From: Alexander Georgiou <alexander.georgiou@all-souls.ox.ac.uk>

Sent: Friday 11 October 2024 14:18

To: Robert Stevens

Cc: Hector MacQueen; obligations@uwo.ca

Subject: Re: Carriers/Shippers and force majeure?

 

I agree that frustration discharges obligations not contracts. But this is not a case about frustration. What matters is the particular wording of the clause at issue. The force majeure clause here was not drafted in the manner you describe. It did not read that a party affected by a force majeure event was discharged from performing its obligations. Instead, it provided that 'While such Force Majeure Event is in operation the obligation of each Party to perform this Charter Party (other than an accrued obligation to pay monies in respect of a previous voyage) shall be suspended. (emphasis added). The happening of the force majeure event therefore operated to discharge both parties from their respective obligations, not just the party affected. 



As drafted, therefore, if the sanctions were indeed a force majeure event, then the carrier was discharged from its obligation to load. 



A

 



On 11 Oct 2024, at 14:12, Robert Stevens <robert.stevens@law.ox.ac.uk> wrote:

 

Force majeure clauses excuse a party from performing their obligations. They don't discharge contracts.

 

Similarly, it is wrong to think that "contracts" are frustrated, obligations under contracts are. 

 

So, it would do no good for the carrier to argue that the shipper's obligations are subject to a force majeure event. When they're sued for damages for breach of contract they have to argue that they're excused from performing their own obligations. It does them no good to argue that the counterparty would be excused from paying because they could rely on force majeure. Which, as Jacobs J explains, is what the arbitrator accepted they could do (doubtfully).

 

If the carrier is excused from performing because of force majeure (or frustration) that may mean the counterparty 's obligation to pay doesn't accrue (it being conditional on the carriage) but that is because of the nonperformance , not the force majeure (or frustration).

 

From: Alexander Georgiou <alexander.georgiou@all-souls.ox.ac.uk>
Sent: Friday, October 11, 2024 2:00:39 PM
To: Robert Stevens <robert.stevens@law.ox.ac.uk>
Cc: Hector MacQueen <Hector.MacQueen@ed.ac.uk>; obligations@uwo.ca <obligations@uwo.ca>
Subject: Re: Carriers/Shippers and force majeure?

 

I don t think that 'not being able to pay because of sanctions' is the force majeure event. Indeed, not being able to pay isn t an event at all. (Perhaps it is a state of affairs , but I doubt that too )

 

The imposition of sanctions was an event. And, as you say, the arbitrator seems to have accepted that the imposition of sanctions indirectly would have prevented loading/discharge. We can agree or disagree about whether that was actually the case, but I think it is the basis on which the dispute proceeded. 

 

Nonetheless, the person affected by the event was the shipper, not the carrier. The right question the SC should have asked is whether the shipper could with reasonable endeavours have overcome the event. I think that is doubtful. 

 

But I don t share in your criticism that the force majeure point didn t arise because the carrier was able to perform even if unfortunately not argued on this basis, the carrier could (and should) have argued that it was discharged from performing and so could not be in breach.

 

A

 



On 11 Oct 2024, at 13:50, Robert Stevens <robert.stevens@law.ox.ac.uk> wrote:

 

I don't agree. A force majeure event is defined by the contract

 

 

"b)

It prevents or delays the loading of the cargo at the loading port and/or the discharge of the cargo at the discharging port"

 

 

So not being able to pay because of sanctions is not a force majeure event. 

 

The argument that seems to have been accepted by the arbitrator (see Jacobs J) was that the carrier by loading would themselves be triggering the sanctioned payment. But as they weren't *obliged* to accept any payment, I don't see how the carrier could be excused from performing their obligations (which is what a force majeure clause does).

 

R

 

 

From: Alexander Georgiou <alexander.georgiou@all-souls.ox.ac.uk>
Sent: Friday, October 11, 2024 1:35:53 PM
To: Hector MacQueen <Hector.MacQueen@ed.ac.uk>
Cc: Robert Stevens <robert.stevens@law.ox.ac.uk>; obligations@uwo.ca <obligations@uwo.ca>
Subject: Re: Carriers/Shippers and force majeure?

 

Rob,

 

I am not sure the force majeure clause works as you say. Though I do not think the case is reasoned quite correctly either. 

 

The provision reads:

 

While such Force Majeure Event is in operation the obligation of each Party to perform this Charter Party (other than an accrued obligation to pay monies in respect of a previous voyage) shall be suspended. (emphasis added).

 

So the argument for the carriers is: *you* can t perform because of the force majeure event, therefore *we both* need not perform. Therefore we aren t in breach.

 

And so at issue was whether it really was the case that the shippers could not perform. If so, then the question ought not to have been whether the carriers could by reasonable endeavours have overcome the event, for they were not the Party affected (cl. 36.3(d): A Force Majeure Event is an event or state of affairs which meets all of the following criteria:  It cannot be overcome by reasonable endeavors from the Party affected). It was whether the shippers could by reasonable endeavours have done so. 

 

 

Yours,

Alex

 



On 11 Oct 2024, at 13:28, Hector MacQueen <Hector.MacQueen@ed.ac.uk> wrote:

 

Dear Rob

 

Can t resist asking - 

 

Do you think it would have made any difference if the shipper had offered to pay in crypto?

 

All best

 

Hector

 

Sent from Outlook for iOS

From: Robert Stevens <robert.stevens@law.ox.ac.uk>
Sent: Friday, October 11, 2024 11:52:03 AM
To: obligations@uwo.ca <obligations@uwo.ca>
Subject: Carriers/Shippers and force majeure?

 

This email was sent to you by someone outside the University.

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I am a bit late to RTI Ltd v MUR Shipping BV in the UKSC (https://www.supremecourt.uk/cases/uksc-2022-0172.html ) which I had thought obviously right, but having just read an excellent note on it by Paul McMahon (https://onlinelibrary.wiley.com/doi/10.1111/1468-2230.12926 ) and thought some more, I don t think I understand it.


A shipper cannot pay in US$ as contractually required because of sanctions, but offers to pay in euros and to reimburse any conversion cost. Carrier refuses to ship. Shipper claims damages for non-performance before an arbitrator. Carrier invokes a force majeure event as an excuse. Shipper says "reasonable endeavours" require the carrier to accept the proffer of euros. UKSC says "reasonable endeavours" clause can't be used to require carrier to accept a performance different from that contracted for. Carrier not liable.

How should these facts have been understood?

If *you* can t perform because of a contracted for force majeure event, *you* should not be liable for breach, so long as *you* use reasonable endeavours.

But in RTI v MUR the party invoking the clause (the carrier) was perfectly able to perform. There was no problem at all with their ability to load, carry and deliver the goods. They should not be able to rely on the force majeure clause at all (see also cl 36.3(b) of the contract of carriage which reinforces the point.) That means the question of whether "reasonable endeavours" could overcome the force majeure event was of no relevance. They should not have been able to invoke force majeure at all.

Their counterparty, the shipper, may not have been able to perform their side of the deal because they couldn t pay. We can have an argument about whether they would have been able to perform or not but I don t think that is relevant.

The issue should have been: can the carrier refuse to perform because the shipper will inevitably not pay the US$ contracted for? That is about whether the carrier s obligation to perform was conditional upon the shipper s ability to pay in the manner stipulated. Again, I don t think that is anything to do with force majeure, and so reasonable endeavours is of no relevance. The issue was whether a condition of the carrier s obligation to perform was satisfied, not whether the shipper would be liable for breach.

As presently informed, even if the shipper would inevitably not be able to pay the required US$ once the goods were carried, I don t see why that would have been a condition of the obligation to carry. The shipper never repudiated the deal.

Perhaps the court(s) were constrained by the appealed legal question from the arbitrator's decision. But the result is difficult in the abstract and the court does not state that they are so restricted,

 

Having yourself used reasonable endeavours is a condition of invoking force majeure where you are unable to perform, but it was not relevant here.


Perhaps I have not understood the case, and so appeal to others.

 

Rob

 

 

 

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