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