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What constitutes delivery of goods in acommodities repo transaction? Ruhi Sethi, commercial barrister at 4–5 Gray’s Inn Square, examines the recent Mercuria judgment that provides an endorsement for the structure of repo transactions as well as areminder of the importance of cogent drafting of the agreements governing repo transactions
Mercuria Energy Trading Pte Ltd and another v Citibank NA and another  EWHC 1481 (Comm),  All ER (D) 221 (May)
The parties entered repo transactions concerning metal. The first claimant commenced proceedings, seeking declarations that bring forward notices served by the defendants were invalid or superseded by its notice declaring atermination event. The Commercial Court held that the defendants had not effected delivery for the purpose of the parties’ agreements and it was liable for damages for failure to deliver with respect to one transaction. Further, the bring forward notices were valid and the first claimant was in breach of those obligations. Furthermore, the defendants were entitled to terminate the agreements as amatter of contract and common law.
This case concerned aseries of repo transactions which were governed by the terms of two Master Agreements between Mercuria Energy Trading Pte Ltd (Mercuria) and each of the defendants (collectively referred to as ‘Citi’). The transactions related to cargoes of metal stored in the Chinese ports of Qingdao, Penglai and Shanghai.
The dispute arose when it came to light that significant quantities of metal might be missing from the warehouses in Qingdao and Penglai where the metal was thought to have been safely stored. In response to this, on 9 June 2014, Citi served what are known as ‘Bring Forward Event’ (BFE) notices on Mercuria which sought to bring forward the sale date of all of the forward transactions. On 11 July 2014, Mercuria served anotice declaring atermination event which required Citi
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