Background Facts – The EU Commission and Member States were notified via the Rapid Alert System for Food and Feed (RASFF) that sunflower seed oil originating within the EU destined for human consumption was contaminated with high levels of mineral oil. EU-wide import restrictions were imposed.
Emergency Response Issues – Traders and shippers found themselves with open positions or goods afloat, where they had agreed to buy or sell the affected oil but were unable to perform their contractual obligations. Litigation/arbitration, claims against insurers, onward sale defaults and hedging losses all ensued. Receivers of cargoes were unable to import them into the EU with potentially no recourse. Very short time limits for suing suppliers for quality/condition claims had in many cases already expired. The contamination extended to previously imported cargoes, over many months.
Our Role – The Reed Smith team reacted quickly to help clients contain the crisis by halting any further commingling of suspected contaminated cargo and setting up separate storage of cargoes suspected to be contaminated. We then worked urgently with clients to protect and preserve rights of recourse, find routes to market for commingled contaminated product and, in conjunction with insurers, handle recall procedures and deal with third-party claims.
Outcome – Reed Smith successfully applied to have the tight time limits for claiming recourse overturned so that disputes on liability could be determined before a trade tribunal, thereby protecting parties’ rights of recourse. Reed Smith also successfully argued that analysis certificates should not be final and binding, thereby securing litigation successes and recovery of damages on behalf of trading clients. All of the contaminated oil was eventually sold for burning.