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Monday, 01 April 19
FORCE MAJEURE SUCCESS NOT A SEA CHANGE - BALTIC EXCHANGE
 KNOWLEDGE TO ELEVATE
It is difficult to successfully argue that contractual performance has been prevented or delayed by force majeure. This is in part because English courts or arbitration tribunals will interpret these clauses strictly and narrowly against the party seeking to rely on them.
Recent decisions, including Triple Point Technology v PTT (2017) and Seadrill Ghana v Tullow Ghana (2018), are evidence of this approach. However, Sucden Middle-East, represented by Nick Fisher of HFW, has recently relied successfully on such a clause in the Commercial Court, on appeal from arbitration.
The case, Sucden Middle-East v Yagci Denizcilik Ve Ticaret Limited Sirketi, “The Mv Muammer Yagci”, involved a shipment of sugar to Algeria on the Sugar Charter Party 1999 form. The facts found by the arbitral tribunal were that when the cargo arrived in Algeria, the cargo-receivers submitted false import documents to local customs authorities. The local customs responded by seizing the cargo, using powers under customs laws and regulations.
A delay to discharging the cargo of four and a half months ensued. Sucden, as charterers, claimed this delay fell within the exceptions to laytime running under clause 28. Owners disagreed. At first instance, the arbitral tribunal agreed with owners.
Charterers appealed to the Commercial Court. Permission to bring the appeal was given on the basis that the question of law was one of general public importance, as it related to a standard form contract in wide commercial usage.
The judgement
The question before the Commercial Court was: “Where a cargo is seized by the local customs authorities at the discharge port causing a delay to discharge, is the time so lost caused by ‘government interferences’ within the meaning of clause 28 of the Sugar Charter Party 1999 form?” Clause 28 reads:
“Strikes and Force Majeure
In the event that whilst at or off the loading place or discharging place the loading and/or discharging of the vessel is prevented or delayed by any of the following occurrences: strikes, riots, civil commotions, lockouts of men, accidents and/or breakdowns on railways, stoppages on railway and/or river and/or canal by ice or frost, mechanical breakdowns at mechanical loading plants, government interferences, vessel being inoperative or rendered inoperative due to terms and conditions of employment of the Officers and Crew, time so lost shall not count as laytime on demurrage or detention…”
In deciding whether a force majeure event had occurred, the Court focused on the construction of “government interferences”. It was fairly straightforward to establish that a government entity acting in a sovereign capacity was involved, but owners argued that the government being involved was not enough and that there had to be “interferences”. In reaching its decision that there had been no interference, the tribunal had considered it a key point that seizure was an “ordinary” action. The Court rejected this conclusion. It held that the seizure of the cargo was not routine and did fall within the meaning of “interferences”. Seizure is a significant exercise of executive power and therefore could not be regarded as “ordinary”. Suspected or predictable consequences are not the same as ordinary actions (such as the inspection of the cargo by a government surveyor): “In the usual course of things, cargo is not seized and property rights are not invaded in that way.” The very fact that false documents were involved showed that the circumstances were not routine.
The Court emphasised that it was of “real importance” that its conclusion on the language was not difficult to apply, nor did it in any way offend commercial common sense.
The owners’ causation argument was also dismissed, as it was held that the seizure caused the delay, even if the submission of false documents caused the seizure.
Further detail
In allowing the appeal, the Court still maintained the strict and narrow approach to force majeure, stressing that “the answer given to the question is only a narrow ‘yes’. It is ‘yes’ where the circumstances are as in the present case. The answer does not address all of the circumstances that may come within or fall outside clause 28. The answer is concerned only with the seizure of a cargo and with that seizure by a customs authority that is a State revenue authority acting in a sovereign capacity”.
This judgment gives some welcome publicly-available guidance on the interpretation of a force majeure clause in a standard form widely used in sugar trading. While the charterers were successfully able to rely on the force majeure clause in this case, it does not signal a change in the strict and narrow approach typically adopted by the English courts.
Source: Baltic Exchange
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Friday, 21 August 20
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- Salva Resources Pvt Ltd - India
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- Ministry of Finance - Indonesia
- Sindya Power Generating Company Private Ltd
- Uttam Galva Steels Limited - India
- Sakthi Sugars Limited - India
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- Minerals Council of Australia
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- Economic Council, Georgia
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- Mercator Lines Limited - India
- Siam City Cement - Thailand
- The Treasury - Australian Government
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- Interocean Group of Companies - India
- Ministry of Mines - Canada
- Directorate Of Revenue Intelligence - India
- Tamil Nadu electricity Board
- Africa Commodities Group - South Africa
- Aboitiz Power Corporation - Philippines
- Bayan Resources Tbk. - Indonesia
- European Bulk Services B.V. - Netherlands
- Trasteel International SA, Italy
- Bukit Makmur.PT - Indonesia
- Dalmia Cement Bharat India
- SMC Global Power, Philippines
- Billiton Holdings Pty Ltd - Australia
- Rio Tinto Coal - Australia
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- VISA Power Limited - India
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- London Commodity Brokers - England
- Mjunction Services Limited - India
- Commonwealth Bank - Australia
- Agrawal Coal Company - India
- Chamber of Mines of South Africa
- Karbindo Abesyapradhi - Indoneisa
- Singapore Mercantile Exchange
- Aditya Birla Group - India
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- Power Finance Corporation Ltd., India
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- SMG Consultants - Indonesia
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- Maheswari Brothers Coal Limited - India
- Eastern Energy - Thailand
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- Electricity Generating Authority of Thailand
- Indo Tambangraya Megah - Indonesia
- Meenaskhi Energy Private Limited - India
- White Energy Company Limited
- Australian Coal Association
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- Sical Logistics Limited - India
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- Posco Energy - South Korea
- Jorong Barutama Greston.PT - Indonesia
- Renaissance Capital - South Africa
- Toyota Tsusho Corporation, Japan
- Bahari Cakrawala Sebuku - Indonesia
- MS Steel International - UAE
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- Neyveli Lignite Corporation Ltd, - India
- Bukit Baiduri Energy - Indonesia
- Indian Oil Corporation Limited
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- Parry Sugars Refinery, India
- Gujarat Electricity Regulatory Commission - India
- Eastern Coal Council - USA
- ASAPP Information Group - India
- AsiaOL BioFuels Corp., Philippines
- Binh Thuan Hamico - Vietnam
- Global Coal Blending Company Limited - Australia
- Sojitz Corporation - Japan
- Ind-Barath Power Infra Limited - India
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- Therma Luzon, Inc, Philippines
- Marubeni Corporation - India
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- Goldman Sachs - Singapore
- Ministry of Transport, Egypt
- Medco Energi Mining Internasional
- Maharashtra Electricity Regulatory Commission - India
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- Kepco SPC Power Corporation, Philippines
- ICICI Bank Limited - India
- IEA Clean Coal Centre - UK
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PowerSource Philippines DevCo
- Grasim Industreis Ltd - India
- Lanco Infratech Ltd - India
- Manunggal Multi Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
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- Mintek Dendrill Indonesia
- Indogreen Group - Indonesia
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- Kaltim Prima Coal - Indonesia
- Vedanta Resources Plc - India
- Globalindo Alam Lestari - Indonesia
- San Jose City I Power Corp, Philippines
- Ambuja Cements Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
- SN Aboitiz Power Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Australian Commodity Traders Exchange
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- Mercuria Energy - Indonesia
- IHS Mccloskey Coal Group - USA
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- Independent Power Producers Association of India
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