COVID-19 Update – Transnet Port Terminals declare Force Majeure

On the 23rd of March 2020, the President of South Africa Cyril Ramaphosa declared a nationwide lock-down as of the midnight of Thursday 26th March 2020..

The lockdown is part of South Africa’s bid to contain and slow down the spread of Coronavirus COVID-19 in the country and enforces a total lockdown on all services with exception of essential services as defined in the Regulations issued on the 25th of March 2020..

Companies and businesses that are essential to the production and transportation of food, basic goods and medical supplies, emergency and security services are exempt from this lockdown and are allowed to remain operational during the 21 day lockdown period..

In line with these regulations, Transnet Port Terminals (TPT) announced that they will remain operational to support the transportation of essential goods and services as well as those goods and services that support the production or provision of those essential goods and services to the country..

TPT advised that they will scale down their operations over the period of the lockdown to ensure focus and efficiency is maintained over this period..

For those who may not be aware, TPT is one of the 5 divisions of Transnet established in 2000 to handle the operations of the various terminals of the port.. TPT currently handles terminal operations in the container sector, mineral bulk, agricultural bulk & Roro sectors through South Africa’s seven logistics ports, Richards Bay, Durban, Saldanha, Cape Town, Port Elizabeth, East London and Port of Ngqura..

Each of TPT’s sectors have their own working pattern during the lockdown as has been reported previously..

Citing the unforeseen impact of COVID-19 as beyond their control, TPT has advised their customers that they are invoking the provisions of the Force Majeure clauses in TPT’s commercial agreements and Standard Trading Terms and Conditions..

It is understood that under this agreement, any outbreak of epidemic proportions, any plague or quarantine period declared as a result thereof is regarded as a Force Majeure Event..

In a statement to their customers, TPT said “As a result if TPT is prevented from, or delayed in performing any of its obligations under such commercial agreement or in terms of our Conditions of Trade in respect of the Container sector or our Standard Trading Terms in terms of the Bulk and Break-bulk sectors and any annexure thereto as a consequence of such Force Majeure event, TPT shall be relieved of the liability for the delay or failure to perform any of its obligations under such agreement, Conditions of Trade or Standard Trading Terms.”

Suspending the provisions of all applicable contracts during this period of lockdown and specifically from 24h00 on Thursday 26 March 2020 up to and including 16 April 2020, TPT’s notice also advises that any “claims arising from our operation under this state of Force Majeure will be dealt with in terms of the applicable contractual agreements and Standard Trading Terms and Conditions.”

TPT has confirmed that in order to minimise any negative impact the Force Majeure may have on the Agreement upon the lifting of the lockdown by the President, it will do everything possible to perform in accordance with the Contracts as set out in the Agreement or any recovery plan that may be agreed to between the Parties..

TPT anticipates that normal operations will resume as of 06h00 on 17 April 2020 unless the President indicates the contrary and that a further communique will be issued in this regard..

The notice further indicated that “Should the Force Majeure Event (lockdown) be extended by the President of the Republic of South Africa to endure for any such longer period beyond 16 April 2020, Transnet shall advise of steps to be taken for the Parties to jointly quantify the impact of the Force Majeure on the Agreement and consider the Parties available remedies.”

There have been questions whether Force Majeure can be applied in these circumstances and what it means..

In their assessment of the impact of COVID-19 on businesses and investments in South Africa, Bowmans Law has written that “COVID-19 threatens the ability of contracting parties to meet their obligations or perform as required under the relevant agreement regulating their relationship.

Faced with a public health crisis largely beyond their control, contracting parties may find it impossible to fulfil those obligations on time or at all. At the same time, those parties may themselves face non-performance or delayed performance by counterparties. The impact on businesses in these uncertain times may be significant.”

They have further added that parties should review their agreement to assess their risks and seek to limit the risk of their non-performance or non-performance by a counterparty and, in doing so, should consider the following contractual considerations

• Breach of agreement
• Suspension, variation or termination of contractual obligations
  • Force majeure
  • Supervening impossibility of performance
  • Variation and waiver of obligations
  • Mitigation of loss

Force Majeure is defined as “A force majeure clause in an agreement typically excuses non-performance of contractual obligations when an extraordinary event or circumstances beyond the control of the parties (i.e. a force majeure) prevents performance by one or both of the parties. Being excused from performance while the event continues should avoid being placed in breach and limits the exposure to damages being claimed for non-performance.

Determining whether COVID-19 constitutes a force majeure will require careful consideration of the force majeure clause relied upon, the contractual obligation in question and the reasons for non-performance.

Should a party wish to invoke a force majeure clause, it should confirm whether the clause requires it to give notice of force majeure and, if so, when notice must be given. One should be careful to meet the requirements for such notices as precisely as possible including the address to which it must be sent and what level of detail or information the notice should contain.”

No doubt there will be a massive economic impact on many parties due to COVID-19 and one can only really tell when the masks come off and SA (and the rest of the world) is declared safe..

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