
Forecast for 2025: 5 potential areas for commodity contract disputes and key related clauses
The English courts remain a reliable barometer of the pressures faced by the commodity industry globally as parties continue to rely on English law to resolve their disputes. Last year, the courts grappled with issues arising from Russian sanctions and counterparty risks and we can expect that commodity disputes in 2025 will continue to reflect key trends, driven by evolving geopolitical, economic, and regulatory factors. Here are five areas to watch and an indicator of which contractual clauses will be most relevant to them.
1. Sanctions
Last year, the disputes arising from Russia-related sanctions spanned non-performance, payment restrictions, force majeure claims and construction of sanctions clauses. In 2025, we can expect Russia-related sanctions regimes to continue affecting commodity trading, albeit with an element of unpredictability arising from the new Trump administration.1 It will remain important to conduct counterparty due diligence to avoid falling foul of the sanctions regime, which can have severe consequences for businesses and individuals. Thorough compliance checks and well-drafted sanctions, payment and force majeure clauses will remain essential in mitigating the risk of sanctions-related disputes. See my colleague James Neale’s article elsewhere in this bulletin for more information in relation to sanctions enforcement in 2025.
2. Supply chain disruptions and counterparty risks
In 2024, the disruptions in the Red Sea and Panama Canal resulted in increased costs and delays but global trade systems generally adapted well to these challenges.
Going forward, we anticipate specific challenges affecting particular commodities, for example supply shortages in the case of cocoa and coffee and export controls in the case of critical minerals. An increase in regulation and due diligence requirements for some commodities, including the implementation of the EU Deforestation Regulation at the end of 2025 for large companies, is also likely to impact supply chains and create grounds for disputes.
Globally, geopolitical disruption and uncertainty will inevitably affect supply chains and of particular focus for 2025 will be tariffs. Whilst President Trump has indicated an intention to impose tariffs on trading partners, with China, Canada and Mexico mentioned specifically in the first few days of his presidency, the extent, targets and timing of such tariffs remain unclear at the time of publication. The increase of US tariffs in 2018 did not result in many contractual disputes before the English courts, but it would be prudent to plan for disruption. Key contractual clauses in this context will include those dealing with import/export duties, cost allocation, price adjustment and force majeure.
Further, geopolitical and economic uncertainty is likely to lead to increased rates of insolvency. The risk of counterparty default, fraud and non-payment will be high. Payment security will remain essential in commodity trading contracts and increased and regular due diligence and credit checks would be prudent, coupled with well-drafted dispute resolution clauses to improve chances of enforcement in the event of counterparty default.
3. Voluntary carbon credit markets
In the next year, we expect a rise in the number of disputes in the voluntary carbon credit (VCC) markets. The nature of the disputes may be wide-ranging, including over market value of VCCs, overselling and mis-selling or fraud. Several factors play into this, such as the absence of established pricing benchmarks, differences in the approach adopted by various voluntary standards in respect of their project governance processes, integrity issues arising from arbitrage or ambiguity in the methodologies used by the voluntary standards.
Another factor is the volatility in the VCC market prices over the past 2-3 years, which increases or suppresses the appetite for disputes. The difference between the anticipated price of the VCC at the time of the contract and the actual price when the VCCs become capable of being delivered is often a reflection of whether the contract remains economical for one of the parties in light of the price volatility. Anticipated future shifts in climate change policy and compliance market dynamics, driven in significant part by the new US administration, will likely create new challenges and previously unforeseen disputes in the VCC market.
The key clauses in VCC market agreements will include (i) those allocating costs and obligations relating to compliance and integrity of VCCs; (ii) representations and warranties (iii) force majeure; and (iv) those defining the consequences of contractual breaches, including indemnities and termination rights.
For more information, please reach out to your usual contact at HFW or our specialist team in Singapore, Dan Perera, Peter Zaman and Justine Barthe-Dejean.
4. Increase in digitalisation
The role of blockchain and smart contracts in trading and supply chain management is likely to increase. The misuse or failure of digital platforms, as well as cyberattacks, are likely to create grounds for disputes.
Looking beyond 2025, the adoption of electronic bills of lading is likely to continue growing, following new legislation enacted in Singapore in 2021, the UK in 2023 and France in 2024, and with Australia now consulting on a new law based on MLETR.2 This will change the landscape for bill of lading disputes, particularly in this transitional period: misdelivery claims are likely to reduce but new types of claims could arise such as, for example, claims challenging the reliability of electronic platforms or disputes in relation to the applicable law and jurisdiction in transactions involving electronic bills of lading. This highlights the importance of making sure that such contracts contain clear law and jurisdiction clauses.
5. Recoverable losses
At the end of 2024, the Commercial Court issued a judgment regarding the impact of a claimant’s contracts with third parties on its ability to recover market losses. The context was a claim for late redelivery of two time-chartered vessels, however, the judgment drew heavily on the principles arising from a series of cases involving sale and purchase of goods where market loss represents a typical measure of damages for delivery of damaged goods, non-delivery and late delivery. The Court found that in sale of goods contracts, onward contracts for the sale of the same specific goods can be taken into account to reduce a claim for damages (compared to the loss of opportunity to sell on the open market) even if such onward contracts were not within the defendant’s knowledge or contemplation of the parties at the time of making the contract. Whilst this finding will be relevant only in certain specific scenarios in the context of commodity trading, it is an important clarification in relation to the losses recoverable in commodity disputes.
HFW comment
If we have learnt anything from recent years, it is that the global trade is resilient and will rise to the challenges it faces. That said, the risk of contractual disputes arising as a result of these challenges can and should be mitigated against. Whilst no amount of careful contract drafting can entirely protect parties from a dispute, there is a significant advantage in being prepared. When negotiating new contracts, be aware of the key clauses identified above and aim to ensure maximum protection from them. Review existing contracts with a focus on the key clauses and know your contractual position in advance, so that you are ready to act swiftly if a dispute arises.
Footnotes
- https://www.gtreview.com/news/americas/trump-may-find-russia-sanctions-stickier-than-expected/
- UNCITRAL’s Model Law on Electronic Transferable Records
- Hapag-Lloyd AG v. Skyros Maritime Corporation and Agios Minas Shipping Company [2024] EWHC 3139 (Comm)