433. Cottonex Anstalt v Patriot Spinning Mills Ltd [2013] EWHC 236 (Comm)

Interpretation of incorporation clause

The facts

Cotton was sold CFR Chittagong, Bangladesh.

The contract was not performed.

Buyers contended that they were entitled to a payment from the Sellers in terms of an “invoicing back” clause (a standard industry provision allowing for a penalty irrespective of fault).

The invoicing back clause was found in the International Cotton Association by-laws.

Buyers claimed that the entire by-laws of the ICA had been incorporated by the following arbitration clause:

5.        Claims and controversial matters, that may occur in connection with the execution of the following contract, are to be solved by the representatives of the buyer and seller, having full power to act.  All disputes relating to this contract will be resolved through arbitration in accordance with the By-laws of the International Cotton Association Ltd.  This agreement incorporates the By-laws which set out the Association’s arbitration procedure.”

The by-laws and rules which contained a section dedicated to arbitration were placed before the court.

The invoicing back provision was found in the general provisions dealing with substantive matters.


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