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