The “government interferences” exception under the Sugar Charterparty form

Strictly Sucden Middle-East v Yagci Denizcilik ve Ticaret (The “MUAMMER YAGCI”) is limited to the proper construction of the “Strikes and Force Majeure” at Clause 28 of the Sugar Charter Party 1999 against the very particular facts of the case itself.  It can easily be seen, though, that it could provide general guidance in broader circumstances.

The relevant part of the provisions states:

In the event that…the discharging of the vessel is prevented or delayed by…government interference…time so lost shall not count as laytime or time on demurrage or detention”

The receivers of the cargo presented defective import documents in respect of a cargo of sugar intended for discharge in Algeria.  The customs authorities took the view that this was part of an illegal attempt to transfer capital abroad.  The cargo was seized, sold and the proceeds held by the treasury.

It was a protracted process.  The ship was held up for four and a half months.  The charterer took the position that the exceptions clause operated so as to mean the lost time did not count for laytime and demurrage purposes.  The matter first went to arbitration where the tribunal found that the exemption clause did not apply.  The charterer was able to obtain leave to appeal to the High Court.

The arbitration and the subsequent appeal revolved very narrowly around the construction of the two words “government interferences”.  That divides into two overlapping elements.

Firstly, could it truly be said that the customs authorities’ actions amounted to those of a “government”.  There does seem force in the argument that they are a local organisation administering their legal powers and not, as such, the government.  However, in seizing the cargo Knowles J held that “…action on the part of local customs authorities is, in this context, the action of government through its appropriate arm or agency.”  Another way of putting it is to say they were acting in a “sovereign capacity”.

…action on the part of local customs authorities is, in this context, the action of government through its appropriate arm or agency.

Knowles J

The question then turns to the second overlapping element, the quality of the act itself.  A local authority, even acting in a sovereign capacity, will take a whole variety of routine decisions that could delay a ship.  For example, the day to day allocation of berths or the more dramatic ordering of ships off berth for safety reasons.

It would be absurd to treat these routine acts as “government interference”.  Although the judge did not quite agree with the terminology, the tribunal’s characterisation of these as being “ordinary” events is quite a helpful way of looking at the position.

 In seeking to avoid the operation of the clause, a central theme of the owner’s arguments was that the steps taken were simply part of the routine process of discharging the cargo.  That would include the presentation of the documents.  The steps then taken by the customs authority in response were, owners argued, a routine reaction to that.  It is not so much local authority “interference” more that they simply constitute the process of discharge itself.

The judge had little difficulty accepting the underlying logic of the argument based, as it is, on existing precedent.  He could not see, however, how it could be applied to the present circumstances.  As he says

“in the usual course of things cargo is not seized and property rights invaded…that remains the case…even when the seizure is predictable as when, for example, there is a suspicion of forged documents”.

In the balance the judge allowed the appeal.  The exception did apply.

It is difficult to believe that in the drafting of the clause this consequence was anticipated.  The intention must surely have been to protect a charterer from actions of a government outside and much more remote from one of its local agencies exercising what look like routine statutory duties and powers in the face of a perceived attempted fraud by the cargo interests.  The judge though did stress he made his decision on narrow grounds. against the precise circumstances of this case.

"It is difficult to believe that in the drafting of the clause this consequence was anticipated.  The intention must surely have been to protect a charterer from actions of a government outside and much more remote from one of its local agencies exercising what look like routine statutory duties and powers in the face of a perceived attempted fraud by the cargo interests."

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