08.09.2022

BIMCO Introduces Force Majeure Clause 2022

In response to a recent string of disruptive and unforeseen events, BIMCO has introduced the Force Majeure Clause 2022 (Clause) as an optional inclusion for charterparty and shipping contracts.

The model Clause contains a warning that it must be carefully reviewed before incorporated, to ensure it can be sensibly read in the context of other contractual terms.  It also may not be appropriate for all contract types with caution urged in respect of time charterparties. Parties should always turn their mind to the specific wording of such a clause, to ensure it is fit for their purposes.

Force Majeure Requirements

The Clause applies where an event or circumstance prevents a party from performing one or more of its contractual obligations.

The requirement that performance be “prevented” rather than “impeded” (see for example the ICC Force Majeure Clause 2020) imposes a comparatively high bar for reliance.

In addition to the above, the affected party needs to show that the preventative circumstance: 

  1. comes within a list of approved Force Majeure Events;
  2. is beyond its reasonable control;
  3. could not reasonably have been foreseen at the time of contracting; and
  4. could not reasonably have been avoided or overcome.

The definition of a “Force Majeure Event” in respect of (a) above, includes those events characteristic of force majeure such as an act of God, act of war, labour disturbance, destruction of equipment, among others.

It also includes the catch all “any other similar event or circumstance”, which allows an affected party to rely on the clause where the unexpected event is in the same vein as those stipulated, even if not expressly listed.

Relief Under the Clause

As is typical of a force majeure provision, the Clause provides that a party is not in breach or liable in damages if it is delayed or cannot perform because of a force majeure event. 

However, payment obligations are continuing unless affected by the force majeure event.

Where the Clause is used in a charterparty or contract of affreightment, additional wording to clarify the laytime and demurrage position is recommended.  Parties should carefully consider the laytime and demurrage position to ensure it is suitable for their specific charterparty or contract of affreightment.

The Clause also provides for two alternative means of termination where a force majeure event occurs.

The first is where the contract has become impossible, illegal, or radically different to what was intended at the time of contracting.  The imposed threshold is high, and mirrors the test for termination under the doctrine of frustration.  However, unlike frustration, parties do not have to wait for a significant period of time to pass before it can terminate; once the requirements are satisfied, relief is immediately available.     

The second is by way of a long stop number of days, the expiry of which entitles a party to terminate if the force majeure event substantially affects the performance of the contract as a whole.  This option is only available if parties specifically agree to a number of days and insert this into the contract.  The wording deliberately requires the force majeure event affect the “contract as a whole” so that minor consequences of force majeure, even if prolonged, do not entitle a party to terminate the contract.

Our Comment

Under the English common law, force majeure is not an established concept.  Accordingly, parties must expressly include a force majeure provision should they wish to be excused from performance in the situation of a no-fault, unexpected event.  In the absence of such a provision, parties must resort to the doctrine of frustration, which imposes a notoriously high bar.

BIMCO’s Force Majeure Clause 2022 is an interesting addition to the toolbox of clauses available to parties in commercial shipping.  Parties should always carefully consider if inserting standard wording is appropriate for their purposes, and amend where necessary to ensure commercial suitability.

If you have any questions about the BIMCO Force Majeure Clause 2022, or the operation of force majeure more generally, please get in touch with our Trade & Transport Team  or your usual contact at Hesketh Henry.

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

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