The High Court rules on the Exception Clause of the Sugar Charterparty 1999

In the case Sucden Middle-East v Yagci Denizcilik ve Ticaret Limited Sirketi (The Muammer Yagci) [2018] EWHC 3873 (Comm), the English High Court was asked to rule on whether the seizure of cargo at the place of discharge by certain governmental authorities amounted to “government interferences” within the context of a Force Majeure headed clause contained in the Sugar Charterparty form 1999.

Facts

The vessel “MUAMMER YAGCI” was chartered under a Sugar Charterparty 1999 to carry a consignment of sugar to Annaba, Algeria. Problems with the cargo documentation produced by the cargo receivers upon discharge resulted in various Algerian governmental authorities intervening to seize, and subsequently, sell the cargo. These authorities included the Customs Directorate and the State Property Directorate.

As result of the above interference with the cargo, the ship was delayed for over four months. Owners claimed that Charterers were liable for the delay in the form of demurrage and commenced arbitration proceedings in London. Relying on Clause 28 of the Charterparty, Charterers rejected any responsibility for any loss of time.

Clause 28 read as follows:

“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 [emphasis added], vessel being inoperative or rendered inoperative due to the terms and conditions of employment of the Officers and Crew, time so lost shall not count as laytime or time on demurrage or detention.

Charterers therefore argued that time lost due to the delay suffered by the vessel should not count as the vessel was held in Annaba through “government interferences”.

The arbitration tribunal held that while the authorities referred to above could be treated as “government” within the meaning of the clause, there was no interference as such insofar as their actions had been foreseeable, ordinary and well within the functions one would expect these entities to perform.

Appeal

Charterers successfully appealed the arbitration award under a section 69 application and the matter was referred to the High Court. The judge was asked to decide whether the seizure of the cargo by the local authorities amounted to “government interferences” within clause 28.

Charterers pleaded the arbitrators misinterpreted the words “government interferences” by failing to consider the ordinary meaning of the language of clause 28; such meaning, in their view, did not require the actions of the government to be extraordinary or unforeseeable. They further argued that the Tribunal was wrongly influenced by the heading of the clause in the sense that force majeure events must be extraordinary. The Force Majeure heading was, in Charterers’ opinion, a mere label describing a list of the events beyond of the control of the parties which did not necessarily imply any requirement of unforeseeability. Charterers finally relied on commercial common sense considerations to the effect that it would not be clear to the parties how the clause was to apply if there was an unforeseeable requirement.

The Owners naturally agreed with the arbitrators award arguing that the actions of the authorities could not be treated as interference as said actions were ordinary as part of the process of discharging cargo. Relying on precedent, Owners argued that any government act for the clause to apply had to be extraordinary and unforeseeable.

The High Court Judgement

The judge agreed with Charterers in that the ordinary language used in Clause 28 did not require the acts of the governmental authorities to be extraordinary or unforeseeable. The fact Clause 28 was headed as “Force Majeure” did not mean that certain events beyond the control of the parties should be extraordinary or unforeseeable. The Court did not find it necessary to define the words “government interference”; it was sufficient in its opinion that the delay was caused by “government interferences”.

Conclusion

Careful attention should be placed on the headings used in charterpaty clauses so as to avoid scope for disputes. If the intention is that certain events beyond the control of the parties that stop laytime from counting must be extraordinary or unforeseeable, the clause must say so as such requirements would not be simply implied.