(1) Egyptian Plant Manager and (2) Egyptian Seller v. Egyptian Buyer (Partial Final Award, Second Partial Final Award, Costs Award and Ruling and Costs Award), CRCICA Case No QQQ/2012, 7 April 2017, 31 January 2018, 30 May 2018 and 26 July 2018, in Stephan W. Schill (ed), Yearbook Commercial Arbitration 2021 - Volume XLVI, Yearbook Commercial Arbitration, Volume 46
(1) Egyptian Plant Manager and (2) Egyptian Seller v. Egyptian Buyer (Partial Final Award, Second Partial Final Award, Costs Award and Ruling and Costs Award), CRCICA Case No QQQ/2012, 7 April 2017, 31 January 2018, 30 May 2018 and 26 July 2018, in Stephan W. Schill (ed), Yearbook Commercial Arbitration 2021 - Volume XLVI, Yearbook Commercial Arbitration, Volume 46
(....) [113] “Art. 16 is headed ‘Force Majeure’. Sect. 16.1 provides ‘Release of Obligations. Subject to the provisions of Sect. 16.2, 16.4 and 16.7, neither Party shall be liable for any delay or failure in performance hereunder if, and to the extent, such delay or failure in performance is due to Force Majeure, and each Party's obligations under this Agreement shall be suspended during the continuance of any Force Majeure that renders such Party unable to perform such obligations.’
‘“Requirement to Act as ‘Reasonable and Prudent Person.” A Party claiming Force Majeure must act as a Reasonable and Prudent Person in preventing the effects of any Force Majeure events (and, as soon as reasonably practicable after the commencement of an event of Force Majeure, a Party claiming Force Majeure must act as a Reasonable and Prudent person to overcome and mitigate the effects of such event of Force Majeure), and shall continue to perform its obligations pursuant to this Agreement to the extent such obligations are not impacted by such Force Majeure events. To the extent a Party claiming Force Majeure fails to act as a Reasonable and Prudent Person in preventing or mitigating the effects of any Force Majeure events, such Party shall not be excused for any delay or failure to perform that would have been avoided if such Party had acted as a Reasonable and Prudent Person.’
‘Definition of “Force Majeure”. “Force Majeure” means an event or circumstance, which is beyond the control of the Party concerned (acting and having acted as a Reasonable and Prudent Person), resulting in or causing the delay or the failure by such Party to perform all or any of its obligations under this Agreement (including in the case of Buyer, the inability to take delivery of any Properly Nominated Quantity of commodity and in the case of Seller, the inability to deliver the Properly Nominated Quantities of commodity), which delay or failure could not have been prevented or overcome by the standard of a Reasonable and Prudent Person.’
[116] “By Sect. 16.4.5 force majeure does not include ‘late payment or non-payment of money due in accordance with this Agreement, or the lack or unavailability of funds...’.
[117] “Sect. 16.8 provides that a party invoking force majeure must:
‘Serve notice of such Force Majeure to the other Party as soon as is reasonably practicable, promptly provide a report of the circumstances of such Force Majeure, providing all relevant information as is available as to such event (including the Place thereof, the reasons for failure, and the reasons why such Party's performance of its obligations under this Agreement were affected, and from time to time provide updates of such event), including further information and explanation as it becomes available.’
[118] “Annex 6 defines a Reasonable and Prudent Person as:
‘A Person seeking in good faith to perform its contractual obligations and in so doing and in the general conduct of its undertaking exercising that degree of skill, prudence, diligence and foresight that would reasonably and ordinarily be expected from a skilled and experienced Person complying with Law engaged in the same type of undertaking under the same or similar circumstances and conditions.’
[119] “Between February Year X and the termination of the Supply Agreement on 19 April Year X+1, the Plant was subject to external damaging actions.... This led to an interruption in supplies untilmid-March Year X.
[120] “Seller declared an event of force majeure in the following terms:
‘Reference is made to the a/m subject and to the Supply Agreement between Plant Manager/Seller (Seller) and Buyer (Buyer).
According to Art. 16 “Force Majeure” of the above mentioned Supply Agreement, we inform you that Seller declares a Force Majeure status as a result of external action....
Accordingly, delivery of the commodity will be stopped until ... the repair works are executed. Such stoppage will affect the annual contracted quantity of Year X.
Kindly take note of such information and you will receive details about repair activities and schedule as soon as the current damage assessment is concluded.’
(....)
[121] “Supply of the commodity was interrupted and not resumed until mid-March Year X (39 days after the incident). Seller issued a technical report on the incident on 10 April Year X.
[122] “The crucial question is whether, as regards February Year X, Buyer was entitled to deduct compensation for shortfall in delivery, as Buyer maintains, or whether, as Seller maintains, Buyer was not so entitled because delivery failure was due to an event of force majeure.”
[124] “Seller does not contest Buyer's contention that a party claiming force majeure protection to excuse what would otherwise be contractual breaches bears the burden of proving it: Channel Island Ferries Ltd v Sealink UK Ltd [1988] 1 Lloyd's Rep 323, 327; Tandrin Aviation Holdings Ltd v Aero Toy Store LLC [2010] EWHC 40 (Comm), [2010] 2 Lloyd's Rep 668, para 48; Chitty on Contracts (31st ed 2014), para 14-143. Consequently, in relation to the main issue on force majeure, the onus is upon Seller to establish force majeure to avoid being obliged to account for compensation for shortfall in delivery.”
[125] “Buyer says that supply [shortfall] is to be regarded as [shortfall] unless and until it is agreed or decided that force majeure has been properly claimed....
[126] “Seller says that the effect of Sect. 6.8.2 is that the Seller can take the amount that was (wrongly) treated as compensation for shortfall in delivery and include it in the next Annual Reconciliation to adjust any amounts previously credited to the Buyer.
(....)
[127] “Having carefully considered all submissions by each party, the Tribunal's conclusion is that the correct approach to these provisions is that where there is a delivery failure which would entitle the Buyer to compensation for shortfall in delivery, the compensation for shortfall in delivery may be deducted, and is validly deducted, unless in an objective sense there is force majeure. The time at which force majeure is agreed between the parties or determined by an arbitral tribunal does not affect either the right of the Seller to payment or the right of the Buyer to compensation for shortfall in delivery.”
[128] “Sect. 16.8 provides that a party invoking force majeure must:
‘Serve notice of such Force Majeure to the other Party as soon as is reasonably practicable, promptly provide a report of the circumstances of such Force Majeure, providing all relevant information as is available as to such event (including the Place thereof, the reasons for failure, and the reasons why such Party's performance of its obligations under this Agreement were affected, and from time to time provide updates of such event), including further information and explanation as it becomes available.’
[129] “Seller says that ... Seller gave notice to Buyer of ... force majeure event in compliance with Sect. 16.8 of Annex 1. It promptly notified Buyer of the circumstances of each force majeure event, including all relevant available information.... Seller says that it gave all the information required under Sect. 16.8 and provided Buyer with regular updates regarding the progress of repair works and the expected date for resuming supply of the commodity, by way of meetings, conference calls and letters; and it went beyond its contractual obligations by sending lengthy technical reports providing detailed technical information relating to some of the force majeure events.
[130] “The Tribunal accepts Buyer's contention (which was not contested) that information requirements can constitute a mandatory precondition to force majeure protection, because full information is necessary for the counter-party to assess whether force majeure has been properly invoked: Mamidoil-Jetoil Greek Petroleum Company SA v Okta Crude Oil Refinery AD [2002] EWHC 2210 (Comm), [2003] 1 Lloyd's Rep. 1, para 134; affd [2003] EWCA Civ 1031 (CA), para 34.
[131] “The information given by Seller on the circumstances of each event was minimal, and it provided technical reports in only fewer than half of the incidents and in all but one of those cases after a long delay.
[132] “In the view of the Tribunal, the evidence (which was not effectively contradicted) supports Third Expert for Buyer's view that the failure and/or delay in issuing contemporaneous reports would have prevented Buyer from analysing the damage assessment and anticipating the likely repair schedule, and that the long-delayed technical reports were inadequate.
[133] “It is not, however, necessary to express a final view on whether the delay in giving, and inadequacy of content of, the reports debars Seller from relying on force majeure because of the firm conclusion to which the Tribunal has come as to the existence of force majeure and the delay in repairs.”
[134] “As spelled out above, the combined effect of Sect. 16.3 of Annex 1 and the definition Sect. in Annex 6 is that
(a)‘“Force Majeure” means an event or circumstance, which is beyond the control of the Party concerned (acting and having acted as a Reasonable and Prudent Person), resulting in or causing the delay or the failure by such Party to perform all or any of its obligations under this Agreement ... which delay or failure could not have been prevented or overcome by the standard of a Reasonable and Prudent Person’,
(b)namely ‘a Person seeking in good faith to perform its contractual obligations and in so doing and in the general conduct of its undertaking exercising that degree of skill, prudence, diligence and foresight that would reasonably and ordinarily be expected from a skilled and experienced Person complying with Law engaged in the same type of undertaking under the same or similar circumstances and conditions.’
[135] “Seller was plainly aware of the importance of the issue of force majeure in this arbitration. It devoted more than 20 pages in aggregate to the subject in its Statement of Claim and its Reply and Defence to Counterclaim.
[136] “But Seller did not put forward any positive evidence from its employees to contradict the expert opinions or factual assumptions of Buyer's experts, and the only expert evidence relied on by Seller in connection with force majeure was an expert report by Expert for Seller Mr X....
[137] “Expert for Seller Mr X ... was an impressive witness but he did not directly address the security of the Plant. In his oral evidence he confirmed that he had no specific expertise and had not been asked to give an opinion on the circumstances surrounding each event; or on whether Seller or Plant Manager's Subsidiary had complied with reasonable security practices; or on Seller's response to the security threat in Year X-1; or on whether the damage could have been prevented.
[138] “As indicated above, Seller relies on his expert report to support these contentions in particular.”
[139] The Arbitral Tribunal summarized the findings and conclusions of the extensive expert reports submitted by Buyer. It then continued as follows:
[140] “In the view of the Tribunal, Seller did not at any time put in place an adequate security system in accordance with accepted international practice at the relevant time period.
(....)
[141] “Having carefully considered all the evidence, the Tribunal accepts Buyer's case that Seller failed to implement many fundamental security countermeasures, as a skilled and experienced operator (satisfying the Reasonable and Prudent Person standard) would have done....
(....)
[142] “It follows that Seller's declarations of force majeure were ineffective.”
[143] “It follows that it is not necessary to consider whether the repairs were conducted within a reasonable time. But because it was fully debated the Tribunal will express a view.
[144] “Seller did not present any positive evidence on this aspect. Buyer relied on the evidence of Third Expert for Buyer....
[145] “Third Expert for Buyer's evidence was that, in relation to the standard of a Reasonable and Prudent Person, the claimed repair duration exceeded a reasonable repair time....
(....)
[146] “In the Tribunal's view, Seller cast no doubt on Third Expert for Buyer's credibility or expertise and the Tribunal accepts his evidence. It follows that if it had been necessary to decide the issue of repair delay, the Tribunal would have accepted Buyer's case.”
[147] “In the view of the Tribunal, the short answer to Buyer's contention is the provision in Sect. 16.4 that a force majeure event ‘shall not include’ the ‘late payment or non-payment ... or the lack or unavailability of funds’. The Tribunal is unable to accept Buyer's contention that this provision does not apply because Buyer's inability to pay would have been excused by the force majeure events on which Seller relies....