Rocketing fuel prices are obviously affecting the commercial marine industry as much as any other. Ocean Legal’s solicitor Jennie Harris explains why despite the seriousness of the problem, it might not yet qualify for force majeure.
Under English law at least, a simple increase in the price of fuel - even a very significant one driven by geopolitical events in the Middle East or elsewhere - will not usually amount to force majeure. The general position is that a contract becoming more expensive or less profitable is not enough on its own to excuse performance. If the contract says the client pays for fuel, the commercial pain may in practice sit with the client, but that is a matter of risk allocation rather than force majeure.
Force majeure is primarily a contractual concept, so everything turns on the wording of the particular clause. Many offshore and workboat contracts list examples such as war, terrorism, embargoes, government action or shortages of materials or utilities. Where fuel supply is genuinely interrupted - for example because sanctions, embargoes or physical disruption mean that fuel of the required specification is not available at the place and time the vessel is supposed to operate - there is a much stronger argument that a properly drafted force majeure clause could be triggered.
Even then, there are some important qualifiers that operators and their clients need to keep in mind:
1. The event normally has to be beyond the reasonable control of the party claiming force majeure and not something they could have avoided or overcome by taking reasonable steps (for example sourcing alternative fuel, bunkering earlier or adjusting operations).
2. It must actually prevent, hinder or delay performance, not just make it more expensive. If fuel is available but at a painful price, that is unlikely to be enough. If there is simply no fuel to be had in the region, that is different.
3. The party claiming force majeure usually has to give notice and show that the event is the cause of the non-performance and that they have tried to mitigate its effects.
If a valid force majeure claim is made, the typical contractual consequences for workboat charters and service agreements are:
- · Temporary suspension of the affected obligations for as long as the force majeure event continues
- · Relief from liability for delay or non-performance during that period
- · Sometimes a right for one or both parties to terminate if the disruption continues beyond a stated period. Day rate and fuel cost provisions will often pause with the services, but again that depends on the drafting.
Where supply actually runs out, the legal analysis is therefore less about price and more about whether the clause is wide enough to capture the particular disruption (for example, government embargoes on exports from a given region, closure of key bunkering ports or sanctions affecting particular suppliers) and whether the operator can reasonably obtain fuel elsewhere.
If they can, even at a higher cost, force majeure is harder to sustain. If they genuinely cannot, force majeure or, in extreme cases, frustration of the contract, may come into play, but frustration is a high bar and very fact specific.
In conclusion, operators should not assume that “Middle East disruption” automatically equals force majeure; they need to understand exactly how their contracts deal with fuel, risk allocation and force majeure; and they should take advice on specific wordings and situations rather than relying on general assumptions.
