ED&F Man Sugar v Unicargo Transportgesellschaft (Comm) (the “Ladytramp”) [2012] EWHC 2879 (Comm) (Eder J.)
This matter was an appeal under s.69 Arbitration Act from an award in respect of owners’ claim for demurrage in the amount of US$ 397,912.77.
The charterparty was based on the Sugar Charterparty Form and included clause 28 as follows:
“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, lock outs 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, vessel being inoperative due to terms and conditions of appointment of Officers and crew and time so lost shall not count as laytime or time on demurrage or detention.” (emphasis supplied.)
The charter provided for loading at “1-2 safe berth(s), 1 safe port (including Santos) but not south of Paranagua…”. On the day of the fixture charterers nominated Paranagua as the loading port, however they subsequently discovered that fire had destroyed the conveyor belt at the CBL terminal where the vessel was programmed to load, thereby making the terminal inoperable. Consequently charterers had to revise the nomination and find an alternative berth. The port authority at Paranagua had to manage congestion and re-schedule loading and discharging of the vessels in light of the incident.
Charterers sought to rely on clause of 28 arguing, inter alia, that decisions of the port authority or other body responsible for operations at Paranagua port amounted to “government interference”.
The arbitrators rejected charterers’ argument and held that any refusal by the Port Authority of Paranagua to load at the CBL terminal was not “government interference”. They considered that clause 28 related to matters such as embargoes and export bans and not simple administrative re-scheduling of cargoes due to the fire.
Charterers appealed on the ground that it was wrong to conclude that the expression could not extend to the actions of a port authority 1. because provided there was interference, the precise arm of the government causing the delay did not matter and (2) when the clause did not make express reference to “embargoes” or “export bans” and the tribunal had not explained their reasoning, it was not appropriate to restrict the clause in such a manner.
Eder J dismissed the charterers’ appeal and held that the exception of “government interference” did not apply here. There was no finding by the tribunal that the port authority at Paranagua was a government entity, or that permission to berth at the terminal was suspended by the port authority.
The judge agreed with the tribunal that the phrase “government interferences” cannot have been intended to include a port authority, even if government-controlled or state-owned, acting in the ordinary course of discharging its port or berth administrative function as distinct from a government entity acting specifically in a sovereign capacity.
He said the tribunal was correct to conclude that: “ ...that phrase was suggestive…of an embargo or export ban, rather than simply an administrative re-scheduling of cargoes due to fire.”
He acknowledged that a distinction should be drawn on the function that the port authority or government body was fulfilling but noted that it was difficult to determine whether in any given case a port authority is or is not a government entity for purposes of “government interference”.
There is a little authority on the meaning of “government interference”. There is a reference by Eder J to the “The Forum Craftsman” [1991] 1 Lloyd’s Rep 81. In that case the vessel was ordered to anchorage by the port control in Bandar Abbas and remained there for 79 days. The delay was mainly caused by the fact that cargo was found wet upon discharge due to water ingress into the holds. It was further found that the intervention of the Ministry of Health of Iran had some causative effect in delaying the re-berthing of the vessel. Charterers confirmed the vessel had gone on demurrage but contended that the 79 days waiting to re-berth did not count as such. They argued that given the cargo condition it was foreseeable that delay would occur at the discharge port and that the delay was caused by government interference which was beyond their control. Charterers therefore sought to rely on an exception of “government interference”. However, the meaning of “government interference” was not considered by the court in that instance as it held that the application of clause 28 operated during the running of laytime only and the exception did not also apply to time on demurrage.
In this latest decision it is clear that “government interference” will not extend to acts of a port authority acting in the course of its ordinary administrative function unless it amounts to conduct which falls outside normal or reasonable conduct. However, it does open a window for argument in cases where delay may be caused by a sovereign government body such as a Ministry of Health or Transportation, etc.
The Charterers appeal from the High Court decision was dismissed by the Court of Appeal on the 19th November, 2013. An article discussing that decision will be published shortly.
Article by Anna Yudaeva
