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Whether seizure of cargo by local customs authorities amounted to “government interference”

04.04.2019 Shipping

Rania Tadros

Rania Tadros Managing Partner

Sheridan Steiger

Sheridan Steiger Senior Associate

Sucden Middle-East v. Yagci Denizcilik Ve Ticaret Limited Sirketi (MV Muammer Yagci) [2018] EWHC 3873 (Comm)

This recent Commercial Court decision has held that the seizure of a cargo by local customs authorities at the discharge port, leading to a delay in discharge, amounted to a “government interference” within the relevant charterparty provision, with the consequence that time lost would not count as demurrage.

The background facts

The receiver of a cargo of sugar for discharge in Algiers, Algeria, submitted import documentation to the Annaba Customs Directorate (the “ACD”), part of the Algerian Ministry of Finance, for the clearance and payment of customs duties on the cargo. Upon inspection, the ACD found a discrepancy between the invoice price of the cargo and the market price, which allegedly breached Algeria’s Foreign Exchange regulations.

In response, the ACD seized the cargo under powers given to it under Algeria’s customs laws and regulations. As a result of the ACD’s decision to seize the cargo, the discharge of the cargo was delayed by four and a half months. The seizure of the cargo involved not only the ACD, but also the General Director of Customs, a high ranking government officer, and Algeria’s Public Prosecutor.

The Charterers sought to rely on Clause 28 of the Sugar Charter Party 1999 Form, which has a side heading “Strikes and Force Majeure” and which provides that time lost will not count as laytime or time on demurrage in a number of circumstances, one of which is “government interferences”.

In arbitration, the Tribunal found in favour of the Owners, concluding that seizure of the cargo by the ACD could not be construed as “government interference”. The Charterers appealed.

The Commercial Court decision

There was no dispute that those involved in the seizure of the cargo were government entities. Accordingly, the focus of the appeal was on the meaning of “interferences”. The Court noted that an ordinary meaning of the word included an intervention in this specific form, that is, the seizure of a cargo.

Reference was made to the 2012 decision in The Ladytramp, which set out a number of examples of activities carried out by a port authority that would not or might not amount to “government interferences”. This list included a port authority ordering a vessel off a berth for the reason of poor weather or in order to accommodate the berth or terminal operator’s desire to give priority to another vessel.

In distinguishing the ACD’s actions in this case, the Court considered that seizure of a cargo by a government authority could not be treated as a routine occurrence. The Court disagreed with the Tribunal’s finding that the seizure of the cargo following the submission of false documents was expected and was, therefore, an ordinary action. In the usual course of things, cargo is not seized and on the facts of this case and, in particular, in light of the finding that the seizure was by a State revenue authority acting in a sovereign capacity, the seizure fell within Clause 28.

The Court also rejected the argument that the submission of the false documents caused the delay. Rather, it was the ACD’s decision to seize the cargo that resulted in the delay.

The Court noted that the clause’s side heading incorporated the words “force majeure”. However, force majeure was not a term of art and the words simply acted as the label for a list, with the list including a mixture of matters. The list informed the meaning of the heading rather than the other way around.

Comment

The Court gave the words “government interferences” their natural and ordinary meaning. In doing so, it highlighted that its decision was concerned only with the seizure of a cargo by a government entity. Nonetheless, the Court noted that it might not always be necessary to have the involvement of high level government agencies and officers in the seizure in order for Clause 28 to apply. The Court said it could not have been intended that the parties should have to ask how high up the chain of government command the action was authorised or would need to be authorised in order to come within the clause. Query, however, whether a government entity acting in a purely administrative capacity might come under Clause 28.

Article authors:

Rania Tadros Sheridan Steiger