Force Majeure – Is it really?

[Music] Hello and welcome to the MFA podcast. I'm joined by Steve Sims of Sims Showers, LLC in America, good friend of the MFA and the point of today's podcast is the topic of force measure, the clause in a set of general terms of sale force measure and what is the point and the relevance of that. Now this is on the back of a fantastic article written by Steve Sims in Ship.Energies, Recent Magazine, it was volume one, issue two, April 2026. The article will be made available on the MFA website and I'm sure Chloélyn and the team at ship.Energy will be delighted that we're referencing it because Steve wrote a really great article very pertinent today on how and why the force measure clause is used and the implications for it. Steve raises extremely important points and highlights the vagaries if the clause is not fully understood and not absolutely specific in the wording in any agreement or general set of terms. So Steve, I'll introduce yourself and we'll get into the juicy bits of this lovely topic. Anthony, thanks for the good words and welcome everybody to talk about a topic that is in the news and if you're in the bunker industry, you're living this every day since the United States and Israel attacked Iran or Iran attacked the United States and Israel depending on who you listen to. The question now is what do we do? What do we do in the face of a bunker market that has some of the highest prices and lessening availability? How do we respond? What happens when we have long-term contracts? Set at certain prices or even short-term contracts and we try to deliver and our tanker gets a cruise missile through it. What do we do about that? And that's where force measure is important to know about now. And that's why having read your article I thought for the MFA and our bunker supply and trade-emembers including other lawyers and insurance underwriters would be very interested to take our opinion and they can feel free to ask questions. This is not a definitive piece but certainly one that's raising a relevant point as you say at the time of the market right now. So let's start at the beginning. What does force measure mean? I've been traveling recently, talking to various stakeholders in industry and I think about one in 10 knew the actual meaning and one of those was actually French. So what does force measure mean? Force measure means superior force. Superior force that's so overwhelming and under some opinions unexpected that it takes away any obligation to perform a contract. And the question with force measure is what is overwhelming force? And that's where contract terms are essential. So you wrote this article now given the geopolitical issues we have. Does it become a more heightened risk element in someone's teasing seas? Is it becoming more widely used by bunk supplies and owners' charters when they're looking to delay or cancel a bunker stem if we're looking at it from our context at the bunk industry? How pertinent is it now in that context? It is critical in this context now. It's critical to look at now because just like many terms that are in supply or traders' contracts, they haven't been looked at it year in years because things have been going along just fine. But now with the current events and don't think this will be the last of them, the terms have to be looked at now because there are many events which could qualify as force measure. So what's the biggest misconception then? The people have about force measure in marine feeling. So let's say I've booked a I'm a Shipponah charter a bunker buyer. I've booked a stem but my owner or the insurance company says I can't go that way. You're not going to let's say Fajira or Aman. Is that force measure or the bunk supply says the prices are gone up. I want to cancel the stem because I can make a bit more money. Don't think I could supply a vessel but I could supply some other vessels tomorrow at a high level. I mean, these aren't beyond reasonable doubt to fulfill a contract, right? That's a subjective take on it rather than absolute. That's right. Price increases happen. But that is not necessarily overwarming force. It has to be connected. That price increase has to be connected with with something that has been an overwhelming force like the the conflict in at in and around the golf and the street of hormones. And the contract is what defines the overwhelming force. And that's why it's essential now to look back at contract terms and make sure that if you have to enforce them, you can enforce them consistent with the controlling law which generally will be either English or US. And the point there being that it's beyond reasonable effort or doubt that you could have fulfilled it. So, you know, my storage tank was hit. I couldn't go in and reload my bunker badge. Absolutely. You know, my ship is physically stuck in the bell from Cancom out. Okay, absolutely. But not wanting to do something for some subjective reason doesn't stand up if you haven't tried or shown that you could have tried other means or methods of fulfilling that that contract obligation. Into the bunker stamp, could you have got filled from somewhere else? Could another barge of being used? Could you have gone there with your ship and paid the extra price? You know, the burden of evidence is a big thing, right? What you want to make sure if you're a trader or a supplier is you're not going to have an argument, at least one that won't go in your favor over what an overwhelming force is. Because let's say you haven't defined it, you just say force measure event. So this contract shall not apply in a force measure event. Okay, great. So you say, well, my tanker just got a cruise missile through the side of it. I can't deliver. And your customer says, what do you mean that wasn't foreseeable and wasn't an overwhelming force? Well, yeah, cruise missile is, but you can get another tanker and you can buy it from somebody else just supplying me. So what you want to make sure of is you with good terms and conditions, defining force measure, you minimize arguments. And with that comes obviously, therefore like any noble bunker claim, all the problems of reputational risk impact a commercial relationship. So how are these typically managed? Because this becomes very technical, very legal ease, very quickly. And we know the worst thing in any bunker claim. And I've seen them as where people start writing in capital letters and big exclamation marks, things escalate quickly. How can this one be really managed carefully at a reputational and therefore ongoing commercial level? You first need to make sure that your customers understand that you have these terms, that you refer and incorporate your terms of the contract. I, I, I, and of course, this is what comes to me as a lawyer when the terms haven't been effectively incorporated, basic, basic, basic terms and conditions, put them in your confirmation, put a link to your terms and conditions, put them on the website and make sure that the customer knows that you will be selling according to your terms. And every customer with any sophistication should know, even though when this comes up, they'll always say, oh, we never saw this, is that a well-written set of terms will have a force measure clause in it. But the question is, how well does your terms, your force measure clause define exactly what force measure is? We won't go into them now. They're in your very well-written article and you have cited some example. of a bunker trader and supplies and how they've gone about this. I do encourage people to read the article. You've listed a few bunker well-known global bunker companies who've addressed this very, very particularly. And probably to their own benefit, therefore, at a time like this. Other companies, we are encouraging them through the MFA, as we did recently with our talk on the BIMCO election sheet. Please use it as a manager meeting agenda item. Look at your terms today. And we are doing a piece right now with a locked and insurance on general insurance terms at a time of heightened risk. And Jamie is going to be saying, how often and how essential it is for management teams to stop and look at what their terms are saying. Is your insurance cover or your T's and C's actually pointing at the activity you're currently doing in the environment you're doing it in. And that's a major point. And that's what the MFA is trying to help with. We can't solve it. We always say that, but we can certainly connect people with companies that do. So are you seeing an increased level of claims along this line? Is this something that people are coming to you at Sim Shows about? Yes. And it's interesting parallel with how the industry started. How the industry started. That is the trading industry back in the early 70s when there was the first Arab oil embargo and long term contracts, which had been the way people had bought bunkers from the major oil companies. We're not available because the majors declared force measure. And so they fell a name. Christensen. Brilliant went around found bits and pieces of bunkers around put them together with the first trader and here we are. So now going forward look at the look at the situation. The prices have gone up. We're bunkers significantly. And it's a good news bad news thing because where they can be delivered in the prices are high. If you're making 3% 3% on a thousand dollars a ton is a lot better than on 300 dollars a ton. But what happens in the in the places where especially inside the the Gulf where because of operations there can't be a delivery. Yes, that's where we're seeing it. So you get a claim it comes to a lawyer. People go through their process but then it gets to the courts. I mean how to court an arbitrator is generally assess. Force major claims in marine field to speak. I guess the first answer is they'll go back and look at the T's and C's what was in the contract. But there must be some good case studies and examples through the arbitration. The bodies that have seen this through previous big geopolitical conflicts and incidents and it's not just conflict of course you could have weather, you know, hurricanes and typhoons and stuff like that can affect as well. There are and you mentioned the BIMCO bunker terms and the election sheet and other frequent disputes we see is the specification of BIMCO terms. That use of the election sheet. Well, why is that important? Okay, that gets to your question. Get to your question because you have to choose the law that applies and you also have to choose how disputes will be resolved. So English law will resolve a dispute differently than US law. Singapore laws also not the arbitrator arbitrage procedure is going to be different than a court procedure including in England. And so if you have an elected your law and how are the disputes going to be resolved, then you're going to have a dispute over whether you can look at the contract at the first place. Let's say that you have elected English law and arbitration or English law and court resolution. You will find that there is a wealth of opinions on forced measure clauses. And the first stop is the specificity of your contract first stop. That's what the arbitrators will look at this, but English law says to look at this what American law says to look at one arbitration example is there was this particular bunker supplier had a port closure clause in as defining forced measure. And the forced measure includes port closure and the arbitrators looked at it and said, yeah, port closed because of I think it was a weather problem. Therefore forced measure, you don't have to honor your contract. Another one was a strike clause. Okay, and you say, wait a second, you know, overwhelming force is that really a strike strikes happen a lot. But the terms and conditions contract clause defining for mature said, yes, there is a strike clause because of the strike clause the arbitrator says, yes, there was a strike you couldn't perform. So it was forced measure and a lot of forced measure law came out of COVID-19 remember COVID-19 a lot of us have repressed that how strange it was that crews couldn't get off ships. You couldn't come near a ship in some ports and ships were were quarantined. And so this particular set of arbitrators looked at the contract clause. It said pandemics. Well, pretty clear that that's what COVID was. So the arbitrator supplied that to find a force measure or contract and have to be honored. You touch on something there that I'm going to mention them again, but Jamie Cook locked in the insurance brokers can be talked to us about general insurance and he said, you know, there we were being shocked around the world years ago. Now we're almost not shocked by the next major incident with COVID-19 now we got this and it's almost like we kind of roll with it and typically the shipping industry manages with it it deals with it. But are we prepared for it are the stakeholders and the contracting parties ready for it. We can't a roll our shoulders now and something happens because, oh yeah, okay, it's a new event or a new walls broken out as terrible as they all are. But but our company stopping and looking at how that affects their business now our own chairman of the MFA Robert Thompson CEO of prepare the fields. He always uses the phrase what keeps the MD awake at night and that's almost become a kind of working subtitle to a lot of what we talk about in the MFA and why people have come to us. You know what is it I've got to do what should I stop and look at and we keep coming back to that so you know are we ready for the next day to disruption and I think calls is like this and calls it a general insurance are I open a keep you wake up night tight issues right. And they should be and one thing we can be sure of is that there will be a next major disruption our daughter is an epidemiologist before covid nobody knew what it was now everybody knows what an epidemiologist is and and she says in the literature back to stuff. And covid was nothing compared to the next world pandemic that's coming it's coming and if we consider the problems in the golf now to be limited to that that's never going to get bigger than that optimism is good but I think that's overly optimistic. Yeah not reality the Pacific is a very very volatile place right now with Taiwan and the different archipelago states that are that are claiming sovereignty in the Pacific the US very involved there and of course there is Russia and the European communities now are coming out with a very first. Focus on bunker suppliers who have been providing supplies to the dark fleet and I wonder for the longest time why why haven't you you just put your finger on the exact problem if you want to stop dark fleet tankers from running cut off their bunkers cut off the field supply yeah and so there are bigger things happening and you mention insurance. This is this is something that could be of well besides just defensive but I positive I think that insurance brokers are very concerned about this is state they step a night with you you know call your insurance broker at 3 a.m. See whether they're up probably are if you were to present to them terms of conditions that that we're going to hold up and force measure and you confidently do that you go to your lawyers and you say look I think that the it's not going to be a good thing. I think that the at least you can help your insurance broker sleep a little bit better and maybe get a better premium on your insurance it's a very valid point and I almost wish Jamie was was sitting here with us now he is a fun supporter of our podcasts and so he will be listening to this at some point but that's exactly the conversation I had in their office in London recently we spent an hour talking about. what is it that's affecting? Not just the physical supplies in the Middle East and that kind of Indian Ocean area, but what's happening to the traders that are daily getting inquiries, new inquiries from customers that are not dealt before, why? Look for extra credit, looking for extra help. And the ability to quickly do a deal, you've checked the vessel, sanctions is fine, maybe credits fine. And you do the deal because you satisfied all those bits, and then you fire out your T and Cs with the nomination and bang, that's where the whole was, the whole was in your T and Cs, which is not gonna come apparent until, of course, something goes a bit wrong. So I think, you know, not taking anything away from, you know, anders and our friends in the MFA, you do fantastic piece on sanctions and credit. They're the pre-checks, they're the bits of check before you fix the shit. You press a button, your system automatically attaches your T's and Cs, you've got holes in the cheese when it comes to the false measure clause or your general coverage clause. Point to this thing, Steve. Let's get management teams talking, let's get them reaching out. I put the question here, if you could change one thing about how the industry handles false measure, what would it be? And the answer cannot be just call SIM showers for the answer. - That would be first, look at your false measure clause, which will probably lead you to call SIM showers. Because you realize you haven't looked at it for years, but look at it. And one thing you can do is to take it upload it to your favorite AI. And ask your favorite AI, if you want to save a little bit of legal fees, initially, make sure you check it with your lawyer. There's still AI problems that we all know about. But check it. And you'll be amazed at the holes that will come up. And then you talk to your lawyer about it, about drafting a clause that will hold up under whatever law you have chosen. And, but do it now. And it is, there are lots of pressing problems that the tyranny of the urgent, tyranny of the urgent is why it affects a lot of us. Urgent, I can't get my tanker through to this customer that desperately needs my bunkers. Another tier of the urgent is the whole worldwide effect of what's going on in the Gulf. I can't pay to get my ship through the canal, the Panama Canal, because I just auctioned the highest price I could get and I lost. So I don't have a slot. So yes, the tier in the urgent is a problem, but now is the time to carve out. Take all your force-machura clause. Make sure it holds up. Yes, give me a call. You'll be happy you took care of it because it's going to come up. - And maybe also, Steve, I mean the phrase we're using there, I think we've used before is the stress test. Give it this internal stress test. And maybe if you've got some key accounts, key customers, call them. The whole part of T's and C's, especially, if you've got long standing relationships, or if you don't want to lose, talk to them about it. It's one thing being a third party trade away. You've got inquiries coming from all sorts of people, customers you may deal with once a month or every three months. But pick up the phone and deal, like you can do with the BIM code turns where you talk about the election sheet. Sit with a key account and go, but we want to work together as collaborate now before it goes wrong. There's no harming. You're not trying to hide from anything. And we've seen examples of that in the MFA, where people have actually just sat down with a key account and said, look, is this going to work in this situation? We're trying to help you to help each other. So that's a good thing to do as well. I'm going to say, in a happy, positive end. - Well, and that is a great point. Think of the pressure your customers are under now. The daily passage of ships through the straight now is down to 10% of what it was. There are ships that are stranded inside, ships that are stranded outside. There are crews on there that have been on way too long. The ships are running on MGO. They are running out of fuel. They are running out of supplies. Your customers and the prices the customers have to pay for those supplies, including the bunkers, are much more. And if your supplier is a charterer, your charterer isn't able to pay the owners, the charter hire because they haven't been able to deliver the cargo or to pick up the cargo to deliver. And so now is the time, yes, to get with those customers to know and empathize with the pressures that they're under, because we're all in this together and see how you can get in front of what you otherwise might have to call a force measure in that. Brilliant. Steve, thank you. All this was on the back of an article I read several times. Every time I read it, I picked up new things, like reading a good book. You picked up new points to raise. So thank you very much. We have other members of the MFA. I know a keen to talk about this. The podcast are always away for us to open the door to a topic. So to our listeners, please look at the website, follow Steve's article, come to us. There's a comment box on the website. If you want to reach out, we can provide details of Steve and others our insurance programs as well. You can help. So for now, this was the MFA podcast and we'll be in touch soon with the next hot topic. Bye for now. Thanks, Steve. You're welcome, Anthony, and thank you all for listening.