Case Update: MUR Shipping BV V RTI Ltd [2022] EWCA Civ 1406

• Published date: 05 December 2022
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Debevoise & Plimpton
• Author: Patrick Swain, Christopher Boyne, Julia Caldwell and Luke Duggan

Introduction

The Court of Appeal has recently handed down its judgment in the case of MUR Shipping BV v RTI Ltd, which considers when a force majeure clause can relieve a party from performance of its contractual obligations in circumstances where that party has an obligation to use reasonable endeavours to overcome a potential force majeure event. The Court of Appeal (by way of majority) has overturned the decision of the High Court, which had held that, in exercising "reasonable endeavours" to overcome the impact of sanctions, a party is not required to accept anything other than what has been agreed in the contract.

Debevoise & Plimpton has previously considered the High Court's decision in "Russia Related Sanctions'Helpful Guidance on the Proper Application of a Force Majeure Clause," which provides an overview of the proper application of force majeure clauses in the context of Russia-related sanctions. The key takeaways considered in that article still apply, namely that the meaning and effect of a force majeure clause will depend entirely on the specific wording. However, the Court of Appeal has now confirmed that a party may have an obligation to accept payment in an alternative currency to the one specified in the contract to overcome the effect of a force majeure event. The Court of Appeal's decision in MUR Shipping BV v RTI Ltd turned entirely on the specific wording of a force majeure clause and the requirement of a contracting party to exercise "reasonable endeavours." The Court of Appeal's decision and the wider implications for other contracting parties are analysed further below.

Summary of the Facts

In 2016, MUR Shipping (the "Owners") entered into a freight contract with the RTI (the "Charterers"). Under the contract, the Owners would transfer goods to Ukraine, on behalf of the Charterers and the Charterers would pay for this service in U.S. dollars. The contract contained a force majeure clause that included four criteria, including that a force majeure event was an "[...event or state of affairs which] cannot be overcome by reasonable endeavours from the party affected."

In 2018, the Charterers' parent company was added to the U.S. sanctions list. The Owners subsequently notified the Charterers that this was a force majeure event. The Owners stated that the U.S. sanctions would (1) unacceptably delay its receipt of the Charterers' U.S. dollar payment (delay would be caused by U.S. banks that would thoroughly scrutinise the transaction...