Saturday, September 23, 2023

Charterers successfully relied on force majeure – s.69 appeal was dismissed

Laysun Service Co Limited v Del Monte International GMBH [2022] EWHC 699 (Comm)

The contract of affreightment concerned the carriage of refrigerated bananas from the Philippines to Bandar Bushehr in Iran from 1 January 2018 to 31 December 2018. It was for a total of 36 voyages, being 3 per month.

After 17 shipments, the Charterers stopped providing cargoes. The Owners brought a claim for their losses arising out of the Charterers’ alleged wrongful failure to perform the remaining 19 shipments. The Charterers denied liability.

Their defence rested on two declarations of force majeure served on 25 June 2018 and 28 June 2018, stating that:

(a) it was impossible to make payments from Iran to a bank in another country due to the US hardening its stance against Iran, and (b) it was impossible to import bananas into Iran due to the imposition by the Iranian Government of various restrictions on import permits.

Under the contract, the Charterer “shall bear the cost and risks of loading and unloading at the Port of Shipment and the Port of Destination“. Further, a force majeure clause 8 applied to “any circumstances beyond the reasonable control of that party that prevents such party, practically or legally, from performing any or all of its obligations under this Agreement, including, without prejudice to the generality of the foregoing..”.

As a result, the Charterers contended that the force majeure provision was engaged and that they were entitled from the end of June 2018, with immediate effect, to reduce the shipments to nil.

The arbitral tribunal found for the Charterers. The Charterers couldn’t perform their obligations under the prevailing conditions, i.e. import permits not issued by the Iranian Government, and there was no alternative way to perform the COA by delivering cargo to another party to mitigate the force majeure event.

The Owners appealed under s.69 of the “AA 1996”. The questions of law were:

(a) Whether on the facts found and on the true construction of the Agreement, the Charterers were entitled to invoke the force majeure provisions of clause 8 so as to relieve them from liability for failing to make and pay for shipments thereunder for the entire period covered by the Agreement, namely until 31 December 2018; and

(b) Whether the Tribunal were correct in law in holding that the judgment of the Court of Appeal in The Crudesky, whereby a party seeking to rely on a force majeure exemption cannot rely on the acts/omissions of that party’s delegates, was restricted to the case where there was an ‘…ongoing relationship…’ between the party and the said delegate and did not extend to the case where that relationship has been terminated.

The appeal under s. 69 was dismissed. These suggested questions of law did not arise in the light of the tribunal’s factual findings, and the Owners have not identified any error of law. Whether the Charterers could rely on a force majeure exemption because of the acts/omissions of that party’s delegates and the relationship had terminated did not arise in the tribunal’s findings of fact. Further, the court expressed that when the force majeure event had ceased around July 2018, the rest of the force majeure clause had no operation, and the Charterers had no duty to mitigate.

So, assuming that the wording of the clause “The Charterer shall bear the cost and risks of loading and unloading at the Port of Shipment and the Port of Destination” imposes a duty on the Charterers to discharge the cargo at the destination, that duty is subject to the force majeure provisions in clause 8. Therefore, the Charterers do not have an absolute duty but are subject to the force majeure provision.

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