Netherlands Arbitration Institute Case No. 2319

Several companies (collectively, the seller) (defendant) conducted exploratory activities in the gas fields of the Netherlands. The exploration of gas fields generated a liquid product, or condensate. The seller’s condensate was known as Rijn Blend. Rijn Blend, like other condensates, had varying chemical compositions. There was no industry standard for mercury levels in condensate. Rijn Blend could be used for different refining processes. Prior to 1993, a major international oil refinery (the buyer) (plaintiff) contracted to purchase Rijn Blend from the seller. For the first two years, there were no issues relating to levels of mercury in the Rijn Blend. In June 1998, the buyer refused delivery of the product. The buyer normally resold the Rijn Blend, but unexpectedly higher levels of mercury in the condensate had made it unacceptable for further processing or sales. To cover the buyer’s refusal to take delivery, the seller agreed to sell the Rijn Blend to several third parties (cover transactions). The cover transactions were for a substantially reduced price, or about $6.3 million less than the contract price. The seller initiated an arbitration against the buyer, arguing that their contract did not call for any specific quality requirements. The buyer argued that the Rijn Blend was nonconforming under the relevant standard of the Convention on Contracts for the International Sale of Goods (CISG).