Summary of facts
An automobile manufacturing joint stock company (Manufacturing Company) participated in cargo insurance under Policy No. 4586869 issued on August 24, 2020 (Amendment and Supplemental Letter No. 1984575 dated August 24, 2020) at an insurance enterprise (Insurer) with the insurance amount of VND 34,487,011,694. On December 1, 2019, the Manufacturing Company signed a Service Contract (Contract) with the Respondent (Shipping Company), under which, the Respondent carried the insured goods of the Manufacturing Company from the Port of Xingang, China to Haiphong Port, Vietnam according to Bills of Lading No. CKPANXG2008169 and No. HASLC2200800106.
On October 2, 2020, when checking the delivery and receipt of goods at the Warehouse of the Manufacturing Company in Gian Khau Industrial Park, Gia Tran commune, Gia Vien district, Ninh Binh province, the Manufacturing Company discovered that the goods in the containers No. TEMU8652994 and DRYU9733017 were wet and sent a Notice of Loss dated October 5, 2020 to the relevant parties.
The Insurer (Claimant) paid an insurance compensation amount to the Manufacturing Company and subrogated to claim the reimbursement of that amount from the Shipping Company, but the Shipping Company did not pay and a dispute arose over many problems related to the loss of goods (components). Below was a dispute about whether a “storm” was a force majeure event or not. The Respondent argued that the storm caused damage to the goods, therefore, it should be considered force majeure and they did not have to compensate for the damage, but the Claimant did not agree and filed a lawsuit at arbitration, requesting the Respondent to reimburse the amount of VND 1,776,998,112 (excluding 10% VAT).
Respondent's point of view
The Respondent argued that under Article 10 of the Contract, a “storm” should be considered a force majeure event because, that was: “... an event or circumstance, or a combination of events or circumstances, which, in whole or in part, prevents or is an unavoidable delay by a party in performing its obligations under the Contract, but not only if and to the extent of events or circumstances not within the scope of reasonable control, direct or indirect, of the affected party and could not be avoided if the affected party had taken reasonable care, including but not limited to: war, hostilities (where war declared or not), invasion, act of foreign enemy, mobilization, requisition, embargo, rebellion, revolution, uprising, military or usurpation, civil war, terrorism, natural disaster according to the Vietnamese laws and regulations”.
Storm Maysak caused the situation that cargo stuffed containers located at Gamman Terminal of Busan Port (Korea) were flooded with sea water, damaging the gaskets and floors of the containers, and sea water damaged the goods. The Respondent considered this to be a force majeure event, therefore, according to the provisions of Clause 2, Article 351 of the Civil Code 2015 (“Civil Code”), Clause 2, Article 151 of the Vietnam Maritime Code, Clause 1 Article 294 of the Commercial Law and Clause 4, Article 10 of the Contract, the Respondent was exempt from liability when breaching the contract due to force majeure events.
Claimant's point of view
About force majeure events, Claimant based on the provisions of Article 156 of the Civil Code and argued that storm Maysak was not a force majeure event, because: (a) storm Maysak was not an unforeseen event; (b) the Respondent had failed to prove that it had taken all necessary measures and permissible capacities as a transport service provider to its customer; and (c) Respondent failed to demonstrate that storm Maysak was the direct cause of the loss. In addition, the Respondent also did not perform the notification obligation under the Contract for the occurrence of a force majeure event.
The Arbitral Tribunal considered that in order to be recognized as a force majeure event, such event should satisfy the conditions prescribed in Article 156 of the Civil Code. Although storm Maysak was an objectively occurring event, it was not unpredictable in the course of the Contract performance, as it had been publicly forecasted by the relevant authorities and the Parties were aware of the occurrence of this storm.
The case file also showed that there was no notice from the Respondent about the force majeure event. There was also no evidence that the Respondent had taken all necessary and permissible measures to overcome and limit the impact of the Maysak storm event in Busan, Korea. In addition, Clause 3, Article 9 of the Contract stipulated: “If the damage is caused by [...] the omission of Party A (i.e. the Respondent) in the process of assessing the risk of the occurrence of damage, Party A cannot apply the limitation of liability provided for in the Commercial Law, the Maritime Law and the Bill of Lading”.
The Arbitral Tribunal found that the Respondent had not fully assessed the risk of damage caused by storm Maysak, so they did not notify the force majeure event and did not apply all necessary and permissible measures to overcome and limit the impact of the storm Maysak event in Busan, Korea. This was the Respondent’s omission as prescribed in Clause 3, Article 9 of the Contract. For the foregoing reasons, Respondent could not rely on the storm Maysak event to claim an exemption from liability for damage to the goods carried by Respondent. Therefore, the Arbitral Tribunal decided to force the Respondent to reimburse the entire amount of money that the Claimant had indemnified the insured.