Force Majeure. Current issues in Argentina
This article deals with some circumstances of extraordinary nature which have been lately affecting the shipping industry in Argentina and could be invoked as force majeure defence by carriers being prevented from executing their duties under their respective contracts of carriage.
It was presented in Valencia, Spain, at the conference organized by the ASSOCIATION INTERNATIONALE DES JEUNES AVOCATS (AIJA), in cooperation with the INTERNATIONAL ASSOCIATION (IBA), from September 29th to October 1st, 2022.
I.- Introduction
First of all, I will make a brief description of these extraordinary circumstances. Then, I will share some judicial precedents which have been found illustrative of the treatment that these phenomena may have in Argentine jurisdiction. Finally, I will draw some conclusions with the intent of pointing out how the case law has influenced or modified the judicial criteria for the admissibility of this defence, pursuant to the dynamism of the industry and the impact of technological developments.
II.- Local phenomena currently taking place in Argentina
Firstly, I would like to direct your attention to the low water levels which the Paraná river has been experiencing since 2019. This situation has gotten worse in 2020 and 2021, when the waterway reached its lowest levels ever recorded. Local authorities have even declared this as a force majeure event and issued several red alerts to navigators and the local community. The low water levels of the Paraná river have caused many inconveniences, including, among others, an increase of 35% of vessel groundings, changes in vessel´s loading capacity, delays and demurrage charges.
Secondly, I will address the impact that strikes, stoppages, and lockouts led by powerful Argentine workers unions may have on contract performance and how this may cause business disruption.
Finally, when it comes to the transport of cargo by land, a major concern is caused by the armed robberies performed by truck hijackers. For many years, these have been considered force majeure or violent acts performed by third parties, which exempted the carriers from their liabilities under the contract. However, as it will be shown below, this criterion has changed, and other requirements have to be met in order to be considered that way.
III. Judicial Precedents
III.a) Perils of the Sea – Low water levels
I will present here the first case, related to the navigation matters: “FLUVIALCO NAVEGACIÓN S.A. V. TRANSPORTES FLUVIALES ARGENRÍO S.A.”.[1]
In this particular case, the company Fluvialco hired Argenrío for the towage of several barges from Asunción, San Antonio y Villeta, Paraguay, to Escobar, Buenos Aires, Argentina. The barges were towed by the TB ARGENRIO I in convoy. During the voyage, the convoy was disassembled, and the barges went adrift. All the barges were recovered, except one, which remained aground for more than a month, generating extra costs of custody and to get it released. As that barge was not delivered as agreed, Fluvialco sued Argenrío for breach of contract of towage. In their defence, Argenrío invoked the exemption to liabilities provided for the contract of carriage -which is applicable to the contract of towage- under Argentine Law, pleading the perils of the sea defence (section 275, c, Law No. 20.094).
The judge of First Instance admitted this defence, since he considered that the barge could not be delivered because it went aground, after part of the convoy touched the bottom of the river due to the low water levels. This event was deemed unforeseeable, unavoidable, and alien to the carrier, because the changes in the river level and the corresponding beaconing were done and informed to the shipping community by the maritime authority two weeks after the incident occurred.
This decision was appealed by the parties, and the Court of Appeal overturned the previous judgement, holding the Carrier liable and denying the defence. The foundation of the Court of Appeal’s decision was that, in river navigation, the perils of the sea cannot be considered unforeseeable events, by virtue of the information publicly available, the training and knowledge of the seamen, and the technological developments.
Therefore, for this defence to be admitted, the Court of Appeal stated that, the carrier must prove that the incident was unavoidable and alien to its negligence by demonstrating having adopted all necessary measures to avoid and face any possible risk that may arise and that are considered foreseeable.
In this case, the Court of Appeal considered that the master was negligent during navigation because he did not perform the proper investigations before the commencement of the voyage, was not aware of the current river conditions, and hence, did not count with the necessary information to adopt a correct manoeuvre to make the convoy of barges navigate in a safely manner and pass the area of low water level.
The Court also assessed the manoeuvres adopted by other convoys in the same area, and by the tug Argenrio I, a few kilometres away. The correct manoeuvre would have been to disassemble the convoy and to pass fewer barges at the time.
In view of summarizing the position adopted by Argentine Tribunals in respect of the defence of perils of the sea in river navigation, the following could be said:
♦ The perils of sea defence does not need to meet the requirement set by the Civil Law for the force majeure, and a more flexible criterion is adopted.
♦ Judges have stated that, given the state of professional knowledge and training of the seamen, the sources of information, and the technology available, the perils of fluvial navigation constitute foreseeable risks.
♦ For the carrier to be exempted from liabilities under the contract of carriage due to an event of this nature, it has to be demonstrated and proved that the peril was unavoidable and alien to the Carrier or their servants´ fault, by conclusively accrediting that, despite having adopted all available preventive and safety measures to face and overcome any possible hazard, the incident still arose.
♦ The burden of proof is harsh and falls on the Carrier. Besides, being this defence an exception to the Carrier´s liability, its construction is strict; therefore, in case of doubt, the Carrier will be held liable.
III.b) The strikes
The second phenomenon which could also affect a contract performance within the shipping industry in Argentina is related to the STRIKES.
In this respect, I will bring the judicial precedent “EPSON ARGENTINA SRL C/ CAP Y/O ARM Y/O PROP BQ MONTE TAMARO Y OTRO S/ INCUMPLIMIENTO DE CONTRATO” [2] which involved a carriage of four containers under one Bill of Lading. Upon their arrival at Buenos Aires, three containers were delivered, while the fourth was transhipped to another port and delivered 15 days later.
The Claimant sued Hamburg Sud for breach of contract. Hamburg Sud Argentina alleged that the fourth container was not delivered because of a strike, invoking that defence under the Argentine Navigation Law no. 20094 (section 275, paragraph j).
During the proceeding, it was accredited that the strike consisted in affecting only two hours of the port operations per shift. Therefore, the Court of Appeal considered that the carrier did not demonstrate that the strike was unforeseen and unavoidable, because the fourth container could have been unloaded on the same day, two hours later, instead of being sent to a nearby port in a foreign country and reshipped, which resulted in it arriving fifteen days later.
The Court of Appeal stated that the strike defence must be construed restrictively. Consequently, it was decided that the carrier was negligent in the fulfilment of their duties to carry, discharge and deliver the cargo in accordance with the terms of the contract of carriage, and hence, held them liable.
As in this case, other judicial precedents have also stated in respect of the shipping industry that, for the defence of strike to be admitted, the strike must be of significant effect and duration; no matter if it is legitimate or illegitimate, general or partial. Besides, it must be alien to the carrier and their servants and agents.A simple suspension or unwillingness to work, or a decrease in rhythm of work has not been considered exemptions to liability.[3]
Also regarding this, judges have stated that, given the formal organization of workers in unions and associations, the compulsory intervention of the State in labour disputes in general, and the existing communication between the parties involved through commissions, it is truly difficult to believe that the strike could be unforeseeable, unavoidable and unrelated to the carrier.
III.c) Armed robberies performed by truck hijackers
Finally, the third and last phenomenon which may have impact on the carriage of goods by land is linked to the armed robberies performed by truck hijackers.
As mentioned above, for many years, these have been considered force majeure or violent acts carried out by third parties which exempted the Carriers from their liabilities under the contract. However, this criterion has changed, and other requirements have to be met in order to be considered that way.
The liability regime for land transportation is ruled by the Argentine Civil and Commercial Code, which provides that, in case of failure to deliver the goods in accordance with the contract, the Carrier shall be liable, except in case of cargo inherence vice or force majeure (section 1286, CCC).
The issue of armed robberies has been subject of extensive judicial treatment, and the case law currently tends to reject this type of event as defence for a non-delivery, and predominantly, condemns the carriers, being the interpretation of this defence very strict.
As I explained in the first case about perils of the sea, Argentine judges have considered that, due to the frequency and modality of this type of robberies, these incidents cannot longer be considered unforeseeable; and further, that due to the technological developments and current available security measures to discourage the occurrence of these illicit acts, they cannot longer be considered unavoidable either.
Therefore, for the carriers to be released from their liability for breach of contract of carriage due to an armed robbery perpetrated against the cargo, the crux of the matter has turned to be a strict analysis of the their diligence in adopting measures to prevent and discourage the occurrence of these illicit actions against that specific cargo. In other words, the dissuasive power of the measures is what really matters and not whether they were indeed effective or efficient.
The aforesaid represents a harsh burden of proof which falls on the shoulders of the carrier. Evidence must be conclusive, leaving no room for doubt; otherwise, the fault of the carrier in the breach of their obligations shall be presumed, and they shall be held liable.
For illustrative purposes, I would like to share the following judicial precedents:
⇒ MOTORES Y EQUIPOS ORTHOLAN S.A. C/CIPRIANI S.R.L. S/DAÑOS Y PERJUICIOS. [4]
During this process, the carrier alleged and accredited only a police report as evidence of the armed robbery to the cargo and truck, and the Court stated that they failed to prove having taken neither dissuasive nor preventive measures. Hence, the report was not sufficient to prove the force majeure as an exemption to Carrier´s liability.
⇒ GENERALI ARGENTINA CIA. DE SEGUROS SA C/ TRANSPORTE DE TITTA Y OTRO S/ FALTANTE Y/O AVERIA DE CARGA TRANSP. TERRESTRE. [5]
In this case, the carrier alleged and proved having provided their truck with a satellite control system. However, the Court considered that such preventive measure was not effective neither dissuasive, and decided that it was not clear whether the satellite control system aimed to protect the truck or the transported cargo. Further, it was considered that the driver was negligent when getting off the truck at an unsafe area to assist another driver who was experiencing technical problems. Therefore, the carrier was held liable.
⇒ CLORINDO APPO SRL C/ SANCOR COOPERATIVA DE SEGUROS LTDA S/ COBRO DE PESOS[6]
Here, the Carrier alleged and proved having hired a satellite control system, constant radio communication with the driver, panic button system, and accompanying security guards during the voyage. The court considered that as despite all those measures, the robbery still occurred, the carrier was diligent by taking all the preventive measures, and decided to exempt it from liability.
The described case law shows that, in Argentina, the risk of armed robbery of cargo during its transport by land lays on carriers, who would only be able to escape liability in very specific circumstances and at a great economic cost.
Based on this, and in an attempt to find a solution to this matter, the Argentine Law of Carriage of Goods by Land (no. 24673) was enacted in 1996. This law provides for a compulsory insurance which must be obtained by the shipper or the consignee and contain a carrier’s exemption of liability clause, or by the carrier, against who the insurance company cannot bring recovery actions, due to being the assured.
The purpose of this legislation is to channel the liability for these events on the Insurance Companies, which are eventually the ones specialized in the evaluation and assessment of these kind risks. They count with relevant information and statistics which are helpful to decide on how to mitigate losses, and are in a position to determine which security measures must be taken through the incorporation of them as conditions of cover.
IV. CONCLUSIONS
In light of the judicial cases discussed, the conclusions could be summarized as follows:
♦ The concept of force majeure is dynamic and cannot be analysed in abstract situations.
♦ The admissibility of defences of force majeure depends strictly on the circumstances of the case.
♦ The technological advances and changes that occur in the transport and communication industry have an impact on the judicial criteria applied on the admissibility of the defences of force major nature.
♦ Particularly, in navigation and shipping related matters, the requirements of enforceability and unavoidability —as set forth by the Civil and Commercial legislations— do not apply strictly, and the criterion may be more flexible. However, the event must necessarily be alien to the carrier’s and their dependants´ fault.
♦ How? The crux of the matter will very much rely on the proof of the carriers and their dependants’ diligence in adopting measures —depending on the circumstances— to successfully avoid, prevent, discourage or face the risks that may arise.
♦ Prudence should prevail in the judicial criterion when interpreting the defences of Force Majeure nature in order to avoid the risk of promoting careless in the fulfilment of the duties of the contracting parties.
MARIA BELEN ESPIÑEIRA- FOUNDING PARTNER
[1] (Cámara Nacional de Apelaciones en lo Civil y Comercial Federal, sala IIC. Nac. Civ. y Com. Fed.,sala 2ª, 11/06/1991, , TR LALEY 2/7840)
[2] (Camara Civil Y Comercial Federal. Sala I. Causa N° 6663/2011/Ca1)
[3] Cfr. C. Nac. Fed., sala Civil y Comercial, 29/12/1958,”Secretaría de Transporte de la Nación v.
Sierras de Balcarce”, JA 1959-111-80:
[4] (Causa 82598/99, Camara Civil y Comercial de San Isidro, Sala II, 21/12/1999).
[5] (Camara Nacional De Apelaciones En Lo Civil Y Comercial Federal Sala II, Casusa 8257/2011. Fecha 5/12/2020)
[6] (Cámara Federal De Apelaciones De Rosario. Nov. 17, 2015. Cita Mj-Mu-M 97385-Ar)
