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