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