“7.9 The fact that the US and EU Regulations relied on by Buyers applied does not, however, of itself drive the Buyers’ argument home. For them to succeed, Buyers would need to prove not only that the Regulations applied but that, on a balance of probabilities, the opening of the letter of credit required by the Subject Contract would indeed violate those Regulations. It is only such putative violation which would allow Buyers to escape from what would otherwise be a breach by Buyers of the payment clause under the Subject Contract. 7.10 For Buyers to be home and dry on the US Regulation, they would need to prove that the money payable through reimbursement under the letters of credit was payable to Burmese persons. For them to succeed on the EU Regulation, Buyers would need to prove that the moneys payable under the letters of credit was payable to the persons listed in Annex VI of the EU Regulation. The question for the Board was whether Buyers had succeeded in proving these two things on a balance of probabilities. 7.11 Buyers sought to establish that a Schedule of Shipments from Myanmar late in 2008 after the dispute had arisen between the parties to the Subject Contract was proof positive that the original suppliers of the goods destined for the performance of the Subject Contract were Burmese (for the purposes of the USA Regulation) and were listed persons (for the purposes of the EU Regulation) - and that moneys paid under the Subject Contract were eventually destined for Burma and/or for Burmese listed persons. 7.12 Looking at the evidence as carefully as we might, however, we took the view that the evidence relied upon by Buyers fell far short of what they needed to prove to establish the defence of illegality to an action for breach. In our view, all that was proven by the Schedule of Shipments was that after the dispute had arisen between Sellers and Buyers, Sellers had sold to third party buyers in Bangladesh goods which had originated in Burma with listed persons. It did not, however, prove that the goods sold to buyers in Bangladesh were the same physical parcels of goods which Sellers had intended to sell Buyers under the Subject Contract. Neither were we presented with any evidence of an actual contract of purchase upstream from the Subject Contract between Sellers and listed Burmese persons. Neither, indeed, were we presented with any evidence that Sellers intended to pay sums payable under the Subject Contract to listed Burmese persons - much less that they had paid such persons for the same goods destined for delivery under the Subject Contract. In our view, the evidence simply did not stack up to support Buyers’ contentions in this regard. 7.13 Before we leave the issue of the link between the goods sold by Sellers to Bangladeshi buyers against Buyers and the goods which had been purchased by Sellers to satisfy the Subject Contract, we need to deal with a pleading point raised by Buyers. In quantifying the losses said by Sellers to have been caused by Buyers’ failure to open a letter of credit, a matter with which we shall presently deal more specifically, Sellers had suggested, at paragraph 24.4 of their Statement of Case before this Board, and as one of two alternative measures of loss, ‘damages based on its actual re-sale price of the cargo [emphasis added] at USD348’. Buyers’ pleading point was that this short sentence on quantum precluded Sellers from now denying that the goods they sold to Bangladeshi buyers were indeed the goods purchased from Burmese listed persons. 7.14 We took the view that this pleading point, unsupported in any way by any evidence (as we have seen) to prove a necessary linkage between goods purchased upstream and goods sold against default, was an extremely unmeritorious and technical argument, based on an unjustifiably narrow interpretation of a phrase, i.e. ‘the cargo’ in a short paragraph, namely paragraph 24 in Sellers’ Appeal Submissions. 7.15 For these reasons we find that Buyers did not establish, on a balance of probabilities, that the opening of the letter of credit required by the Subject Contract would violate the applicable USA and EU Regulations, such that performance of the Subject Contract would become illegal. 7.16 It follows from our findings so far - and from the fact that it was never denied by Buyers that they had failed to open a letter of credit - that, bereft of the defences which they had failed to establish (namely, the Sellers’ alleged renunciation of the Subject Contract and illegality), Buyers were clearly in breach of contract by failing to open a letter of credit - and we so find.”
“paragraph 537.202 Prohibited exportation or reexportation of financial services to Burma. Except as authorized, and notwithstanding any contracts entered into or any license or permit granted prior to July 29, 2003, the exportation or reexportation of financial services to Burma, directly or indirectly, from the United States or by a U.S. person, wherever located, is prohibited.” ii) The term “exportation or reexportation of financial services to Burma” was defined in 31 CFR paragraph 537.305 as follows: “(a) The transfer of funds, directly or indirectly, from the United States or by a U.S. person, wherever located, to Burma; or (b) The provision, directly or indirectly, to persons in Burma of … banking services, … letters of credit or other extensions of credit;...” iii) In evidence before the Board See his letter dated23 November 2009 was the undisputed expert evidence of Mr. R. Richard Newcomb, a partner in DLA Piper LLP, New York. This was to the effect that, if a US Bank: “… were to issue confirm or advise a L/C opened by a buyer of Burmese goods or if it were to send US Dollars to reimburse a foreign bank/s funding of any L/C issued for the purpose of paying for Burmese goods ....” it would be subject to the prohibition in the relevant US Regulation. In other words, his expert opinion was that: “… a New York bank would be exporting financial services indirectly to Burma in violation of [the Regulation] if it reimbursed the buyer’s issuing bank [or the seller’s bank See his letter dated4 December 2009 . ] in the manner contemplated by the Payment term of the Contract. In my experience, New York banks do not issue, confirm, advise or otherwise support L/Cs opened by buyers of Burmese goods becauseparagraph 537.202 prohibits them from so doing in the absence of an OFAC license. Similarly, if a buyer’s bank wished to make a payment in U.S. dollars to the seller’s bank for the purchase of Burmese goods (whether under a L/C or otherwise) then any correspondent bank in the United States instructed to effect such a payment would be prohibited by the Regulations from knowingly processing that payment.” iv) That argument was specifically made in paragraphs 24(b)(ii) and (iii) of the Buyers’ written Statement of Case and specifically developed by the Buyers’ representative at the hearing See the Buyers’ Oral Submission paragraphs 106-111. . Those statements were expressly endorsed as correct by Mr. Newcomb as a matter of United States law. He said: “The [US Regulations] generally prohibit ‘U.S. persons’ as defined above from transacting most business involving Burma (a/k/a Myanmar) unless OFAC has issued a license authorising the business in question.” v) For this issue, the identity of the specific Burmese beneficiaries was irrelevant. It was enough if there was an “indirect supply of financial services to Burma”
“... the refusal to make funds or economic resources available, carried out in good faith on the basis that such action is in accordance with the Regulation, shall not give rise to liability of any kind on the part of the natural or legal person or entity implementing it, or its directors or employees, unless it is proved that the funds and economic resources were frozen as a result of negligence...”. ii) Thus, although the Board’s finding that the Buyers had failed to prove as a matter of fact that the suppliers were “listed Burmese persons” deprived the Buyers of any defence under Article 11 of the EU Regulation (which was accepted), nonetheless there was a separate and discrete argument that the Buyers were absolved from liability pursuant to Article 14. The argument was that, even if a party refusing to make economic resources available was wrong in his belief that there was going to be direct or indirect funding of a proscribed “listed person”, nonetheless, provided that he so acted in “good faith” in the belief that his act was in accordance with the Regulation, he was absolved from all liability. iii) That argument had been clearly presented in the Buyers’ Statement of Case and in their Oral Submissions. However the point did not appear to have been considered by the Board in the Award. iv) The Sellers did not seem actually to deny that the Board was in material error in failing to consider the “good faith” defence. The Sellers’ approach was to the effect that there was no substantial injustice under s68 because the Buyers were “bound to fail” on the Article 14 good faith issue; that was because “… the Buyers did not ‘in good faith’ ‘refuse’ to make funds or economic resources available. It was the banks which refused to establish letters of credit. The article might arguably give the banks a defence to a claim against them by the Buyers. But it cannot help the Buyers themselves who simply do not fall within its terms.”
“[The US Regulations] generally prohibit ‘U.S. persons’ as defined above from transacting most business involving Burma (a/k/a Myanmar) unless OFAC has issued a license authorising the business in question.”
“… the correct approach, in the first instance, would be to order the Board pursuant to s70(4) of the Act to state the reasons for its award in sufficient detail to enable the court to determine whether in fact the Tribunal had dealt with the “points” relied on by the Buyers.”