Sugar, Seizure & Stoppage
Posted on 7th May 2019 at 11:37
In our 19/3/18 post on London Arbitration 23/17 [(2017) 986 LMLN 1] we looked briefly at force majeure, noting that it is not an all-purpose protection but a contractual term, and that those seeking to use it must come within its reach.
Costing owners a lot of money, the outcome in Sucden v Yagci (the "MUAMMER YAGCI") ( EWHC 3873 (Comm)) further illustrates that. The judgment was given last November but its text has only recently been released.
The vessel was fixed under the Sugar Charter Party 1999 form for carriage to Annaba, Algeria.
Titled "Strikes and Force Majeure", clause 28 said that:
"[If] ... discharging ... [was] prevented or delayed by ... strikes, riots, civil commotions, lockouts of men, [railway problems], stoppages on … river and/or canal by ice or frost, mechanical breakdowns at mechanical loading plants, government interferences, vessel being ... or rendered inoperative due to [vessel interest] terms and conditions of employment, ...." any time lost was not laytime, demurrage or detention.
In January 2015 the receiver submitted discrepant import documentation to the Annaba customs authorities. Suspecting attempted wrongdoing, they seized the cargo, after consultation with their central administration in Algiers, and it then came under port authority control. The receiver was unsuccessfully prosecuted and the cargo was sold at the fifth attempt, all within the remit of the government’s General Director of Customs and Ministry of Finance.
Discharge was delayed by 4.5 months, and with about $350,000 in demurrage in dispute the issue was whether the loss of time was due to "government interferences", under the above clause.
The Tribunal said not, largely because they considered that all steps taken were “ordinary”, but the High Court disagreed.
Owners said that:
Clause 28 concerns laytime and demurrage, which commonly involves routine tasks like submission of documents or nomination of a surveyor to sample and analyse cargo;
Such is not interference with discharging, but part of its process; thus
The question is not whether a government entity was involved (as, in various ways, one might be) but whether it was interfering; so
The right comparison was between (a) a government body behaving in a way that is unanticipated, officious and outside the parties’ control and (b) expected, routine application of legislation to the cargo and documents;
Government interference here is (a) above, and in a force majeure sense, i.e. something beyond ordinary engagement of laws and regulations;
The seizure was a run-of-the-mill trade event.
The Judge ruled that:
(i) The plain meaning of "interference" here includes seizure of cargo by local customs authorities;
(ii) Seizure involves a purposive decision, and (as a significant exercise of executive power) could not be treated as routine, ordinary or how things could be expected to work out - as for example when a port authority orders a vessel off berth or reschedules cargo arrangements;
(iii) Seizure and annulment of property rights is not usual, even though it may be predictable, or might happen often in some places;
(iv) Owners’ points (4) and (5) created a test that was hard to apply and was not warranted by the relevant phrase;
(v) Clause 28 lists a variety of matters and its title is merely a label for that list, whose interpretation does not have to include, or convey, notions commonly associated with force majeure;
(vi) The involvement of higher echelon powers made this a particularly strong example of “government interferences”, but it was not necessary for charterers to prove the precise level of government authority.
Thus owners were unable to recover about $350,000 of demurrage.
The judge emphasised that this did not address everything that might be “government interferences” under clause 28, and concerned only the seizure of cargo by a State authority acting in a sovereign capacity.
However, the case is likely to be of great interest to shipowners, as many fixtures contain similar laytime and demurrage exceptions. These often cover activity by government authorities or bodies identifiable as such, who might become involved in various ways, sometimes (as here) occasioning very significant delay. Owners and operators might therefore wish to review any such clauses in the light of this and other decisions on this theme, in order to ensure as far as possible that their wording reflects what they intend and offers an adequate balance of risk.
Also, the consideration of force majeure again underlines that it is not an independent concept with its own defined scope. It is a heading for what is frequently a varied list of factors which might excuse non performance or curtail liability, if one of them can be shown to apply.
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