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