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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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- Merrill Lynch Commodities Europe
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- Sindya Power Generating Company Private Ltd
- Pendopo Energi Batubara - Indonesia
- Indian Energy Exchange, India
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- White Energy Company Limited
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- Global Green Power PLC Corporation, Philippines
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- India Bulls Power Limited - India
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- GAC Shipping (India) Pvt Ltd
- Grasim Industreis Ltd - India
- Central Electricity Authority - India
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- Rio Tinto Coal - Australia
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- McConnell Dowell - Australia
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- Chamber of Mines of South Africa
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- Samtan Co., Ltd - South Korea
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- Indian Oil Corporation Limited
- Vizag Seaport Private Limited - India
- Anglo American - United Kingdom
- Maheswari Brothers Coal Limited - India
- Tata Chemicals Ltd - India
- Intertek Mineral Services - Indonesia
- Commonwealth Bank - Australia
- Port Waratah Coal Services - Australia
- Chettinad Cement Corporation Ltd - India
- Price Waterhouse Coopers - Russia
- Jindal Steel & Power Ltd - India
- Karaikal Port Pvt Ltd - India
- Sical Logistics Limited - India
- Central Java Power - Indonesia
- CNBM International Corporation - China
- Petrochimia International Co. Ltd.- Taiwan
- Straits Asia Resources Limited - Singapore
- LBH Netherlands Bv - Netherlands
- Kartika Selabumi Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Parliament of New Zealand
- CIMB Investment Bank - Malaysia
- Standard Chartered Bank - UAE
- London Commodity Brokers - England
- VISA Power Limited - India
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- Wood Mackenzie - Singapore
- Jorong Barutama Greston.PT - Indonesia
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- Banpu Public Company Limited - Thailand
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- Malabar Cements Ltd - India
- Kapuas Tunggal Persada - Indonesia
- SMC Global Power, Philippines
- Madhucon Powers Ltd - India
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- Altura Mining Limited, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Vijayanagar Sugar Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- MS Steel International - UAE
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- New Zealand Coal & Carbon
- IEA Clean Coal Centre - UK
- European Bulk Services B.V. - Netherlands
- The University of Queensland
- Bahari Cakrawala Sebuku - Indonesia
- Electricity Authority, New Zealand
- Aboitiz Power Corporation - Philippines
- Lanco Infratech Ltd - India
- Sakthi Sugars Limited - India
- Baramulti Group, Indonesia
- Meenaskhi Energy Private Limited - India
- Goldman Sachs - Singapore
- Thai Mozambique Logistica
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Parry Sugars Refinery, India
- IHS Mccloskey Coal Group - USA
- Gujarat Sidhee Cement - India
- Posco Energy - South Korea
- Miang Besar Coal Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Formosa Plastics Group - Taiwan
- PTC India Limited - India
- Singapore Mercantile Exchange
- Indonesian Coal Mining Association
- Neyveli Lignite Corporation Ltd, - India
- Thiess Contractors Indonesia
- Kideco Jaya Agung - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Minerals Council of Australia
- PNOC Exploration Corporation - Philippines
- Renaissance Capital - South Africa
- Australian Coal Association
- Rashtriya Ispat Nigam Limited - India
- The Treasury - Australian Government
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- Economic Council, Georgia
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- Pipit Mutiara Jaya. PT, Indonesia
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- Coalindo Energy - Indonesia
- Indogreen Group - Indonesia
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- Electricity Generating Authority of Thailand
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- Ministry of Finance - Indonesia
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- Carbofer General Trading SA - India
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- Xindia Steels Limited - India
- Australian Commodity Traders Exchange
- Ind-Barath Power Infra Limited - India
- Trasteel International SA, Italy
- Heidelberg Cement - Germany
- Kepco SPC Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Indika Energy - Indonesia
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- ICICI Bank Limited - India
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- Holcim Trading Pte Ltd - Singapore
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- Kohat Cement Company Ltd. - Pakistan
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- Petron Corporation, Philippines
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- Savvy Resources Ltd - HongKong
- Binh Thuan Hamico - Vietnam
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- Semirara Mining and Power Corporation, Philippines
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