A Banking Day by any other name (would still end at midnight): Commercial Court clarifies contractual payment deadlines

The Commercial Court has made a rare decision to allow an appeal on a question of law arising out of an arbitration award, under s.69 Arbitration Act 1996.  In Songa Product and Chemical Tankers IV AS v Gardsea Shipping Inc [2026] EWHC 1559 (Comm), the Court overturned the decision of a London Maritime Arbitrators Association (“LMAA”) tribunal as to the correct contractual construction of “Banking Days” in the widely used Saleform 2012 contract. 

The decision clarified how payment deadlines operate where contracts define “Banking Days” by reference to multiple jurisdictions. The court held that the Banking Days definition in the contract before it determined which calendar days counted for time-calculation purposes, but did not alter when a day began or ended. The contract in question required payment for a vessel to be made within three Banking Days of a “Notice of Readiness” (“NOR”) being given. The court found, on a true construction of the contract, that the deadline expired at midnight local time in the place where the obligation was to be performed, not at midnight in the most westerly time zone referenced in the contract.

The decision is significant for the shipping industry but also more widely for any party to an international contract that uses multi-jurisdictional “Banking Day” definitions. In this Legal Update we analyse the Court’s decision and set out the key practical takeaways for parties to cross-border transactions involving payment deadlines. 

Background

In July 2022, Songa Product and Chemical Tankers IV AS (“Sellers”) agreed to sell the vessel MT Songa Coral to Gardsea Shipping Inc (“Buyers”) for USD 25 million under a contract based on the Saleform 2012, the Norwegian Shipbrokers’ Association’s template Memorandum of Agreement for the sale and purchase of ships. The purchase price was to be released from an escrow account held at the Sellers’ bank in Norway within three Banking Days of an NOR being given. Saleform 2012 defined “Banking Days” as days on which banks were open in a number of jurisdictions, including Norway, the UK and the US, among others.

The NOR was given on 2 September 2022. Accounting for weekends and a US public holiday, both parties agreed that the third Banking Day fell on 8 September 2022. No payment had reached the escrow account by midnight Norway time, and the Sellers served a cancellation notice nine minutes later. However, it was still 8 September in parts of the US. In particular, it would not be midnight for several more hours in Hawaii, the most westerly jurisdiction referenced in Saleform 2012. The Buyers made payment before midnight in Hawaii and subsequently argued that they were entitled to do so on a proper construction of the contract.

The Tribunal’s decision

A distinguished LMAA tribunal found in the Buyers’ favour, holding that the definition of “Banking Days” effectively defined a “day” as running from midnight in the most easterly jurisdiction (the UAE) to midnight in the most westerly (Hawaii) – a period of some 37 to 38 hours. The tribunal acknowledged this had “little commercial logic”, but considered that odd results would arise either way, and that the language of the definition was clear.

The issue before the Court

The sole question on appeal was whether the Buyers’ obligation to release funds from the Norwegian escrow account had to be performed by midnight on 8 September 2022 in Norway, or by midnight on 8 September 2022 in the most westerly US time zone (Hawaii-Aleutian Standard Time).

The Court’s analysis

Paul Stanley KC, sitting as a Deputy High Court Judge, disagreed with the Tribunal’s construction and allowed the Sellers’ appeal. His reasoning rested on two key points:

• First, the Court held that the definition of “Banking Days” does not redefine what a “day” is. It simply identifies which calendar days count for the purpose of calculating a time period, and which do not. The definition requires a simple question to be asked of each calendar date: were banks open in all of the listed jurisdictions? If yes, the date qualifies as a Banking Day; if not, it is disregarded for counting purposes. The definition says nothing about when a day starts or ends. 
• Second, once the relevant calendar date has been identified, the question of whether payment was made “on that day” is answered by ordinary principles of construction. It is a requirement for commercial certainty that for any particular contractual act one should be able to say whether a day has started or has ended, so one must assume both a time and a place.  The time, absent a contrary provision, is midnight, and “the usual and common sense view” as to location is that it be the place where the act in question is to be performed. Since the funds were to be released from a Norwegian escrow account into a Norwegian bank account, that place was Norway.

The court observed that the Buyers’ alternative interpretation produced a “day” lasting nearly 38 hours, during which overlapping days would already have begun in other jurisdictions. The judge considered this “extremely improbable” and inconsistent with the ordinary meaning of a calendar day.

Comment and practical takeaways

This decision is of practical importance to anyone involved in ship sale and purchase transactions using Saleform 2012 or similar standard forms, but also has wider application, as discussed below. The Banking Days definition in Saleform 2012 invites parties to include multiple jurisdictions as appropriate, and this judgment makes clear that the purpose of that list of jurisdictions is solely to filter out non-business days – it does not extend the payment window to the last time zone on the list.

The decision is also relevant to international transactions more broadly. Similar drafting of the definition of “Business Days” appears regularly in contracts governing M&A transactions, financing arrangements, commodity trades and other cross-border contracts where parties seek to align payment mechanics across multiple jurisdictions. While the judgment does not establish a universal rule that payment deadlines are always determined by local time at the place of performance, it suggests that, absent clear wording to the contrary, the English courts are likely to approach contractual time limits by reference to ordinary concepts of calendar days and local time at the place where the relevant obligation is to be performed. Applying the usual principles of English contractual construction, the court favoured an interpretation that allowed parties to identify with certainty whether a contractual deadline had passed, rather than one under which the expiry of a “day” would depend on a rolling sequence of time zones across the globe.  

Parties to international sale contracts should consider the following practical steps:

• Specify time zones expressly: Where a contract involves parties and banks in multiple jurisdictions, consider stating explicitly the time zone or locality by reference to which deadlines are to be measured. This removes any scope for the kind of dispute that arose here. 
• Review existing contracts: Any contract that defines “Banking Days” or “business days” by reference to multiple jurisdictions should be reviewed to check whether the place of performance – and therefore the applicable midnight – is sufficiently clear.
• Ensure funds are in position well ahead of the deadline: The court noted that the Saleform 2012 already contemplates that money should be pre-positioned in escrow before the payment deadline. Parties should not rely on the full Banking Days period if intermediary banks in different time zones are involved in routing the payment. 

The case also illustrates that arbitral awards may, in limited circumstances, be challenged on questions of law under s.69 of the Arbitration Act 1996 where the parties have not excluded that right.  Although, as discussed in our ‘Arbitration Atlas’ series, s.69 is by far the most popular route for challenging an award, the number of instances where parties successfully challenge arbitral awards is consistently low. The English courts remain very pro-arbitration and there is a high bar for intervening in a Tribunal’s decision, but they will exercise their supervisory powers carefully and, as in this case, uphold a challenge where that high bar is met. 

For further information, including on the application of this judgment to your commercial contracts, please email the authors or your usual CMS contact.

Co-authored by Daniel Boden, Trainee Solicitor