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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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- MS Steel International - UAE
- Directorate Of Revenue Intelligence - India
- Makarim & Taira - Indonesia
- Economic Council, Georgia
- Gujarat Sidhee Cement - India
- Ind-Barath Power Infra Limited - India
- Aditya Birla Group - India
- Globalindo Alam Lestari - Indonesia
- Gujarat Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- Marubeni Corporation - India
- Meralco Power Generation, Philippines
- Holcim Trading Pte Ltd - Singapore
- McConnell Dowell - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Australian Coal Association
- Sarangani Energy Corporation, Philippines
- Lanco Infratech Ltd - India
- Eastern Energy - Thailand
- Siam City Cement - Thailand
- Parry Sugars Refinery, India
- Rashtriya Ispat Nigam Limited - India
- Renaissance Capital - South Africa
- TeaM Sual Corporation - Philippines
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- Heidelberg Cement - Germany
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- Energy Development Corp, Philippines
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- The University of Queensland
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- Thai Mozambique Logistica
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- Metalloyd Limited - United Kingdom
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- Chamber of Mines of South Africa
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- Singapore Mercantile Exchange
- Bharathi Cement Corporation - India
- Directorate General of MIneral and Coal - Indonesia
- Trasteel International SA, Italy
- Ministry of Finance - Indonesia
- Africa Commodities Group - South Africa
- Banpu Public Company Limited - Thailand
- Malabar Cements Ltd - India
- Star Paper Mills Limited - India
- Meenaskhi Energy Private Limited - India
- ASAPP Information Group - India
- Price Waterhouse Coopers - Russia
- Ministry of Transport, Egypt
- Standard Chartered Bank - UAE
- Coal and Oil Company - UAE
- LBH Netherlands Bv - Netherlands
- SMC Global Power, Philippines
- Semirara Mining and Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bhatia International Limited - India
- South Luzon Thermal Energy Corporation
- Cement Manufacturers Association - India
- Deloitte Consulting - India
- Karbindo Abesyapradhi - Indoneisa
- Videocon Industries ltd - India
- CNBM International Corporation - China
- Uttam Galva Steels Limited - India
- Kaltim Prima Coal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Georgia Ports Authority, United States
- Kepco SPC Power Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Indogreen Group - Indonesia
- Planning Commission, India
- GAC Shipping (India) Pvt Ltd
- Power Finance Corporation Ltd., India
- Rio Tinto Coal - Australia
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- India Bulls Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Coalindo Energy - Indonesia
- White Energy Company Limited
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- Global Coal Blending Company Limited - Australia
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- Cigading International Bulk Terminal - Indonesia
- Mjunction Services Limited - India
- Larsen & Toubro Limited - India
- Attock Cement Pakistan Limited
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- Ambuja Cements Ltd - India
- Merrill Lynch Commodities Europe
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- Global Business Power Corporation, Philippines
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- IHS Mccloskey Coal Group - USA
- Siam City Cement PLC, Thailand
- Jaiprakash Power Ventures ltd
- Pendopo Energi Batubara - Indonesia
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Kideco Jaya Agung - Indonesia
- Electricity Authority, New Zealand
- Edison Trading Spa - Italy
- PNOC Exploration Corporation - Philippines
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- Bukit Asam (Persero) Tbk - Indonesia
- Port Waratah Coal Services - Australia
- Intertek Mineral Services - Indonesia
- Romanian Commodities Exchange
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- Madhucon Powers Ltd - India
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- VISA Power Limited - India
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- Mintek Dendrill Indonesia
- Global Green Power PLC Corporation, Philippines
- Ministry of Mines - Canada
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- ICICI Bank Limited - India
- SN Aboitiz Power Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Commonwealth Bank - Australia
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- Tamil Nadu electricity Board
- OPG Power Generation Pvt Ltd - India
- Baramulti Group, Indonesia
- Kartika Selabumi Mining - Indonesia
- GVK Power & Infra Limited - India
- Grasim Industreis Ltd - India
- Karaikal Port Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Dalmia Cement Bharat India
- Kumho Petrochemical, South Korea
- Anglo American - United Kingdom
- Bhushan Steel Limited - India
- Iligan Light & Power Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- San Jose City I Power Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Sojitz Corporation - Japan
- Latin American Coal - Colombia
- PTC India Limited - India
- Medco Energi Mining Internasional
- Neyveli Lignite Corporation Ltd, - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Miang Besar Coal Terminal - Indonesia
- Energy Link Ltd, New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Toyota Tsusho Corporation, Japan
- Indian Oil Corporation Limited
- Orica Australia Pty. Ltd.
- Vijayanagar Sugar Pvt Ltd - India
- Orica Mining Services - Indonesia
- Sree Jayajothi Cements Limited - India
- Maheswari Brothers Coal Limited - India
- Aboitiz Power Corporation - Philippines
- Parliament of New Zealand
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- CIMB Investment Bank - Malaysia
- Mercator Lines Limited - India
- The State Trading Corporation of India Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Goldman Sachs - Singapore
- Savvy Resources Ltd - HongKong
- Bangladesh Power Developement Board
- Bhoruka Overseas - Indonesia
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