Futures fray

China based Pioneer Freight Futures has failed in a bid to collect more than $5m in a key dispute arising from the dry cargo market collapse in late 2008.

Pioneer sought to “net off” $12m it was owed with a $7m liability to Luxembourg domiciled Marine Trade SA but has failed in the high court in London.

Pioneer and Marine trade were counterparties to 14 forward freight agreements between May and September 2008 with the dispute one of the first arising from the dramatic fall in the dry cargo market to go to trial.

Large numbers of FFA disputes have arisen from last year's collapse of dry cargo rates.

Marine Trade then invoiced Pioneer for the $7m due before “netting off” so there was now claim and counterclaim.

High court judge, Justice Flaux, goes into considerable detail about the contractual terms of the Forward Freight Agreement Brokers Association master agreement and the question of what constitutes a default, identifying seven issues between the parties.

The significance of a default is that in such an event the counterparties have the right under the agreement of designating an early termination date which crystallises cross liabilities.

The judge notes that a “wash out” would have meant a very substantial sum was payable by Marine Trade.

Justice Flaux rules that Pioneer was affected by an event of default while Marine Trade was not.

But in the end the judge decides that he will not grant Pioneer the declaratory relief it sought.

Pioneer Freight Futures is an offshoot of Pioneer Metals headed by Chen Ningning, one of China's richest and best connected businesswomen.

Armada, the Singapore based chartering group, assigned some of its claims against Pioneer to Marine Trade but was effectively taken out of the dispute as the company is operating under judicial management with protection from creditors under bankruptcy laws.

Click on the document in the related media column to the right to read the judgment in full.

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