London Arbitration 23/17 [(2017) 986 LMLN 1]
Posted on 19th March 2018 at 16:30
Another recent London Arbitration Award considers common force majeure wording, and rejects an attempt to turn amended safe berth provisions into a “reachable on arrival” warranty.
Some think this exists as a settled and distinct part of English law which can be used to avoid difficulty when external factors impede or prevent contract performance, with a vague and indefinable tradition as part of its attraction. Thus, where for example a storm, strike, breakdown or other physical interference happens, one party might cite it almost as of right.
But force majeure is not an English legal concept. It is simply a label for something, or more usually one or more of various things, which the parties have agreed will excuse performance or lessen liability. It is a creature of contract, and its application depends on whether the events come within its precise terms. London Arbitration 23/17 [(2017) 986 LMLN 1] is a good example of that.
Under a recap with amended BPVOY3 terms, a vessel’s berthing was delayed for eight days because a loading hose on the previous vessel (“X”) had ruptured, causing a spill for which the authorities had arrested X.
Charterers cited clause 21, headed “Laytime/Demurrage Force Majeure” and halving demurrage for delays arising from, among other things:
“…. breakdown or failure of equipment, plant or machinery in or about ports or places of loading … or arrest or restraint of princes, rulers or peoples … provided always that the cause of the delay(s) was not within the reasonable control of Charterers or … their … servants or agents …”.
What was decided
Owners argued that the delay was due to an oil spill from X, and that the clause did not cover those, or resulting suspension of loading or shippers’ inability to provide cargo for X or any other vessel.
The Tribunal agreed, though the effect of that is not clear, and anyway charterers’ success would depend on their identifying a provision that applied, not on owners listing some that did not.
Charterers could not persuade the Tribunal to attribute the delay to “breakdown or failure of equipment, plant or machinery in or about ports or places of loading ….”. This was because the hose could have been replaced before the arrival of the subject vessel, and was thus perhaps on a causation basis, rather than because loading hose rupture falls outside this wording. It may have been argued, also, that while the rupture caused the spill, the resulting arrest caused the delay.
On that issue owners urged that (i) arrest did not refer to some other vessel, but applied only to that under the subject fixture, and it must also be (ii) forcible interference and (iii) of state origin - not merely court action - and alternatively (iv) the arrest was during the loading of X, for which charterers were responsible, so it was within their reasonable control.
The Tribunal rejected (ii) and (iii) as neither required by the wording nor supported by authority. As to (i), this could include another vessel whose arrest delayed the relevant one, but the arrest must not be caused by an event for which the charterers were responsible, which in this case was the loading of X.
Citing a prior decision where the charterers (as FOB chain buyers) were held responsible for the terminal operators’ default, owners here established that as charterers were responsible* for the loading of X they could not rely on the clause.
Reachable on arrival
By such a clause charterers confirm that on arrival the vessel can reach the relevant place. As cited in this Award, an example is clause 9 of Part II of Asbatankvoy - “The vessel shall load and discharge at any safe place or wharf, or alongside vessels or lighters reachable on her arrival.”
Many fixtures contain familiar wording by which charterers can order the vessel to loading and discharging locations, and generally limiting any “safe port” warranty. Here a recap amendment, as set below in italics, referred to charterers exercising due diligence, as regards any such place, “to ascertain that the Vessel can always proceed thereto lie safely afloat and depart ….”
Owners had further argued that these changes meant that the vessel had to be able to reach the berth, so charterers were liable for the delay, as she could not.
The Tribunal rejected that. It was simply part of charterers’ safety obligations, and did not create a reachable on arrival provision.
This Award is a reminder that force majeure is merely a phrase to signpost contract terms that might mitigate the effect of certain things. It also highlights that parties must identify the wording that applies, and that Tribunals and Courts will strictly and often widely apply provisions that remove protection when the cause of the delay - albeit perhaps not the trigger event itself - is within the reasonable control of the defending party.
It is also a warning that slight changes to familiar wording might have unintended and possibly serious adverse consequences, and that seemingly routine alterations must always be tested in the context of the fixture as a whole.
If you would like to discuss any point or topic in this article please contact firstname.lastname@example.org.
*The precise basis of charterers’ responsibility here is uncertain. Perhaps they themselves were also charterers of X.
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