)	Thirdly, I cannot accept that in order for a “written request for arbitration” within 302(1) to be a meaningful document, it was necessary that it should be accompanied by all the matters referred to in 302(2).  It may be the case that there are certain implicit requirements for any document to count as a “written request for arbitration” within 302(1).  By way of example, it may be implicit that it has to specify who the other party is, as it is envisaged by 302(1) itself that the “Request” will be sent on to the other party.  But it does not appear implicit in the concept of a “written request for arbitration” that it should include or be accompanied by all the matters specified in 302(2).  It is notable that in the present case it is not contended that the fax of 30 October 2012 failed to qualify as a “written request for arbitration” other than by reference to the non-payment of the fee and the Buyer’s argument that any “Request” had to comply with all the requirements of 302(2).
(4)	Fourthly, there is nothing commercially absurd in a construction which means that payment of a fee is not a precondition to there being an effective arbitration.  Arbitration clauses and rules are not uniform on this point, and it is notable that the default provisions of the 1996 Act do not provide for payment of fees to be a precondition to the valid commencement of an arbitration.  In this particular context, it is in my judgment permissible to take into account the TAC’s statement that the majority of members of the ICA would consider that arbitration had been commenced on receipt by the ICA of the faxed application.  I do not read that as being a statement as to the subjective understanding of members of the ICA as to the construction of the Bylaws, and still less as seeking to make a statistically accurate statement as to majority and minority views within the membership.  I read it as seeking to convey that commercially minded people, such as the members of the ICA can be assumed to be, would see nothing surprising in the notion that arbitration had been commenced without payment of the fee.
35.	Furthermore, I consider that even if I am wrong in concluding that the Rules can be found unambiguously to provide that an arbitration could be commenced without payment of the relevant fee, then at best – from the Buyer’s point of view - the Rules were unclear and ambiguous on the point.  In the circumstances, I consider that the approach referred to in Bunge SA v Deutsche Conti-Handels-Gesellschaft MBH (No. 2) is applicable.  Donaldson J, at [1980] 1 Lloyd’s Rep 353, 358, stated the principle in terms of construing a contract in which there is any relevant doubt or ambiguity in such a way that it does not “bar a legitimate claim”.  He expressed the same approach as being a “general principle that claims are not to be barred except by clear words”.  Here the effect of clause 3.4 of the September Agreement together with the terms of the Bylaws would mean, if the Buyer were correct, that the Seller’s claim would effectively be barred by reason of the non payment of the applicable fee on 30 October 2012, and the Buyer’s price would automatically be deemed applicable.  That result should not be reached in the absence of a clear provision to that effect.  In my judgment there was no such clear provision in this case.  That the 2011 version of the Rules was not clear appears to me to be supported by the fact that the ICA has subsequently found it necessary to change and “clarify” them.  
36.	For the sake of completeness, I should record that I did not find the case relied upon by Mr Pearce, Page v Hewetts Solicitors, to be of any assistance.  That case deals, as Miss Hopkins submitted, with issues specific to the commencement of court proceedings, and the circumstances in which a claimant can be said to have done enough to bring the matter before the court so that any risk of loss or delay thereafter is transferred to the court.  I do not consider that that helps in construing the contract or Rules at issue here.
37.	In the circumstances, I uphold the Award in relation to the first issue.
The second issue: whether the TAC was correct to apply Rule 224 of the ICA Rules in relation to the issue of price
Rule 224
38.	It is convenient first to set out the terms of Rule 224 of the ICA Rules.  They are as follows:
“1. On buyer’s call: 
For sales on call New York Board of Trade Cotton no. 2 Futures: 
*The final price of cotton sold on call will be fixed based on the New York Board of Trade No. 2 Cotton Futures contract month specified in the sales contract.
*The buyer should communicate to the seller an executable fixation instruction.
Unless agreed otherwise by the parties:
*Cotton must be fixed no later than the New York Board of Trade Cotton No. 2 Futures close of business on the day prior to first notice day for the futures contract month specified in the sales contract.
*If cotton has not been fixed by this time the final price shall be based on the New York Board of Trade Cotton No. 2 Futures closing price:
on the day prior to first notice day of the futures contract month specified in the sales contract.
…
2. On seller’s call, the roles of the buyer and seller are reversed.”

The reasoning of the TAC
39.	The reasoning of the TAC on the pricing point was as follows:
“5.6 The TAC examined the contractual terms before it. It noted that the fixation for the July portion of 3,333 mt was at the Buyer’s option from 15 days prior to the start of July 2012.  It accepted that neither party had acted upon this and the parties had therefore mutually condoned the extension of the Seller’s option to fix the cotton.
5.7  The TAC accepted the evidence of the Seller’s letter of 23rd June 2012 that the Seller had not traded any futures contracts against this contract on the 22nd June 2012.
5.8  The ICA’s Rule 224 was quoted by the Seller in their letter of the 23rd June 2012 and is clearly relevant to the dispute.  [The TAC then set out most of the terms of Rule 224, which is quoted above]
5.9 The TAC examined whether the terms of the fixation clause within the original contract would override or amend the terms of Rule 224, as this fixation clause appears to allow the Buyer to fix the contract if the Seller has failed to fix the price by the close of the day prior to first notice day. This would therefore allow the Buyer to fix the cotton on the futures month either on first notice day or later during the futures contract delivery period. The TAC accepted that the terms of reference given to it by the parties made this a moot point, as the parties had agreed the fixation could only be one of the two proposed figures for the close on 22nd June 2012.
5.10   Rule 224 makes reference to New York Board of Trade Cotton No. 2 Futures, this was superseded by the International Commodity Exchange (ICE) Cotton No. 2 futures contract.  The TAC concluded that both parties would accept that this clause applied to their contract.
5.11 The TAC was willing to accept that regardless of whether the text fixation order was in accordance with the terms of the contract or not, it may well have been sent too late to be executable.  The Seller failed to perform their right to fix the price. What follows from this failure is whether the cotton should be fixed at the published final price or fixed at the last executable price, be this a synthetic price or otherwise.
5.12  The TAC concluded that Rule 224 makes no reference to executable prices or synthetic prices.  The conclusion reached therefore was that the cotton should be fixed as per the published closing price, which on the date in question was 74.17 usc/lb.  This would give a contract price for the 8000 mt of 76.17 usc/lb.”
The issues arising
40.	In seeking permission to appeal, the Buyer attacked this reasoning on a number of grounds.  In particular, it was argued that the TAC’s reasoning was obviously wrong because:
(1)	The TAC apparently considered that it was a ‘moot point’ as to whether Rule 224 was overridden by the terms of the Sale Contract. The reason why the parties had agreed that the fixation could only be one of two proposed figures for the close on 22 June 2012 was because one figure was the price at which the Seller had purported to fix, and the other was the price at which the Buyer had purported to fix.  Accordingly, whether or not Rule 224 had been ousted by clause 15.10 of the Sale Contract, such that the price fixation was ‘”Buyer’s call”, was a central issue.
(2)	The TAC had been wrong to go on to apply the default provisions of Rule 224 by holding that, in the absence of a valid price fixation by the Seller, the price should be fixed based on the ICE Futures ‘closing price’ on 22 June 2012.  This was because, by clause 15.10 of the Sale Contract, the parties had agreed what would be the consequence of the Seller failing to make a valid fixation in time, namely that the fixation would be “Buyer’s call”.  By this provision, the parties had “agreed otherwise” for the purposes of Rule 224.
41.	These arguments shaped the formulation of the second issue of law for which permission to appeal was granted, namely “Whether the fixation clause, in clause 10 of the [Sale] Contract, was an agreement of the parties that displaced the default provisions of ICA Rule 224”.
42.	Since the Seller has become involved in the proceedings, however, it has become apparent that the issue between the parties as to pricing, and any deficiencies in the Award on the point, cannot be resolved simply by answering that question.
43.	The Seller accepts the finding that his own purported fixation of 22 June 2012 was invalid and ineffective.  The argument put forward on his behalf is rather:
(1)	The TAC had applied Rule 224.   It had not explained why and how Rule 224 was applicable in light of the terms of clause 15.10 of the Sale Contract.  However, the likelihood is that it considered that although, pursuant to clause 15.10, and in the absence of a valid fixation by the Seller, the Buyer could have fixed, the Buyer had made no valid fixation because the purported synthetic fixation was invalid.
(2)	Furthermore, even if that was not actually the process of reasoning of the TAC, it was in any event correct, and should have been the process of reasoning.  The Seller accepted that clause 15.10 of the Sale Contract did, at least to some extent, displace Rule 224; and that if the Buyer had issued an executable price fixation by reference to the simple futures market on a day when the market was operating, that would have been a valid fixation by the Buyer at its call and there would have been no room for the application of Rule 224.  That was not however what had happened because the Buyer had purported to ‘fix’ a synthetic price based not on the simple futures market but on the July – December spread trade price.
(3)	The initial question accordingly was or should have been whether fixing a synthetic price was an effective “Buyer’s call” for the purposes of clause 15.10 of the Sale Contract.  The Seller further argued that the answer to this question was that it was not.  This was because clause 15.10 was predicated on an executable price fixation order being issued, whether by Seller or Buyer, by reference to “the ICE Futures price”.  Attention was drawn to the requirement in clause 15.10 that “All fixation orders must state the ICE Futures price to be fixed at, the cover month, the quantity to be fixed and the validity of the fixation order.”  That, it was argued, imported a reference to a simple futures price and not a spread trade price, not least because a reference to a synthetic price could not “state the ICE Futures price to be fixed at”.  This was reinforced by clause 6 of the Sale Contract, which provided that the fixation was to be by reference to the quoted “July 2012 ICE Futures” market price at the time of fixation.  Furthermore, clauses 6 and 15.10 were predicated on there being a market price on the day on which the fixation was purportedly made, which there was not on 23 June 2012 because it was a Saturday.
(4)	On this basis, there had been no valid “Buyer’s call” as contemplated by clause 15.10.  It followed that neither party had “called” the price.  That gave rise to a vacuum, which the TAC had filled by applying the “default” provisions of Rule 224.
44.	The Buyer’s response to these arguments started by recognising that the answer to the second question of law was now largely common ground: it was common ground that clause 15.10 ousted Rule 224 such that in the – undisputed – absence of a valid Seller’s call, price fixation was to be at Buyer’s call.  The Buyer argued that the TAC had not made a finding as to whether the Buyer’s call was or was not valid.  However, the Buyer said that its price fixation was indeed valid and effective.  A spread order, it was said, was simply a simultaneous purchase and selling of futures, with the July leg of the relevant spread equating to the prevailing futures price for July.  Equally, so it was said, there was no requirement in the Sale Contract for the fixation to be on 22 June, as opposed to the weekend.
45.	Furthermore, it was submitted on behalf of the Buyer that, even if in some way the Buyer’s fixation had not been a valid one, that would give rise to an issue of what the consequence of this fact was.  Mr Pearce argued that it cannot be correct that, in such a situation, Rule 224 comes back into the frame, and applies in default. This is not least because its provisions are inapplicable in such a situation.  Mr Pearce argued that they are premised on there being an obligation and a possibility to fix by the day prior to the first notice day for the relevant futures contract month.  Here, because of the terms of clause 15.10, there could be no Buyer’s call until after that day, and it made no sense to apply Rule 224 in such a situation.  He further argued that, if there had indeed been no valid call by either party, and if Rule 224 was inapplicable, then the contractual mechanism would have broken down, and, he said, the parties had provided for that eventuality by the terms of clause 3.5 of the September Agreement, which resulted in the application of the Synthetic Price.
Discussion and decision
46.	It appears to me to be clear that the issue of law as to which permission to appeal has been given, and which the Court can decide, only answers a part of the question as to what is the applicable price.
47.	It is certainly correct, and indeed common ground, that clause 15.10 ousts Rule 224, at least to the extent that, in the absence of a valid price fixation at Seller’s call, the contract provides for there to be a price fixation at Buyer’s call.
48.	In the accepted absence of a valid Seller’s call, it was necessary for the TAC to consider whether there had been a valid fixation at Buyer’s call.  The TAC did not, however, address this issue in its reasons.  There are competing arguments as to whether the Buyer’s purported fixation was or was not valid, on none of which has the TAC expressed its views.  It appears to me impossible and inappropriate for the Court to seek to determine this issue in these circumstances.  Quite apart from the fact that it is not within the scope of the issue as formulated and on which permission to appeal has been granted, the material before the court does not include the entirety of the communication(s) by which the Buyer announced that it had fixed the price.  It is impossible for the Court to say whether it complied with the requirements of clause 15.10, including that it should “state the ICE Futures price to be fixed at, the cover month, the quantity to be fixed and the validity of the fixation order”.  Moreover, these issues and the issue of whether a “synthetic” fixation was compliant with this provision, are ones on which the views of the TAC would be of importance.
49.	In these circumstances, subject to the point considered below, it would appear clear that the Award must be remitted to the TAC to decide this point.
50.	The only argument addressed to me as to why, if I concluded - as I have - that the issue of whether there was a valid Buyer’s fixation should be decided by the TAC rather than by this Court, that there should nevertheless not be remission, was Mr Pearce’s argument based on clause 3.5 of the September Agreement.  This was to the effect that the only possible answers to the issue of whether there had been a valid fixation at Buyers’ call were either that there had been, in which case the Synthetic Price was the applicable price, or that there had not been, in which case the procedure had broken down, such that clause 3.5 of the September Agreement applied, in which case the Synthetic Price was, again, the applicable price.
51.	I was not persuaded by this argument that there should not be remission.  Instead I consider that the position is this.  The TAC will need to consider whether there was a valid fixation at Buyer’s call.  If there was, then the Synthetic Price will be the relevant price for the purposes of the September Agreement.  If there was not, then the TAC will have to go on to consider what the consequences are of there having been no valid fixation by either party.  
52.	Without attempting to be exhaustive as to the matters which will form part of this consideration (if it arises), one aspect will be whether clause 3.5 of the September Agreement is relevant.  Another would be to consider whether the terms of Rule 224 are of any continued relevance at this stage of the enquiry.  In relation to the latter point, and as it can be said to form part of the issue on which permission to appeal was given, I should state my conclusion that Rule 224 cannot be of direct application in those circumstances.  Rule 224 was not drafted to provide for, and does not directly apply to, a case in which a Buyer’s call only arises after the day prior to the first notice day for the relevant futures contract month. Whether in such circumstances Rule 224 can be of any relevance would depend on whether there is some other basis on which it can be said that the parties agreed to look to the provisions of Rule 224 in such a situation.  I express no view on that issue, which will be one for the TAC to consider.
53.	Section 69(7) of the Arbitration Act 1996 directs that the court should not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.  In my judgment, it is clearly not inappropriate to remit the Award for reconsideration of the pricing issue in light of my conclusions of law, and I accordingly do so.  
54.	I will hear counsel on the exact terms of the order which should be made.