Force Majeure And The Limits Of Reasonableness In MUR Shipping BV v RTI LTD1

• Published date: 14 July 2022
• Subject Matter: Corporate/Commercial Law, International Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Export Controls & Trade & Investment Sanctions, Arbitration & Dispute Resolution
• Law Firm: Fenwick Elliott LLP
• Author: Olivia Liang and Oliver Weisemann

In March 2022, in allowing an appeal under section 69 of the Arbitration Act 1996, the Commercial Court held that a shipowner was entitled to rely on a force majeure clause in a shipping contract where the Charterers' Russian parent company became subject to sanctions imposed by the United States in 2018.

In doing so, the Commercial Court (Jacobs J) considered that a contractual requirement to exercise "reasonable endeavours" to overcome the impact of a force majeure event did not require the shipowners to accept anything other than contractual performance - being, in this case, their right under the contract to receive payment in USD.

Background

MUR Shipping BV (the "Owners") entered into a Contract of Affreightment ("COA") with RTI Ltd (the "Charterers") in June 2016 to carry Bauxite in an amount of 280,000 metric tons per month from Guinea to Ukraine. The COA contained a force majeure clause which provided that neither the Owners nor the Charterers would be liable to one another for loss, damage, delay or failure in performance caused by a force majeure event.

A "force majeure event" was defined in the COA as an event or state of affairs satisfying each of the following criteria:

"a) It is outside the immediate control of the Party giving the Force Majeure Notice;

b) It prevents or delays the loading of the cargo at the loading port and/or the discharge of the cargo at the discharging port;

c) It is caused by one or more of acts of God, extreme weather conditions ... any rules or regulations of governments or any interference or acts or directions of governments, the restraint of princes, restrictions on monetary transfers and exchanges;

d) It cannot be overcome by reasonable endeavours from the Party affected." (emphasis added)

On 6 April 2018, the US applied sanctions to the Charterers' parent company, United Company Rusal plc.

On 10 April 2018 the Owners sent a force majeure notice stating that it would be a breach of sanctions for the Owners to continue with the performance of the COA, and that the sanctions would prevent payments in USD, the currency stipulated for payment under the COA.

In response, the Charterers raised several arguments: firstly, the sanctions would not interfere with cargo operations; secondly, payment could be made in Euros; and, thirdly, that, the Owners were a Dutch company and, accordingly, not a "US person" caught by sanctions.

The Owners remained adamant that there was a force majeure event that limited payment in US...