Success of force majeure argument in court will not bring about a sea change

Sucden Middle-East, represented by Nick Fisher of HFW, recently relied successfully on clause 28 of Sugar Charter Party 1999 form, the “force majeure” clause, in the Commercial Court, on appeal from arbitration.

The case was Sucden Middle-East v Yagci Denizcilik Ve Ticaret Limited Sirketi, (The Muammer Yagci), involved a shipment of sugar to Algeria.

The arbitration tribunal found 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 four-and-a-half month delay to discharging the cargo followed. Sucden, as charterers, claimed this delay fell within the exceptions to laytime running under clause 28.

The Owners disagreed.

At the first instance the tribunal agreed with the owners.

The 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 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?”

In deciding whether a force majeure event had occurred, the Court focused on the construction of the term “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”. The Court found that seizure was a significant exercise of executive power and therefore could not be regarded as “ordinary”. Suspected or predictable consequences were not the same as ordinary actions .

“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.

However, the decision was not a portent of a sea change when it came to force majeure. 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.

English courts and arbitration tribunals have interpreted such 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), were evidence of this approach.

However, this case was 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.

However, the judgment gave 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 was not thought to signal a change in the strict and narrow approach typically adopted by the English courts.

http://www.hfw.com/A-rare-force-majeure-success-but-still-a-narrow-one