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