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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, 07 August 20
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- Kartika Selabumi Mining - Indonesia
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- Indian Energy Exchange, India
- Georgia Ports Authority, United States
- The State Trading Corporation of India Ltd
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- SMG Consultants - Indonesia
- India Bulls Power Limited - India
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- Petron Corporation, Philippines
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- Oldendorff Carriers - Singapore
- Sical Logistics Limited - India
- Eastern Coal Council - USA
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- Uttam Galva Steels Limited - India
- Merrill Lynch Commodities Europe
- Intertek Mineral Services - Indonesia
- Renaissance Capital - South Africa
- Lanco Infratech Ltd - India
- Meenaskhi Energy Private Limited - India
- Jindal Steel & Power Ltd - India
- Power Finance Corporation Ltd., India
- Minerals Council of Australia
- Ind-Barath Power Infra Limited - India
- Parliament of New Zealand
- Star Paper Mills Limited - India
- Borneo Indobara - Indonesia
- GAC Shipping (India) Pvt Ltd
- Australian Commodity Traders Exchange
- Globalindo Alam Lestari - Indonesia
- Ministry of Mines - Canada
- Bukit Asam (Persero) Tbk - Indonesia
- Heidelberg Cement - Germany
- Xindia Steels Limited - India
- Global Coal Blending Company Limited - Australia
- Sarangani Energy Corporation, Philippines
- Altura Mining Limited, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kaltim Prima Coal - Indonesia
- MS Steel International - UAE
- Karaikal Port Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- London Commodity Brokers - England
- Bharathi Cement Corporation - India
- Orica Australia Pty. Ltd.
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- Banpu Public Company Limited - Thailand
- Asmin Koalindo Tuhup - Indonesia
- Grasim Industreis Ltd - India
- Indo Tambangraya Megah - Indonesia
- CIMB Investment Bank - Malaysia
- Commonwealth Bank - Australia
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- Sinarmas Energy and Mining - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Thai Mozambique Logistica
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- Pendopo Energi Batubara - Indonesia
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- SMC Global Power, Philippines
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- LBH Netherlands Bv - Netherlands
- Riau Bara Harum - Indonesia
- Indonesian Coal Mining Association
- Energy Link Ltd, New Zealand
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- Savvy Resources Ltd - HongKong
- IHS Mccloskey Coal Group - USA
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- Deloitte Consulting - India
- PowerSource Philippines DevCo
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- Makarim & Taira - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- The University of Queensland
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- Baramulti Group, Indonesia
- Ministry of Finance - Indonesia
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- Indogreen Group - Indonesia
- Salva Resources Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- White Energy Company Limited
- Vijayanagar Sugar Pvt Ltd - India
- Indian Oil Corporation Limited
- Economic Council, Georgia
- Tamil Nadu electricity Board
- Trasteel International SA, Italy
- Chamber of Mines of South Africa
- Parry Sugars Refinery, India
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- IEA Clean Coal Centre - UK
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- Siam City Cement PLC, Thailand
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- Antam Resourcindo - Indonesia
- Mercuria Energy - Indonesia
- Wood Mackenzie - Singapore
- Metalloyd Limited - United Kingdom
- Port Waratah Coal Services - Australia
- Videocon Industries ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Marubeni Corporation - India
- Pipit Mutiara Jaya. PT, Indonesia
- Barasentosa Lestari - Indonesia
- Africa Commodities Group - South Africa
- European Bulk Services B.V. - Netherlands
- Global Business Power Corporation, Philippines
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- Planning Commission, India
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- Samtan Co., Ltd - South Korea
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- Bhushan Steel Limited - India
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