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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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- Indian Oil Corporation Limited
- San Jose City I Power Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Samtan Co., Ltd - South Korea
- Independent Power Producers Association of India
- Globalindo Alam Lestari - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sakthi Sugars Limited - India
- Planning Commission, India
- Simpson Spence & Young - Indonesia
- McConnell Dowell - Australia
- Meenaskhi Energy Private Limited - India
- Alfred C Toepfer International GmbH - Germany
- Maheswari Brothers Coal Limited - India
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- Uttam Galva Steels Limited - India
- Sical Logistics Limited - India
- Cement Manufacturers Association - India
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- CNBM International Corporation - China
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- Energy Development Corp, Philippines
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- Directorate General of MIneral and Coal - Indonesia
- Central Electricity Authority - India
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- Heidelberg Cement - Germany
- ASAPP Information Group - India
- Posco Energy - South Korea
- ICICI Bank Limited - India
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- Sinarmas Energy and Mining - Indonesia
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- Tata Chemicals Ltd - India
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- Metalloyd Limited - United Kingdom
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- London Commodity Brokers - England
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- Kapuas Tunggal Persada - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
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- Minerals Council of Australia
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- South Luzon Thermal Energy Corporation
- PowerSource Philippines DevCo
- Savvy Resources Ltd - HongKong
- Power Finance Corporation Ltd., India
- Bukit Makmur.PT - Indonesia
- Coalindo Energy - Indonesia
- Goldman Sachs - Singapore
- Sree Jayajothi Cements Limited - India
- Coal and Oil Company - UAE
- Thai Mozambique Logistica
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Transport, Egypt
- IEA Clean Coal Centre - UK
- TNB Fuel Sdn Bhd - Malaysia
- Georgia Ports Authority, United States
- Jaiprakash Power Ventures ltd
- Attock Cement Pakistan Limited
- Coastal Gujarat Power Limited - India
- CIMB Investment Bank - Malaysia
- Sarangani Energy Corporation, Philippines
- Xindia Steels Limited - India
- Standard Chartered Bank - UAE
- Dalmia Cement Bharat India
- Bukit Baiduri Energy - Indonesia
- Thiess Contractors Indonesia
- Orica Australia Pty. Ltd.
- Lanco Infratech Ltd - India
- Karaikal Port Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Meralco Power Generation, Philippines
- Latin American Coal - Colombia
- New Zealand Coal & Carbon
- Makarim & Taira - Indonesia
- Toyota Tsusho Corporation, Japan
- Pendopo Energi Batubara - Indonesia
- Mercuria Energy - Indonesia
- Indika Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Madhucon Powers Ltd - India
- Australian Coal Association
- Straits Asia Resources Limited - Singapore
- White Energy Company Limited
- Barasentosa Lestari - Indonesia
- Rio Tinto Coal - Australia
- SMC Global Power, Philippines
- Siam City Cement - Thailand
- Ministry of Mines - Canada
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- Krishnapatnam Port Company Ltd. - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Africa Commodities Group - South Africa
- Renaissance Capital - South Africa
- European Bulk Services B.V. - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- Manunggal Multi Energi - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Mintek Dendrill Indonesia
- India Bulls Power Limited - India
- Eastern Coal Council - USA
- Kideco Jaya Agung - Indonesia
- Deloitte Consulting - India
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- PTC India Limited - India
- Binh Thuan Hamico - Vietnam
- Ambuja Cements Ltd - India
- Bharathi Cement Corporation - India
- Kalimantan Lumbung Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining and Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Antam Resourcindo - Indonesia
- Price Waterhouse Coopers - Russia
- Vedanta Resources Plc - India
- The University of Queensland
- Global Business Power Corporation, Philippines
- Chamber of Mines of South Africa
- TeaM Sual Corporation - Philippines
- Tamil Nadu electricity Board
- Central Java Power - Indonesia
- GVK Power & Infra Limited - India
- VISA Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Electricity Generating Authority of Thailand
- Malabar Cements Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Orica Mining Services - Indonesia
- Videocon Industries ltd - India
- Ministry of Finance - Indonesia
- Aboitiz Power Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- Bhatia International Limited - India
- MS Steel International - UAE
- Australian Commodity Traders Exchange
- Baramulti Group, Indonesia
- Larsen & Toubro Limited - India
- LBH Netherlands Bv - Netherlands
- Kumho Petrochemical, South Korea
- Mjunction Services Limited - India
- Marubeni Corporation - India
- Iligan Light & Power Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Grasim Industreis Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- PNOC Exploration Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Port Waratah Coal Services - Australia
- Kobexindo Tractors - Indoneisa
- Petron Corporation, Philippines
- Trasteel International SA, Italy
- Wilmar Investment Holdings
- Bahari Cakrawala Sebuku - Indonesia
- Global Coal Blending Company Limited - Australia
- Miang Besar Coal Terminal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bhoruka Overseas - Indonesia
- Electricity Authority, New Zealand
- GAC Shipping (India) Pvt Ltd
- Gujarat Sidhee Cement - India
- Jorong Barutama Greston.PT - Indonesia
- Directorate Of Revenue Intelligence - India
- The State Trading Corporation of India Ltd
- Ind-Barath Power Infra Limited - India
- The Treasury - Australian Government
- Petrochimia International Co. Ltd.- Taiwan
- Gujarat Electricity Regulatory Commission - India
- GMR Energy Limited - India
- Therma Luzon, Inc, Philippines
- Intertek Mineral Services - Indonesia
- Sojitz Corporation - Japan
- Star Paper Mills Limited - India
- Bayan Resources Tbk. - Indonesia
- Jindal Steel & Power Ltd - India
- Parry Sugars Refinery, India
- Asmin Koalindo Tuhup - Indonesia
- Economic Council, Georgia
- Parliament of New Zealand
- Sindya Power Generating Company Private Ltd
- Singapore Mercantile Exchange
- Bhushan Steel Limited - India
- Eastern Energy - Thailand
- Siam City Cement PLC, Thailand
- Carbofer General Trading SA - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kohat Cement Company Ltd. - Pakistan
- Indogreen Group - Indonesia
- Borneo Indobara - Indonesia
- Mercator Lines Limited - India
- Wood Mackenzie - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Indonesian Coal Mining Association
- Romanian Commodities Exchange
- Merrill Lynch Commodities Europe
- Maharashtra Electricity Regulatory Commission - India
- Commonwealth Bank - Australia
- Indian Energy Exchange, India
- SMG Consultants - Indonesia
- Cigading International Bulk Terminal - Indonesia
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