7/16/2020 India and Force Majeure: Is COVID-19 Frustrating Shipping Operations?

  SUBSCRIBE NOW (/subscribe)

()

(/)
Wednesday, July 15, 2020 Media Kit (
http://mediakit.maritime-
executive.com)

5342
Views

India and Force Majeure: Is COVID-19 Frustrating Shipping

Operations?

file photo
BY THE MARITIME EXECUTIVE (HTTPS://WWW.MARITIME-EXECUTIVE.COM/AUTHOR/MAREX) 04-26-2020 11:43:48

https://www.maritime-executive.com/blog/india-and-force-majeure-is-covid-19-frustrating-shipping-operations 1/8
7/16/2020 India and Force Majeure: Is COVID-19 Frustrating Shipping Operations?

The coronavirus (COVID-19) pandemic continues to disrupt global trade, due in part to reduction
in distribution capacities and delays in evacuation or arrival of goods in transit or at ports. To
address this adverse impact on the ability of stakeholders in discharging their contractual
obligations, the Indian Ministry of Shipping issued guidelines that the pandemic may be
considered as a valid ground for invoking Force Majeure (FM) clause on port activities and port
operations.

This supplements the Ministry of Finance’s clarification which described COVID-19 as a case of
natural calamity and stated that an FM clause may be appropriately invoked in accordance with
the Manual for Procurement of Goods 2017 where FM means “extraordinary events or
circumstance beyond human control such as an event described as an act of God (like a natural
calamity) or events such as a war, strike, riots, crimes (but not including negligence or wrong-
doing, predictable/seasonal rain and any other events specifically excluded in the clause).”

Meaning and character of Force Majeure

FM is a doctrine established under French Law whereby a promisor is relieved from the
responsibility of non-performance in certain unforeseeable and irresistible circumstances. This
position is now recognized in English Law whose earlier stance was of the absolute sanctity of
the contract. Today, FM is often used in contracts worldwide, including in the shipping industry.

An FM clause in a contract captures the nature of the FM and its invocation procedure. It may
enlist events that constitute an FM event, and/or broadly include events beyond the control of the
parties’ through ‘catch-all’ phrasing such as:

“FM event includes any event due to any cause beyond the reasonable control of either party
including, without limitation, unavailability of any communication system including Internet,
breach or virus in the processes or payment mechanism, sabotage, fire, flood, explosion, acts of
God, civil commotion, strikes or industrial action of any kind, riots, insurrection, war, epidemics,
acts of government.”

The operation of the FM clause is not automatic and is influenced by its contractual terminology.
Thus, it is contractual, i.e. an outcome of a legally enforceable agreement between the parties.

To claim the existence of the FM event and the consequent remedy (such as termination or
extension of time or delay to honor the contractual terms), the party invoking an FM clause is to
abide by the notice period and the procedure for serving such notice, as specified in that
particular FM clause. The party invoking the FM clause is required to show that its inability to
perform the contractual obligation was a result of the event covered by the FM clause. It is
important that there is a causative link between the occurrence of the FM event and the
hindrance or delay in the contractual performance by the party invoking the FM clause.

In a recent case before the Bombay High Court, the Petitioners sought to terminate the contract
claiming impossibility of performance due to the lockdown consequent to COVID-19. The Court
ruled in favor of the Respondents by reasoning that the FM clause in the contract was only
applicable to the Respondents and despite the circumstances, the Respondents had complied
with their contractual obligation and shipped the contracted steel products, whose distribution is
declared as an essential service, and there existed no restrictions on port operations.
https://www.maritime-executive.com/blog/india-and-force-majeure-is-covid-19-frustrating-shipping-operations 2/8
7/16/2020 India and Force Majeure: Is COVID-19 Frustrating Shipping Operations?

Force Majeure and Frustration

The civil law doctrine of FM shares affinity with the common law doctrine of frustration.
Frustration is recognized in Section 56 of the Indian Contract Act, 1872. The Supreme Court of
India has remarked that the doctrine of frustration captures an exhaustive arena of FM under
which non-performance stands excused by reason of an impediment beyond the control of the
parties which could neither be foreseen at the time of entering into the contract nor can the effect
of the supervening event could be avoided or overcome.

Despite such striking similarities, the doctrines differ in their operation and consequences. Unlike
FM, frustration operates automatically, i.e. even in the absence of an agreement between the
parties and renders the contract void, i.e. unenforceable by law. The Manual for Procurement of
Goods 2017 explains that an FM clause only suspends the contractual performance for the
duration of the FM event, but if the performance is prevented or delayed beyond a period of 90
days, the choice of termination of the contract without financial repercussions is available to
either party.

Further, Courts have applied a higher threshold in applying frustration than an FM clause invoked
by a party. Interestingly, case law clarifies that, when incorporated in the contract and applicable
to the case, the FM clause supersedes frustration.

Force Majeure Clauses and COVID-19

The contractual implication of COVID-19 is to be drawn based on the terminology of the FM

clause (if incorporated) in that contract, where epidemics/pandemics/natural calamity/act of God
may be:

A. explicitly enlisted; or
B. explicitly excluded; or
C. neither specified nor excluded.

In situation A, invoking the FM clause for COVID-19 is straightforward since the World Health
Organisation has classified the outbreak as a “pandemic” and the Government of India has
classified it as an “epidemic” and a “natural calamity” in their advisory—which carry a persuasive
value.

In situation B, the FM clause cannot be invoked for the outbreak of COVID-19. This position
resonates the ruling in Energy Watchdog vs Central Electricity Regulatory Commission and Ors.,
where rise in the fuel price could not be regarded as an FM event because the FM clause had
specifically excluded it, and the Sunborne Energy Rajasthan Solar Pvt. Ltd. vs NTPC Vidyut
Vyapar Nigam Ltd., where the suspension of debt facility did not qualify as an FM event as
“insufficiency of finances or funds” was excluded in the FM clause. Besides, judicial position
indicates that, in situation B, there can be no recourse to frustration available for COVID-19 as
well.

Situation C can result in two possibilities since the FM clause does not preclude
epidemics/pandemics/natural calamity/act of God. Firstly, the rationale in Nabha Power Ltd. vs
PSPCL conveys that the all-inclusive character of such FM clause may imply COVID-19 as an

https://www.maritime-executive.com/blog/india-and-force-majeure-is-covid-19-frustrating-shipping-operations 3/8
7/16/2020 India and Force Majeure: Is COVID-19 Frustrating Shipping Operations?

FM event for purposes of business efficacy of the contract. Secondly, the ratio of Satyabrata
Ghose vs Mugneeram Bangur & Co. suggests the possibility of frustration of the contract owing
to impossibility of performance due to COVID-19 - an event beyond the parties’ control and
contemplation.

Force Majeure Clauses in shipping industry and COVID-19

The position in situation A applies to excuse performance due to COVID-19 in case of

shipbuilding agreements, based on the standard contracts such as Shipbuilders Association of
Japan and the NEWBUILCON, and ship management agreements, based on BIMCO Standard
Ship Management Agreement, which expressly specify epidemics in the FM clause, or otherwise
provide so. However, the BIMCO Standard Crew Management agreement, which uses “catch-all”
phrasing in its FM clause, is a case illustrated in situation C.

Conventionally, no excuse is available for delay in cargo operations due to circumstances

beyond charterer’s control where the fixed period of loading and discharging has been agreed.
However, the exceptions to this position are of frustration of contract, exceptions specified in the
charter, or the fault of the shipowner. Where the charter incorporates the provisions of the
Hague-Visby Rules, the ship and the carrier may seek to be excused from the responsibility for
loss or damage arising or resulting from COVID-19, by virtue of events covered under Article IV
(2) such as “act of God,” “quarantine restrictions,” “restraint of labor from whatever cause,
whether partial or general” and “any other cause arising without the actual fault or privity of the
carrier, or without the fault or neglect of the agents or servants of the carrier.”

Several charters include some form of FM clause wherein laytime, i.e. the contractual time in
which the vessel is to be loaded or discharged, will not run when time is lost due to
circumstances beyond the charterer’s control. Subject to the charter language, laytime starts
when the ship has reached its contractual destination which is ‘safe’, i.e. reachable, usable and
returnable. In case of a time charter, Courts have observed, that in a situation where a port,
which though prospectively safe at the time of nomination, becomes unsafe subsequently due to
some unexpected and abnormal event, the charterer is to discharge a secondary obligation of
ordering the ship to another port prospectively safe for her.

However, in case of a voyage charter, where the charterer does not exercise complete control,
the position remains uncertain and the doctrine of frustration may be possibly resorted to. Thus,
during continuing operation of commercial ports in times of COVID-19, risks to the crew and port
safety measures are to be assessed before calling at a particular port while having in mind the
character and wording of the subject charter.

The implication of FM in the COVID-19 world of shipping is dependent on the scrutiny of

elements of the FM clause, Governmental position, applicable law and the nexus with the
impediment faced in performing the contractual obligation. Further, it is advisable to determine
the insurance coverage for losses resulting from COVID-19.

However, in case of the standard marine insurance policies, alternative means may be required
for risk management since they may generally be ineffective due to exclusion of delays from their
coverage. For that purpose, relevant governmental policies may be effective, in addition to

https://www.maritime-executive.com/blog/india-and-force-majeure-is-covid-19-frustrating-shipping-operations 4/8
7/16/2020 India and Force Majeure: Is COVID-19 Frustrating Shipping Operations?

ascertaining clarity on the duty to mitigate contractual non-performance and protection of acts
done in good faith.

Sindhura Natesha Polepalli is a Maritime Legal Consultant at the Directorate General of Shipping
(Ministry of Shipping, Government of India). She holds a Master of Laws in International Maritime
Law from IMO-International Maritime Law Institute, Malta. Note: The opinions expressed are
personal.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.

MORE TOP STORIES

Holland America Sells Ships With Two to Olsen in Carnival's Downsizing
(https://www.maritime-executive.com/article/holland-america-sells-four-cruise-ships-in-
carnival-s-downsizing)
Major Fire Damages Seven Boats at Port of Bushehr, Iran (https://www.maritime-
executive.com/article/major- re-damages-seven-boats-at-port-of-bushehr-iran)
Chinese Government and CSSC Cooperate to Develop Shipping Technologies
(https://www.maritime-executive.com/article/chinese-government-and-cssc-cooperate-to-
develop-shipping-technologies)
U.S. Navy Commissions Amphib USS Tripoli Remotely Due to COVID-19 (https://www.maritime-
executive.com/article/u-s-navy-commissions-amphib-uss-tripoli-remotely-due-to-covid-19)

EDITORIALS TOP STORIES

Interview: Commanding the Futuristic Destroyer USS Zumwalt (https://www.maritime-
executive.com/editorials/interview-commanding-the-futuristic-destroyer-uss-zumwalt)
Digital Twins for the Maritime Sector (https://www.maritime-executive.com/editorials/digital-
twins-for-the-maritime-sector)
Sea Shepherd Helps The Gambia Tackle Illegal Fishing (https://www.maritime-
executive.com/editorials/sea-shepherd-helps-the-gambia-tackle-illegal- shing)
Most of Colombia's Northbound Cocaine Isn't Headed for America (https://www.maritime-
executive.com/editorials/op-ed-most-of-colombia-s-northbound-cocaine-isn-t-headed-for-
america)
How Tide Predictions Made D-Day Possible (https://www.maritime-
executive.com/editorials/how-tide-predictions-made-d-day-possible)

RELATED STORIES

GOVERNMENT (/GOVERNMENT-NEWS) SHIPPING (/SHIPPING-NEWS)

https://www.maritime-executive.com/blog/india-and-force-majeure-is-covid-19-frustrating-shipping-operations 5/8
7/16/2020 India and Force Majeure: Is COVID-19 Frustrating Shipping Operations?

(https://www.maritime- (https://www.maritime-
executive.com/editorials/interview- executive.com/editorials/digital-twins-for-the-
commanding-the-futuristic-destroyer-uss- maritime-sector)
Digital Twins for the Maritime Sector
zumwalt)
Interview: Commanding the Futuristic (https://www.maritime-
Destroyer USS Zumwalt executive.com/editorials/digital-twins-
(https://www.maritime- for-the-maritime-sector)
executive.com/editorials/interview-
commanding-the-futuristic-destroyer- PIRACY (/PIRACY-NEWS)

uss-zumwalt)

(https://www.maritime-
executive.com/article/violent-attacks-and-
kidnappings-on-the-rise-against-seafarers-imb-
says)
IMB: Violent Attacks and Kidnappings
Against Seafarers on the Rise
(https://www.maritime-
executive.com/article/violent-attacks-
and-kidnappings-on-the-rise-against-
seafarers-imb-says)

SHIPPING (/SHIPPING-NEWS)

(https://www.maritime-
executive.com/article/kleven-verft-split-into-
three-companies-to-complete-bankruptcy)
Kleven Verft Split Into Three Companies
to Complete Bankruptcy
(https://www.maritime-
executive.com/article/kleven-verft-
split-into-three-companies-to-
complete-bankruptcy)

SUBSCRIBE

https://www.maritime-executive.com/blog/india-and-force-majeure-is-covid-19-frustrating-shipping-operations 6/8
7/16/2020 India and Force Majeure: Is COVID-19 Frustrating Shipping Operations?

SUBSCRIBE (/subscribe)

 (https://www.facebook.com/MarExMag/)  (https://www.linkedin.com/groups/47685)

 (https://twitter.com/Mar_Ex)  (articles.rss)

© Copyright 2020 The Maritime Executive, LLC. All rights reserved.

https://www.maritime-executive.com/blog/india-and-force-majeure-is-covid-19-frustrating-shipping-operations 8/8
7/16/2020 India and Force Majeure: Is COVID-19 Frustrating Shipping Operations?

Print (/subscribe) Digital (/subscribe) Newsletter (/subscribe)

Renew (/subscriber/send_subscriber_email)


The Maritime Executive Comment Policy
We welcome all relevant and respectful comments.

Comments for this thread are now closed ×

0 Comments The Maritime Executive 🔒 Disqus' Privacy Policy 

1 Login

 Recommend t Tweet f Share Sort by Newest

This discussion has been closed.

✉ Subscribe d Add Disqus to your siteAdd DisqusAdd ⚠ Do Not Sell My Data

ABOUT US (/ABOUTUS)
ADVERTISE (HTTP://MEDIAKIT.MARITIME-EXECUTIVE.COM/2020/)
NEWSLETTER (/NEWSLETTER)
CONTACT US (/CONTACT)
PRIVACY POLICY (/PRIVACY-POLICY)
SITE MAP (/SITE-MAP)

NEWS (/) Piracy News (/piracy-news)

FEATURES (/FEATURES) Shipbuilding News (/shipbuilding-news)
PODCASTS (/PODCAST) Cruise Ship News (/cruiseshipping-news)
MAGAZINE (/MAGAZINE) Ports News (/port-news)
NEWSLETTER (/NEWSLETTER) Salvage News (/tugsalvage-news)
BLOGS (/BLOG) Training News (/training-news)
DIRECTORY (/MARITIME-DIRECTORY) Government News (/government-news)
JOBS (/JOBS) Environment News (/environmental-news)
Corporate News (/pressrelease)

https://www.maritime-executive.com/blog/india-and-force-majeure-is-covid-19-frustrating-shipping-operations 7/8