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