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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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- Leighton Contractors Pty Ltd - Australia
- Romanian Commodities Exchange
- Straits Asia Resources Limited - Singapore
- Xindia Steels Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Bayan Resources Tbk. - Indonesia
- Singapore Mercantile Exchange
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- CNBM International Corporation - China
- Miang Besar Coal Terminal - Indonesia
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- Indian Energy Exchange, India
- Australian Coal Association
- Bahari Cakrawala Sebuku - Indonesia
- McConnell Dowell - Australia
- Sakthi Sugars Limited - India
- Bukit Baiduri Energy - Indonesia
- Toyota Tsusho Corporation, Japan
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- Malabar Cements Ltd - India
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- Economic Council, Georgia
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- Ministry of Finance - Indonesia
- Anglo American - United Kingdom
- Power Finance Corporation Ltd., India
- Coal and Oil Company - UAE
- Therma Luzon, Inc, Philippines
- Price Waterhouse Coopers - Russia
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- Bhushan Steel Limited - India
- IEA Clean Coal Centre - UK
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- Coastal Gujarat Power Limited - India
- Bukit Makmur.PT - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Gujarat Sidhee Cement - India
- Ministry of Transport, Egypt
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- Maharashtra Electricity Regulatory Commission - India
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- Kohat Cement Company Ltd. - Pakistan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Ministry of Mines - Canada
- Vedanta Resources Plc - India
- Essar Steel Hazira Ltd - India
- LBH Netherlands Bv - Netherlands
- SMC Global Power, Philippines
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- Krishnapatnam Port Company Ltd. - India
- Sojitz Corporation - Japan
- Formosa Plastics Group - Taiwan
- Kapuas Tunggal Persada - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Meralco Power Generation, Philippines
- Bhatia International Limited - India
- Standard Chartered Bank - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Orica Mining Services - Indonesia
- Savvy Resources Ltd - HongKong
- Timah Investasi Mineral - Indoneisa
- Makarim & Taira - Indonesia
- Trasteel International SA, Italy
- Wilmar Investment Holdings
- Simpson Spence & Young - Indonesia
- Posco Energy - South Korea
- Africa Commodities Group - South Africa
- Commonwealth Bank - Australia
- Mercuria Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Kartika Selabumi Mining - Indonesia
- Orica Australia Pty. Ltd.
- Riau Bara Harum - Indonesia
- Deloitte Consulting - India
- PTC India Limited - India
- Meenaskhi Energy Private Limited - India
- Borneo Indobara - Indonesia
- International Coal Ventures Pvt Ltd - India
- Bulk Trading Sa - Switzerland
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- Vijayanagar Sugar Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- TeaM Sual Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Lanco Infratech Ltd - India
- ICICI Bank Limited - India
- Port Waratah Coal Services - Australia
- Siam City Cement - Thailand
- Alfred C Toepfer International GmbH - Germany
- Wood Mackenzie - Singapore
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- PetroVietnam Power Coal Import and Supply Company
- Coalindo Energy - Indonesia
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- Planning Commission, India
- Banpu Public Company Limited - Thailand
- The State Trading Corporation of India Ltd
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- Dalmia Cement Bharat India
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- White Energy Company Limited
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- Directorate General of MIneral and Coal - Indonesia
- Edison Trading Spa - Italy
- Tata Chemicals Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Interocean Group of Companies - India
- Bharathi Cement Corporation - India
- Siam City Cement PLC, Thailand
- Cigading International Bulk Terminal - Indonesia
- Central Java Power - Indonesia
- Directorate Of Revenue Intelligence - India
- Maheswari Brothers Coal Limited - India
- Parliament of New Zealand
- European Bulk Services B.V. - Netherlands
- Indian Oil Corporation Limited
- Goldman Sachs - Singapore
- Indogreen Group - Indonesia
- Sree Jayajothi Cements Limited - India
- SN Aboitiz Power Inc, Philippines
- Mercator Lines Limited - India
- Georgia Ports Authority, United States
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- Energy Link Ltd, New Zealand
- VISA Power Limited - India
- Eastern Coal Council - USA
- Gujarat Electricity Regulatory Commission - India
- Minerals Council of Australia
- South Luzon Thermal Energy Corporation
- Kideco Jaya Agung - Indonesia
- Indonesian Coal Mining Association
- Manunggal Multi Energi - Indonesia
- Oldendorff Carriers - Singapore
- Indika Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Antam Resourcindo - Indonesia
- Intertek Mineral Services - Indonesia
- Binh Thuan Hamico - Vietnam
- Global Business Power Corporation, Philippines
- Jaiprakash Power Ventures ltd
- PowerSource Philippines DevCo
- Thai Mozambique Logistica
- Star Paper Mills Limited - India
- GAC Shipping (India) Pvt Ltd
- Chamber of Mines of South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bangladesh Power Developement Board
- Cement Manufacturers Association - India
- Semirara Mining Corp, Philippines
- Kaltim Prima Coal - Indonesia
- The Treasury - Australian Government
- Heidelberg Cement - Germany
- Ceylon Electricity Board - Sri Lanka
- Samtan Co., Ltd - South Korea
- Metalloyd Limited - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rio Tinto Coal - Australia
- Australian Commodity Traders Exchange
- Mjunction Services Limited - India
- Mintek Dendrill Indonesia
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- GMR Energy Limited - India
- Baramulti Group, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- India Bulls Power Limited - India
- MS Steel International - UAE
- Eastern Energy - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
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- OPG Power Generation Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Petron Corporation, Philippines
- Parry Sugars Refinery, India
- Neyveli Lignite Corporation Ltd, - India
- Chettinad Cement Corporation Ltd - India
- Altura Mining Limited, Indonesia
- London Commodity Brokers - England
- Sical Logistics Limited - India
- Medco Energi Mining Internasional
- Sindya Power Generating Company Private Ltd
- New Zealand Coal & Carbon
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