Friday, October 20, 2006


Inco's Force Majeure

Force Majeure literally means "greater force". These clauses excuse a party from liability if some unforseen event beyond the control of that party prevents it from performing its obligations under the contract. Typically, force majeure clauses cover natural disasters or other "Acts of God", war, or the failure of third parties--such as suppliers and subcontractors--to perform their obligations to the contracting party. It is important to remember that force majeure clauses are intended to excuse a party only if the failure to perform could not be avoided by the exercise of due care by that party.

When negotiating force majeure clauses, make sure that the clause applies equally to all parties to the agreement--not just the licensor. Also, it is helpful if the clause sets forth some specific examples of acts that will excuse performance under the clause, such as wars, natural disasters, and other major events that are clearly outside a party's control. Inclusion of examples will help to make clear the parties' intent that such clauses are not intended to apply to excuse failures to perform for reasons within the control of the parties.

Force Majeure:
Not enough electricity available to run a commercial processing plant for the Voisey's Bay concentrate in NL.

With the rolling black outs we had on the island last winter.
The shutting down of the Stephenville PnP mill in part because of a lack of cheap energy supply.

An infeed looking less and less feasible with the price tag running around 2.2 Billion, and Williams intent on exporting any new electrical developments outside the province.

The feds not willing to pony up for a national East West power corridor (INFEED) let alone forcing Quebec to allow transmission of energy through Quebecs territory.
That can't possibly be "force majeure". The only way the plan would fail for lack of electrical energy would be if the province fails to live up to ITS end of the deal:

6.2 Electrical Rights and Provision of Power. The Government shall cause Newfoundland
and Labrador Hydro or its successors to:
6.2.1 provide to the Proponent electrical power for the Processing Plant at the lower of
(a) the island industrial electrical rate or (b) any lower electrical rate that may be
offered from time to time by Newfoundland and Labrador Hydro or its successors
to its industrial customers in comparable circumstances; and
6.2.2 ensure that Newfoundland and Labrador Hydro or its successors can supply to the
Proponent sufficient electrical power for the operation of the Processing Plant.
bottom line - power generates industry - export the power - export the future - hydro remains the most competitive and renewable power in world - Danny and his buds can't have it.
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