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